-----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, IAZ3okgSE20YI0PtuSHMblMa5D6ool/5Z7mk/DocAG2ILQVq/meFUGWy1gEcLRy/ XOZ0K0Gt91Qd1UM3+YZJtw== 0000893220-95-000704.txt : 19951106 0000893220-95-000704.hdr.sgml : 19951106 ACCESSION NUMBER: 0000893220-95-000704 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19951103 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PECO ENERGY CO CENTRAL INDEX KEY: 0000078100 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 230970240 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-60859 FILM NUMBER: 95586926 BUSINESS ADDRESS: STREET 1: 2301 MARKET ST STREET 2: P O BOX 8699 CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2158414000 FORMER COMPANY: FORMER CONFORMED NAME: PHILADELPHIA ELECTRIC CO DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PECO ENERGY CAPITAL LP CENTRAL INDEX KEY: 0000925910 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 51035522 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-60859-01 FILM NUMBER: 95586927 BUSINESS ADDRESS: STREET 1: 2301 MARKET STREET CITY: WILMINGTON STATE: DE ZIP: 19103 BUSINESS PHONE: 3029980592 MAIL ADDRESS: STREET 1: C/O PECO ENERGY CO STREET 2: 2301 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19101 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PECO ENERGY CAPITAL TRUST I CENTRAL INDEX KEY: 0001002558 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-60859-02 FILM NUMBER: 95586928 BUSINESS ADDRESS: STREET 1: C/O PECO ENERGY CORP STREET 2: 2301 MARKET ST PO BOX 8690 CITY: PHILADELPH STATE: PA ZIP: 19101 MAIL ADDRESS: STREET 1: PNC BANK DELAWARE 222 DELAWARE AVENUE STREET 2: PNC BANK DELAWARE 222 DELAWARE AVENUE CITY: WILMINGTON STATE: DE ZIP: 19801 S-4/A 1 AMENDMENT NO. 2 TO FORM S-4, PECO ENERGY 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 3, 1995 REGISTRATION NOS. 33-60859 33-60859-01 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- AMENDMENT NO. 2 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- PECO ENERGY COMPANY PECO ENERGY CAPITAL, L.P. PECO ENERGY CAPITAL TRUST I (EXACT NAME OF REGISTRANT (EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS AS SPECIFIED IN ITS CHARTER) SPECIFIED IN SPECIFIED ITS CERTIFICATE OF LIMITED IN ITS CERTIFICATE OF TRUST) PARTNERSHIP) Pennsylvania Delaware Delaware (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 4931 6799 6799 (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER) 23-0970240 51-0355322 51-0369609 (I.R.S. EMPLOYER IDENTIFICATION NO.) P.O. Box 8699, 2301 Market 1013 Centre Road, Suite 350F c/o PNC Bank, Delaware Street Wilmington, DE 19805 222 Delaware Avenue Philadelphia, PA 19101 (302) 998-0592 Wilmington, DE 19801 (215) 841-4000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF PRINCIPAL EXECUTIVE OFFICES) J. B. MITCHELL P.O. Box 8699, 2301 Market Street Philadelphia, PA 19101 (215) 841-4000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE FOR EACH REGISTRANT) with copies to: JAMES W. DURHAM, ESQ. Senior Vice President and General Counsel P.O. Box 8699, 2301 Market Street, Philadelphia, PA 19101 ROBERT C. GERLACH, ESQ. ROBERT M. JONES, JR., ESQ. Ballard Spahr Andrews & Drinker Biddle & Reath Ingersoll 1345 Chestnut Street 1735 Market Street Philadelphia, PA 19107 Philadelphia, PA 19103-7599
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the Registration Statement becomes effective. --------------------- If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / --------------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 CROSS REFERENCE SHEET PECO ENERGY COMPANY PECO ENERGY CAPITAL, L.P. PECO ENERGY CAPITAL TRUST I PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING LOCATION IN OFFERING CIRCULAR/PROSPECTUS OF ITEMS OF FORM S-4
FORM S-4 ITEM NO. CAPTION IN OFFERING CIRCULAR/PROSPECTUS ------------------------------------------- ------------------------------------------- 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus... Outside Front Cover Page; Inside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus............................ Inside Front Cover Page; Available Information; Incorporation of Certain Documents by Reference; Table of Contents 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information............ Offering Circular/Prospectus Summary; Risk Factors; Coverage Ratios; Selected Consolidated Financial Data; Comparison of Preferred Trust Receipts and Depositary Shares; The Offer -- General; United States Taxation 4. Terms of the Transaction................... Offering Circular/Prospectus Summary 5. Pro Forma Financial Information............ Not Applicable 6. Material Contracts with the Company Being Acquired................................. Not Applicable 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters....................... Not Applicable 8. Interests of Named Experts and Counsel..... Legal Matters; Experts 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.............................. Not Applicable 10. Information with Respect to S-3 Registrants.............................. Incorporation of Certain Documents by Reference 11. Incorporation of Certain Information by Reference................................ Incorporation of Certain Documents by Reference 12. Information with Respect to S-2 or S-3 Registrants.............................. Not Applicable 13. Incorporation of Certain Information by Reference................................ Not Applicable 14. Information with Respect to Registrants Other than S-3 or S-2 Registrants........ The Trust 15. Information with Respect to S-3 Companies................................ Not Applicable 16. Information with Respect to S-2 or S-3 Companies................................ Not Applicable 17. Information with Respect to Companies Other than S-3 or S-2 Companies................ Not Applicable 18. Information if Proxies, Consents or Authorizations are to be Solicited....... Not Applicable 19. Information if Proxies, Consents or Authorizations are not to be Solicited or in an Exchange Offer..................... Incorporation of Certain Documents by Reference
3 SUBJECT TO COMPLETION, DATED NOVEMBER 3, 1995 OFFERING CIRCULAR/PROSPECTUS PECO ENERGY COMPANY OFFER TO EXCHANGE TRUST RECEIPTS ("TOPRS SM") EACH REPRESENTING A 8.72% CUMULATIVE MONTHLY INCOME PREFERRED SECURITY, SERIES B OF PECO ENERGY CAPITAL, L.P. (STATED LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY) FOR UP TO 5,400,000 OUTSTANDING DEPOSITARY SHARES EACH REPRESENTING A ONE-FOURTH INTEREST IN A SHARE OF $7.96 CUMULATIVE PREFERRED STOCK OF PECO ENERGY COMPANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 13, 1995, UNLESS THE OFFER IS EXTENDED. --------------------- PECO Energy Company, a Pennsylvania corporation ("PECO Energy"), hereby offers, upon the terms and subject to the conditions set forth in this Offering Circular/Prospectus and the accompanying Letter of Transmittal (the "Letter of Transmittal" which, together with this Offering Circular/Prospectus, constitute the "Offer"), to effect the exchange (the "Exchange") of Trust Receipts, each representing a 8.72% Cumulative Monthly Income Preferred Security, Series B, representing a limited partner interest issued by PECO Energy Capital, L.P., a limited partnership formed under the laws of the State of Delaware ("PECO Energy Capital"), for up to 5,400,000 depositary shares (the "Depositary Shares"), or 96.4% of the outstanding Depositary Shares, each representing a one-fourth interest in a share of $7.96 Cumulative Preferred Stock of PECO Energy. The Trust Receipts, which will be issued by PECO Energy Capital Trust I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), are hereinafter referred to as the "Preferred Trust Receipts" and the underlying 8.72% Cumulative Monthly Income Preferred Securities, Series B of PECO Energy Capital are hereinafter referred to as the "Series B Preferred Securities." Exchanges will be made on the basis of one Preferred Trust Receipt for each Depositary Share validly tendered and accepted for exchange in the Offer. Depositary Shares not accepted for exchange because of proration or otherwise will be returned. IN ORDER TO PARTICIPATE IN THE OFFER, HOLDERS OF DEPOSITARY SHARES MUST EITHER SUBMIT A LETTER OF TRANSMITTAL (OR AN AGENT'S MESSAGE, IF APPLICABLE) OR SUBMIT A NOTICE OF GUARANTEED DELIVERY AND COMPLY WITH THE OTHER PROCEDURES FOR TENDERING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED HEREIN AND IN THE LETTER OF TRANSMITTAL PRIOR TO 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 13, 1995 (THE "EXPIRATION DATE"). The Preferred Trust Receipts have been approved for listing on the New York Stock Exchange (the "NYSE") subject to notice of issuance and attainment of the NYSE distribution standards. Trading of the Preferred Trust Receipts on the NYSE is expected to commence within a 30-day period after the initial delivery of the Preferred Trust Receipts. --------------------- SEE "RISK FACTORS" WHICH COMMENCES ON PAGE 9 OF THIS OFFERING CIRCULAR/PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THE PREFERRED TRUST RECEIPTS THAT SHOULD BE CONSIDERED BY INVESTORS, INCLUDING THE PERIOD DURING WHICH AND CIRCUMSTANCES UNDER WHICH DISTRIBUTIONS ON THE UNDERLYING SERIES B PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED FEDERAL INCOME TAX CONSEQUENCES. --------------------- 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 OFFERING CIRCULAR/PROSPECTUS, AND ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- NO RECOMMENDATION TO HOLDERS OF DEPOSITARY SHARES TO TENDER OR TO REFRAIN FROM TENDERING IN THE OFFER IS MADE BY PECO ENERGY, THE BOARD OF DIRECTORS OF PECO ENERGY, PECO ENERGY CAPITAL, THE GENERAL PARTNER OF PECO ENERGY CAPITAL, THE TRUST OR THE TRUSTEE (AS DEFINED BELOW). HOLDERS OF DEPOSITARY SHARES ARE URGED TO CONSULT THEIR FINANCIAL AND TAX ADVISERS IN MAKING THEIR DECISIONS ON WHAT ACTION TO TAKE IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES. --------------------- PECO Energy will pay to Soliciting Dealers (as defined herein) designated by the record or beneficial owner, as appropriate, of Depositary Shares a solicitation fee of $0.50 per Depositary Share validly tendered and accepted for exchange pursuant to the Offer and to Merrill Lynch & Co. and Smith Barney Inc., as Dealer Managers, an aggregate fee of $0.125 per Depositary Share tendered pursuant to the Offer, subject to certain conditions. Soliciting Dealers are not entitled to a solicitation fee for Depositary Shares beneficially owned by such Soliciting Dealer. See "The Offer -- Dealer Managers; Soliciting Dealers." --------------------- The Dealer Managers for the Offer are: MERRILL LYNCH & CO. SMITH BARNEY INC. --------------------- THE DATE OF THIS OFFERING CIRCULAR/PROSPECTUS IS NOVEMBER , 1995. (SM) "TOPrS" is a service mark of Merrill Lynch & Co., Inc. 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 OFFERING CIRCULAR/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 STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. 4 DIAGRAM OF OFFER The diagram shows that the Depositary Shares will be tendered by the holders thereof to the Exchange Agent which will return the Depositary Shares to PECO Energy. PECO Energy will issue its Series B Subordinated Debentures to the Exchange Agent, and the Exchange Agent will deliver the Series B Subordinated Debentures to PECO Energy Capital. PECO Energy Capital will issue its Series B Preferred Securities to the Trust, and the Trust will issue its Preferred Trust Receipts to the Exchange Agent which will deliver Preferred Trust Receipts to each tendering holder of Depositary Shares. - --------------- (1) Depositary Shares (2) Series B Subordinated Debentures* (3) Series B Preferred Securities (4) Preferred Trust Receipts** * The principal amount of the Series B Subordinated Debentures delivered to PECO Energy Capital pursuant to the Exchange will be equal to the aggregate stated liquidation preference of the Series B Preferred Securities issued in connection with the Offer. PECO Energy Capital will also purchase Series B Subordinated Debentures with a principal amount equal to the proceeds received by PECO Energy Capital from the issuance of additional general partner interests to PECO Energy Capital Corp., the general partner. ** Holders of Depositary Shares who participate in the Offer will receive one Preferred Trust Receipt for each outstanding Depositary Share that is validly tendered and accepted for exchange. 5 DIAGRAM OF OFFER SHOWING END RESULT FOR HOLDERS OF DEPOSITARY SHARES The diagram shows that each holder of Depositary Shares tendering Depositary Shares to the Exchange Agent will receive, in exchange therefor, Preferred Trust Receipts from the Exchange Agent. - --------------- * Holders of Depositary Shares who participate in the Offer will receive one Preferred Trust Receipt for each outstanding Depositary Share that is validly tendered and accepted for exchange. DIAGRAM OF PAYMENT FLOWS AFTER COMPLETION OF THE EXCHANGE The diagram shows that PECO Energy will pay interest on its Series B Subordinated Debentures to PECO Energy Capital as the holder thereof. PECO Energy Capital will then make distributions on its Series B Preferred Securities to the Trust which will concurrently make distributions on its Preferred Trust Receipts to the holders thereof. 6 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFERING CIRCULAR/PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PECO ENERGY, PECO ENERGY CAPITAL, THE TRUST OR THE DEALER MANAGERS. NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR/PROSPECTUS NOR ANY EXCHANGE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF PECO ENERGY, PECO ENERGY CAPITAL OR THE TRUST SINCE THE RESPECTIVE DATES AS OF WHICH INFORMATION IS GIVEN HEREIN. THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF DEPOSITARY SHARES IN ANY JURISDICTION IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. HOWEVER, PECO ENERGY, PECO ENERGY CAPITAL OR THE TRUST MAY, AT THEIR DISCRETION, TAKE SUCH ACTION AS THEY MAY DEEM NECESSARY TO MAKE THE OFFER IN ANY SUCH JURISDICTION AND EXTEND THE OFFER TO HOLDERS OF DEPOSITARY SHARES IN SUCH JURISDICTION. IN ANY JURISDICTION THE LAWS OF WHICH REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER IS BEING MADE ON BEHALF OF PECO ENERGY BY THE DEALER MANAGERS OR ONE OR MORE REGISTERED BROKERS OR DEALERS WHICH ARE LICENSED UNDER THE LAWS OF SUCH JURISDICTION. AVAILABLE INFORMATION PECO Energy is subject to the information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy and information statements and other information with the Securities and Exchange Commission (the "SEC"). Such reports, proxy and information statements and other information filed by PECO Energy may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at certain of its regional offices at Suite 1400, 500 West Madison Street, Chicago, IL 60661-2511 and Suite 1300, 7 World Trade Center, New York, NY 10048. Copies of such material may also be obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Securities of PECO Energy are listed on the New York and Philadelphia Stock Exchanges, where reports, proxy and information statements and other information concerning PECO Energy may be inspected. No separate financial statements of PECO Energy Capital or the Trust have been included herein. PECO Energy does not consider that such financial statements would be material to holders of Preferred Trust Receipts offered hereby because PECO Energy Capital and the Trust are special purpose entities, have no independent operations and are not engaged in, and do not propose to engage in, any activity other than as set forth below. See "PECO Energy Capital" and "The Trust." 1 7 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the SEC pursuant to Section 13 of the Exchange Act by PECO Energy (File No. 1-1401) are incorporated herein by reference: 1. PECO Energy's Annual Report on Form 10-K for the year ended December 31, 1994; 2. PECO Energy's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995 and June 30, 1995; and 3. PECO Energy's Current Reports on Form 8-K dated February 2, 1995, May 24, 1995, June 13, 1995, July 24, 1995, August 14, 1995, October 17, 1995, October 23, 1995 and November 1, 1995. Each document filed subsequent to the date of this Offering Circular/Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the termination of the offering shall be deemed to be incorporated by reference in this Offering Circular/Prospectus and shall be a part hereof from the date of filing of such document. Any statement contained herein or in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Offering Circular/Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein 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 Offering Circular/Prospectus. THIS OFFERING CIRCULAR/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. PECO ENERGY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM AN OFFERING CIRCULAR/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL DOCUMENTS DESCRIBED ABOVE UNDER "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," OTHER THAN EXHIBITS TO SUCH DOCUMENTS. SUCH REQUESTS SHOULD BE DIRECTED TO PECO ENERGY COMPANY, FINANCIAL DIVISION, S21-1, P.O. BOX 8699, PHILADELPHIA, PA 19101, (215) 841-5741. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE NOT LATER THAN FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE. TABLE OF CONTENTS
PAGE ---- Offering Circular/Prospectus Summary.................................................. 3 Risk Factors.......................................................................... 9 Comparison of Preferred Trust Receipts and Depositary Shares.......................... 11 PECO Energy........................................................................... 14 PECO Energy Capital................................................................... 14 The Trust............................................................................. 14 Coverage Ratios....................................................................... 14 Selected Consolidated Financial Data.................................................. 16 The Offer............................................................................. 18 Listing and Trading of Preferred Trust Receipts and Depositary Shares................. 25 Transactions and Arrangements Concerning the Offer.................................... 26 Fees and Expenses; Transfer Taxes..................................................... 26 Price Range of Depositary Shares...................................................... 26 Description of the Preferred Trust Receipts........................................... 27 Description of the Series B Preferred Securities...................................... 30 Description of the Series B Guarantee................................................. 36 Description of the Series B Subordinated Debentures and the Indenture................. 38 Description of the Depositary Shares.................................................. 43 United States Taxation................................................................ 48 Legal Matters......................................................................... 51 Experts............................................................................... 51
2 8 OFFERING CIRCULAR/PROSPECTUS SUMMARY The following summary does not purport to be complete and is qualified in its entirety by the more detailed information contained elsewhere in, or incorporated by reference in, this Offering Circular/Prospectus. PECO ENERGY PECO Energy Company, incorporated in Pennsylvania in 1929, is an operating utility which provides electric and gas service to the public in southeastern Pennsylvania. In 1994, PECO Energy's total revenues were $4 billion, with approximately 90% derived from its electric business and 10% from its gas business. PECO Energy's mailing address is P.O. Box 8699, Philadelphia, PA 19101, and its telephone number is (215) 841-4000. See "PECO Energy -- Recent Developments." PECO ENERGY CAPITAL PECO Energy Capital, L.P. is a limited partnership formed in 1994 under the laws of the State of Delaware solely for the purpose of issuing one or more series of its limited partner interests (the "Preferred Securities") and lending the proceeds thereof to PECO Energy and entering into similar arrangements. PECO Energy Capital's mailing address is 1013 Centre Road, Suite 350F, Wilmington, DE 19805, and its telephone number is (302) 998-0592. THE TRUST PECO Energy Capital Trust I is a statutory business trust recently created under the laws of the State of Delaware solely for the purpose of issuing Preferred Trust Receipts representing the Series B Preferred Securities held by the Trust and performing functions directly related thereto. The Trust's mailing address is c/o PNC Bank, Delaware, Corporate Trust Department, 222 Delaware Avenue, Wilmington, Delaware 19801, and its telephone number is (302) 429-1546. THE OFFER Subject to the terms and conditions set forth herein and in the Letter of Transmittal, PECO Energy offers to effect the exchange of Preferred Trust Receipts, each representing a Series B Preferred Security, for up to 5,400,000 Depositary Shares. The exchange of Preferred Trust Receipts for Depositary Shares will be effected by (a) the delivery by PECO Energy of its 8.72% Deferrable Interest Subordinated Debentures, Series B (the "Series B Subordinated Debentures") to First Chicago Trust Company of New York (the "Exchange Agent"), which will receive the Series B Subordinated Debentures on behalf of the Holders (as defined herein) of the Depositary Shares in exchange for Depositary Shares, (b) the delivery by the Exchange Agent (acting pursuant to the directions of the Holders of the Depositary Shares) of the Series B Subordinated Debentures to PECO Energy Capital in consideration for the issuance and deposit by PECO Energy Capital of the Series B Preferred Securities to the Trust under an Amended and Restated Trust Agreement (the "Trust Agreement") with PNC Bank, Delaware, as Trustee and (c) the issuance and delivery by the Trust of the Preferred Trust Receipts to the Exchange Agent for distribution to the former Holders of the Depositary Shares. The Preferred Trust Receipts are being issued in exchange for the Depositary Shares instead of directly issuing the Series B Preferred Securities to Holders so that a holder of Preferred Trust Receipts will receive a Form 1099 to report interest income for Federal income tax purposes, rather than a Form K-1 which would have been required if the Series B Preferred Securities were held directly by investors. On July 3, 1995, the last day of trading prior to the first public announcement of the Offer, the closing sales price of the Depositary Shares on the NYSE as reported on the Composite Tape was $25 1/8 per share. Holders of Depositary Shares are urged to obtain a current market quotation for the Depositary Shares. 3 9 PURPOSE OF THE OFFER - The purpose of the Offer is to reduce the after-tax financing costs of PECO Energy through the replacement of Depositary Shares with Preferred Trust Receipts. POTENTIAL BENEFITS TO EXCHANGING HOLDERS - The rate of Distributions on the Preferred Trust Receipts will be 76 basis points greater than the dividend rate on the Depositary Shares. - Dividends on the Depositary Shares accumulate but do not compound. Monthly Distributions on Preferred Trust Receipts will be cumulative and monthly Distributions in arrears after the monthly payment date therefor will accumulate additional Distributions thereon at the Distribution rate. The term "Distributions" as used herein shall include, as applicable, monthly distributions and distributions on monthly distributions in arrears. Monthly Distributions on the Series B Preferred Securities underlying the Preferred Trust Receipts will be made from interest payments by PECO Energy on the Series B Subordinated Debentures. PECO Energy can defer such interest payments for up to 60 consecutive months (the "Extension Period"). During such deferral, PECO Energy may not pay dividends on any of its capital stock, including the Depositary Shares. PECO Energy currently believes that it is unlikely that it (a) will discontinue declaring dividends on its capital stock, including the Depositary Shares, or (b) defer interest payments on the Series B Subordinated Debentures. - Monies for Distributions and liquidation and redemption payments on the Preferred Trust Receipts will only be available if PECO Energy pays principal and interest on the Series B Subordinated Debentures. Although the Series B Subordinated Debentures are subordinated to all Senior Indebtedness (as defined herein) of PECO Energy (approximately $5.0 billion at September 30, 1995) and the Payment and Guarantee Agreement delivered by PECO Energy for the benefit of the holders of the Series B Preferred Securities (the "Series B Guarantee") is subordinated to all creditors of PECO Energy, in the event of a liquidation of PECO Energy, the Series B Subordinated Debentures and the Series B Guarantee must be satisfied in full before the holders of PECO Energy's preferred stock, including the Depositary Shares, will be entitled to any liquidation payments. - The Series B Preferred Securities and the Preferred Trust Receipts will be redeemed upon payment at maturity of the Series B Subordinated Debentures on December 19, 2025. As a result, the Preferred Trust Receipts are effectively subject to mandatory redemption; in contrast the Depositary Shares could remain outstanding indefinitely. POTENTIAL DISADVANTAGES TO EXCHANGING HOLDERS - Participation in the Offer will be a taxable event for Holders of Depositary Shares; Holders of Depositary Shares should consult their tax advisers. - If PECO Energy elects to defer payments of interest on the Series B Subordinated Debentures by extending the interest period thereon, Distributions on the Preferred Trust Receipts would also be deferred but the holders of the Preferred Trust Receipts would continue to accrue interest income (as original issue discount) in respect of the Preferred Trust Receipts which will be taxable to owners of the Preferred Trust Receipts. As a result, owners of the Preferred Trust Receipts during an Extension Period of interest on the Series B Subordinated Debentures will include their pro rata share of the interest in gross income in advance of the receipt of cash. - Holders of Preferred Trust Receipts will have no voting rights with respect to PECO Energy. If preferred dividends of PECO Energy are in arrears in an aggregate amount equivalent to four full quarterly dividend payments, the holders of PECO Energy's preferred stock, including Holders of Depositary Shares, have the right to elect the least number of directors necessary to constitute a majority of the full board of directors of PECO Energy. 4 10 - While the Depositary Shares are not redeemable prior to October 1, 1997, the Series B Preferred Securities (and thus the Preferred Trust Receipts) in certain circumstances will be redeemable prior to that date upon the occurrence of a Tax Event (as defined herein) or an Investment Company Act Event (as defined herein). - While dividends on the Depositary Shares are eligible for the dividends received deduction for corporate holders, distributions on the Preferred Trust Receipts are not eligible for the dividends received deduction for corporate holders. - While the Preferred Trust Receipts have been approved for listing on the NYSE, subject to notice of issuance and attainment of the NYSE distribution standards, the Preferred Trust Receipts are a new issue of securities with no established trading market. - Holders of the Depositary Shares are entitled to participate in PECO Energy's Dividend Reinvestment and Stock Purchase Plan. Holders of Preferred Trust Receipts will not be entitled to participate in such plan. POTENTIAL RISK TO NON-EXCHANGING HOLDERS - The liquidity and trading market for Depositary Shares which are not exchanged in the Offer could be adversely affected by the reduction in the number of publicly traded Depositary Shares resulting from the Offer. For more detailed information concerning the potential disadvantages to exchanging Holders of Depositary Shares and the potential risk to non-exchanging Holders of Depositary Shares, see "Risk Factors" and "United States Taxation" herein. TERMS OF THE OFFER BASIS OF EXCHANGE: One Preferred Trust Receipt for each Depositary Share validly tendered and accepted. MAXIMUM NUMBER OF SHARES; PRORATION: The Offer is for up to 5,400,000 Depositary Shares, unless reduced by PECO Energy in its sole discretion. If more than 5,400,000 Depositary Shares are validly tendered, acceptance of Depositary Shares of each tendering Holder will be pro rated. EXPIRATION DATE: 12:00 Midnight, New York City time on December 13, 1995 unless extended by PECO Energy in its sole discretion or as required by law. EXCHANGE DATE: The date of issuance of the Preferred Trust Receipts will be as soon as practicable following the Expiration Date or up to 12 Business Days following the Expiration Date if proration of tendered Depositary Shares is required. WITHDRAWALS: Any time prior to the Expiration Date and, unless accepted for exchange, at any time after 40 Business Days (defined, for purposes of the Offer, as any day other than a Saturday, Sunday or federal holiday) from November 8, 1995. AMENDMENT; TERMINATION: PECO Energy may amend or terminate the Offer and not accept any Depositary Shares at any time prior to the Expiration Date, provided PECO Energy will not accept Depositary Shares if as of the Expiration Date for any reason there would be fewer than 1,000,000 Preferred Trust Receipts to be issued or 400 record or beneficial holders of Preferred Trust Receipts to be issued as a result of the Exchange. PROCEDURES FOR TENDERING: In order to participate in the Offer, Holders of Depositary Shares must submit a Letter of Transmittal or Agent's Message (as defined herein) 5 11 or submit a Notice of Guaranteed Delivery and comply with the other procedures for tendering in accordance with instructions contained herein and in the Letter of Transmittal prior to the Expiration Date. LETTERS OF TRANSMITTAL, DEPOSITARY SHARES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO PECO ENERGY, PECO ENERGY CAPITAL, THE TRUST, THE DEALER MANAGERS OR THE INFORMATION AGENT. BENEFICIAL OWNERS: Any beneficial owner of Depositary Shares registered in the name of a broker/dealer, commercial bank, trust company or other nominee who wishes to tender must instruct such registered holder to tender on behalf of such beneficial owner. GUARANTEED DELIVERY PROCEDURES: A tender may be effected in accordance with the guaranteed delivery procedures set forth in "The Offer -- Procedures for Tendering -- Guaranteed Delivery." EXCHANGE AGENT: First Chicago Trust Company of New York. INFORMATION AGENT: D. F. King & Co., Inc. DEALER MANAGERS: Merrill Lynch & Co. and Smith Barney Inc. Questions and requests for assistance, requests for additional copies of this Offering Circular/Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Information Agent. The address and telephone number of the Information Agent are set forth in "The Offer -- Exchange Agent and Information Agent" and on the outside back cover of this Offering Circular/Prospectus. Questions with respect to the Offer may be directed to Merrill Lynch & Co. Marketing Support at (212) 236-4565 (call collect) or the Smith Barney Inc. Liability Management Group at (800) 813-3754. PREFERRED TRUST RECEIPTS NATURE OF SECURITY: Each Preferred Trust Receipt represents a Series B Preferred Security DISTRIBUTIONS: Cumulative Distributions at the annual rate of 8.72% per annum payable monthly in arrears. Distributions in arrears after the monthly payment date therefor will accumulate additional Distributions thereon at the Distribution rate. Additionally, the Preferred Trust Receipts will accrue an additional distribution at the rate of 7.96% per annum of the liquidation amount thereof from November 1, 1995 up to but not including the Exchange Date, payable on the first Distribution payment date. DENOMINATIONS: Each Preferred Trust Receipt represents a Series B Preferred Security; each Series B Preferred Security has a stated liquidation preference of $25. FORM: Certificated or Book-Entry REDEMPTION: Upon any redemption of Series B Preferred Securities, which are subject to the following redemptions: Optional: (i) After October 1, 1997 (ii) Upon a Tax Event Mandatory: (i) Upon an Investment Company Event (ii) Upon payment at maturity of the Series B Subordinated Debentures on December 19, 2025 6 12 (iii) Upon redemption of the Series B Subordinated Debentures, which are subject to optional redemption upon a Tax Event or after October 1, 1997
LISTING: The Preferred Trust Receipts have been approved for listing on the NYSE, subject to notice of issuance and attainment of the NYSE distribution standards. In order to satisfy the NYSE listing requirements, acceptance of Depositary Shares validly tendered in the Offer is subject to the conditions that as of the Expiration Date there be at least 1,000,000 Preferred Trust Receipts to be issued and 400 record or beneficial holders of Preferred Trust Receipts to be issued in exchange for such Depositary Shares, which conditions may not be waived. WITHDRAWAL: Upon surrender of Preferred Trust Receipts at the principal office of the Trustee, and subject to the terms of the Partnership Agreement, a holder of Preferred Trust Receipts represented thereby is entitled to delivery of the whole number of Series B Preferred Securities represented by such Preferred Trust Receipts. SERIES B SUBORDINATED DEBENTURES: The Distribution rate and the Distribution and other payment dates for the Series B Preferred Securities represented by the Preferred Trust Receipts will correspond to the interest rate and the interest and other payment dates of the Series B Subordinated Debentures issued to PECO Energy Capital concurrently with the issuance of the Series B Preferred Securities. The Series B Subordinated Debentures will be issued under PECO Energy's Indenture dated as of July 1, 1994 between PECO Energy and Meridian Trust Company, as trustee (the "Indenture Trustee"), as supplemented by a First Supplemental Indenture dated as of December 1, 1995 (as so supplemented, the "Indenture"). SERIES B GUARANTEE: The Series B Guarantee guarantees payment of accumulated and unpaid monthly Distributions, amounts payable upon redemption, and amounts payable upon liquidation with respect to the Series B Preferred Securities, in each case, only to the extent that PECO Energy Capital has funds on hand legally available therefor and payment does not violate applicable law. If PECO Energy fails to make interest payments on its Series B Subordinated Debentures, PECO Energy Capital will not have sufficient funds to pay Distributions on the Series B Preferred Securities. The Series B Guarantee does not cover payment of Distributions when PECO Energy Capital does not have sufficient funds to pay such Distributions. In such event, the remedy of a holder of Series B Preferred Securities is to enforce the rights of PECO Energy Capital under the Series B Subordinated Debentures. SUBORDINATION OF PECO ENERGY OBLIGATIONS: The obligations of PECO Energy under the Series B Guarantee are subordinate and junior in right of payment to all general liabilities of PECO Energy and its obligations under the Series B Subordinated Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness of PECO Energy, which aggregated approximately $5.0 billion at September 30, 1995. CERTAIN UNITED STATES INCOME TAX CONSIDERATIONS The Exchange will be a taxable event. Gain or loss generally will be recognized in an amount equal to the difference between the fair market value on the Exchange Date of the Holder's pro rata share of the Series B Subordinated Debentures deemed received in the Exchange and the exchanging Holder's tax basis in the Depositary Shares surrendered. For this purpose, the fair market value of the Series B Subordinated 7 13 Debentures deemed issued in exchange for Depositary Shares on the Exchange Date will equal the fair market value of the Preferred Trust Receipts on that date. See "United States Taxation -- Receipt of Preferred Trust Receipts for Depositary Shares." No portion of the amounts received on the Preferred Trust Receipts will be eligible for the dividends received deduction. The Preferred Trust Receipts may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the Series B Subordinated Debentures. During any extension period, each holder of Preferred Trust Receipts (a "Securityholder") who disposes of his Preferred Trust Receipts prior to the record date for payment of Distributions at the end of such Extension Period will nevertheless be required to include his pro rata share of accrued but unpaid interest on the Series B Subordinated Debentures allocable monthly to the Trust through the date of disposition in income as ordinary income, and to add such amount to his adjusted tax basis in his pro rata share of the Series B Preferred Securities deemed disposed of. Accordingly, such a Securityholder will recognize a capital loss to the extent the selling price (which may not fully reflect the value of accrued but unpaid interest) is less than the Securityholder's adjusted tax basis (which will include accrued but unpaid interest). Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. 8 14 RISK FACTORS Holders of the Depositary Shares who plan to participate in the Offer should carefully consider, in addition to the information set forth elsewhere in this Offering Circular/Prospectus, the following: TAX CONSEQUENCES OF THE EXCHANGE The Exchange will be a taxable event. Generally, gain or loss will be recognized in an amount equal to the difference between the fair market value on the Exchange Date of the Holder's pro rata share of the Series B Subordinated Debentures deemed received in the Exchange and the exchanging Holder's tax basis in the Depositary Shares exchanged. See "United States Taxation -- Receipt of Preferred Trust Receipts for Depositary Shares." All Holders of the Depositary Shares are advised to consult their tax advisers regarding the United States federal, state, local and foreign tax consequences of the exchange of the Depositary Shares and the issuance of Preferred Trust Receipts. SUBORDINATE OBLIGATIONS OF SERIES B GUARANTEE AND SERIES B SUBORDINATED DEBENTURES PECO Energy's obligations under the Series B Guarantee are subordinate and junior in right of payment to all general liabilities of PECO Energy and its obligations under the Series B Subordinated Debentures are subordinate and junior in right of payment to all Senior Indebtedness of PECO Energy. At September 30, 1995, the Senior Indebtedness of PECO Energy aggregated approximately $5.0 billion. There are no terms in the Series B Subordinated Debentures or the Series B Guarantee that limit PECO Energy's ability to incur additional indebtedness, including indebtedness that ranks senior to the Series B Subordinated Debentures and the Series B Guarantee. The Series B Guarantee guarantees payment of accumulated and unpaid monthly distributions, amounts payable on redemption, and amounts payable on liquidation with respect to the Series B Preferred Securities, in each case, however, only to the extent that PECO Energy Capital has funds on hand legally available therefor and payment thereof does not otherwise violate applicable law. If PECO Energy were to default on its obligation to pay interest or amounts payable on redemption or maturity of the Series B Subordinated Debentures, PECO Energy Capital would lack legally available funds for the payment of Distributions or amounts payable on redemption of the Series B Preferred Securities or upon liquidation of PECO Energy Capital, and in such event the holders of the Preferred Trust Receipts representing the Series B Preferred Securities would not be able to rely upon the Series B Guarantee for payment of such amounts. Instead, holders of the Preferred Trust Receipts representing the Series B Preferred Securities would be required to seek enforcement of PECO Energy Capital's rights against PECO Energy pursuant to the terms of the Indenture. See "Description of the Series B Guarantee -- Status of the Series B Guarantee" and "Description of the Series B Subordinated Debentures and the Indenture -- Subordination." OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX IMPACT OF EXTENSION PECO Energy has the right under the Indenture to extend interest payment periods on the Series B Subordinated Debentures for up to 60 consecutive months, and, as a consequence, monthly Distributions on the Series B Preferred Securities can be deferred by PECO Energy Capital during any such extended interest payment period. Distributions in arrears after the monthly payment date therefor will accumulate additional distributions thereon at the rate per annum of 8.72% thereof. In the event PECO Energy exercises its right to extend the interest payment periods on the Series B Subordinated Debentures, PECO Energy may not declare dividends on any shares of its capital stock during such extension period. See "Description of the Series B Subordinated Debentures and the Indenture -- Option to Extend Interest Payment Period." Should an extended interest payment period occur, PECO Energy Capital will continue to accrue income for United States federal income tax purposes which will be allocated, but not distributed, to the holders of the Preferred Trust Receipts, as the owners for tax purposes of the Series B Preferred Securities represented by the Preferred Trust Receipts. As a result, the owner will include such interest in gross income for United States federal income tax purposes in advance of the receipt of cash, and will not receive the cash related to such income if the owner disposes of the Preferred Trust Receipts prior to the record date for payment of Distributions. See "United States Taxation -- Potential Extension of Payment Period." 9 15 LISTING AND TRADING OF PREFERRED TRUST RECEIPTS AND DEPOSITARY SHARES The Preferred Trust Receipts constitute a new issue of securities with no established trading market. While the Preferred Trust Receipts have been approved for listing on the NYSE, subject to notice of issuance and attainment of the NYSE distribution standards, there can be no assurance that an active market for the Preferred Trust Receipts will develop or be sustained in the future on the NYSE. Although the Dealer Managers have indicated to PECO Energy and PECO Energy Capital that they intend to make a market in the Preferred Trust Receipts as permitted by applicable laws and regulations prior to the commencement of trading on the NYSE, they are not obligated to do so and may discontinue any such market-making at any time without notice. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Preferred Trust Receipts. In order to satisfy the NYSE listing requirements, acceptance of Depositary Shares validly tendered in the Offer is subject to the conditions that as of the Expiration Date there be at least 1,000,000 Preferred Trust Receipts to be issued and 400 record or beneficial holders of Preferred Trust Receipts to be issued as a result of the Exchange, which conditions may not be waived by PECO Energy. The liquidity and trading market for Depositary Shares which are not exchanged in the Offer could be adversely affected by the reduction in the number of publicly traded Depositary Shares resulting from the Offer. The Offer is for up to 5,400,000 Depositary Shares (or 96.4% of the 5,600,000 Depositary Shares outstanding) rather than for all the outstanding Depositary Shares, to reduce the risk that the Depositary Shares would be subject to delisting following consummation of the Offer. Under the rules of the NYSE, preferred securities such as the Depositary Shares are subject to delisting if (i) the aggregate value of publicly held shares is less than $2 million and (ii) the number of publicly held shares is less than 100,000. Since at least 200,000 Depositary Shares will remain outstanding following consummation of the Offer, the number of outstanding Depositary Shares will exceed the delisting criteria set forth in clause (ii) above. In addition, based on the market price of the Depositary Shares on the NYSE ($25 1/8 on July 3, 1995, the closing sales price of the Depositary Shares on the NYSE on the last trading day immediately prior to PECO Energy's first public announcement of the Offer, and $25 3/8 on November 2, 1995), PECO Energy believes that the aggregate value of the minimum number (200,000) of Depositary Shares which will be outstanding following consummation of the Offer should exceed the delisting criteria set forth in clause (i) above. See "Price Range of Depositary Shares." If less than 5,400,000 Depositary Shares are validly tendered, then the number of Depositary Shares remaining outstanding, and the aggregate value thereof, will be even greater. POSSIBLE REDEMPTION OF PREFERRED TRUST RECEIPTS PRIOR TO OCTOBER 1, 1997 The Depositary Shares are not subject to redemption prior to October 1, 1997. Except as described below, the Series B Preferred Securities will not be subject to redemption prior to October 1, 1997. If a Tax Event shall occur and be continuing, the Series B Preferred Securities will be subject to redemption, at the option of PECO Energy Capital Corp., a Delaware corporation and a wholly owned subsidiary of PECO Energy, as the sole general partner (the "General Partner") of PECO Energy Capital, in whole or in part. If an Investment Company Act Event shall occur and be continuing, the Series B Preferred Securities will be subject to mandatory redemption following the occurrence of such event. In the event the Series B Preferred Securities are redeemed, an equal amount of related Preferred Trust Receipts will be redeemed. See "Description of the Series B Preferred Securities -- Special Event Redemptions" and "Description of the Series B Subordinated Debentures and the Indenture -- Redemption." 10 16 COMPARISON OF PREFERRED TRUST RECEIPTS AND DEPOSITARY SHARES The following is a brief summary of certain terms of the Preferred Trust Receipts and the Depositary Shares. For a more complete description of the Preferred Trust Receipts, see "Description of the Preferred Trust Receipts" and "Description of the Series B Preferred Securities." For a more complete description of the Series B Subordinated Debentures which will represent the sole source for the payment of distributions and other payments on the Series B Preferred Securities represented by the Preferred Trust Receipts, see "Description of the Series B Subordinated Debentures and the Indenture."
PREFERRED TRUST RECEIPTS DEPOSITARY SHARES --------------------------------- --------------------------------- Nature of Security....... Represents a Series B Preferred A one-fourth interest in $7.96 Security, which represents a Cumulative Preferred Stock issued limited partner interest in PECO by PECO Energy. Energy Capital. Distribution/Dividend Rate................... 8.72% per annum payable $1.99 ($7.96 per share of $7.96 monthly in arrears on the Cumulative Preferred Stock) per last day of each month of each annum payable on February 1, May year, commencing 1, August 1 and November 1 of December 29, 1995 from and each year, out of funds legally including the Exchange Date but available therefor, when, as and only if, and to the extent that, if declared by PECO Energy's Distributions are made in respect Board of Directors. Dividends are of the Series B Preferred cumulative. Accumulated unpaid Securities. Distributions in dividends do not accumulate arrears after the monthly payment additional dividends thereon. date therefor, including during any Extension Period for the Series B Subordinated Debentures, accumulate additional Distributions thereon at the rate of 8.72% per annum. Optional Redemption...... See "Maturity/Mandatory Redeemable at the option of PECO Redemption" below. Energy on and after October 1, 1997, in whole or in part, at a redemption price equal to 100% of the stated liquidation preference of the shares to be redeemed, plus accrued and unpaid dividends, if any, to the redemption date. Maturity/Mandatory Redemption............. The Preferred Trust Receipts will None be redeemed upon: (1) the redemption of the Series B Preferred Securities upon the payment at maturity of the Series B Subordinated Debentures, (2) optional redemption, in whole or in part, of the Series B Subordinated Debentures or the Series B Preferred Securities on or after October 1, 1997 or (3) the optional redemption of the Series B Subordinated Debentures or Series B Preferred Securities upon the occurrence of a Tax Event or mandatory redemption of the Series B Preferred Securities upon occurrence of an Investment Company Act Event. Any such redemption of the Preferred Trust Receipts will be at a redemption price equal to 100% of the stated
11 17
PREFERRED TRUST RECEIPTS DEPOSITARY SHARES --------------------------------- --------------------------------- liquidation preference of the Series B Preferred Securities to be redeemed, plus accrued and unpaid Distributions, if any, to the redemption date, including Distributions accrued as a result of PECO Energy's election to defer payments of interest on the Series B Subordinated Debentures. The Series B Subordinated Debentures have a final maturity of December 19, 2025. See "Description of the Preferred Trust Receipts -- Redemption of Preferred Trust Receipts" and "Description of the Series B Preferred Securities -- Mandatory Redemption" and "-- Special Event Redemptions." Withdrawal Rights........ Upon surrender of Preferred Trust Upon surrender of Depositary Receipts at the principal office Receipts (as defined below) at of the Trustee, and subject to the principal office of the the terms of the Partnership Depositary (as defined below), Agreement, a holder of Preferred and upon payment of the Trust Receipts is entitled to Depositary's customary charges delivery of the number of whole therefor, and subject to the Series B Preferred Securities terms of the deposit agreement represented by such Preferred for the Depositary Shares, a Trust Receipts. holder of the Depositary Shares is entitled to delivery of the number of whole shares of the $7.96 Preferred Stock and all money and other property, if any, represented by such Depositary Shares. Subordination............ The Series B Preferred Securities Subordinate to claims of will rank subordinate to claims creditors of PECO Energy, of creditors of PECO Energy including the Subordinated Capital, but senior to the Debentures, but senior to the general partner interests in PECO common stock of PECO Energy and Energy Capital and pari passu pari passu with all other with all other Preferred outstanding series of preferred Securities of PECO Energy stock of PECO Energy. Capital. The obligations of PECO Energy under the Series B Guarantee are subordinate and junior in right of payment to all general liabilities of PECO Energy and its obligations under the Series B Subordinated Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness of PECO Energy, which aggregated approximately $5.0 billion at September 30, 1995, but senior in payment to all capital stock of PECO Energy, including the Depositary Shares. Listing.................. The Preferred Trust Receipts have The Depositary Shares are listed been approved for listing on the on the NYSE. NYSE, subject to notice of issuance and attainment of the NYSE
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PREFERRED TRUST RECEIPTS DEPOSITARY SHARES --------------------------------- --------------------------------- distribution standards. In order to satisfy the NYSE listing requirements, acceptance of Depositary Shares validly tendered in the Offer is subject to the conditions that as of the Expiration Date there be at least 1,000,000 Preferred Trust Receipts to be issued and 400 record or beneficial holders of Preferred Trust Receipts to be issued in exchange for such Depositary Shares, which conditions may not be waived. Federal Income Tax Consequences of Distributions/ Dividends.............. Distributions are not eligible Dividends are eligible for the for the dividends received dividends received deduction for deduction for corporate holders. corporate holders. Voting Rights/Enforcement..... If (i) PECO Energy Capital fails If dividends shall be in arrears to pay Distributions in full on in an aggregate amount equivalent any series of the Preferred to four quarterly dividend Securities for 18 consecutive payments, the holders of PECO monthly distribution periods, Energy preferred stock, including (ii) an Event of Default (as the holders of Depositary Shares, defined in the Indenture) occurs have the right to elect the and is continuing, or (iii) PECO smallest number of directors Energy is in default on any of necessary to constitute a its payment obligations under the majority of the full board of Payment and Guarantee Agreements directors of PECO Energy. (the "Guarantees") relating to the Preferred Securities issued by PECO Energy Capital, then the holders of the Preferred Securities, including the Trust acting through the Trustee at the direction of the holders of the Preferred Trust Receipts, acting as a single class, will be entitled by a vote of the majority of the aggregate stated liquidation preference of the outstanding Preferred Securities to appoint a special representative (the "Special Representative") to enforce PECO Energy Capital's rights against PECO Energy under the Deferrable Interest Subordinated Debentures of PECO Energy (the "Subordinated Debentures") and the Indenture and the obligations undertaken by PECO Energy under the Guarantees, including, after failure to pay distributions for 60 consecutive monthly distribution periods on the Preferred Securities, the payment of distributions on the Preferred Securities.
13 19 PECO ENERGY PECO Energy, incorporated in Pennsylvania in 1929, is an operating utility which provides electric and gas service to the public in southeastern Pennsylvania. The total area served by PECO Energy covers 2,107 square miles. Electric service is supplied in an area of 1,972 square miles with a population of about 3,638,000, including 1,600,000 in the City of Philadelphia. Approximately 94% of the electric service area and 63% of retail kilowatthour sales are in the suburbs around Philadelphia, and 6% of the service area and 37% of such sales are in the City of Philadelphia. In 1994, approximately 60% of PECO Energy's electric output was generated from nuclear sources. PECO Energy estimates for 1995 that 59% of its electric output will come from nuclear sources. Natural gas service is supplied in a 1,475-square-mile area of southeastern Pennsylvania adjacent to Philadelphia with a population of 1,900,000. PECO Energy and its subsidiaries hold franchises to the extent necessary to operate in the areas served. PECO ENERGY CAPITAL PECO Energy Capital is a limited partnership formed in 1994 under the laws of the State of Delaware. All of its general partner interests are owned by PECO Energy Capital Corp., as the General Partner. As a limited partnership, all of the business and affairs of PECO Energy Capital are managed by the General Partner. PECO Energy Capital was created solely for the purpose of issuing the Preferred Securities and lending the proceeds thereof to PECO Energy, and entering into similar financing arrangements. Such loans are evidenced by the Subordinated Debentures issued by PECO Energy under the Indenture. The Subordinated Debentures are the only assets of PECO Energy Capital and the only revenues of PECO Energy Capital are interest on the Subordinated Debentures. The General Partner pays all of PECO Energy Capital's operating expenses and has general liability for all of PECO Energy Capital's obligations. THE TRUST PECO Energy Capital Trust I is a statutory business trust recently created under the laws of the State of Delaware. PNC Bank, Delaware is the sole trustee of the Trust (in such capacity, and not in its individual capacity, the "Trustee"). The Trust exists for the sole purpose of issuing the Preferred Trust Receipts representing the Series B Preferred Securities held by the Trust and performing functions directly related thereto. The Series B Preferred Securities are the only assets of the Trust. All expenses or liabilities of the Trust will be paid by the General Partner, provided that if the Trustee incurs fees, charges or expenses for which it is not otherwise liable under the Trust Agreement at the election of a holder of Preferred Trust Receipts or other person, such holder or other person will be liable for such fees, charges and expenses. COVERAGE RATIOS PECO Energy's Ratio of Earnings to Fixed Charges for each of the periods indicated was as follows:
SIX MONTHS ENDED JUNE YEARS ENDED DECEMBER 31, 30, - ---------------------------------------- ------------- 1990 1991 1992 1993 1994 1994 1995 - ---- ---- ---- ---- ---- ---- ---- 1.31(1) 2.55 2.43 3.15 2.66(2) 3.30 3.46
The Ratio of Earnings to Fixed Charges represents, on a pre-tax basis, the number of times earnings cover fixed charges. Earnings consist of net income to which has been added fixed charges and taxes based on income of PECO Energy. Fixed charges consist of interest on funded indebtedness, other interest, amortization of net gain on reacquired debt and net discount on debt and the interest portion of all rentals charged to income. 14 20 PECO Energy's Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends for each of the periods indicated was as follows:
SIX MONTHS ENDED JUNE YEARS ENDED DECEMBER 31, 30, - ---------------------------------------- ------------- 1990 1991 1992 1993 1994 1994 1995 - ---- ---- ---- ---- ---- ---- ---- 1.04(1) 2.14 2.06 2.67 2.32(2) 2.80 3.15
- --------------- (1) Reflects the one-time, after-tax charge against income of $250 million associated with various disallowances made by the Pennsylvania Public Utility Commission in the Limerick Unit No. 2 rate order and the one-time, after-tax charge against income of $150 million associated with PECO Energy's 1990 early retirement plan. (2) Reflects a one-time after-tax charge against income of $254 million associated with early retirement and separation programs. The Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends represents, on a pre-tax basis, the number of times earnings cover fixed charges and preferred stock dividends. Earnings consist of net income to which has been added fixed charges and taxes based on income of PECO Energy. Combined fixed charges and preferred stock dividends consist of interest on funded indebtedness, other interest, amortization of net gain on reacquired debt and net discount on debt, preferred stock dividends (increased to reflect the pre-tax earnings required to cover such dividend requirements) and the interest portion of all rentals charged to income. 15 21 SELECTED CONSOLIDATED FINANCIAL DATA Reference is made to PECO Energy's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (the "Form 10-K"), which is incorporated by reference in this Offering Circular/Prospectus and which contains PECO Energy's audited consolidated financial statements, including the consolidated income statement for the three fiscal years in the period ended December 31, 1994, consolidated balance sheets as of December 31, 1993 and 1994, and the related notes. Selected unaudited financial information as of and for the six months ended June 30, 1994 and 1995 should be read in conjunction with the audited consolidated financial statements and related notes contained in the Form 10-K and the unaudited consolidated financial statements contained in PECO Energy's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, which report is also incorporated by reference in this Offering Circular/Prospectus. Such unaudited information reflects, in the opinion of management, all adjustments, consisting of only normal accruals, necessary for a consistent presentation with the audited financial information. Results of operations for the six months ended June 30, 1995 are not necessarily indicative of the results to be expected for the full fiscal year.
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31, --------------------- ----------------------------------------------------------- 1995 1994 1994 1993 1992 1991 1990 --------- --------- --------- --------- --------- --------- --------- (MILLIONS OF DOLLARS) SUMMARY OF EARNINGS Operating Revenues........................ $ 2,017.2 $ 2,080.0 $ 4,040.6 $ 3,988.1 $ 3,962.5 $ 4,018.6 $ 3,786.7 Operating Income.......................... 489.3 463.1 829.6 1,035.4 1,033.4 1,081.2 767.7 Income from Continuing Operations......... 305.6 275.4 426.7 590.6 478.9 534.7 105.8 Net Income................................ 305.6 275.4 426.7 590.6 478.9 534.7 214.2 Earnings Applicable to Common Stock....... 293.5 253.8 389.4(2) 541.6 418.2 468.6 123.9(1) Earnings Per Average Common Share From Continuing Operations (Dollars)......... 1.32 1.15 1.76 2.45 1.90 2.15 0.07 Earnings Per Average Common Share (Dollars)............................... 1.32 1.15 1.76 2.45 1.90 2.15 0.58 Dividends Per Common Share (Dollars)...... 0.81 0.76 1.545 1.43 1.325 1.225 1.45 Common Stock Equity (Per Share)........... 19.94 19.63 19.41 19.25 18.24 17.69 16.71 Average Shares of Common Stock Outstanding (Millions).............................. 221.7 221.5 221.6 221.1 220.2 218.2 214.4 FINANCIAL CONDITION AT END OF PERIOD Net Utility Plant, at Original Cost....... 10,693.4 10,727.6 10,828.7 10,763.0 10,691.2 10,598.4 10,591.3 Leased Property, Net...................... 163.2 167.6 174.6 194.7 210.0 223.8 241.3 --------- --------- --------- --------- --------- --------- --------- Total Current Assets...................... 683.3 605.0 454.8 514.8 550.0 783.2 745.0 Total Deferred Debits and Other Assets.... 3,539.5 3,664.8 3,634.7 3,559.8 1,127.0 918.1 938.6 --------- --------- --------- --------- --------- --------- --------- Total Assets............................ $15,079.4 $15,165.0 $15,092.8 $15,032.3 $12,578.2 $12,523.5 $12,516.2 ======== ======== ======== ======== ======== ======== ======== Common Shareholders' Equity............... $ 4,423.2 $ 4,349.3 $ 4,302.5 $ 4,263.4 $ 4,022.2 $ 3,892.3 $ 3,624.5 Preferred and Preference Stock Without Mandatory Redemption............ 277.4 422.5 277.5 422.5 422.5 422.5 422.5 With Mandatory Redemption............... 92.7 182.1 92.7 186.5 231.1 315.6 330.9 Company Obligated Mandatorily Redeemable Preferred Securities of Partnership holding solely PECO Energy Debentures... 221.3 -- 221.3 -- -- -- -- Long-Term Debt............................ 4,515.5 4,876.5 4,785.6 4,884.3 5,203.9 5,415.6 5,830.8 --------- --------- --------- --------- --------- --------- --------- Total Capitalization...................... 9,530.1 9,830.4 9,679.6 9,756.7 9,879.7 10,046.0 10,208.7 --------- --------- --------- --------- --------- --------- --------- Total Current Liabilities................. 1,064.3 930.4 878.6 954.6 830.6 823.4 783.8 --------- --------- --------- --------- --------- --------- --------- Total Deferred Credits and Other Liabilities............................. 4,485.0 4,404.2 4,534.6 4,321.0 1,867.9 1,654.1 1,523.7 --------- --------- --------- --------- --------- --------- --------- Total Capitalization and Liabilities...... $15,079.4 $15,165.0 $15,092.8 $15,032.3 $12,578.2 $12,523.5 $12,516.2 ======== ======== ======== ======== ======== ======== ========
- --------------- (1) Reflects the one-time, after-tax charge against income of $250 million associated with various disallowances made by the Pennsylvania Public Utility Commission in the Limerick Unit No. 2 rate order and the one-time, after-tax charge against income of $150 million associated with PECO Energy's 1990 early retirement plan. (2) Reflects a one-time after-tax charge against income of $254 million associated with early retirement and separation programs. 16 22 On October 23, 1995, PECO Energy reported that common stock earnings for the quarter ended September 30, 1995 were $0.80 per share, which are $0.08 per share, or 11% higher than the third quarter of last year after adjusting for the one-time charge in 1994 of $0.66 per share associated with PECO Energy's retirement and separation programs. The increase in earnings was attributable to higher electric sales resulting primarily from warmer weather in August 1995 compared to last year and lower operations and maintenance expenses related to PECO Energy's retirement and separation programs. Total electric sales increased 11% from the third quarter of 1994 primarily due to increased sales to other utilities and increased residential sales. Gas sold and transported increased 42% primarily due to increased gas transported for others. Earnings for the twelve months ended September 30, 1995 were $2.68 per share as compared to $1.78 per share for the corresponding period in 1994. The increase is primarily attributable to the one-time charge in the third quarter of 1994 associated with PECO Energy's retirement and separation programs. Also contributing to the increase in earnings were lower operations and maintenance expenses related to PECO Energy's retirement and separation programs, the ongoing emphasis on cost control, a one-time gain on the sale of Conowingo Power Company in June 1995, and benefits of PECO Energy's ongoing debt and preferred stock refinancing program. These increases were partially offset by a reduction in revenue received in 1994 for accepting nuclear fuel from the Shoreham Nuclear Power Station. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, --------------------- --------------------- --------------------- 1995 1994 1995 1994 1995 1994 --------- --------- --------- --------- --------- --------- (MILLIONS OF DOLLARS) Total Operating Revenues.......... $ 1,125.2 $ 1,041.1 $ 3,142.4 $ 3,121.1 $ 4,061.9 $ 4,062.8 Net Income........................ 184.3 22.2 489.9 297.6 619.0 436.6 Shares of Common Stock -- Average (Millions)...................... 221.9 221.6 221.8 221.5 221.7 221.5 Earnings Per Average Common Share (Dollars)....................... $ 0.80 $ 0.06 $ 2.13 $ 1.20 $ 2.68 $ 1.78
17 23 THE OFFER PURPOSE OF THE OFFER The purpose of the Offer is to reduce the after-tax financing costs of PECO Energy through the replacement of Depositary Shares with Preferred Trust Receipts. Although the Distribution rate on the Preferred Trust Receipts will be higher than the dividend rate on the Depositary Shares, PECO Energy will deduct interest payable on the Series B Subordinated Debentures for federal income tax purposes; dividends payable on the Depositary Shares are not deductible by PECO Energy for federal income tax purposes. Except as described herein, PECO Energy has no present plans or intentions to make acquisitions of or offers for the Depositary Shares. PECO Energy will continue to monitor the market for the Depositary Shares outstanding after the expiration of the Offer and reserves the right, in its sole discretion, subject to applicable law, to acquire and to make offers for Depositary Shares subsequent to the Expiration Date for cash or in exchange for other securities, by optional redemption of the Depositary Shares, after October 1, 1997, or otherwise. The terms of any such acquisitions or offers may differ from the terms of the Offer. Such acquisitions or offers, if any, may depend upon, among other things, the market price of the Depositary Shares, and general economic and market conditions. GENERAL PARTICIPATION IN THE OFFER IS VOLUNTARY AND HOLDERS OF DEPOSITARY SHARES SHOULD CAREFULLY CONSIDER WHETHER TO ACCEPT. NO RECOMMENDATION TO HOLDERS TO TENDER OR TO REFRAIN FROM TENDERING IN THE OFFER IS MADE BY PECO ENERGY, THE BOARD OF DIRECTORS OF PECO ENERGY, PECO ENERGY CAPITAL, THE GENERAL PARTNER, THE TRUST OR THE TRUSTEE. HOLDERS OF DEPOSITARY SHARES ARE URGED TO CONSULT THEIR FINANCIAL AND TAX ADVISERS IN MAKING THEIR DECISIONS ON WHAT ACTION TO TAKE IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES. Holders of Depositary Shares will not have any appraisal or dissenters' rights under the Pennsylvania Business Corporation Law in connection with the Offer. PECO Energy intends to conduct the Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the SEC thereunder. PECO Energy has received all regulatory approvals necessary to consummate the Exchange. Unless the context requires otherwise, the term "Holder" with respect to the Offer means (i) any person in whose name any Depositary Shares are registered on the books of the Depositary or (ii) any other person who has obtained a properly completed stock power from the registered Holder, or (iii) any person whose Depositary Shares are held of record by The Depository Trust Company ("DTC"), Philadelphia Depository Trust Company or Midwest Securities Trust Company (collectively, the "Depositories" and each, a "Depository") who desires to deliver such Depositary Shares by book-entry transfer at such Depository. The $7.96 Cumulative Preferred Stock represented by the Depositary Shares exchanged pursuant to the Offer will be retired. PECO Energy will take all actions necessary to restore such retired Preferred Stock to the status of authorized but unissued Preferred Stock which may thereafter be reissued. TERMS OF THE OFFER Upon the terms and subject to the conditions set forth herein and in the Letter of Transmittal, PECO Energy will offer to effect an exchange of Preferred Trust Receipts for up to 5,400,000 outstanding Depositary Shares. The exchange of Preferred Trust Receipts for Depositary Shares will be effected by (a) the delivery by PECO Energy of its Series B Subordinated Debentures to the Exchange Agent, which will receive the Series B Subordinated Debentures on behalf of the Holders of the Depositary Shares, in exchange for Depositary Shares, (b) the delivery by the Exchange Agent (acting pursuant to the directions of the Holders of Depositary Shares) of the Series B Subordinated Debentures to PECO Energy Capital in consideration for the issuance and deposit by PECO Energy Capital of the Series B Preferred Securities to and with the Trust under the Trust Agreement and (c) the issuance and delivery by the Trust of the Preferred Trust Receipts to the Exchange Agent for distribution to the former Holders of the Depositary Shares. 18 24 Holders of Depositary Shares will not have the right to retain the Series B Subordinated Debentures delivered to the Exchange Agent in exchange for Depositary Shares validly tendered and accepted. The Offer will be effected on the basis of one Preferred Trust Receipt for each Depositary Share validly tendered and accepted for exchange. See "-- Procedures for Tendering." Upon the terms and subject to the conditions set forth herein and in the Letter of Transmittal, PECO Energy will accept up to 5,400,000 Depositary Shares validly tendered and not withdrawn prior to the Expiration Date and, unless the Offer has been withdrawn or terminated, PECO Energy will cause to be delivered Preferred Trust Receipts to tendering Holders of Depositary Shares as promptly as practicable following the Exchange Date. PECO Energy expressly reserves the right, in its sole discretion, to delay acceptance for exchange of Depositary Shares tendered under the Offer and the delivery of the Preferred Trust Receipts with respect to the Depositary Shares accepted for exchange (subject to Rules 13e-4 and 14e-1 under the Exchange Act, which require that PECO Energy consummate the Offer or return the Depositary Shares deposited by or on behalf of the Holders thereof promptly after the termination or withdrawal of the Offer), or to withdraw or terminate the Offer at any time prior to the Expiration Date for any reason. In all cases, except to the extent waived by PECO Energy, delivery of Preferred Trust Receipts issued with respect to the Depositary Shares accepted for exchange pursuant to the Offer will be made only after timely receipt by the Exchange Agent of Depositary Shares (or confirmation of book-entry transfer thereof), a properly completed and duly executed Letter of Transmittal or Agent's Message, as applicable, and any other documents required thereby. As of the date of this Offering Circular/Prospectus, there are 5,600,000 Depositary Shares outstanding. This Offering Circular/Prospectus, together with the Letter of Transmittal, is being sent to all registered Holders as of November 8, 1995. PECO Energy will accept validly tendered Depositary Shares (or defectively tendered Depositary Shares with respect to which PECO Energy has waived such defect) by giving oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering Holders for the purpose of receiving Depositary Shares from, and remitting Preferred Trust Receipts to, tendering Holders who are participating in the Offer and whose shares are accepted. Upon the terms and subject to the conditions of the Offer, delivery of Preferred Trust Receipts to tendering Holders will be made as promptly as practicable following the Expiration Date. If proration of tendered Depositary Shares is required, the Preferred Trust Receipts will be issued and distributed by the Exchange Agent up to 12 Business Days following the Expiration Date. If proration of tendered Depositary Shares is required, because of the difficulty in determining the number of Depositary Shares validly tendered (including shares tendered by the guaranteed delivery procedures described in "-- Procedures for Tendering"), PECO Energy does not expect that it would be able to announce the final proration factor or to commence the Exchange for any Depositary Shares pursuant to the Offer until approximately seven Business Days after the Expiration Date. Preliminary results of the proration will be announced by press release as promptly as practicable after the Expiration Date. Holders of Depositary Shares may obtain such preliminary information from the Dealer Managers, the Information Agent or the Exchange Agent and may also be able to obtain such information from their brokers. If any tendered Depositary Shares are not accepted for exchange because of an invalid tender, proration or withdrawal or termination by PECO Energy of the Offer, unless otherwise requested by the Holder under "Special Delivery Instructions" in the Letter of Transmittal, such Depositary Shares will be returned, without expense, to the tendering Holder thereof (or in the case of Depositary Shares tendered by book-entry transfer into the Exchange Agent's account at the Depository where such Depositary Shares are held, such Depositary Shares will be credited to an account maintained at the Depository designated by the participant therein who so delivered such Depositary Shares), as promptly as practicable after the Expiration Date or the withdrawal or termination of the Offer. Holders who tender Depositary Shares in the Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Depositary Shares pursuant to the Offer. See "Fees and Expenses; Transfer Taxes." 19 25 Holders who tender Depositary Shares held in global form shall receive Preferred Trust Receipts in global form and holders tendering Depositary Shares held directly in certificated form shall receive Preferred Trust Receipts in certificated form in each case unless otherwise provided in the Letter of Transmittal. See "-- Procedures for Tendering." EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION The Offer will expire on the Expiration Date. PECO Energy reserves the right to extend the Offer in its sole discretion at any time and from time to time by giving oral or written notice to the Exchange Agent and by timely public announcement communicated or as otherwise required by applicable law or regulation. During any extension of the Offer, all Depositary Shares previously tendered pursuant to the Offer and not withdrawn will remain subject to the Offer. PECO Energy expressly reserves the right to (i) extend, amend or modify the terms of the Offer in any manner and (ii) withdraw or terminate the Offer and not accept for exchange any Depositary Shares at any time prior to the Expiration Date for any reason. PECO also reserves the right to waive any condition of the Offer, including the condition that at least 2,800,000 Depositary Shares are tendered in the Offer; provided that in order to satisfy the NYSE listing requirements, acceptance of Depositary Shares validly tendered in the Offer is subject to the conditions that as of the Exchange Date there be at least 1,000,000 Preferred Trust Receipts to be issued and 400 record or beneficial holders of Preferred Trust Receipts to be issued in exchange for such Depositary Shares, which conditions may not be waived. If PECO Energy makes a material change in the terms of the Offer or if it waives a material condition of the Offer, PECO Energy may extend the Offer. The minimum period for which the Offer will be extended following a material change or waiver, other than a change in the amount of Depositary Shares sought for exchange, the consideration offered therefor or the fee paid to the Soliciting Dealers, will depend upon the facts and circumstances, including the relative materiality of the change or waiver. With respect to a change in the amount of Depositary Shares sought, the consideration offered therefor or the fee paid to the Soliciting Dealers, if required, the Offer will remain open for a minimum of ten Business Days following public announcement of such change. Any withdrawal or termination of the Offer will be followed as promptly as practicable by public announcement thereof. If PECO Energy withdraws or terminates the Offer, it will give immediate notice to the Exchange Agent, and all Depositary Shares theretofore tendered pursuant to the Offer will be returned promptly to the tendering Holders thereof. See "-- Withdrawal of Tenders." ACCUMULATED DIVIDENDS AND DISTRIBUTIONS The Preferred Trust Receipts will bear Distributions at an annual rate of 8.72% from and including the Exchange Date. Dividends accumulated after October 31, 1995 on the Depositary Shares which have been accepted for exchange in the Offer will not be paid. In lieu thereof, holders of Preferred Trust Receipts will be entitled to an additional distribution at the rate of 7.96% per annum (equal to the dividend rate on the Depositary Shares) from and including November 1, 1995 up to but not including the Exchange Date, payable at the time of the first Distribution payment on the Preferred Trust Receipts. See "Description of Preferred Trust Receipts -- Distributions." PROCEDURES FOR TENDERING The tender of Depositary Shares by a Holder thereof pursuant to one of the procedures set forth below will constitute an agreement between such Holder and PECO Energy in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal and PECO Energy's right to terminate or withdraw the Offer at any time for any reason. EACH HOLDER OF THE DEPOSITARY SHARES WISHING TO PARTICIPATE IN THE OFFER MUST (I) PROPERLY COMPLETE AND SIGN THE LETTER OF TRANSMITTAL IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED HEREIN AND IN THE LETTER OF TRANSMITTAL (EXCEPT WHEN AN AGENT'S MESSAGE IS APPROPRIATE AND UTILIZED), TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, AND DELIVER THE SAME TO THE EXCHANGE AGENT, AT ONE OF ITS ADDRESSES SET FORTH IN "-- EXCHANGE AGENT AND INFORMATION AGENT" PRIOR TO THE EXPIRATION DATE AND EITHER (A) CERTIFICATES FOR THE 20 26 DEPOSITARY SHARES MUST BE RECEIVED BY THE EXCHANGE AGENT AT SUCH ADDRESS OR (B) SUCH DEPOSITARY SHARES MUST BE TRANSFERRED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER DESCRIBED BELOW AND A CONFIRMATION OF SUCH BOOK-ENTRY TRANSFER MUST BE RECEIVED BY THE EXCHANGE AGENT, IN EACH CASE PRIOR TO THE EXPIRATION DATE OR (II) COMPLY WITH THE GUARANTEED DELIVERY PROCEDURES DESCRIBED BELOW. LETTERS OF TRANSMITTAL, DEPOSITARY SHARES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO PECO ENERGY, PECO ENERGY CAPITAL, THE TRUST, THE TRUSTEE, THE DEALER MANAGERS OR THE INFORMATION AGENT. Special Procedure for Beneficial Owners. Any beneficial owner whose Depositary Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered Holder promptly and instruct such registered Holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on its own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering its Depositary Shares, either make appropriate arrangements to register ownership of the Depositary Shares in such owner's name or obtain a properly completed stock power from the registered Holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date. THE METHOD OF DELIVERY OF DEPOSITARY SHARES AND ALL OTHER DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT (A) REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, (B) INSURANCE BE OBTAINED, AND (C) THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE. Signature Guarantees. If tendered Depositary Shares are registered in the name of the signer of the Letter of Transmittal and the Preferred Trust Receipts to be issued in exchange therefor are to be issued (and any untendered Depositary Shares are to be reissued) in the name of the registered holder (which includes any participant in a Depository whose name appears on a security listing as the owner of Depositary Shares), the signature of such signer need not be guaranteed. If the tendered Depositary Shares are registered in the name of someone other than the signer of the Letter of Transmittal, or if Preferred Trust Receipts issued in exchange therefor are to be issued in the name of any other person other than the signer of the Letter of Transmittal, such tendered Depositary Shares must be endorsed or accompanied by written instruments of transfer in form satisfactory to First Chicago Trust Company of New York, transfer agent for the Depositary Shares, and duly executed by the registered Holder, and the signature on the endorsement or instrument of transfer must be guaranteed by a financial institution (including most banks, savings and loans associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program or the Stock Exchange Medallion Program (any of the foregoing hereinafter referred to as an "Eligible Institution"). If the Depositary Shares not exchanged are to be delivered to an address other than that of the registered Holder appearing on the register for the Depositary Shares, the signature in the Letter of Transmittal must be guaranteed by an Eligible Institution. Book-Entry Transfer. PECO Energy understands that the Exchange Agent has an account or will make a request promptly after the date of this Offering Circular/Prospectus to establish accounts with respect to the Depositary Shares at DTC and such other Depositories which hold Depositary Shares for the purpose of facilitating the Offer, and subject to the establishment thereof, any financial institution that is a participant in DTC's or such other Depository's system may make book-entry delivery of Depositary Shares by causing DTC or such other Depository to transfer such Depositary Shares into the Exchange Agent's account with respect to the Depositary Shares in accordance with DTC's Automated Tender Offer Program ("ATOP") procedures, in the case of DTC, or the procedures of such other Depository, in the case of such other Depository, for such book-entry transfers. However, the exchange for the Depositary Shares so tendered will only be made after timely confirmation (a "Book-Entry Confirmation") of such book-entry transfer of Depositary Shares into the Exchange Agent's account, and timely receipt by the Exchange Agent of an Agent's Message (as such term is defined in the next sentence), in the case of a book-entry transfer effected by DTC, or the Letter of Transmittal and any other documents required by the Letter of Transmittal, in the case of DTC or any other Depository. 21 27 The term "Agent's Message" means a message, transmitted by DTC and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from a participant tendering Depositary Shares that are the subject of such Book-Entry Confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal, and that PECO Energy may enforce such agreement against such participant. Guaranteed Delivery. If a Holder desires to participate in the Offer and time will not permit a Letter of Transmittal or Depositary Shares to reach the Exchange Agent before the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if the Exchange Agent has received at its office prior to the Expiration Date a Notice of Guaranteed Delivery from an Eligible Institution setting forth the name and address of the tendering Holder, the name(s) in which the Depositary Shares are registered and, if the Depositary Shares are held in certificated form, the certificate numbers of the Depositary Shares to be tendered, and stating that the tender is being made thereby and guaranteeing that within three NYSE trading days after the date of execution of such Notice of Guaranteed Delivery by the Eligible Institution, the Depositary Shares in proper form for transfer together with a properly and duly executed Letter of Transmittal (and any other required documents), or a confirmation of book-entry transfer of such Depositary Shares into the Exchange Agent's account at a Depository with a Letter of Transmittal (and any other required documents) or, in the case of DTC, an Agent's Message, will be delivered by such Eligible Institution. Unless the Depositary Shares being tendered by the above-described method are deposited with the Exchange Agent within the time period set forth above (accompanied or preceded by a properly completed Letter of Transmittal and any other required documents) or a confirmation of book-entry transfer of such Depositary Shares into the Exchange Agent's account at a Depository, in accordance with such Depository's procedures (accompanied or preceded by a properly completed Letter of Transmittal and any other required documents) or, in the case of DTC, in accordance with DTC's ATOP procedures (along with a Letter of Transmittal or an Agent's Message), is received, PECO Energy may, at its option, reject the tender. In addition to the copy being transmitted herewith, copies of a Notice of Guaranteed Delivery which may be used by Eligible Institutions for the purposes described in this paragraph are available from the Exchange Agent and the Information Agent. Miscellaneous. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of Depositary Shares will be determined by PECO Energy, whose determination will be final and binding. PECO Energy reserves the absolute right to reject any or all tenders not in proper form or the acceptance for exchange of which may, in the opinion of PECO Energy's counsel, be unlawful. PECO Energy also reserves the absolute right to waive any defect or irregularity in the tender of any Depositary Shares, and PECO Energy's interpretation of the terms and conditions of the Offer (including the instructions in the Letter of Transmittal) will be final and binding. None of PECO Energy, the Exchange Agent, the Dealer Managers, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Tenders of Depositary Shares involving any irregularities will not be deemed to have been made until such irregularities have been cured or waived. Depositary Shares received by the Exchange Agent that are not validly tendered and as to which the irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering Holder (or in the case of Depositary Shares tendered by book-entry transfer into the Exchange Agent's account at DTC or such other Depository, such Depositary Shares will be credited to an account maintained at DTC or such other Depository designated by the participant therein who so delivered such Depositary Shares), unless otherwise requested by the Holder in the Letter of Transmittal, as promptly as practicable after the Expiration Date or the withdrawal or termination of the Offer. LETTER OF TRANSMITTAL The Letter of Transmittal contains, among other things, the following terms and conditions, which are part of the Offer. 22 28 The party tendering Depositary Shares for exchange (the "Transferor") sells, assigns and transfers the Depositary Shares to PECO Energy, and irrevocably constitutes and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to cause the Depositary Shares to be assigned, transferred and exchanged. The Letter of Transmittal directs the Exchange Agent to deliver the Series B Subordinated Debentures received upon exchange of the Depositary Shares to PECO Energy Capital. The Transferor represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Depositary Shares and to acquire Preferred Trust Receipts issuable upon the exchange of such tendered Depositary Shares and that, when such Transferor's Depositary Shares are accepted for exchange, PECO Energy will acquire good and unencumbered title to such tendered Depositary Shares, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The Transferor also warrants that it will, upon request, execute and deliver any additional documents deemed by PECO Energy to be necessary or desirable to complete the exchange, assignment and transfer of tendered Depositary Shares or transfer ownership of such Depositary Shares. All authority conferred by the Transferor will survive the death, bankruptcy or incapacity of the Transferor and every obligation of the Transferor shall be binding upon the heirs, legal representatives, successors, assigns, executors and administrators of such Transferor. WITHDRAWAL OF TENDERS Tenders of Depositary Shares pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless accepted for exchange by PECO Energy, may be withdrawn at any time after 40 Business Days from November 8, 1995. To be effective, a written notice of withdrawal delivered by mail, hand delivery or facsimile transmission must be timely received by the Exchange Agent at the address set forth below under "-- Exchange Agent and Information Agent." The method of notification is at the risk and election of the Holder. Any such notice of withdrawal must specify (i) the Holder named in the Letter of Transmittal as having tendered Depositary Shares to be withdrawn, (ii) if the Depositary Shares are held in certificated form, the certificate numbers of the Depositary Shares to be withdrawn, (iii) that such Holder is withdrawing his election to have such Depositary Shares exchanged and (iv) the name of the registered Holder of such Depositary Shares. Any notice of withdrawal must be signed by the Holder in the same manner as the original signature on the Letter of Transmittal (including any required signature guarantees) or be accompanied by evidence satisfactory to PECO Energy that the person withdrawing the tender has succeeded to the beneficial ownership of the Depositary Shares being withdrawn. The Exchange Agent will return the properly withdrawn Depositary Shares promptly following receipt of notice of withdrawal. If Depositary Shares have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at DTC or other Depository to be credited with the withdrawn Depositary Shares and otherwise comply with DTC's or such other Depository's procedures. All questions as to the validity of notice of withdrawal, including time of receipt, will be determined by PECO Energy, and such determination will be final and binding on all parties. Withdrawals of tenders of Depositary Shares may not be rescinded and any Depositary Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. Properly withdrawn Depositary Shares, however, may be retendered by following the procedures therefor described elsewhere herein at any time prior to the Expiration Date. See "-- Procedures for Tendering." ACCEPTANCE OF DEPOSITARY SHARES AND PRORATION Upon the terms and subject to the conditions of the Offer, if 5,400,000 Depositary Shares (or, if decreased as described herein, such lesser number as PECO Energy may elect to exchange pursuant to the Offer) have been validly tendered and not withdrawn prior to the Expiration Date, PECO Energy will accept for exchange all such Depositary Shares. Upon the terms and subject to the conditions of the Offer, if more than 5,400,000 Depositary Shares (or, if decreased as described herein, such lesser number) have been validly tendered and not withdrawn prior to the Expiration Date, PECO Energy will accept for exchange Depositary Shares from each Holder on a pro rata basis, subject to adjustment to avoid the acceptance for exchange of fractional shares. 23 29 If PECO Energy decreases the amount of Depositary Shares sought, changes the consideration offered therefor or changes the fee offered to the Soliciting Dealers, and the Offer is scheduled to expire less than ten Business Days from and including the date that notice of such decrease is first published, sent or given in the manner specified above in "-- Expiration Date; Extensions; Amendments; Termination," then the Offer will be extended for ten Business Days from and including the date of such notice. All Depositary Shares not accepted pursuant to the Offer, including Depositary Shares not accepted because of proration, will be returned to the tendering Holders at PECO Energy's expense as promptly as practicable following the Expiration Date. EXCHANGE AGENT AND INFORMATION AGENT First Chicago Trust Company of New York has been appointed as the Exchange Agent for the Offer. THE EXCHANGE AGENT: FIRST CHICAGO TRUST COMPANY OF NEW YORK By Hand or Overnight Courier in New York: First Chicago Trust Company of New York 14 Wall Street Tenders and Exchanges 8th Floor -- Suite 4680-PECO New York, New York 10005 By Mail: (Registered or certified mail recommended) First Chicago Trust Company of New York Tenders and Exchanges Suite 4660-PECO P.O. Box 2559 Jersey City, New Jersey 07303-2559 By Facsimile Transmission: (For Eligible Institutions Only) (201) 222-4720 or 4721 Confirm Receipt of Notice of Guaranteed Delivery by Telephone: (201) 222-4707 D. F. King & Co., Inc. (the "Information Agent") has been retained by PECO Energy as the Information Agent to assist in connection with the Offer. Questions and requests for assistance regarding the Offer, requests for additional copies of this Offering Circular/Prospectus, the Letter of Transmittal and requests for Notice of Guaranteed Delivery may be directed to the Information Agent at 77 Water Street, New York, New York 10005. Banks and brokers call: (212) 425-1685; all others telephone (800) 628-8509. PECO Energy will pay the Exchange Agent and the Information Agent reasonable and customary fees for their services and will reimburse them for all their reasonable out-of-pocket expenses in connection therewith. DEALER MANAGERS; SOLICITING DEALERS Merrill Lynch & Co. and Smith Barney Inc., as Dealer Managers, have agreed to solicit exchanges of Depositary Shares for Preferred Trust Receipts. PECO Energy will pay the Dealer Managers an aggregate fee of $0.125 per Depositary Share tendered and not withdrawn (up to 5,400,000 Depositary Shares) pursuant to 24 30 the Offer. The maximum fee payable to the Dealer Managers is approximately $675,000 plus such amount, if any, that Merrill Lynch & Co. and Smith Barney Inc. may be entitled to pursuant to the next paragraph. PECO Energy will also reimburse the Dealer Managers for certain reasonable out-of-pocket expenses in connection with the Offer and will indemnify the Dealer Managers against certain liabilities, including liabilities under the Securities Act of 1933, as amended ("Securities Act"). Merrill Lynch & Co. and Smith Barney Inc. engage in transactions with, and from time to time have each performed services for, PECO Energy, including acting as an underwriter for the issuance of the Depositary Shares. PECO Energy will pay to a Soliciting Dealer a solicitation fee of $0.50 per Depositary Share validly tendered and accepted for exchange pursuant to the Offer. As used in this Offering Circular/Prospectus, "Soliciting Dealer" includes (i) any broker or dealer in securities, including each Dealer Manager in its capacity as a broker or dealer, who is a member of any national securities exchange or of the National Association of Securities Dealers, Inc. (the "NASD"), (ii) any foreign broker or dealer not eligible for membership in the NASD who agrees to conform to the NASD's Rules of Fair Practice in soliciting tenders outside the United States to the same extent as though it were an NASD member, or (iii) any bank or trust company, any one of whom has solicited and obtained a tender pursuant to the Offer. No such fee shall be payable to a Soliciting Dealer in respect of Depositary Shares registered in the name of such Soliciting Dealer unless such Depositary Shares are held by such Soliciting Dealer as nominee and such shares are being tendered for the benefit of one or more beneficial owners identified on the Letter of Transmittal or on the Notice of Solicited Tenders (included in the materials provided to brokers and dealers). No such fee shall be payable to a Soliciting Dealer with respect to the tender of Depositary Shares by a holder unless the Letter of Transmittal accompanying such tender designates such Soliciting Dealer as such in the box captioned "Solicited Tenders" or the Notice of Solicited Tenders accompanying such tender designates such Soliciting Dealer. No such fee shall be payable to the Soliciting Dealer with respect to the tender of Depositary Shares by the holder of record, for the benefit of the beneficial owner, unless the beneficial owner has designated such Soliciting Dealer. No such fee shall be payable to the Soliciting Dealer unless the Soliciting Dealer returns a Notice of Solicited Tenders to the Exchange Agent within five business days after the Expiration Date. No such fee shall be payable to a Soliciting Dealer if such Soliciting Dealer is required for any reason to transfer the amount of such fee to a depositing holder. No broker, dealer, bank, trust company or fiduciary shall be deemed to be the agent of PECO Energy, PECO Energy Capital, the Trust, the Exchange Agent, the Information Agent or the Dealer Managers for purposes of the Offer. Soliciting Dealers are not entitled to a solicitation fee for Depositary Shares beneficially owned by such Soliciting Dealer. The maximum fee payable to Soliciting Dealers is $2,700,000, exclusive of the amount that Merrill Lynch & Co. and Smith Barney Inc. are entitled to pursuant to the preceding paragraph. Additional solicitation may be made by telephone or in person by officers and regular employees of PECO Energy and its affiliates. No additional compensation will be paid to any such officers and employees who engage in soliciting tenders. LISTING AND TRADING OF PREFERRED TRUST RECEIPTS AND DEPOSITARY SHARES The Preferred Trust Receipts constitute a new issue of securities with no established trading market. The Preferred Trust Receipts have been approved for listing on the NYSE subject to notice of issuance and attainment of the NYSE distribution standards. Trading of the Preferred Trust Receipts on the NYSE is expected to commence within a 30-day period after the initial delivery of the Preferred Trust Receipts. There can be no assurance, however, that an active market for the Preferred Trust Receipts will develop or be sustained in the future on such exchange. Although the Dealer Managers have indicated to PECO Energy that they intend to make a market in the Preferred Trust Receipts as permitted by applicable laws and regulations prior to the commencement of trading on the NYSE, they are not obligated to do so and may discontinue any such market-making at any time without notice. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Preferred Trust Receipts. In order to satisfy the NYSE listing requirements, acceptance of Depositary Shares validly tendered in the Offer are subject to the conditions that as of the Exchange Date there be at least 1,000,000 Preferred Trust Receipts to be issued and 400 record or beneficial 25 31 holders of Preferred Trust Receipts to be issued in exchange for such Depositary Shares, which conditions may not be waived. To the extent that Depositary Shares are tendered and accepted in the Offer, the terms on which untendered Depositary Shares could subsequently be sold could be adversely affected. In addition, if the Offer is substantially subscribed or oversubscribed, there would be a significant risk that round lot holdings of Depositary Shares outstanding following the Offer would be limited. See "Risk Factors -- Listing and Trading of Preferred Trust Receipts and Depositary Shares." TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OFFER Except as described or referred to herein, there are no material contracts, arrangements, understandings or relationships in connection with the Offer between PECO Energy or any of its directors or executive officers, PECO Energy Capital or the General Partner, the Trust or the Trustee and any person with respect to the Series B Subordinated Debentures, the Depositary Shares, the Series B Preferred Securities and the Preferred Trust Receipts. FEES AND EXPENSES; TRANSFER TAXES The expenses of soliciting tenders of the Depositary Shares will be borne by PECO Energy. For compensation to be paid to the Dealer Managers and Soliciting Dealers, see "The Offer -- Dealer Managers; Soliciting Dealers." The total cash expenditures to be incurred by PECO Energy in connection with the Offer, other than fees payable to the Dealer Managers and Soliciting Dealers, but including the expenses of the Dealer Managers, accounting and legal fees, and the fees and expenses of the Exchange Agent, the Information Agent, the Trustee, and Meridian Trust Company, as trustee under the Indenture (the "Indenture Trustee") are estimated to be approximately $525,000. PECO Energy will pay all transfer taxes, if any, applicable to the exchange of Depositary Shares pursuant to the Offer. If, however, Depositary Shares not tendered or accepted for exchange, are to be delivered to, or are to be issued in the name of, any person other than the registered Holder of the Depositary Shares tendered or if a transfer tax is imposed for any reason other than the exchange of Depositary Shares pursuant to the Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. PRICE RANGE OF DEPOSITARY SHARES The Depositary Shares are listed and principally traded on the NYSE. The following table sets forth, for each period shown, the high and low sales prices of the Depositary Shares as reported on the NYSE Composite Tape.
HIGH LOW --- --- Fiscal Year Ended December 31, 1993 1st Quarter............................................................ 27 1/8 25 2nd Quarter............................................................ 26 1/2 25 1/2 3rd Quarter............................................................ 27 1/8 26 4th Quarter............................................................ 27 25 3/8 Fiscal Year Ended December 31, 1994 1st Quarter............................................................ 26 3/8 24 1/2 2nd Quarter............................................................ 25 1/4 23 7/8 3rd Quarter............................................................ 25 1/8 23 3/8 4th Quarter............................................................ 24 1/4 21 5/8
26 32
HIGH LOW --- ---
Fiscal Year Ended December 31, 1995 1st Quarter............................................................ 25 22 3/8 2nd Quarter............................................................ 25 1/4 24 3rd Quarter............................................................ 26 24 7/8 4th Quarter (through November 2, 1995)................................. 26 25 1/4
On July 3, 1995 the last day of trading prior to the first public announcement of the Offer, the closing sales price of the Depositary Shares on the NYSE as reported on the Composite Tape was $25 1/8 per share. Holders of Depositary Shares are urged to obtain a current market quotation for the Depositary Shares. DESCRIPTION OF THE PREFERRED TRUST RECEIPTS The following is a summary of certain terms and provisions of the Preferred Trust Receipts and the Trust Agreement. The summary is subject to, and qualified in its entirety by reference to, the Trust Agreement and the laws of the State of Delaware for business trusts. The Trust Agreement is an exhibit to the Registration Statement of which this Offering Circular/Prospectus forms a part. The Preferred Trust Receipts will be issued by the Trust pursuant to the Trust Agreement. Each Preferred Trust Receipt represents a Series B Preferred Security. Each Series B Preferred Security has a stated liquidation preference of $25. The Preferred Trust Receipts will be issued directly to the holders thereof or in book-entry form through DTC or such other Depository at which the Exchange Agent may have established an account. The Trust is a statutory business trust created under the Delaware Business Trust Act. The Trustee will hold the Series B Preferred Securities deposited in the Trust for the benefit of the holders of the Preferred Trust Receipts. The holders of the Preferred Trust Receipts will have the right to withdraw Preferred Securities from the Trust as described below. The Trust Agreement provides that, to the fullest extent permitted by law, without the need for any other action of any person, including the Trustee and any other holder of Preferred Trust Receipts, each holder of Preferred Trust Receipts shall be entitled to enforce in the name of the Trust the Trust's rights under the Series B Preferred Securities represented by the Preferred Trust Receipts held by such holder. DISTRIBUTIONS Whenever the Trust shall receive any cash distribution representing a monthly distribution on the Series B Preferred Securities (whether or not distributed by PECO Energy Capital on the regular monthly distribution date therefor) or payment under the Series B Guarantee in respect thereof, the Trust shall distribute such amounts to the holders of the Preferred Trust Receipts in proportion to the respective number of Series B Preferred Securities represented by such Preferred Trust Receipts. Under the Indenture, PECO Energy shall have the right at any time after payment of the Additional Distribution (as defined below), so long as an Event of Default under the Indenture has not occurred and is continuing, to extend the interest payment period for all Subordinated Debentures for up to 60 consecutive months; provided that no Extension Period shall extend beyond the stated maturity date or date of redemption of any series of Subordinated Debentures. At the end of the Extension Period, PECO Energy shall pay all interest then accrued and unpaid on such Subordinated Debentures (together with interest thereon to the extent permitted by applicable law at the rate per annum borne by such Subordinated Debentures). During any Extension Period, no Distributions will be made on the Series B Preferred Securities represented by the Preferred Trust Receipts; however, all accrued and unpaid Distributions (together with any applicable Distributions on such Distributions) shall be paid at the end of the Extension Period. See "Description of the Series B Subordinated Debentures and the Indenture -- Option to Extend Interest Payment Period." The paying agent for the Preferred Trust Receipts will be First Chicago Trust Company of New York. 27 33 REDEMPTION OF PREFERRED TRUST RECEIPTS Whenever PECO Energy Capital shall elect or is required to redeem Series B Preferred Securities in accordance with the Amended and Restated Limited Partnership Agreement of PECO Energy Capital, dated as of July 25, 1994, as amended (the "Partnership Agreement"), PECO Energy Capital shall give the Trustee at least 40 days' prior notice thereof. The Trustee will mail the notice of redemption not less than 30 nor more than 60 days prior to the date fixed for redemption of the Series B Preferred Securities and the Preferred Trust Receipts to the holders of the Preferred Trust Receipts. On the date of redemption of the Series B Preferred Securities, provided that PECO Energy Capital (or PECO Energy pursuant to the Series B Guarantee) shall have deposited with the Trustee the aggregate amount payable upon redemption of all Series B Preferred Securities held by the Trust to be redeemed, the Trustee shall redeem Preferred Trust Receipts representing the same number of such Series B Preferred Securities redeemed by PECO Energy Capital at the same redemption price at which such Series B Preferred Securities are redeemed. In the event that fewer than all the outstanding Preferred Trust Receipts are redeemed, the Preferred Trust Receipts to be redeemed shall be selected by lot or pro rata or other equitable method determined by the Trustee. Under the Trust Agreement, PECO Energy Capital agrees that if a partial redemption of the Series B Preferred Securities would result in a delisting of the Preferred Trust Receipts from any national exchange on which the Preferred Trust Receipts are then listed, PECO Energy Capital will only redeem the Series B Preferred Securities in whole. PAYMENTS ON LIQUIDATION OF PECO ENERGY CAPITAL Upon receipt by the Trust of any distribution from PECO Energy Capital upon liquidation of PECO Energy Capital (or payment by PECO Energy under the Series B Guarantee in respect thereof), after satisfaction of creditors of the Trust as required by applicable law, the Trustee shall distribute to the holders of the Preferred Trust Receipts such amounts in proportion to the respective number of Series B Preferred Securities represented by such Preferred Trust Receipts. PAYMENTS ON PREFERRED TRUST RECEIPTS Monthly distributions on the Preferred Trust Receipts in certificated form will be payable by check to the holders of record on the record date therefor which will be the fifteenth day (whether or not a business day) of the month, provided that the record date for the Distribution on December 29, 1995 will be the date of initial issuance of the Preferred Trust Receipts. Payments of the redemption price of the Preferred Trust Receipts in certificated form and distributions in liquidation will be made at the office of First Chicago Trust Company of New York, as paying agent, upon surrender of such Preferred Trust Receipts. Payments on Preferred Trust Receipts in global form will be made through the appropriate Depository. TRANSFERS AND EXCHANGES First Chicago Trust Company of New York will act as transfer agent and registrar for the Preferred Trust Receipts. Subject to the terms and conditions of the Trust Agreement, the transfer agent shall register the transfers on its books from time to time of Preferred Trust Receipts upon any surrender thereof by the holder in person or by a duly authorized attorney, properly endorsed or accompanied by a properly executed instrument of transfer or endorsement, together with evidence of the payment of any transfer taxes as may be required by law. Upon surrender of Preferred Trust Receipts at the office of the transfer agent, subject to the terms and conditions of the Trust Agreement, the transfer agent shall execute and deliver new Preferred Trust Receipts representing the same number of Series B Preferred Securities as the Preferred Trust Receipts surrendered. As a condition precedent to the registration of the transfer or exchange of any Preferred Trust Receipt, the transfer agent, may require (i) payment to it of a sum sufficient for the payment of any tax or other governmental charge with respect thereto; (ii) the production of proof satisfactory to it as to the identity and genuineness of any signature; and (iii) compliance with such requirements as the Trustee may establish not inconsistent with the provisions of the Trust Agreement. 28 34 No service charge shall be made to a holder of Preferred Trust Receipts for any registration of transfer or exchange of Preferred Trust Receipts, but the Trustee or the registrar shall require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Trust Receipts. The transfer agent shall not be required (i) to register the transfer of or exchange any Preferred Trust Receipts for a period beginning at the opening of business ten days next preceding any selection of Preferred Trust Receipts to be redeemed and ending at the close of business on the day of the mailing of a notice of redemption of Preferred Trust Receipts or (ii) to transfer or exchange for another Preferred Trust Receipt any Preferred Trust Receipt called or being called for redemption in whole or in part. WITHDRAWAL OF SERIES B PREFERRED SECURITIES Upon surrender of Preferred Trust Receipts at the principal office of the Trustee and subject to the terms of the Trust Agreement and the Partnership Agreement, an owner of Preferred Trust Receipts is entitled to delivery of the number of whole Series B Preferred Securities represented by such Preferred Trust Receipts. Owners of Preferred Trust Receipts will be entitled to receive whole numbers of Series B Preferred Securities on the basis of one Series B Preferred Security for each Preferred Trust Receipt. Partial Series B Preferred Securities will not be issued. If the Preferred Trust Receipts delivered by the owner exceed the number of the Series B Preferred Securities to be withdrawn, the Trustee will deliver to such owner at the same time a new Preferred Trust Receipt evidencing such excess number of Preferred Trust Receipts. Subject to the terms of the Trust Agreement, owners of the Series B Preferred Securities thus withdrawn will thereafter be entitled to deposit such Series B Preferred Securities under the Trust Agreement and to receive Preferred Trust Receipts representing Series B Preferred Securities therefor. The Series B Preferred Securities will not be listed on any exchange, and as a result, the liquidity and trading market for the Series B Preferred Securities will be limited. VOTING RIGHTS If the holders of the Preferred Partner Interests (as defined in the Partnership Agreement), acting as a single class, are entitled to appoint and authorize a Special Representative pursuant to the Partnership Agreement, the Trustee shall notify the holders of the Preferred Trust Receipts of such right, request direction of each holder of a Preferred Trust Receipt as to the appointment of a Special Representative and vote the Series B Preferred Securities represented by such Preferred Trust Receipt in accordance with such direction. If the General Partner fails to convene a general meeting of PECO Energy Capital as required in the Partnership Agreement, the Trustee shall notify the holders of the Preferred Trust Receipts and, if so directed by the holders of the Preferred Trust Receipts representing Preferred Securities constituting at least 10% of the aggregate stated liquidation preference of the outstanding Preferred Partner Interests shall convene such meeting. Under the Trust Agreement, PECO Energy Capital has agreed that without the consent of the holders of 66 2/3% in liquidation amount of the Preferred Trust Receipts it may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other entity if, as a result, the Preferred Trust Receipts would be delisted, downgraded or the holders thereof would recognize any gain or loss for federal income tax purposes. Upon receipt of notice of any meeting at which the holders of Series B Preferred Securities are entitled to vote, the Trustee shall, as soon as practicable thereafter, mail to the holders of Preferred Trust Receipts a notice, which shall be provided by the General Partner and which shall contain (i) such information as is contained in such notice of meeting, (ii) a statement that the holders of Preferred Trust Receipts will be entitled, subject to any applicable provision of law, to instruct the Trustee as to the exercise of the voting rights pertaining to the amount of Series B Preferred Securities represented by their respective Preferred Trust Receipts, and (iii) a brief statement as to the manner in which such instructions may be given. Upon the written request of a holder of a Preferred Trust Receipt, the Trustee shall vote or cause to be voted the number of Series B Preferred Securities represented by such Preferred Trust Receipts in accordance with the instructions set forth in such request. 29 35 AMENDMENT AND TERMINATION OF TRUST AGREEMENT PECO Energy Capital or the General Partner may, and the Trustee shall, at any time and from time to time enter into one or more agreements supplemental to the Trust Agreement without the consent of the holders of the Preferred Trust Receipts: (i) to evidence the succession of another partnership, corporation or other entity to PECO Energy Capital or the General Partner and the assumption by any such successor of the covenants of PECO Energy Capital or the General Partner in the Trust Agreement; (ii) to add to the covenants of PECO Energy Capital or the General Partner for the benefit of the holders of the Preferred Trust Receipts, or to surrender any right or power herein conferred upon PECO Energy Capital or the General Partner; (iii) to correct or supplement any provision in the Trust Agreement which may be defective or inconsistent with any other provision therein or to make any other provisions with respect to matters or questions arising under the Trust Agreement, provided, that any such action shall not materially adversely affect the interests of the holders of Preferred Trust Receipts; or (iv) to cure any ambiguity or correct any mistake. Any other amendment of the Trust Agreement must be approved by the holders of 66 2/3% of the Preferred Trust Receipts. The Trust Agreement shall terminate upon the redemption of the Preferred Trust Receipts or a final distribution in respect of the Series B Preferred Securities and such distribution has been delivered to the holders of the Preferred Trust Receipts. EXPENSES OF THE TRUSTEE All charges or expenses of the Trust, including the charges and expenses of the Trustee, will be paid by the General Partner, provided that if the Trustee incurs fees, charges or expenses for which it is not otherwise liable under the Trust Agreement at the election of a holder of Preferred Trust Receipts or other person, such holder or other person will be liable for such fees, charges and expenses. RESIGNATION AND REMOVAL OF TRUSTEE The Trust shall at all times have a Trustee which is a bank that has its principal place of business in the State of Delaware having a combined capital and surplus of $50,000,000. If the Trustee ceases to be eligible, it will resign. The Trustee may at any time resign as trustee under the Trust Agreement by notice of its election to do so delivered to PECO Energy Capital and the General Partner, such resignation to take effect upon the appointment of a successor trustee and its acceptance of such appointment as hereinafter provided. The Trustee may at any time be removed by PECO Energy Capital by notice of such removal delivered to the Trustee, such removal to take effect upon the appointment of a successor trustee and its acceptance of such appointment. In case at any time the Trustee shall resign or be removed, PECO Energy Capital shall, within 45 days after the delivery of the notice of resignation or removal, as the case may be, appoint a successor trustee, which shall be a bank or trust company, or an affiliate of a bank or trust company, having its principal office in the State of Delaware and having a combined capital and surplus of at least $50,000,000. DESCRIPTION OF THE SERIES B PREFERRED SECURITIES The following is a summary of certain terms and provisions of the Series B Preferred Securities represented by the Preferred Trust Receipts and the Partnership Agreement. The summary is subject to, and qualified in its entirety by reference to, the Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act. The Partnership Agreement is an exhibit to the Registration Statement of which this Offering Circular/Prospectus forms a part. 30 36 GENERAL Under the Partnership Agreement, PECO Energy Capital is authorized to issue two classes of partner interests: the Preferred Securities representing limited partner interests, including the Series B Preferred Securities, and general partner interests. All of the general partner interests of PECO Energy Capital are owned by the General Partner, which is a wholly owned subsidiary of PECO Energy. All of the Preferred Securities issued by PECO Energy Capital will be of equal rank in participation in the profits and assets and income of PECO Energy Capital. The Partnership Agreement authorizes the General Partner to establish series of Preferred Securities having such designations, rights, privileges, restrictions and other terms and provisions as the General Partner may determine. Distributions on all series of Preferred Securities must be paid in full before the General Partner may participate in the profits or assets of PECO Energy Capital. DISTRIBUTIONS The Series B Preferred Securities will be entitled to Distributions out of funds on hand legally available therefor held by PECO Energy Capital at the annual rate of 8.72% of the stated liquidation preference of $25, payable monthly in arrears on the last day of each calendar month. Distributions on the Series B Preferred Securities will be cumulative, will accrue from the Exchange Date and, except as otherwise described below, will be payable monthly in arrears, on the last day of each month of each year, commencing on December 29, 1995. Distributions in arrears after the monthly payment date therefor will accumulate additional distributions thereon at the rate of 8.72% per annum. In addition, holders of Series B Preferred Securities will be entitled to receive, when, as and if declared by the General Partner out of funds on hand and legally available therefor an additional cash distribution at the rate of 7.96% per annum of the stated liquidation preference thereof from November 1, 1995 up to but not including the Exchange Date in lieu of dividends accumulating from November 1, 1995 on their Depositary Shares accepted for exchange, such additional distribution to be made at the time the first distribution on the Series B Preferred Securities is made (the "Additional Distribution"). The General Partner may make distributions on the general partner interests of PECO Energy Capital only after payment in full of all Distributions accrued on the Series B Preferred Securities and any other outstanding Preferred Securities of PECO Energy Capital. The Series B Preferred Securities will rank pari passu with all other series of Preferred Securities which may be issued by PECO Energy Capital. The Series A Preferred Securities are the only other series of Preferred Securities which have been issued by PECO Energy Capital to date. The stated liquidation preference of the Series A Preferred Securities is $221,250,000. After payment of the Additional Distribution, PECO Energy has the right under the Indenture to extend the interest payment period from time to time on the Series B Subordinated Debentures to a period not exceeding 60 consecutive months; provided that such extended interest period shall not extend beyond the stated maturity date or redemption date of any Subordinated Debentures, including the Series B Subordinated Debentures. As a consequence, monthly Distributions on the Series B Preferred Securities would be deferred (but would continue to accumulate with Distributions thereon) by PECO Energy Capital during any such extended interest payment period. In the event that PECO Energy exercises its right to extend the interest payment period on the Subordinated Debentures, PECO Energy may not declare or pay dividends on, or redeem, purchase or acquire, any of its capital stock during the extension period. PECO Energy Capital and PECO Energy currently believe that the extension of an interest payment period is unlikely. Prior to the termination of any such extension period, PECO Energy may further extend the interest payment period, provided that such extension period together with all such previous and further extensions thereof may not exceed 60 consecutive months. Upon the termination of any extension period and the payment of all amounts then due on the Subordinated Debentures, PECO Energy may elect to extend the interest payment period again, subject to the above requirements. Following an extension period of eighteen (18) months or more, the holders of Preferred Securities, including the Series B Preferred Securities, shall have the right to appoint a Special Representative (as hereinafter defined) to enforce PECO Energy Capital's rights against PECO Energy under the Subordinated Debentures and the Indenture and the obligations of PECO Energy under the Guarantees. See "-- Voting Rights," "Risk Factors" and "Description of the Series B Subordinated Debentures and the Indenture -- Option to Extend Interest Payment Period" and "-- Interest." 31 37 Distributions on the Series B Preferred Securities must be paid by PECO Energy Capital in any calendar year or portion thereof to the extent that PECO Energy Capital has funds on hand legally available therefor. It is anticipated that the funds available for distribution by PECO Energy Capital will be limited to payments received by PECO Energy Capital in respect of the Series B Subordinated Debentures. See "Description of the Series B Subordinated Debentures and the Indenture." The amount of Distributions payable for any period will be computed on the basis of twelve 30-day months and a 360-day year and, for any period shorter than a full monthly distribution period, will be computed on the basis of the actual number of days elapsed in such period. Distributions on the Series B Preferred Securities will be made to the Holders thereof as they appear on the books and records of PECO Energy Capital on the relevant record dates, which will be the 15th day of each month, provided that the record date for the Distribution on December 29, 1995 will be the date of initial issuance of the Series B Preferred Securities. If any date on which Distributions are payable on the Series B Preferred Securities is not a business day, then payment of the Distributions payable on such date will be made on the next succeeding day that is a business day (and without any interest or other payment in respect of any such delay) except that, if such business day is in the next succeeding calendar year, such payment shall be made on the immediately preceding business day, in each case with the same force and effect as if made on such date. The term "business day," as used in relation to the Series B Preferred Securities, shall mean any day other than a day on which banking institutions in the City of New York or the State of Delaware are authorized or required by law to close. CERTAIN RESTRICTIONS ON PECO ENERGY CAPITAL If distributions have not been paid in full on any series of Preferred Securities of PECO Energy Capital, PECO Energy Capital shall not: (i) pay any distributions on any other series of Preferred Securities, unless the amount of any distributions paid on any Preferred Securities is paid on all Preferred Securities then outstanding on a pro rata basis in proportion to the full distributions to which each series of Preferred Securities would be entitled if paid in full; (ii) pay any distribution on the general partner interests; or (iii) redeem, purchase or otherwise acquire any Preferred Securities or the general partner interests; until, in each case, such time as all accumulated and unpaid distributions on all series of Preferred Securities shall have been paid in full for all prior distribution periods. OPTIONAL REDEMPTION The Series B Preferred Securities are subject to redemption, at the option of the General Partner, in whole or in part, from time to time, on or after October 1, 1997, at $25 per Series B Preferred Security, plus accumulated and unpaid Distributions(whether or not declared), if any, to the date fixed for redemption (the "Redemption Price"). MANDATORY REDEMPTION If at any time PECO Energy redeems the Series B Subordinated Debentures or pays the Series B Subordinated Debentures at maturity, the Series B Preferred Securities will be subject to mandatory redemption at the Redemption Price. The Series B Preferred Securities will not be entitled to any sinking fund. SPECIAL EVENT REDEMPTIONS If a Tax Event (as defined below) shall occur and be continuing, the Series B Preferred Securities will be subject to redemption, at the option of the General Partner, in whole or in part at the Redemption Price within 90 days following the occurrence of such Tax Event. "Tax Event" means that PECO Energy Capital shall have received an opinion of counsel (which may be regular counsel to PECO Energy or an affiliate but not an employee thereof) experienced in such matters to the effect that, as a result of any amendment to, or change 32 38 (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such interpretation or pronouncement is announced on or after the date of issuance of the Series B Preferred Securities, there is more than an insubstantial risk that (i) PECO Energy Capital is subject to United States federal income tax with respect to interest received on the Series B Subordinated Debentures or PECO Energy Capital will otherwise not be taxed as a partnership, (ii) interest payable by PECO Energy on the Series B Subordinated Debentures will not be deductible for United States federal income tax purposes or (iii) PECO Energy Capital is subject to more than a de minimis amount of other taxes, duties or other governmental charges. If an Investment Company Act Event (as defined below) shall occur and be continuing, the Series B Preferred Securities will be subject to mandatory redemption in whole at the Redemption Price within 90 days following the occurrence of such Investment Company Act Event. "Investment Company Act Event" means the occurrence of a change in law or regulation or a change in official interpretation of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law") to the effect that PECO Energy Capital is or will be considered an "Investment Company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in 1940 Act Law becomes effective on or after the date of the issuance of the Series B Preferred Securities; provided, that no Investment Company Act Event shall be deemed to have occurred if PECO Energy Capital has received an opinion of counsel (which may be regular counsel to PECO Energy or any affiliate but not an employee thereof) experienced in such matters, to the effect that PECO Energy Capital and/or PECO Energy has taken reasonable measures, in its discretion, to avoid such Change in 1940 Act Law so that notwithstanding such Change in 1940 Act Law, PECO Energy Capital is not required to be registered as an "Investment Company" within the meaning of the 1940 Act. REDEMPTION PROCEDURES PECO Energy Capital may not redeem any Series B Preferred Securities unless all accumulated and unpaid Distributions have been paid on all Series B Preferred Securities for all monthly distribution periods terminating on or prior to the date of redemption. Notice of any redemption of the Preferred Partner Interests will be given by the Partnership by mail or delivery to each record holder of Series B Preferred Securities to be redeemed not fewer than 30, nor more than 60 days prior to the date fixed for redemption thereof (at least 40 days' prior for notice to the Trust). A notice of redemption shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, or on the date it was delivered in person, receipt acknowledged to the holders of such Series B Preferred Securities. Notices of redemption shall be addressed to the record holders of the Series B Preferred Securities at the addresses of the holders appearing in the books and records of the Partnership. If notice of redemption shall have been given and payment shall have been made by the Partnership to the Trust and any other holder of Series B Preferred Securities, then, upon the date of such payment all rights of beneficial owners of the Series B Preferred Securities so called for redemption will cease. In the event that any date fixed for redemption of Series B Preferred Securities is not a business day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a business day (and without any interest or other payment in respect of any such delay), except that if such business day falls in the next succeeding calendar year, such payment will be made on the immediately preceding business day (in each case with the same force and effect as if made on such day). LIQUIDATION DISTRIBUTION In the event of any voluntary or involuntary dissolution and winding up of PECO Energy Capital, the holders of the Preferred Securities will be entitled to receive out of the assets of PECO Energy Capital after satisfaction of liabilities to creditors as required by Delaware law and before any distribution of assets is made to holders of its general partner interests, the sum of their stated liquidation preference and all accumulated 33 39 and unpaid Distributions to the date of payment for such series of Preferred Securities (collectively, the "Partnership Liquidation Distribution"). All assets of PECO Energy Capital remaining after payment of the Partnership Liquidation Distribution will be distributed to the General Partner. If, upon such liquidation, the Partnership Liquidation Distribution can be paid only in part because PECO Energy Capital has insufficient assets available to pay in full the aggregate Partnership Liquidation Distribution on all Preferred Securities, then the amounts payable on each series of Preferred Securities shall be paid on a pro rata basis, in proportion to the full Partnership Liquidation Distribution to which each series of Preferred Securities would be entitled. Pursuant to the Partnership Agreement, PECO Energy Capital shall be dissolved and its affairs shall be wound up upon the occurrence of any of the following events: (i) upon the expiration of the term of PECO Energy Capital, which is 99 years, (ii) upon the withdrawal, removal or bankruptcy of the General Partner or the occurrence of any other event that under applicable law causes PECO Energy Capital Corp. to cease to be the General Partner, except for a transfer to a permitted successor of the General Partner or as otherwise provided in the Partnership Agreement, (iii) the entry of a decree of judicial dissolution, or (iv) the written consent of the General Partner and all of the holders of the Preferred Securities. Upon such dissolution, PECO Energy is required to redeem the Subordinated Debentures to fund the Partnership Liquidation Distribution. The amount per share payable on the Series B Preferred Securities in the event of any voluntary or involuntary liquidation of PECO Energy Capital is $25 plus accumulated and unpaid Distributions. MERGER, CONSOLIDATION, ETC. OF PECO ENERGY CAPITAL PECO Energy Capital may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other entity, except with the approval of the General Partner and the holders of 66 2/3% in aggregate stated liquidation preference of the outstanding Preferred Securities or as otherwise described below. The General Partner may, without the consent of the holders of the Preferred Securities, cause PECO Energy Capital to consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, a corporation, a limited liability company or a limited partnership, a trust or other entity organized as such under the laws of any state of the United States of America or the District of Columbia, provided that (i) such successor entity either (x) expressly assumes all of the obligations of PECO Energy Capital under the Preferred Securities or (y) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank, as regards participation in the profits and assets of the successor entity, at least as high as the Preferred Securities rank, as regards participation in the profits and assets of PECO Energy Capital, (ii) PECO Energy confirms its obligations under the Guarantee with regard to the Successor Securities, if any, (iii) such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease does not cause any series of Preferred Securities or Successor Securities to be delisted by any national securities exchange on which such series of Preferred Securities is then listed, (iv) such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease does not cause the Preferred Securities or Successor Securities to be downgraded by any "nationally recognized statistical rating organization," as that term is defined by the SEC for purposes of Rule 436(g)(2) under the Securities Act, (v) such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease does not adversely affect the powers, preferences and other special rights of holders of Preferred Securities or Successor Securities in any material respect, (vi) such successor entity has a purpose substantially identical to that of PECO Energy Capital and (vii) prior to such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease, PECO Energy has received an opinion of counsel (which may be regular tax or other counsel to PECO Energy or an affiliate, but not an employee thereof) experienced in such matters to the effect that (w) holders of outstanding Preferred Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the consolidation, amalgamation, merger, replacement, conveyance, transfer or lease, (x) such successor entity will be treated as a partnership for United States federal income tax purposes, (y) following such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease, PECO Energy and such successor entity will be in compliance with the 1940 Act without registering thereunder as an 34 40 investment company, and (z) such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease will not adversely affect the limited liability of holders of Preferred Securities or Successor Securities. VOTING RIGHTS Except as provided below and under "-- Merger, Consolidation, etc. of PECO Energy Capital" and "Description of the Series B Guarantee -- Amendments" and as otherwise required by law and the Partnership Agreement, the holders of the Preferred Securities will have no voting rights. If (i) PECO Energy Capital fails to pay Distributions in full on the Preferred Securities for 18 consecutive monthly distribution periods, (ii) an Event of Default (as defined in the Indenture) occurs and is continuing, or (iii) PECO Energy is in default on any of its payment obligations under the Guarantees, then the holders of the Preferred Securities, acting as a single class, will be entitled by a vote of the majority of the aggregate stated liquidation preference of the outstanding Preferred Securities to appoint a special representative (the "Special Representative") to enforce PECO Energy Capital's rights against PECO Energy under the Subordinated Debentures and the Indenture and the obligations undertaken by PECO Energy under the Guarantees, including, after failure to pay Distributions for 60 consecutive monthly distribution periods on the Preferred Securities, the payment of Distributions on the Preferred Securities. The Special Representative shall not be admitted as a partner of PECO Energy Capital or otherwise be deemed a partner of PECO Energy Capital and shall have no liability for the debts, obligations or liabilities of PECO Energy Capital. For purposes of determining whether PECO Energy Capital has failed to pay Distributions in full for 18 consecutive monthly distribution periods, Distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative Distributions on all Preferred Securities have been or contemporaneously are paid with respect to all monthly distribution periods terminating on or prior to the date of payment of such full cumulative Distributions. Subject to the requirements of applicable law, not later than 30 days after such right to appoint the Special Representative, the General Partner will convene a general meeting for the above purpose. If the General Partner fails to convene such meeting within such 30-day period, the holders of 10% of the aggregate stated liquidation preference of the Preferred Securities will be entitled to convene such meeting. The provisions of the Partnership Agreement relating to the convening and conduct of the general meetings of security holders will apply with respect to any such meeting. Any Special Representative so appointed shall vacate office immediately if PECO Energy Capital (or PECO Energy pursuant to the Guarantee) shall have paid in full all accumulated and unpaid Distributions on the Preferred Securities or such default or breach, as the case may be, shall have been cured. Notwithstanding the appointment of any such Special Representative, PECO Energy retains all rights under the Indenture, including the right to extend the interest payment period on the Subordinated Debentures. If any proposed amendment to the Partnership Agreement provides for, or the General Partner otherwise proposes to effect, any action which would materially adversely affect the powers, preferences or special rights attached to any series of Preferred Securities, whether by way of amendment to the Partnership Agreement or otherwise, then the holders of such series of Preferred Securities will be entitled to vote on such amendment or action of the General Partner (but not on any other amendment or action) and, in the case of an amendment or action which would equally adversely affect the rights or preferences of any other Preferred Securities, such Preferred Securities shall vote together as a class on such amendment or action of the General Partner (but not on any other amendment or action), and such amendment or action shall not be effective except with the approval of the holders of not less than 66 2/3% of the aggregate stated liquidation preference of such series of Preferred Securities. Except in certain circumstances described under "-- Liquidation Distribution," PECO Energy Capital will be dissolved and wound up only with the consent of the holders of all Preferred Securities then outstanding as well as the General Partner. The powers, preferences or special rights attached to any Preferred Securities will be deemed not to be adversely affected by the creation or issue of, and no vote will be required for the creation or issue of, any additional series of Preferred Securities or additional general partner interests. Holders of Preferred Securities have no preemptive rights. 35 41 So long as any Subordinated Debentures are held by PECO Energy Capital, the General Partner, unless so directed by the Special Representative, shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the holder of the Subordinated Debentures or the Indenture Trustee under the Indenture, or executing any trust or power conferred on the Indenture Trustee, (ii) waive any past default which is available under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Subordinated Debentures shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture, where such consent shall be required, without, in each case, obtaining the prior approval of the holders of at least 66 2/3% in aggregate stated liquidation preference of all series of Preferred Securities affected thereby, acting as a single class; provided, however, that where a consent under the Indenture would require the consent of each holder affected thereby, no such consent shall be given by the General Partner without the prior consent of each holder of all series of Preferred Securities affected thereby. The General Partner shall not revoke any action previously authorized or approved by a vote of any series of Preferred Securities. The General Partner shall notify all holders of the Preferred Securities of any notice of default received from the Indenture Trustee with respect to the Subordinated Debentures. Any required approval of holders of Preferred Securities may be given at a separate meeting of such holders convened for such purposes, at a meeting of all partners of PECO Energy Capital or pursuant to written consent. PECO Energy Capital will cause a notice of any meeting at which holders of any series of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of such series of Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. The holders of the Preferred Securities will have no rights to remove or replace the General Partner. MISCELLANEOUS The General Partner is authorized and directed to use its best efforts to manage the affairs of PECO Energy Capital in such a way that PECO Energy Capital would not be deemed to be an "investment company" required to be registered under the 1940 Act or taxed as a corporation for United States federal income tax purposes and so that the Subordinated Debentures will be treated as indebtedness of PECO Energy for federal income tax purposes. In this connection, the General Partner is authorized to take any action not inconsistent with applicable law, the Certificate of Limited Partnership of PECO Energy Capital or the Partnership Agreement, and that does not materially adversely affect the interests of holders of Preferred Securities, that the General Partner determines in its discretion to be necessary or desirable for such purposes. PECO Energy Capital may not borrow money or issue debt or mortgage or pledge any of its assets. DESCRIPTION OF THE SERIES B GUARANTEE The following is a summary of certain provisions of the Series B Guarantee which will be executed and delivered by PECO Energy concurrently with the issuance of the Series B Preferred Securities. The summary is subject to, and qualified by reference to the Payment and Guarantee Agreement, which is filed as an exhibit to the Registration Statement of which this Offering Circular/Prospectus forms a part. GENERAL Under the Series B Guarantee, PECO Energy will agree to pay (i) any accumulated and unpaid Distributions on the Series B Preferred Securities to the extent that PECO Energy Capital has funds on hand legally available therefor, (ii) the redemption price payable with respect to any Series B Preferred Securities called for redemption by PECO Energy Capital to the extent that PECO Energy Capital has funds on hand legally available therefor, (iii) upon a liquidation of PECO Energy Capital, the lesser of (a) the portion of the Partnership Liquidation Distribution applicable to the Series B Preferred Securities and (b) the amount of 36 42 assets of PECO Energy Capital legally available for distribution to holders of Series B Preferred Securities in liquidation of PECO Energy Capital and (iv) the Additional Distribution (collectively, the "Guarantee Payments"). PECO Energy will agree to pay the Guarantee Payments, as and when due (except to the extent paid by PECO Energy Capital), to the fullest extent permitted by law, regardless of any defense, right of set-off or counterclaim which PECO Energy may have or assert against PECO Energy Capital, the General Partner, the Trust or the Trustee. PECO Energy's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by PECO Energy to the holders of Series B Preferred Securities or by causing PECO Energy Capital to pay such amounts to such holders. STATUS OF THE SERIES B GUARANTEE The Series B Guarantee will constitute an unsecured obligation of PECO Energy and will rank subordinate and junior in right of payment to all general liabilities of PECO Energy. The Series B Guarantee will constitute a guarantee of payment and not of collection. The Series B Guarantee will be held by the General Partner for the benefit of the holders of the Series B Preferred Securities. In the event of the appointment of a Special Representative, the Special Representative may enforce the Series B Guarantee. If no Special Representative has been appointed to enforce the Series B Guarantee, the General Partner has the right to enforce the Series B Guarantee on behalf of the holders of the Series B Preferred Securities. The holders of Preferred Trust Receipts, together with the holders of the Series B Preferred Securities other than the Trust, representing not less than 10% in aggregate stated liquidation preference of the Series B Preferred Securities have the right to direct the time, method and place of conducting any proceeding to enforce any remedy available in respect of the Series B Guarantee, including the giving of directions to the General Partner or the Special Representative, as the case may be. If the General Partner or the Special Representative fails to enforce the Series B Guarantee as above provided, any holder of Preferred Trust Receipts representing Series B Preferred Securities, and any holder of Series B Preferred Securities other than the Trust, may institute a legal proceeding directly against PECO Energy to enforce its rights under the Series B Guarantee without first instituting a legal proceeding against PECO Energy Capital or any other person or entity. The Series B Guarantee will not be discharged except by payment of the Guarantee Payments in full to the extent not paid by PECO Energy Capital and by complete performance of all obligations of PECO Energy contained in the Series B Guarantee. RELATIONSHIP AMONG SERIES B GUARANTEE, SERIES B SUBORDINATED DEBENTURES AND SERIES B PREFERRED SECURITIES In addition to the obligations of PECO Energy under the Series B Guarantee, the Indenture provides that PECO Energy shall cause the General Partner to remain the general partner of PECO Energy Capital and timely perform all its duties as such (including the duty to pay Distributions on the Preferred Securities), which include, among other things, the General Partner's duties under the Partnership Agreement to directly pay all costs and expenses of PECO Energy Capital (for the purpose of insuring that payment of principal and interest by PECO Energy on the Subordinated Debentures will be sufficient to allow payment in full to the holders of the Preferred Securities) and the covenant of the General Partner in the Partnership Agreement to at all times maintain a "fair market value net worth" of at least 10% of the total contributions (less redemptions) to PECO Energy Capital. While the assets of the General Partner will not be available for making Distributions on the Preferred Securities, they will be available for payment of the expenses of PECO Energy Capital. Accordingly, the Series B Guarantee and the Indenture, together with the related covenants contained in the Partnership Agreement and PECO Energy's obligations under the Subordinated Debentures, provide for PECO Energy's full and unconditional guarantee of the Series B Preferred Securities as set forth above. CERTAIN COVENANTS OF PECO ENERGY Under the Series B Guarantee, PECO Energy will covenant that, so long as any Series B Preferred Securities remain outstanding, neither PECO Energy nor any majority-owned subsidiary of PECO Energy shall declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect 37 43 to, any of its capital stock (other than dividends by a wholly owned subsidiary) if at such time PECO Energy shall be in default with respect to its payment obligations under the Series B Guarantee or there shall have occurred any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default under the Indenture. AMENDMENTS Except with respect to any changes which do not materially adversely affect the rights of holders of Series B Preferred Securities (in which case no vote will be required), the Series B Guarantee may be amended only with the prior approval of the holders of Preferred Trust Receipts representing not less than 66 2/3% of the aggregate stated liquidation preference of the outstanding Series B Preferred Securities. MERGER OF PECO ENERGY So long as the Series B Preferred Securities remain outstanding, PECO Energy will maintain its corporate existence; provided that PECO Energy may consolidate with or merge with or into any other person or sell, convey, transfer or lease all or substantially all its properties and assets to any person if the successor person shall be organized and existing under the laws of the United States or any state thereof or the District of Columbia and shall expressly assume the obligations of PECO Energy under the Series B Guarantee. TERMINATION OF THE SERIES B GUARANTEE The Series B Guarantee will terminate and be of no further force and effect upon full payment of the redemption price of all Series B Preferred Securities or upon full payment of the amounts payable with respect to the Series B Preferred Securities upon liquidation of PECO Energy Capital. The Series B Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Series B Preferred Securities must restore payments of any sums paid under the Series B Preferred Securities or the Series B Guarantee. DESCRIPTION OF THE SERIES B SUBORDINATED DEBENTURES AND THE INDENTURE The following is a summary of certain terms and provisions of the Series B Subordinated Debentures and the Indenture. The summary is subject to, and is qualified by reference to the Indenture, which is filed as an exhibit to the Registration Statement of which this Offering Circular/Prospectus forms a part. GENERAL The Series B Subordinated Debentures will be unsecured subordinated obligations of PECO Energy issued under the Indenture. The Series B Subordinated Debentures will be in a principal amount equal to the aggregate stated liquidation preference of the Series B Preferred Securities plus the General Partner's concurrent investment in PECO Energy Capital, will bear interest at a rate equal to the Distribution rate on the Series B Preferred Securities payable on the Distribution dates, will have maturity and redemption provisions corresponding to the redemption provisions of the Series B Preferred Securities and will be subject to mandatory redemption upon the dissolution and winding up of PECO Energy Capital. The entire principal amount of the Series B Subordinated Debentures will become due and payable, together with any accrued and unpaid interest thereon, on December 19, 2025. PECO Energy will deliver the Series B Subordinated Debentures to the Exchange Agent (which will receive the Series B Subordinated Debentures on behalf of the Holders of the Depositary Shares) in exchange for the Depositary Shares. The Series B Subordinated Debentures will be delivered by the Exchange Agent to PECO Energy Capital in consideration for the issuance and deposit by PECO Energy Capital of the Series B Preferred Securities with the Trustee under the Trust Agreement. PECO Energy Capital will purchase additional Series B Subordinated Debentures issued by PECO Energy in an amount equal to the contribution made by the General Partner to PECO Energy Capital concurrently with the Exchange. 38 44 REDEMPTION Except as provided below, the Series B Subordinated Debentures may not be redeemed prior to October 1, 1997. PECO Energy shall have the right to redeem the Series B Subordinated Debentures, in whole or in part, from time to time, on or after October 1, 1997, upon not less than 30 nor more than 60 days' notice (and not less than 40 days' notice to the Trust), at a redemption price equal to 100% of the aggregate principal amount to be redeemed, plus any accrued and unpaid interest, to the redemption date, including interest accrued during an Extension Period. PECO Energy will also have the right to redeem the Series B Subordinated Debentures at any time upon the occurrence of a Tax Event if certain conditions are met as described under "Description of the Series B Preferred Securities -- Special Event Redemption." The Series B Subordinated Debentures will be subject to mandatory redemption upon the dissolution of PECO Energy Capital or upon redemption of the Series B Preferred Securities. If PECO Energy gives a notice of redemption in respect of Series B Subordinated Debentures, then, on or prior to the redemption date, PECO Energy shall deposit with the paying agent funds sufficient to pay the applicable redemption price and will give irrevocable instructions and authority to pay such redemption price. If notice of redemption shall have been given, if required, then the Series B Subordinated Debentures called for redemption shall become due and payable on the redemption date and upon the redemption date, interest will cease to accrue on the Series B Subordinated Debentures called for redemption and such Series B Subordinated Debentures will no longer be deemed to be outstanding. INTEREST The Series B Subordinated Debentures will bear interest at an annual rate of 8.72% plus Additional Interest, if any, from the Exchange Date. Interest will be payable monthly in arrears on the last day of each month of each year, commencing on December 29, 1995, to PECO Energy Capital. In addition, PECO Energy is obligated under the Series B Subordinated Debentures to pay on the first interest payment date an amount sufficient to pay the Additional Distribution. PECO Energy will make additional interest payments on any overdue installment of interest on the Series B Subordinated Debentures to PECO Energy Capital at the same rate per annum as the annual rate payable on the Series B Subordinated Debentures. Interest payments on the Subordinated Debentures are eliminated in consolidation from the Consolidated Statements of Income of PECO Energy. Distributions on the Preferred Securities appear as a separate line item under Interest Charges entitled "Dividends on Preferred Securities of Subsidiary" on the Consolidated Statements of Income of PECO Energy. ADDITIONAL INTEREST If at any time PECO Energy Capital would be required to pay any taxes, duties, or other governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, PECO Energy also will pay as Additional Interest such amounts as shall be required so that the net amounts received and retained by PECO Energy Capital after paying any such taxes, duties, or other governmental charges will not be less than the amounts PECO Energy Capital would have received had no such taxes, duties or other governmental charges been imposed. OPTION TO EXTEND INTEREST PAYMENT PERIOD Under the Indenture, PECO Energy shall have the right at any time after payment of the Additional Distribution, so long as an Event of Default under the Indenture has not occurred and is continuing, to extend the interest payment period for all Subordinated Debentures for up to 60 consecutive months; provided that no Extension Period shall extend beyond the stated maturity date or date of redemption of any series of Subordinated Debentures. At the end of the Extension Period, PECO Energy shall pay all interest then accrued and unpaid (together with interest thereon to the extent permitted by applicable law at the rate per annum borne by such Subordinated Debentures). During any such Extension Period, neither PECO Energy 39 45 nor any majority-owned subsidiary of PECO Energy shall declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than dividends by wholly owned subsidiaries). Prior to the termination of any such Extension Period, PECO Energy may shorten or further extend the interest payment period, provided that such Extension Period, together with all such further extensions thereof, may not exceed 60 consecutive months. Upon the termination of any Extension Period and the payment of all amounts then due, PECO Energy may select a new Extension Period subject to the above requirements. PECO Energy shall give the Indenture Trustee notice of its selection of such extended or shortened interest payment period one business day prior to the earlier of (i) the date PECO Energy has selected to make the interest payment or (ii) the date PECO Energy Capital is required to give notice to the NYSE or other applicable self-regulatory organization of the record date or the date such Distributions are payable, but in any event not less than two business days prior to such record date. PECO Energy shall cause the Indenture Trustee to give such notice of PECO Energy's selection of such extended interest payment period to the holders of the Preferred Securities. SUBORDINATION The Indenture provides that all payments by PECO Energy in respect of the Subordinated Debentures, including the Series B Subordinated Debentures, shall be subordinated to the prior payment in full of all amounts payable on Senior Indebtedness. The term "Senior Indebtedness" means (i) the principal of and premium, if any, in respect of (A) indebtedness of PECO Energy for money borrowed and (B) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by PECO Energy; (ii) all capital lease obligations of PECO Energy; (iii) all obligations of PECO Energy issued or assumed as the deferred purchase price of property, all conditional sale obligations of PECO Energy and all obligations of PECO Energy under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) certain obligations of PECO Energy for the reimbursement of any obligor on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction; (v) all obligations of the type referred to in clauses (i) through (iv) of other persons and all dividends of other persons (other than Preferred Securities) for the payment of which, in either case, PECO Energy is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) of other persons secured by any lien on any property or asset of PECO Energy (whether or not such obligation is assumed by PECO Energy), except for any such indebtedness that is by its terms subordinated to or pari passu with the Subordinated Debentures or indebtedness between or among PECO Energy and its affiliates. Upon any payment or distribution of assets or securities of PECO Energy, upon any dissolution or winding up or total or partial liquidation or reorganization of PECO Energy, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts payable on Senior Indebtedness (including any interest accruing on such Senior Indebtedness subsequent to the commencement of a bankruptcy, insolvency or similar proceeding) shall first be paid in full before PECO Energy Capital (as holder of the Subordinated Debentures), the Indenture Trustee on behalf of such holder or any Special Representative appointed by the holders of the Preferred Securities shall be entitled to receive from PECO Energy any payment of principal of or interest on or any other amounts in respect of the Subordinated Debentures or distribution of any assets or securities. No direct or indirect payment by or on behalf of PECO Energy of principal of or interest on the Subordinated Debentures, whether pursuant to the terms of the Subordinated Debentures or upon acceleration or otherwise, shall be made if, at the time of such payment, there exists (i) a default in the payment of all or any portion of any Senior Indebtedness or (ii) any other default pursuant to which the maturity of Senior Indebtedness has been accelerated and, in either case, requisite notice has been received by the Indenture Trustee and such default shall not have been cured or waived by or on behalf of the holders of such Senior Indebtedness. If the Indenture Trustee, PECO Energy Capital (as holder of the Subordinated Debentures) or any Special Representative appointed by the holders of the Preferred Securities, shall have received any payment on account of the principal of or interest on the Subordinated Debentures when such payment is prohibited 40 46 and before all amounts payable on, under or in connection with Senior Indebtedness are paid in full, then such payment shall be received and held in trust for the holders of Senior Indebtedness and shall be paid over or delivered first to the holders of the Senior Indebtedness remaining unpaid to the extent necessary to pay such Senior Indebtedness in full. Nothing in the Indenture shall limit the right of the Indenture Trustee, PECO Energy Capital (as holder of the Subordinated Debentures) or the Special Representative to take any action to accelerate the maturity of the Subordinated Debentures or to pursue any rights or remedies against PECO Energy; provided that all Senior Indebtedness shall be paid before PECO Energy Capital (as holder of the Subordinated Debentures) is entitled to receive any payment from PECO Energy of principal of or interest on the Subordinated Debentures. Upon the payment in full of all Senior Indebtedness, PECO Energy Capital (as holder of the Subordinated Debentures) (and any Special Representative appointed by such holders) shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of assets of PECO Energy made on such Senior Indebtedness until the Subordinated Debentures shall be paid in full. The Indenture does not limit the aggregate amount of Senior Indebtedness which PECO Energy may issue. CERTAIN COVENANTS OF PECO ENERGY PECO Energy will covenant that it and any majority-owned subsidiary will not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than dividends by wholly owned subsidiaries) (i) during an Extension Period, (ii) if there shall have occurred any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default under the Indenture or (iii) if PECO Energy shall be in default with respect to its payment obligations under any Guarantee. PECO Energy will also covenant (i) to maintain direct or indirect 100% ownership of the General Partner and will cause the General Partner to maintain 100% ownership of the general partner interests of PECO Energy Capital, (ii) to cause the General Partner to at all times maintain a "fair market net worth" of at least 10% of the total capital contributions (less redemptions) to PECO Energy Capital and to maintain general partner interests representing 3% of all interests in the capital, income, gain, loss, deduction and credit of PECO Energy Capital, (iii) to cause the General Partner to timely perform all of its duties as general partner of PECO Energy Capital (including the duty to pay Distributions on the Series B Preferred Securities), and (iv) to use its reasonable efforts to cause PECO Energy Capital to remain a limited partnership and otherwise continue to be treated as a partnership for United States federal income tax purposes. PECO Energy Capital may not waive compliance or waive any default in compliance by PECO Energy with any covenant or other term in the Indenture without the approval of the Special Representative or without the direction of the holders of 66 2/3% of the aggregate stated liquidation preference of the Preferred Securities. MODIFICATION OF THE INDENTURE The Indenture contains provisions permitting PECO Energy and the Indenture Trustee, without the consent of the Special Representative or PECO Energy Capital, to modify the Indenture or any Supplemental Indenture: (i) to cure any ambiguity, defect or inconsistency; (ii) to comply with the provisions of the Indenture regarding a successor to PECO Energy; (iii) to provide for uncertificated Subordinated Debentures in addition to or in place of certificated Subordinated Debentures; (iv) to make any other change that does not adversely affect the rights of any holder of the Subordinated Debentures; (v) to comply with any requirement for qualification of the Indenture under the Trust Indenture Act of 1939, as amended; and (vi) to set forth the terms and conditions of any series of Subordinated Debentures. 41 47 The Indenture contains provisions permitting PECO Energy and the Indenture Trustee, with the consent of the Special Representative or PECO Energy Capital at the direction of the holders of not less than 66 2/3% of the aggregate stated liquidation preference of the Preferred Securities to modify the Indenture or any supplemental indenture or the rights of the holders of the Subordinated Debentures issued under the Indenture; provided that no such modification, without the consent of each holder of the Subordinated Debentures affected, may, (i) change the stated maturity date of the principal of, or any installment of principal of or interest, if any, on, the Subordinated Debentures, (ii) reduce the principal amount of, or premium or rate of interest, if any, on, the Subordinated Debentures, (iii) reduce the amount of principal of an original issue discount Subordinated Debenture payable upon acceleration of the maturity thereof, (iv) make the Subordinated Debentures payable in money or securities other than as stated in the Subordinated Debentures, (v) impair the right to institute suit for the enforcement of any payment on or with respect to the Subordinated Debentures, (vi) adversely change the redemption provisions of the Subordinated Debentures, (vii) adversely affect the rights of the holders of the Subordinated Debentures with respect to subordination or (viii) reduce the principal amount of the holders of the Subordinated Debentures that must consent to an amendment of the Indenture. EVENTS OF DEFAULT The following are Events of Default under the Indenture: (i) default for 10 days in payment of any interest on any series of the Subordinated Debentures (other than the payment of interest during an Extension Period); (ii) default in payment of principal of (or premium, if any, on) any Subordinated Debentures; (iii) default for 60 days after notice in the performance of any other covenant or agreement in the Indenture or any series of Subordinated Debentures or (iv) certain events of bankruptcy, insolvency or reorganization of PECO Energy. In case an Event of Default under the Indenture shall occur and be continuing (other than an Event of Default relating to bankruptcy, insolvency or reorganization of PECO Energy, in which case principal and interest on all of the Subordinated Debentures shall become immediately due and payable), the Indenture Trustee, PECO Energy Capital (as holder of the Subordinated Debentures) or the Special Representative may declare the principal of all the Subordinated Debentures to be due and payable. Under certain circumstances, a declaration of acceleration with respect to Subordinated Debentures may be rescinded and past defaults (except, unless theretofore cured, a default in the payment of principal of or interest on the Subordinated Debentures) may be waived only by the Special Representative or by PECO Energy Capital at the direction of the holders of 66 2/3% in aggregate stated liquidation preference of Preferred Securities. PECO Energy is required to furnish to the Indenture Trustee annually a statement as to the performance by PECO Energy of its obligations under the Indenture and as to any default in such performance. ENFORCEMENT OF CERTAIN RIGHTS OF HOLDERS OF PREFERRED SECURITIES The holders of the Preferred Securities will have the rights referred to under "Description of the Series B Preferred Securities -- Voting Rights," including the right to appoint a Special Representative authorized to exercise the rights of PECO Energy Capital, as the holder of the Series B Subordinated Debentures, to declare the principal and interest on the Series B Subordinated Debentures due and payable and to enforce the obligations of PECO Energy under the Series B Subordinated Debentures and the Indenture directly against PECO Energy, without first proceeding against PECO Energy Capital or any other person or entity. CONSOLIDATION, MERGER, SALE OR CONVEYANCE The Indenture provides that PECO Energy may not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all its assets (either in one transaction or a series of transactions) to, any person, unless, among other things, (i) the successor person shall be organized and existing under the laws of the United States or any state thereof or the District of Columbia, and shall expressly assume by a supplemental indenture all of the obligations of PECO Energy under the Subordinated Debentures and the Indenture and (ii) immediately prior to and after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing. 42 48 DEFEASANCE AND DISCHARGE Under the terms of the Indenture, PECO Energy will be deemed to have paid and discharged the entire indebtedness of the Series B Subordinated Debentures if PECO Energy irrevocably deposits with the Indenture Trustee or other paying agent, in trust, (i) cash and/or (ii) United States Government Obligations (as defined in the Indenture), which through the payment of interest thereon and principal thereof in accordance with their terms will provide cash in an amount sufficient to pay all the principal of, premium, if any, and interest on, the Subordinated Debentures then outstanding on the dates such payments are due in accordance with the terms of the Series B Subordinated Debentures. INFORMATION CONCERNING THE INDENTURE TRUSTEE Subject to the provisions of the Indenture relating to its duties, the Indenture Trustee will be under no obligation to exercise any of its rights or powers under the Indenture, unless the Indenture Trustee receives security and indemnity reasonably satisfactory to it. Subject to such provision for indemnification, the holders of a majority in principal amount of the Subordinated Debentures then outstanding thereunder or the Special Representative will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee thereunder, or exercising any trust or power conferred on the Indenture Trustee. The Indenture contains limitations on the right of the Indenture Trustee, as a creditor of PECO Energy, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. In addition, the Indenture Trustee may be deemed to have a conflicting interest and may be required to resign as Indenture Trustee if at the time of default under the Indenture it is a creditor of PECO Energy. An affiliate of Meridian Trust Company, the Trustee under the Indenture, has from time to time engaged in transactions with, or performed services for, PECO Energy and its affiliates in the ordinary course of business. Mr. Joseph F. Paquette, Jr. is Chairman of the Board and a Director of PECO Energy and a Director of Meridian Bancorp, Inc., the parent corporation of the Indenture Trustee. DESCRIPTION OF THE DEPOSITARY SHARES The summary of the terms of the Depositary Shares set forth below does not purport to be complete and is subject to, and qualified in its entirety by reference to the provisions of PECO Energy's Amended and Restated Articles of Incorporation and the Deposit Agreement (the "Deposit Agreement") among PECO Energy, First Chicago Trust Company of New York, as depositary (the "Depositary") and Holders from time to time of the Depositary Shares, and copies of which may be obtained from PECO Energy upon request. Each Depositary Share represents a one-fourth interest in a share of $7.96 Cumulative Preferred Stock (the "$7.96 Preferred Stock"). The shares of $7.96 Preferred Stock underlying the Depositary Shares are deposited with the Depositary under the Deposit Agreement. The Depositary Shares are evidenced by Depositary Receipts ("Depositary Receipts") issued by the Depositary under the Deposit Agreement. Subject to the terms of the Deposit Agreement, each owner of a Depositary Share is entitled, through the Depositary, in proportion to the one-fourth interest in a share of $7.96 Preferred Stock underlying such Depositary Share, to all rights and preferences of the $7.96 Preferred Stock (including dividend, voting, redemption and liquidation rights). Since each share of $7.96 Preferred Stock entitles the holder thereof to one vote on matters on which the holders of the $7.96 Preferred Stock are entitled to vote, each Depositary Share, in effect, entitles the Holder thereof to one-fourth of a vote thereon, rather than one full vote. The Depositary acts as registrar and transfer agent with respect to the Depositary Shares. 43 49 GENERAL All shares of preferred stock of PECO Energy, including the $7.96 Preferred Stock, are of equal rank. The shares of the preferred stock of different series may vary as to (i) annual dividend rate or rates, (ii) redemption price or prices, if any, and any special terms and conditions applicable to redemption, (iii) amount or amounts payable upon any voluntary or involuntary liquidation or winding up of PECO Energy, (iv) terms and amounts of any sinking fund provided for the purchase or redemption of shares, and (v) conversion, participating or other special rights, and qualifications, limitations or restrictions thereof, if any. The authorized capital stock of PECO Energy consists of 15 million shares of preferred stock without par value, issuable in series, 100 million shares of preference stock, issuable in series, and 500 million shares of common stock without par value. DIVIDENDS AND OTHER DISTRIBUTIONS The Depositary distributes all cash dividends or other cash distributions received in respect of the $7.96 Preferred Stock, less any amount required to be withheld, to the record holders of Depositary Receipts representing the related Depositary Shares in proportion to the number of Depositary Shares owned by such holders on the relevant record date, which is the same date as the record date fixed by PECO Energy for the $7.96 Preferred Stock. In the event that the calculation of any such cash dividend or other cash distribution to be paid to any record holder on the aggregate number of Depositary Receipts held by such holder results in an amount which is a fraction of a cent, the amount the Depositary distributes to such record holder is rounded to the next highest whole cent. In the event of a distribution other than in cash, the Depositary is required to distribute property received by it to the record holders of Depositary Receipts entitled thereto, in proportion, as nearly as may be practicable, to the number of Depositary Shares owned by such holders on the relevant record date, unless PECO Energy determines that it is not feasible to make such distribution, in which case PECO Energy may adopt any other method for such distribution as it deems equitable and practicable, including the sale of such property and distribution of the net proceeds from such sale to such holders. The $7.96 Preferred Stock, pari passu with the issued and outstanding preferred stock of PECO Energy, is entitled to dividends when and as declared by the Board of Directors of PECO Energy at the rate of $7.96 (equivalent to $1.99 per annum per Depositary Share), payable quarterly on February 1, May 1, August 1 and November 1. After payment in full of all dividends accrued on the preferred stock, dividends on the common stock of PECO Energy or any other stock junior to the preferred stock may be declared and paid as the Board of Directors of PECO Energy determine. Unless dividends on all outstanding shares of preferred stock of all series shall have been paid for all past monthly dividend periods, no dividends shall be paid or declared and no other distribution shall be made on the preference stock or the common stock, and no preference stock or common stock shall be purchased or otherwise acquired for value by PECO Energy. REDEMPTION PROVISIONS The Depositary Shares will be redeemed from the proceeds received by the Depositary resulting from the redemption, in whole or in part, of the $7.96 Preferred Stock held by the Depositary. Whenever PECO Energy redeems any $7.96 Preferred Stock held by the Depositary, the Depositary will redeem as of the same redemption date the number of Depositary Shares representing the $7.96 Preferred Stock so redeemed. The Depositary will mail the notice of redemption no less than 30 nor more than 60 days prior to the date fixed for redemption of the $7.96 Preferred Stock and Depositary Shares to the record Holders of the Depositary Receipts. If less than all of the Depositary Shares are to be redeemed, the Depositary Shares to be redeemed will be selected by lot or pro rata or by any other method determined by PECO Energy in its sole discretion to be equitable. 44 50 The $7.96 Preferred Stock is not subject to redemption prior to October 1, 1997. Thereafter, the $7.96 Preferred Stock may be redeemed as a whole at any time or in part from time to time by PECO Energy upon not less than 30 days' notice at a price of $100 per share of $7.96 Preferred Stock (equivalent to $25 per Depositary Share) plus accrued and unpaid dividends. The $7.96 Preferred Stock is not entitled to any sinking fund. Notice of redemption having been given as described above, from and after the date fixed for redemption, unless PECO Energy shall have failed to redeem the number of shares of $7.96 Preferred Stock called for redemption, the Depositary Shares so called for redemption will no longer be deemed to be outstanding, and all rights of the Holders of the Depositary Shares will cease, except for the right to receive the monies payable upon such redemption and any money or other property to which the Holders of such Depositary Shares were entitled upon such redemption and surrender to the Depositary of the Depositary Receipts evidencing such Depositary Shares. LIQUIDATION VALUE The amount per share payable on the $7.96 Preferred Stock in the event of any voluntary or involuntary liquidation of PECO Energy is $100 (equivalent to $25 per Depositary Share) plus accrued and unpaid dividends. All shares of PECO Energy preferred stock of all series are of equal rank. VOTING RIGHTS OF $7.96 PREFERRED STOCK Except as hereinafter set forth or when some mandatory provision of law shall be controlling, the holders of preferred stock of PECO Energy, including the Holders of the Depositary Shares, have no voting rights. Holders of preferred stock of PECO Energy are entitled to vote on certain matters relating to (i) authorizing of stock (other than a series of preferred stock) ranking prior to or on a parity with the preferred stock or any security convertible into shares of stock of such kind; (ii) change of the express terms of the preferred stock or of any series thereof in a manner prejudicial to the holders thereof; (iii) issuance of additional shares of preferred stock unless, for any twelve consecutive calendar months within the fifteen calendar months immediately preceding the calendar month within which such additional shares are issued, net earnings applicable to the payment of dividends on the preferred stock and net income before payment of interest charges on indebtedness and after provision for depreciation and taxes shall have been, respectively, at least two times the dividend requirements upon the entire amount of preferred stock to be outstanding immediately after the proposed issue of such additional shares, and at least one and one-half times the aggregate of such dividend requirements and interest charges for such period on the entire amount of indebtedness then to be outstanding; (iv) issuance of additional shares of preferred stock, unless the capital of PECO Energy represented by its preference stock and common stock together with its surplus is in the aggregate at least equal to the involuntary liquidating value of the preferred stock to be outstanding immediately after the proposed issue of such additional shares of preferred stock; (v) increase in the total authorized amount of preferred stock of all series; and (vi) merger or consolidation with or into any corporation, or division, unless ordered, exempted, approved, or permitted by the SEC or other federal regulatory authority. Except as otherwise provided in the express terms of any series of preferred stock, the number of authorized shares of preferred stock of any series may be increased without vote or consent of the holders of the outstanding shares of the series so affected, subject to the aggregate limit on the authorized number of shares of preferred stock. With respect to (i), (ii), (iii), and (iv) above, the consent or affirmative vote of the holders of shares of the preferred stock entitled to cast at least two-thirds of the votes which all holders of preferred stock of all series then outstanding are entitled to cast (or of the affected series in the case of a change prejudicial to less than all series) is required; and with respect to (v) and (vi), the consent or affirmative vote of the holders of shares of the preferred stock entitled to cast at least a majority of the votes which all holders of preferred stock of all series then issued and outstanding are entitled to cast is required. Coverage under the more restrictive earnings test of PECO Energy's Amended and Restated Articles of Incorporation relating to dividend requirements and interest charges on all indebtedness and preferred stock for the twelve months ended June 30, 1995 was 2.17. 45 51 The Board of Directors of PECO Energy is classified into three classes. In each election of Directors, holders of common stock elect an entire class for three-year terms. If and when dividends payable on all shares of the preferred stock are in default in an amount equal to four full quarterly dividends, and until all dividends then in default are paid or declared and set apart for payment, the holders of all shares of preferred stock, voting separately as a class, are entitled to elect the smallest number of Directors necessary to constitute a majority of the full Board of Directors, and the holders of the common stock (and except as otherwise provided by the terms of the preference stock), voting separately as a class, are entitled to elect the remaining Directors. Holders of preferred stock are not entitled to cumulative voting rights in election of Directors. The preferred stock of all series constitutes one class in any vote of shareholders except as stated above, or when some mandatory provision of law is controlling. VOTING PROCEDURES FOR DEPOSITARY SHARES Promptly upon receipt of notice of any meeting at which the holders of the $7.96 Preferred Stock are entitled to vote, the Depositary will mail the information contained in such notice of meeting to the record holders of the Depositary Receipts as of the record date for such meeting. Each such record holder of Depositary Receipts will be entitled to instruct the Depositary as to the exercise of the voting rights pertaining to the amount of the $7.96 Preferred Stock represented by such record holder's Depositary Shares. The Depositary will endeavor, insofar as practicable, to vote the amount of the $7.96 Preferred Stock represented by such Depositary Shares in accordance with such instructions, and PECO Energy will agree to take all action which may be deemed necessary by the Depositary in order to enable the Depositary to do so. The Depositary will abstain from voting any of the $7.96 Preferred Stock to the extent that it does not receive specific instructions from the Holders of Depositary Receipts. Each share of $7.96 Preferred Stock will be entitled to one vote or a fraction thereof for each $100 or fraction thereof of involuntary liquidation value of such share on matters on which the $7.96 Preferred Stock is entitled to vote. WITHDRAWAL OF $7.96 PREFERRED STOCK Upon surrender of Depositary Receipts at the principal office of the Depositary, upon payment of the Depositary's customary charges therefor, and subject to the terms of the Deposit Agreement, the owner of the Depositary Shares evidenced thereby is entitled to delivery of the number of whole shares of the $7.96 Preferred Stock and all money and other property, if any, represented by such Depositary Shares. Owners of Depositary Shares will be entitled to receive whole shares of the $7.96 Preferred Stock on the basis of one share of $7.96 Preferred Stock for four Depositary Shares. Fractional interests in the Depositary Shares will not be issued. If the Depositary Receipts delivered by the holder evidence a number of Depositary Shares in excess of the number of Depositary Shares representing the number of whole shares of the $7.96 Preferred Stock to be withdrawn, the Depositary will deliver to such holder, at the same time, a new Depositary Receipt evidencing such excess number of Depositary Shares. Subject to the terms of the Deposit Agreement, holders of the $7.96 Preferred Stock thus withdrawn will thereafter be entitled to deposit such shares under the Deposit Agreement and to receive Depositary Receipts evidencing Depositary Shares therefor. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN PECO Energy maintains a Dividend Reinvestment and Stock Purchase Plan (as described in a separate prospectus) which permits holders of PECO Energy's common and preferred shares to reinvest cash dividends automatically and make direct investments of up to $50,000 per calendar year in shares of common stock. Holders of Preferred Trust Receipts will not be entitled to participate in PECO Energy's Dividend Reinvestment and Stock Purchase Plan. AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT The form of Depositary Receipt evidencing the Depositary Shares and any provision of the Deposit Agreement may at any time and from time to time be amended by agreement between PECO Energy and the 46 52 Depositary. Any amendment that shall impose any fees, taxes or charges shall not become effective as to outstanding Depositary Receipts until the expiration of three months after notice of such amendment has been given to the Holders of the outstanding Depositary Receipts. Any amendment which is prejudicial to any substantial existing rights of the Holders of Depositary Shares will not be effective unless such amendment has been approved by the Holders of at least a majority of the Depositary Shares then outstanding. No such amendment may impair the right, subject to the terms of the Deposit Agreement, of any owner of any Depositary Shares to surrender the Depositary Receipt evidencing such Depositary Shares with instructions to the Depositary to deliver to the holder the $7.96 Preferred Stock and all money and other property, if any represented thereby, except in order to comply with mandatory provisions of applicable law. The Deposit Agreement may be terminated by PECO Energy or the Depositary only if all outstanding Depositary Shares relating thereto have been redeemed or there has been a final distribution in respect of the $7.96 Preferred Stock in connection with any liquidation, dissolution or winding up of PECO Energy and such distribution has been distributed to the holders of the related Depositary Receipts. Notwithstanding the foregoing, PECO Energy has the right to terminate the Deposit Agreement upon 30 days' prior written notice to the Holders of the Depositary Receipts and the Depositary if (i) the deposit arrangement evidenced by the Deposit Agreement is in violation of applicable law or becomes separately taxable for federal income tax purposes or (ii) PECO Energy affects a four-for-one split of the $7.96 Preferred Stock. CHARGES OF DEPOSITARY Under the Deposit Agreement, Holders of Depositary Shares are required to pay all transfer and other taxes and governmental charges arising from the existence of the depositary arrangements. PECO Energy will pay charges of the Depositary in connection with any redemption of the $7.96 Preferred Stock. Holders of Depositary Shares pay transfer and other taxes and governmental charges and certain other charges as are provided in the Deposit Agreement to be for their accounts. RESIGNATION AND REMOVAL OF DEPOSITARY The Depositary may resign at any time by delivering to PECO Energy notice of its election to do so, and PECO Energy may at any time remove the Depositary, any such resignation or removal to take effect upon the appointment of a successor depositary and its acceptance of such appointment. Such successor depositary must be appointed within 45 days after delivery of the notice for resignation or removal and must be a bank or trust company having its principal office in the United States of America and having a combined capital and surplus of at least $50,000,000. MISCELLANEOUS The Depositary forwards all reports and communications from PECO Energy which are delivered to the Depositary and which PECO Energy is required to furnish to the holders of the $7.96 Preferred Stock. In addition, the Depositary makes available for inspection by Holders of Depositary Receipts at the principal office of the Depositary, and at such other places as it may from time to time deem advisable, any reports and communications received from PECO Energy which are received by the Depositary as the holder of $7.96 Preferred Stock. The obligations of PECO Energy and the Depositary under the Deposit Agreement are limited to performance in good faith of their duties thereunder and neither the Depositary nor PECO Energy assumes any other obligation or will be subject to any other liability under the Deposit Agreement to holders of Depositary Receipts. Neither the Depositary nor PECO Energy will be liable if it is prevented or delayed by law or any circumstance beyond its control in performing its obligations under the Deposit Agreement. The Depositary and PECO Energy will not be obligated to prosecute or defend any legal proceeding in respect of any Depositary Shares or $7.96 Preferred Stock unless satisfactory indemnity is furnished. PECO Energy and the Depositary may rely on written advice of counsel or accountants, on information provided by Holders of Depositary Shares or other persons believed in good faith to be competent to give such information and on documents believed to be genuine and to have been signed or presented by the proper party or parties. 47 53 UNITED STATES TAXATION In the opinion of Ballard Spahr Andrews & Ingersoll, counsel to PECO Energy, the following are the material United States federal income tax consequences (and certain Pennsylvania tax considerations) of the receipt of Preferred Trust Receipts in exchange for the Depositary Shares pursuant to the Offer and of the ownership and disposition of Preferred Trust Receipts. Unless otherwise stated, this summary deals only with Preferred Trust Receipts held as capital assets by holders who acquire the Preferred Trust Receipts pursuant to the Offer ("Initial Holders"). It does not deal with special classes of holders, such as dealers in securities or currencies, life insurance companies, persons holding Preferred Trust Receipts as a hedge against or which are hedged against currency risks or as a part of a straddle, or persons whose functional currency is not the United States dollar. This summary is based on the Internal Revenue Code of 1986, as amended, Treasury Regulations thereunder and administrative and judicial interpretations thereof, as of the date hereof, all of which are subject to change (possibly on a retroactive basis). ALL HOLDERS OF DEPOSITARY SHARES ARE ADVISED TO CONSULT THEIR TAX ADVISERS AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE RECEIPT OF PREFERRED TRUST RECEIPTS FOR DEPOSITARY SHARES AND OF THE OWNERSHIP AND DISPOSITION OF PREFERRED TRUST RECEIPTS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER LAWS. RECEIPT OF PREFERRED TRUST RECEIPTS FOR DEPOSITARY SHARES The receipt in the Exchange of Preferred Trust Receipts for Depositary Shares pursuant to the Offer will be treated for United States federal income tax purposes as consisting of three transactions: (a) a taxable exchange of Depositary Shares for the underlying Series B Subordinated Debentures followed by (b) a tax-free contribution of the underlying Series B Subordinated Debentures to PECO Energy Capital in exchange for Series B Preferred Securities followed, in turn, by (c) a tax-free deposit of Series B Preferred Securities with the Trust in consideration for the issuance of the Preferred Trust Receipts to the Holders of the Depositary Shares. The receipt of Preferred Trust Receipts for Depositary Shares pursuant to the Offer will be a taxable transaction. In the case of an Initial Holder who actually or constructively owns solely Depositary Shares, or not more than one percent of such stock and not more than one percent of any other class of PECO Energy stock, gain or loss will be recognized in an amount equal to the difference between (a) the fair market value on the Exchange Date of the underlying Series B Subordinated Debentures received in the Exchange and (b) the Initial Holder's tax basis in the Depositary Shares exchanged therefor, and will be long-term capital gain or loss if the Depositary Shares have been held for more than one year as of such date. For this purpose, the fair market value of the Series B Subordinated Debentures deemed issued in exchange for Depositary Shares on the Exchange Date will equal the fair market value of the Preferred Trust Receipts on that date. No further gain or loss will be recognized by an Initial Holder on account of the contribution of the underlying Series B Subordinated Debentures to PECO Energy Capital or the deposit of the Series B Preferred Securities with the Trust in consideration for the issuance of the Preferred Trust Receipts. An Initial Holder's aggregate tax basis in his pro rata share of the Series B Preferred Securities (represented by his Preferred Trust Receipts) will be equal to his tax basis for the Depositary Shares surrendered in the Exchange increased by the amount of any gain or reduced by the amount of any loss recognized in the Exchange. Holders of Depositary Shares who actually or constructively own more than one percent of any class of PECO Energy stock are advised to consult their tax advisers as to the income tax consequences of exchanging Depositary Shares. CLASSIFICATION OF PECO ENERGY CAPITAL AND THE TRUST In connection with the issuance of Preferred Trust Receipts, Ballard Spahr Andrews & Ingersoll will render its tax opinion to the effect that, under then current law and assuming full compliance with the terms of 48 54 the Partnership Agreement and the Trust Agreement, (a) PECO Energy Capital will be classified for United States federal income tax purposes as a partnership and not as an association taxable as a corporation and (b) the Trust will be classified as a grantor trust and not as an association taxable as a corporation. As a consequence, each Securityholder will be considered the owner of a pro rata portion of the Series B Preferred Securities held by the Trust. As a further consequence, each Securityholder will be required to include in gross income his pro rata share of the income accrued on the Series B Subordinated Debentures held by PECO Energy Capital and allocated to the Trust. Such income should not exceed distributions received by the Securityholders on the Preferred Trust Receipts except in limited circumstances described under "-- Potential Extension of Payment Period." No portion of such income will be eligible for the dividends received deduction. ACCRUAL OF ORIGINAL ISSUE DISCOUNT AND PREMIUM The underlying Series B Subordinated Debentures will be considered to have been issued with "original issue discount." PECO Energy Capital will be required to include original issue discount on the Series B Subordinated Debentures in income as it accrues, in accordance with a constant yield method based on a compounding of interest. Each Securityholder, including a taxpayer who otherwise uses the cash method of accounting, will be required to include his pro rata share of such original issue discount allocated to the Trust. Generally, all of a Securityholder's taxable interest income with respect to the Series B Subordinated Debentures will be accounted for by PECO Energy Capital as "original issue discount" and actual distributions of stated interest will not be separately reported as taxable income. So long as the interest payment period is not extended, cash distributions received by an initial Securityholder for any monthly interest period will equal or exceed the sum of the daily accruals of income for such interest period, unless the issue price of the underlying Series B Subordinated Debentures (as defined below) is less than $25. The total amount of "original issue discount" on the underlying Series B Subordinated Debentures will equal the difference between the "issue price" of the Series B Subordinated Debentures and their "stated redemption price at maturity." Because PECO Energy has the right to extend the interest payment period of the Series B Subordinated Debentures, all of the stated interest payments on the Series B Subordinated Debentures will be includible in determining their "stated redemption price at maturity." The "issue price" of each $25 principal amount of the Series B Subordinated Debentures will be equal to the fair market value of the Depositary Shares on the Exchange Date, which may be more or less than $25, with the result that the total amount of original issue discount on the underlying Series B Subordinated Debentures may be more or less than the amount of stated interest payable with respect thereto. POTENTIAL EXTENSION OF PAYMENT PERIOD Securityholders will continue to accrue original issue discount with respect to their pro rata share of the underlying Series B Subordinated Debentures during an extended interest payment period, and any Securityholders who dispose of Preferred Trust Receipts prior to the record date for the payment of Distributions following such extended interest payment period will not receive from the Trust any cash related thereto. Under the terms of the Indenture, PECO Energy will be permitted to extend the interest payment period on the Series B Subordinated Debentures up to 60 consecutive months. In the event that PECO Energy exercises this right, PECO Energy may not declare dividends on any of its capital stock during such extended interest period. PECO Energy currently believes that the extension of an interest payment period is unlikely. In the event that the interest payment period is extended, PECO Energy Capital will continue to accrue income, generally equal to the amount of the interest payment due at the end of the extended payment period, over the length of the extended interest payment period. Accrued income will be allocated, but not distributed, to Securityholders of record on the 15th day of each calendar month. As a result, during an extended interest payment period, Securityholders will be required to include interest in gross income in advance of the receipt of cash, and any such Securityholders who dispose of Preferred Trust Receipts prior to the record date for the payment of Distributions following 49 55 such extended interest payment period will include interest in gross income but will not receive any cash related thereto from the Trust. The tax basis of a Series B Preferred Security will be increased by the amount of any interest that is included in income without a receipt of cash, and will be decreased again when and if such cash is subsequently received from PECO Energy and distributed by PECO Energy Capital and the Trust. The subsequent receipt or distribution of such cash will not be included in gross income. TREATMENT OF THE PAYMENT OF THE ADDITIONAL DISTRIBUTION The Additional Distribution payable on the first monthly Distribution date for the Preferred Trust Receipts should be treated as a dividend for United States federal income tax purposes. WITHDRAWAL OF SERIES B PREFERRED SECURITIES The receipt of Series B Preferred Securities by a Securityholder in exchange for Preferred Trust Receipts (and vice versa), at the option of the Securityholder, will not be a taxable event. The Securityholder's tax basis and holding period for the Series B Preferred Securities immediately after the exchange will equal the Securityholder's tax basis and holding period for the Preferred Trust Receipts (or Series B Preferred Securities, as applicable) surrendered in the exchange. Income earned from the Series B Preferred Securities will be reported annually to the Securityholder and to the Internal Revenue Service on Schedule K-1 and not on Form 1099. DISPOSITION OF THE PREFERRED TRUST RECEIPTS Gain or loss will be recognized on a sale, including a redemption for cash, of Preferred Trust Receipts in an amount equal to the difference between the amount realized and the Securityholder's tax basis in his pro rata share of Series B Preferred Securities represented by such Preferred Trust Receipts. Gain or loss recognized by a Securityholder on the sale or exchange of Preferred Trust Receipts held for more than one year generally will be taxable as long-term capital gain or loss. PENNSYLVANIA TAX CONSIDERATIONS In the opinion of Ballard Spahr Andrews & Ingersoll, the Preferred Trust Receipts are exempt from existing personal property taxes in Pennsylvania. UNITED STATES ALIEN HOLDERS For purposes of this discussion, a "United States Alien Holder" is any holder or beneficial owner who or which is (a) a nonresident alien individual or (b) a foreign corporation, partnership, estate or trust, in either case not subject to United States federal income tax on a net income basis in respect of a Series B Preferred Security. Under present United States federal income tax law, subject to the discussion below with respect to backup withholding: (i) Payments by the Trust or any of its paying agents to any United States Alien Holder will not be subject to United States withholding tax provided that (a) the beneficial owner of the Preferred Trust Receipt does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of PECO Energy, (b) the beneficial owner of the Preferred Trust Receipt is not a controlled foreign corporation that is related to PECO Energy through stock ownership, and (c) either (A) the beneficial owner of the Preferred Trust Receipt certifies to the Trust or its agent, under penalties of perjury, that it is a United States Alien Holder and provides its name and address or (B) the holder of the Preferred Trust Receipt is a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution"), and such holder certifies to the Trust or its agent under penalties of perjury that such statement has been received from the beneficial owner by it or by a financial institution between it and the beneficial owner and furnishes the payor with a copy thereof; and (ii) a United States Alien Holder of a Preferred Trust Receipt will not be subject to United States federal income or withholding tax on any gain realized on the Exchange or on the sale or exchange of a Preferred Trust Receipt unless such person is present in the United States for 183 days or more in the 50 56 taxable year of sale and such person has a "tax home" in the United States or certain other requirements are met. BACKUP WITHHOLDING AND INFORMATION REPORTING In general, information reporting requirements will apply to payments to noncorporate United States holders of the proceeds of the sale of the Preferred Trust Receipts within the United States and "backup withholding" at a rate of 31% will apply to such payments if the seller fails to provide a correct taxpayer identification number. Payments of the proceeds from the sale by a United States Alien Holder of Preferred Securities made to or through a foreign office of a broker will not be subject to information reporting or backup withholding, except that, if the broker is a United States person, a controlled foreign corporation for United States federal tax purposes or a foreign person 50% or more of whose gross income is effectively connected with a United States trade or business for a specified three-year period, information reporting may apply to such payment. Payments of the proceeds from the sale of Preferred Securities to or through the United States office of a broker is subject to information reporting and backup withholding unless the holder or beneficial owner certifies as to its non-United States status or otherwise establishes an exemption from information reporting and backup withholding. LEGAL MATTERS Certain matters of Delaware law relating to the validity of the Series B Preferred Securities and the Preferred Trust Receipts will be passed upon for PECO Energy Capital and the Trust by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to PECO Energy Capital and the Trust. The validity of the Series B Guarantee and the Series B Subordinated Debentures will be passed upon on behalf of PECO Energy by Ballard Spahr Andrews & Ingersoll, Philadelphia, Pennsylvania. Certain legal matters will be passed upon on behalf of the Dealer Managers by Drinker Biddle & Reath, Philadelphia, Pennsylvania, counsel to the Dealer Managers. Ballard Spahr Andrews & Ingersoll and Drinker Biddle & Reath, will rely on Richards, Layton & Finger, P.A. as to certain matters of Delaware law. EXPERTS The consolidated financial statements and schedules of PECO Energy incorporated by reference in this Offering Circular/Prospectus have been audited by Coopers & Lybrand L.L.P., independent accountants, for the periods indicated in their report thereon which is included in the Annual Report on Form 10-K for the year ended December 31, 1994. The consolidated financial statements and schedules audited by Coopers & Lybrand L.L.P. have been incorporated herein by reference in reliance on their report given on their authority as experts in accounting and auditing. 51 57 Facsimile copies of the Letter of Transmittal will not be accepted. Letters of Transmittal, certificates representing Depositary Shares and any other required documents should be sent by each Holder of Depositary Shares or his broker, dealer, commercial bank, trust company or other nominee to the Exchange Agent at one of the addresses as set forth below: THE EXCHANGE AGENT IS: FIRST CHICAGO TRUST COMPANY OF NEW YORK By Hand or Overnight Courier in New York: First Chicago Trust Company of New York 14 Wall Street Tenders and Exchanges 8th Floor -- Suite 4680 -- PECO New York, New York 10005 By Mail: (registered or certified mail recommended) First Chicago Trust Company of New York Tenders and Exchanges Suite 4660 -- PECO P.O. Box 2559 Jersey City, New Jersey 07303-2559 By Facsimile Transmission: (For Eligible Institutions Only) (201) 222-4720 or 4721 Confirm Receipt of Notice of Guaranteed Delivery by Telephone: (201) 222-4707 The Information Agent is: D. F. King & Co., Inc.. 77 Water Street New York, New York 10005 Banks and Brokers Call: (212) 425-1685 ALL OTHERS CALL TOLL-FREE: (800) 628-8509 Any questions or requests for assistance or additional copies of this Offering Circular/Prospectus, the Letter of Transmittal or for copies of the Notice of Guaranteed Delivery may be directed to the Information Agent at its telephone number and location set forth above. You may also contact your broker, dealer, commercial bank or trust company or other nominee for assistance concerning the Offer. The Dealer Managers for the Offer are: MERRILL LYNCH & CO. SMITH BARNEY INC. 58 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 21. EXHIBITS
EXHIBIT NUMBERS - ------- 1-1 Dealer Manager Agreement. 3-1 Amended and Restated Articles of Incorporation of PECO Energy (incorporated by reference to Exhibit 3-1 of PECO Energy's 1993 Annual Report on Form 10-K, File No. 1-1401). 3-2 Bylaws of PECO Energy, adopted February 26, 1990 and amended January 24, 1994 (incorporated by reference to Exhibit 3-2 of PECO Energy's 1993 Annual Report on Form 10-K, File No. 1-1401). 3-3 Certificate of Limited Partnership of PECO Energy Capital, L.P. (incorporated by reference to Registration Statement Nos. 33-53785 and 33-53785-01). 4-1 Amended and Restated Limited Partnership Agreement of PECO Energy Capital (incorporated by reference to Exhibit 10-7 of PECO Energy's 1994 Annual Report on Form 10-K, File No. 1-1401). 4-2 Amendment to Amended and Restated Limited Partnership Agreement of PECO Energy Capital.* 4-3 Form of Action of General Partner creating Series B Preferred Securities.* 4-4 Form of Series B Preferred Security Certificate (included in Exhibit 4-1 above). 4-5 Subordinated Debenture Indenture (incorporated by reference to Exhibit 4-5 of PECO Energy's 1994 Annual Report on Form 10-K, File No. 1-1401). 4-6 Form of Series B Subordinated Debenture (included in Exhibit 4-7 below). 4-7 Form of First Supplemental Indenture.* 4-8 Certificate of Trust.* 4-9 Trust Agreement.* 4-10 Form of Amended and Restated Trust Agreement.* 4-11 Form of Payment and Guarantee Agreement.* 4-12 Form of Certificate Representing the Preferred Trust Receipts (included in Exhibit 4-10 above). 5-1 Opinion of Ballard Spahr Andrews & Ingersoll relating to the legality of the Series B Subordinated Debentures and Series B Guarantees, including consent.* 5-2 Opinion of Richards, Layton & Finger, P.A., relating to the legality of the Preferred Trust Receipts, including consent.* 8 Opinion of Ballard Spahr Andrews & Ingersoll as to tax matters.* 12-1 Computations of PECO Energy's Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements for the years ended December 31, 1990-1994 and for the three months ended March 31, 1994 and March 31, 1995 (incorporated by reference to Exhibits 12-1 and 12-2, respectively, of PECO Energy's 1994 Annual Report on Form 10-K, File No. 1-1401 and PECO Energy's Quarterly Reports on Form 10-Q for the quarters ended June 30, 1994 and June 30, 1995).
- --------------- * Previously filed as an Exhibit (with the same exhibit number) to Registration Statement Nos. 33-60859 and 33-60859-01. II-1 59
EXHIBIT NUMBERS - ------- 13 PECO Energy's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995 and June 30, 1995 (incorporated by reference, File No. 1-1401). 21 List of Subsidiaries of PECO Energy*. 23-1 Consent of Independent Accountants. 23-2 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5-1). 23-3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5-2). 24 Powers of Attorney.* 25-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Meridian Trust Company, as Trustee under the First Supplemental Indenture.* 25-2 Amendment No. 1 to Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Meridian Trust Company, as Trustee under the First Supplemental Indenture.* 99-1 Proposed Form of Letter of Transmittal.* 99-2 Proposed Form of Notice of Guaranteed Delivery.* 99-3 Proposed Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.* 99-4 Proposed Form of Letter to Clients.* 99-5 Form of Exchange Agent Agreement.* 99-6 Form of Information Agent Agreement.* 99-7 Form of Newspaper Announcement.* 99-8 Press Release.* 99-9 Form of Letter from PECO Energy to Holders of $7.96 Cumulative Preferred Stock.* 99-10 Form of Questions and Answers.* 99-11 Form of Dealer Manager's Letter to Non-Contacts.*
- --------------- * Previously filed as an Exhibit (with the same exhibit number) to Registration Statement Nos. 33-60859 and 33-60859-01. II-2 60 ITEM 22. UNDERTAKINGS (c) 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. (1) The undersigned registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrants' 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. (2) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have 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 Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit, or proceeding) is asserted by such director, officer of controlling person in connection with the securities being registered, the Registrants 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. (3) The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (4) The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (5) The undersigned registrants hereby undertake to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. II-3 61 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant, PECO Energy Capital, L.P., has duly caused this Amendment No. 2 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Philadelphia, Commonwealth of Pennsylvania, on the 3rd of November, 1995. PECO Energy Capital, L.P. By: PECO Energy Capital Corp., its general partner By: /s/ J.B. MITCHELL ---------------------------------- J.B. Mitchell President Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2 to the Registration Statement has been signed by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE - --------------------------------------------- ---------------------------- ------------------ /s/ J.B. MITCHELL President and Director November 3, 1995 - --------------------------------------------- (Principal Executive Officer J.B. Mitchell and Principal Financial and Accounting Officer) /s/ K.G. LAWRENCE Director November 3, 1995 - --------------------------------------------- K.G. Lawrence /s/ N.E. DESCANO Director November 3, 1995 - --------------------------------------------- N.E. Descano
II-4 62 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant, PECO Energy Company, has duly caused this Amendment No. 2 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Philadelphia, Commonwealth of Pennsylvania, on the 3rd of November, 1995. PECO Energy Company By: /s/ J.F. PAQUETTE, JR. ------------------------------------ J.F. Paquette, Jr. Chairman of the Board 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.
SIGNATURE TITLE DATE - --------------------------------------------- ---------------------------- ---------------- /s/ J.F. PAQUETTE, JR. Chairman of the Board and November 3, 1995 - --------------------------------------------- Director J.F. Paquette, Jr. /s/ C.A. MCNEILL, JR. President and Director November 3, 1995 - --------------------------------------------- (Principal Executive C.A. McNeill, Jr. Officer) /s/ K.G. LAWRENCE Senior Vice President -- November 3, 1995 - --------------------------------------------- Finance and Chief Financial K.G. Lawrence Officer (Principal Financial and Accounting Officer)
This Amendment No. 2 to the Registration Statement has also been signed by C.A. McNeill, Jr., Attorney-in-Fact, on behalf of the following Directors on the date indicated: Susan W. Catherwood Joseph C. Ladd M. Walter D'Alessio Edithe J. Levit Richard G. Gilmore Kinnaird R. McKee Richard H. Glanton Joseph J. McLaughlin James A. Hagen John M. Palms Nelson G. Harris Ronald Rubin Robert Subin
By: /s/ C.A. MCNEILL, JR. ---------------------------------- C.A. MCNEILL, JR., ATTORNEY-IN-FACT II-5 63 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant, PECO Energy Capital Trust I, has duly caused this Amendment No. 2 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Philadelphia, Commonwealth of Pennsylvania, on the 3rd of November, 1995. PECO Energy Capital Trust I By: PECO Energy Capital, L.P., as its sponsor By: PECO Energy Capital Corp., as general partner By: /s/ J.B. MITCHELL ----------------------------------- J.B. Mitchell President Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2 to the Registration Statement has been signed by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE - --------------------------------------------- ---------------------------- ------------------ /s/ J.B. MITCHELL President and Director November 3, 1995 - --------------------------------------------- (Principal Executive Officer J.B. Mitchell and Principal Financial and Accounting Officer) /s/ K.G. LAWRENCE Director November 3, 1995 - --------------------------------------------- K.G. Lawrence /s/ N.E. DESCANO Director November 3, 1995 - --------------------------------------------- N.E. Descano
II-6 64 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------ ------------------------------------------------------------------------------------ 1-1 Dealer Manager Agreement. 3-1 Amended and Restated Articles of Incorporation of PECO Energy (incorporated by reference to Exhibit 3-1 of PECO Energy's 1993 Annual Report on Form 10-K, File No. 1-1401). 3-2 Bylaws of PECO Energy, adopted February 26, 1990 and amended January 24, 1994 (incorporated by reference to Exhibit 3-2 of PECO Energy's 1993 Annual Report on Form 10-K, File No. 1-1401). 3-3 Certificate of Limited Partnership of PECO Energy Capital, L.P. (incorporated by reference to Registration Statement Nos. 33-53785 and 33-53785-01). 4-1 Amended and Restated Limited Partnership Agreement of PECO Energy Capital (incorporated by reference to Exhibit 10-7 of PECO Energy's 1994 Annual Report on Form 10-K, File No. 1-1401). 4-2 Amendment to Amended and Restated Limited Partnership Agreement of PECO Energy Capital.* 4-3 Form of Action of General Partner creating Series B Preferred Securities.* 4-4 Form of Series B Preferred Security Certificate (included in Exhibit 4-1 above). 4-5 Subordinated Debenture Indenture (incorporated by reference to Exhibit 4-5 of PECO Energy's 1994 Annual Report on Form 10-K, File No. 1-1401). 4-6 Form of Series B Subordinated Debenture (included in Exhibit 4-7 below). 4-7 Form of First Supplemental Indenture.* 4-8 Certificate of Trust.* 4-9 Trust Agreement.* 4-10 Form of Amended and Restated Trust Agreement.* 4-11 Form of Payment and Guarantee Agreement.* 4-12 Form of Certificate Representing the Preferred Trust Receipts (included in Exhibit 4-10 above). 5-1 Opinion of Ballard Spahr Andrews & Ingersoll relating to the legality of the Series B Subordinated Debentures and Series B Guarantees, including consent.* 5-2 Opinion of Richards, Layton & Finger, P.A., relating to the legality of the Preferred Trust Receipts, including consent.* 8 Opinion of Ballard Spahr Andrews & Ingersoll as to tax matters.* 12-1 Computations of PECO Energy's Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements for the years ended December 31, 1990-1994 and for the three months ended March 31, 1994 and March 31, 1995 (incorporated by reference to Exhibits 12-1 and 12-2, respectively, of PECO Energy's 1994 Annual Report on Form 10-K, File No. 1-1401 and PECO Energy's Quarterly Reports on Form 10-Q for the quarters ended June 30, 1994 and June 30, 1995). 13 PECO Energy's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995 and June 30, 1995 (incorporated by reference, File No. 1-1401). 21 List of Subsidiaries of PECO Energy.* 23-1 Consent of Independent Accountants.
- --------------- * Previously filed as an Exhibit (with the same exhibit number) to Registration Statement Nos. 33-60859 and 33-60859-01. 65
EXHIBIT NUMBER DESCRIPTION - ------ ------------------------------------------------------------------------------------ 23-2 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5-1). 23-3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5-2). 24 Powers of Attorney.* 25-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Meridian Trust Company, as Trustee under the First Supplemental Indenture.* 25-2 Amendment No. 1 to Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Meridian Trust Company, as Trustee under the First Supplemental Indenture.* 99-1 Proposed Form of Letter of Transmittal.* 99-2 Proposed Form of Notice of Guaranteed Delivery.* 99-3 Proposed Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.* 99-4 Proposed Form of Letter to Clients.* 99-5 Form of Exchange Agent Agreement.* 99-6 Form of Information Agent Agreement.* 99-7 Form of Newspaper Announcement.* 99-8 Press Release.* 99-9 Form of Letter from PECO Energy to Holders of $7.96 Cumulative Preferred Stock.* 99-10 Form of Questions and Answers.* 99-11 Form of Dealer Manager's Letter to Non-Contacts.*
- --------------- * Previously filed as an Exhibit (with the same exhibit number) to Registration Statement Nos. 33-60859 and 33-60859-01. EX-1.1 2 DEALER MANAGER AGREEMENT 1 EXHIBIT 1-1 November 2, 1995 Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters World Financial Center North Tower New York, New York 10281-1201 Smith Barney Inc. 388 Greenwich St. New York, New York 10013 Dear Sir or Madam: PECO Energy Company (the "Company") proposes to effect the exchange of Trust Receipts (the "Preferred Trust Receipts") issued by PECO Energy Capital Trust I (the "Trust"), a statutory business trust created under the laws of Delaware, each representing a 8.72% Cumulative Monthly Income Preferred Security, Series B (the "Series B Preferred Securities") representing a limited partner interest in PECO Energy Capital, L.P., a limited partnership formed under the laws of the State of Delaware ("PECO Energy Capital"), for up to 5,400,000 depositary shares (the "Depositary Shares"), each representing a one-fourth interest in a share of $7.96 Cumulative Preferred Stock of the Company. The exchange of Preferred Trust Receipts for Depositary Shares will be effected by (a) the delivery by the Company, pursuant to the Indenture dated as of July 1, 1994 between the Company and Meridian Trust Company, as trustee, as supplemented by a First Supplemental Indenture between the Company and Meridian Trust Company, as trustee (together, the "Indenture"), of its 8.72% Deferrable Interest Subordinated Debentures, Series B (the "Series B Subordinated Debentures") to First Chicago Trust Company of New York (the "Exchange Agent"), which will receive the Series B Subordinated Debentures on behalf of the holders of the Depositary Shares in exchange for Depositary Shares, (b) the delivery by the Exchange Agent (acting pursuant to the directions of the holders of the Depositary Shares) of the Series B Subordinated Debentures to PECO Energy Capital in consideration for the issuance and deposit by PECO Energy Capital of the Series B Preferred Securities to the Trust under an Amended and Restated Trust Agreement (the "Trust Agreement") with PNC Bank, Delaware, Trustee (the "Trustee") and (c) the issuance and delivery by the Trust of the Preferred Trust Receipts to the Exchange Agent for distribution to the former holders of the Depositary Shares. The Series B Preferred Securities and the Preferred Trust Receipts are together hereinafter referred as the "Preferred Securities." The Company and PECO Energy Capital are together hereinafter 2 referred to as the "Offerors", and the offer, as described above is hereinafter referred to as the "Offer". Merrill Lynch & Co. of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Smith Barney Inc. ("Smith Barney") are together hereinafter referred to as the "Co-Dealer Managers." The Series B Preferred Securities will be guaranteed (the "Guarantee") by the Company to the extent described in the Offer Materials (as hereinafter defined). This Agreement will confirm the understanding between the Offerors and the Co-Dealer Managers pursuant to which the Offerors will retain the Co-Dealer Managers to act as their co-dealer managers, on the terms and subject to the conditions set forth herein, in connection with the Offer. 1. Appointment and Duties as Co-Dealer Managers. Subject to the terms and conditions hereof, the Offerors authorize the Co-Dealer Managers to act as co-dealer managers commencing on the date that the Registration Statement (as hereinafter defined) becomes effective (the "Effective Date") and the Co-Dealer Managers agree to act as the Offerors' co-dealer managers in connection with the Offer commencing on the Effective Date. The Offerors hereby authorize the Co-Dealer Managers to act in accordance with this Agreement and the terms of the Offer Materials (hereinafter defined), which Offer Materials the Co-Dealer Managers and any other broker or dealer or any commercial bank or trust company are entitled to use in connection with the solicitation of exchanges in connection with the Offer. In so soliciting, the Co-Dealer Managers shall not be deemed to act as agent of the Offerors, and the Offerors shall not be deemed to act as their agent. In addition, in so soliciting, no broker, dealer, commercial bank or trust company shall be deemed to act as their agent of the Co-Dealer Managers or as agent of the Offerors, and the Co-Dealer Managers shall not be deemed to act as the agent of any broker, dealer, commercial bank or trust company. The Offerors shall obtain their own legal, tax and accounting advice from appropriate third party advisers. The Co-Dealer Managers agree, in accordance with their customary practice, to perform those services in connection with the Offer as are customarily performed by investment banking concerns in connection with offers of like nature, including, but not limited to, soliciting tenders pursuant to the Offer and communicating generally regarding the Offer with brokers, dealers, commercial banks and trust companies and other persons, including the holders of Depositary Shares; notwithstanding the foregoing, we agree that nothing set forth in this Agreement shall require the Co-Dealer Managers to continue to render services hereunder (i) for the period during which any injunction, restraining order or other adverse judicial or regulatory ruling, declaration, pronouncement, motion or other order shall remain in effect with respect to the Offer or with -2- 3 respect to any of the transactions in connection with, or contemplated by, the Offer or this Agreement if in their judgment the Co- Dealer Managers believe it inadvisable to render services pursuant hereto, or (ii) if their continuing so to act would, in their judgment, violate any statute, regulation or other law of the United States of America or any state thereof or other jurisdiction applicable to the Offer. We further agree that the Co-Dealer Managers shall not be under any liability to the Offerors or any other person for any act on the part of any broker or dealer (other than themselves in their capacities as co-dealer managers for the Offer, which liability shall be governed by Section 6 hereof), commercial bank or trust company which solicits holders of Depositary Shares; the Offerors acknowledge and agree that, in their capacities as co-dealer managers, the Co-Dealer Managers shall act as independent contractors, and any of their duties arising out of their engagement pursuant to this Agreement shall be owed solely to the Offerors. The Offer Materials will be prepared and approved by the Offerors; the Co-Dealer Managers and any other broker or dealer or any commercial bank or trust company are authorized to use the Offer Materials in connection with the solicitation of holders of Depositary Shares. The Co-Dealer Managers agree not to provide the holders of Depositary Shares any written information regarding the Offer other than information contained in the Offer Materials. 2. Duties of the Offerors. (a) The Offerors have filed a registration statement on Form S-4 (File No. 33-60859) (the "Registration Statement") with the Securities Exchange Commission (the "Commission") registering the securities to be issued in the Offer. The Offerors intend to file with the Commission a second pre-effective amendment (the "Second Amendment") to the Registration Statement, in the form previously approved by the Co-Dealer Managers, containing pricing and other information required by the Securities Act of 1933, as amended (the "Act") and the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Other than pursuant to the Second Amendment, filings under the Exchange Act incorporated by reference in the Registration Statement and in the prospectus (the "Prospectus") included therein in the form first filed pursuant to Rule 424(b) under the Act, the Offerors shall not amend or supplement the Offer Materials or prepare or approve any related material for use in connection with the Offer without first having submitted a copy thereof to the Co-Dealer Managers within a reasonable period of time prior to the filing or use thereof, including as set forth in Section 3; the Offerors agree, at their expense, to furnish to each Co-Dealer Manager as many copies of the Offer -3- 4 Materials in final form for use in connection with the Offer as such Co-Dealer Manager may reasonably request. (b) The Offerors agree to furnish to the Co-Dealer Managers cards or lists or copies thereof showing the names and addresses of, and the number of shares or principal amount, as applicable, of Depositary Shares held by the registered holders of the Depositary Shares as of a reasonably appropriate date, and shall advise the Co-Dealer Managers on each business day during the continuance of the Offer as to any transfers known to the Offerors or of record of the Depositary Shares. (c) The Offerors shall or shall cause the Exchange Agent to inform the Co-Dealer Managers during each business day during the Offer (to be followed on a daily basis by written confirmation) as to the respective amounts of Depositary Shares which have been tendered pursuant to the Offer during the interval since its previous daily report to the Co-Dealer Managers pursuant to this provision, and the names and addresses of any holders who have so tendered Depositary Shares. (d) The Offerors agree to advise the Co-Dealer Managers promptly of the occurrence of any event which could cause the Offerors to withdraw, rescind, or modify the Offer and shall also advise the Co-Dealer Managers promptly of any proposal or requirement to amend or supplement any filing with respect to the Offer, required pursuant to the Act or the Exchange Act or, to the extent known by the Company, "blue sky" or other state securities laws; the Offerors will prepare and, if necessary, file with the Commission, as required by applicable law or regulation, any and all necessary amendments and supplements to the Offer Materials; prior to and during the continuance of the Offer, the Offerors will inform the Co-Dealer Managers promptly after either of the Offerors receives notice or becomes aware of the happening of any event, or the discovery of any fact, that would require the making of any change in any Offer Materials then being used or would affect the truth or completeness of any representation or warranty contained in this Agreement if such representation or warranty were being made immediately after the happening of such event or the discovery of such fact. (e) The Offerors shall arrange for each information agent and depositary named in the Offer Materials relating to the Offer to cooperate with the Co-Dealer Managers in all respects reasonably requested by you. (f) The Offerors acknowledge and agree that the Co-Dealer Managers may use the Offer Materials as specified herein and the Offerors represent and warrant to the Co-Dealer Managers that the Co-Dealer Managers may rely on any information delivered to the Co-Dealer Managers by or on behalf of the -4- 5 Offerors without any independent verification of such information or an appraisal or evaluation of the Offerors' assets and liabilities and that such information does not and will not contain any 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. 3. Offer Materials and Withdrawal Rights. Prior to the commencement of the Offer, the Offerors agree to furnish each Co-Dealer Manager with as many copies as each Co-Dealer Manager may reasonably request of the following, to the extent prepared by or at the request of the Company: (i) each of the documents that is filed with the Commission, including each registration statement, preliminary and final prospectus filed with the Commission, in connection with or pertaining to the Offer, and all documents incorporated therein by reference, (ii) each offering circular, sales memorandum, term sheet, proposed agreement, solicitation statement, disclosure document, or other explanatory statement, or other report, filing, document, release or communication mailed, delivered, published, or filed by or on behalf of the Offerors in connection with the Offer, and (iii) each appendix, attachment, modification, amendment or supplement to any of the foregoing and all related documents, including but not limited to the Second Amendment and each related letter of transmittal. The information referred to in clauses (i), (ii) and (iii) above, in each case in the form as amended or supplemented at the time it is first used or made available by the Offerors, together with each document incorporated by reference into any of the foregoing, in each case to the extent prepared by or at the request of the Company or approved in writing by the Company an "Offer Material" and, collectively, the "Offer Materials"). At the commencement of the Offer, the Offerors shall cause timely to be delivered to each registered holder of any Depositary Shares legally entitled thereto, such of the Offer Materials as may be required by the Securities Act or the Exchange Act to be delivered to such holder and any other offering materials prepared expressly for use by holders of Depositary Shares tendering in the Offer, together with a return envelope. Thereafter, to the extent practicable, until the expiration of the Offer, the Offerors shall use their best efforts to cause copies of such materials and a return envelope to be mailed to each person who becomes a holder of any applicable Depositary Shares. In connection with the Offer, if either of the Offerors (a) uses or permits the use of, or files with the Commission or any other governmental or regulatory agency, authority or instrumentality, any Offer Material that (i) has not been submitted to the Co-Dealer Managers on a timely basis for their comments to the extent required in Section 2(a) hereof or (ii) has been so submitted and with respect to which either Co-Dealer -5- 6 Manager reasonably objects or (b) shall have breached any of its representations, warranties, agreements or covenants herein, then the Co-Dealer Managers shall be entitled to withdraw as co-dealer managers in connection with the Offer, without any liability or penalty to the Co-Dealer Managers or any other Indemnified Party (as hereinafter defined) for such withdrawal and without loss of any right to indemnification or contribution provided in this Agreement, to the payment of all fees and expenses payable hereunder that have accrued to the date of such withdrawal or to the benefit of any other provisions surviving such withdrawal pursuant to Section 11. In the event of any such withdrawal, for the purpose of determining the fees payable to the Co-Dealer Managers pursuant to this Section 3, the amount of Depositary Shares tendered for exchange as of the close of business on the date of such withdrawal that are thereafter exchanged pursuant to the Offer shall be deemed to have been exchanged, pursuant to the Offer, as of the date of such withdrawal. If the Co-Dealer Managers should withdraw, the fees accrued and reimbursement for their expenses through the date of such withdrawal shall be paid to the Co-Dealer Managers in cash on or promptly after such date. 4. Compensation and Expense Reimbursement; Certain Limitations. (a) In consideration of the services to be rendered pursuant hereto, the character and sufficiency of which the Offerors hereby acknowledge, the Company agrees to pay, in cash, the following non-refundable amounts: (i) The Company agrees to pay to the Co-Dealer Managers a fee (the "Management Fee"), payable upon the consummation of the Offer, equal to $.125 per share of Depositary Shares, up to a maximum of 5,400,000 Depository Shares, validly tendered and not withdrawn pursuant to the Offer. The Management Fee shall be divided 60% to Merrill Lynch and 40% to Smith Barney. (ii) In addition, and without regard to whether the Offer is commenced or consummated or whether this Agreement is terminated, unless this Agreement is terminated by the Company for cause, the Company agrees to pay to each Co-Dealer Manager promptly, in cash, all of the reasonable out-of-pocket expenses such Co-Dealer Manager incurred in connection with the services rendered or to be rendered by such Co-Dealer Manager pursuant to this Agreement, including all reasonable fees and expenses of its counsel. Nothing in this paragraph shall in any way limit or affect the Co-Dealer Managers' or any other Indemnified Party's right to receive all expenses (including reasonable counsel fees and expenses) under the indemnification provisions of this Agreement. (b) The Company agrees to pay to each Soliciting Dealer (as defined herein) a solicitation fee of $.50 per share of Depositary Shares validly tendered and accepted for exchange -6- 7 pursuant to the Offer and covered by a Letter of Transmittal which designates, as having solicited and obtained the tender, the name of (i) any dealer or broker in securities, including either Co-Dealer Manager in its capacity as a dealer or broker, who is a member of any national securities exchange or of the National Association of Securities Dealers, Inc. ("NASD"), (ii) any foreign dealer or broker not eligible for membership in the NASD which agrees to conform to the NASD's Rules of Fair Practice in soliciting tenders outside the United States to the same extent as though it were an NASD member, or (iii) any bank or trust company (each of which is referred to herein as a "Soliciting Dealer"). No such fee shall be payable to a Soliciting Dealer in respect of Depositary Shares registered in the name of such Soliciting Dealer unless such Depositary Shares are held by such Soliciting Dealer as nominee and such Depositary Shares are being tendered for the benefit of one or more beneficial owners identified on the Letter of Transmittal. No such fee shall be payable to a Soliciting Dealer with respect to the tender of Depositary Shares by a holder unless the Letter of Transmittal accompanying such tender designates such Soliciting Dealer. If the Depositary Shares covered by the Letter of Transmittal are held by the Soliciting Dealer as nominee for the tendering holder, the nominee may only be designated as a Soliciting Dealer if the beneficial owner has so designated. No such fee shall be payable to a Soliciting Dealer if such Soliciting Dealer is required for any reason to transfer the amount of such fee to a tendering holder. No Soliciting Dealer shall be deemed to be the agent of the Offerors. (c) Whether or not the Offer is commenced or consummated and whether or not this Agreement has been terminated, the Company shall pay or cause to be paid (i) all expenses of preparation, printing, mailing and dissemination of the Offer Materials and any other documents related to the Offer; (ii) all fees and expenses paid by brokers, dealers (including you), commercial banks, trust companies and nominees for their customary mailing and handling expenses incurred in forwarding Offer Materials and any other documents related to the Offer to their customers; (iii) all fees and expenses of the Exchange Agent and any depositary, information agent or other persons rendering services in connection with the Offer, including, without limitation, fees payable and expenses incurred in respect of any agent of the Offerors engaged to solicit holders of the Depositary Shares; (iv) all fees and expenses of the Trust and the Trustee in connection with the Trust; (v) all advertising charges incurred with the approval of the Company; (vi) all filing fees applicable to any transaction addressed herein required to be paid to any governmental or regulatory agency (including those required of the Co-Dealer Managers by the Commission); (vii) any fees payable in connection with the rating of the Preferred Trust Receipts; (viii) the fees and expenses incurred in connection with the listing on the New York Stock -7- 8 Exchange of the Preferred Trust Receipts; and (viii) all other expenses incurred in connection with the Offer. (d) Anything in this Agreement to the contrary notwithstanding, the Co-Dealer Managers' rights to payment under this Agreement shall be limited to the payment of compensation and expenses as provided in Section 3, 4 and 5 and indemnification and/or contribution as provided in Section 6 of this Agreement. 5. Termination. The Co-Dealer Managers may resign upon written notice to the Company that any of the conditions specified in Section 7 have not been fulfilled pursuant to Section 7, and, following 3 business days notice, the Offerors may terminate their engagement hereunder at any time. If this Agreement were to terminate for any reason, however, in addition to, but without duplication of, any fees earned pursuant to Section 3, the Co-Dealer Managers shall be entitled to receive from the Company all of the amounts payable in respect of expenses incurred in accordance with Section 4(a)(ii) and, to the extent applicable, Section 4(a)(c) hereof up to and including the effective date of such termination; provided that if this Agreement were to be terminated by the Co-Dealer Managers for cause or by the Offerors other than for cause, and on or prior to the first anniversary of the date this Agreement either of the Offerors or any affiliate of the Offerors proceed or proceeds with any exchange offer the terms of which do not differ substantially from the terms set forth in any Offer Material or as recommended by the Co- Dealer Managers prior to such termination, the Co-Dealer Managers also shall be entitled to receive from the Company all of the amounts due and payable pursuant to Section 4(a)(i) hereof as if this Agreement were to remain in effect with respect to such subsequent exchange offer. 6. Indemnification, Contribution and Other Provisions. (a) The Company agrees to indemnify and hold harmless each Co-Dealer Manager and its affiliates and their respective directors, officers, employees, agents and controlling persons as follows: (i) from and against any and all loss, liability, claim, damage, and expense whatsoever, as incurred, under any applicable federal or state law, or otherwise, and related to or arising out of (A) an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement as of its effective date, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein not misleading, (B) an untrue -8- 9 statement or alleged untrue statement of a material fact contained in the Offer Materials, or the omission or alleged omission therefrom of 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, (C) any breach by either of the Offerors of any of their representations, warranties and agreements contained in this Agreement, (D) either of the Offerors' failure to make the Offer, or the withdrawal, termination or extension of the Offer or any other failure on their part to comply with the terms and conditions specified in the Offer Materials, and (E) the Offer, the engagement of the Co-Dealer Managers pursuant to, and the performance by the Co-Dealer Managers of the services contemplated by, this Agreement; (ii) from and against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon the occurrence of any matter described in clause (i) above, if such settlement is effected with the written consent of the Offerors; and (iii) from and against any and all expense whatsoever, as incurred (including, subject to the last sentence of Section 6(d) hereof, reasonable fees and disbursements of counsel chosen by you), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon the occurrence of any matter described in clause (i) above, whether or not the indemnified party is a party thereto and whether or not such claim, action or proceeding is initiated or brought by or on behalf of the Offerors, to the extent that any such expense is not paid under clause (i) or (ii) above. The Offerors shall not, however, be liable under this subsection 6(a) to a Co-Dealer Manager for any loss, liability, claim, settlement, damage or expense under (x) clauses (i)(A) and (B) of this subsection 6(a) to the extent arising out of an untrue statement or omission or alleged untrue statement or omission made in the Offer Materials in reliance upon and in conformity with written information furnished to the Offerors by such Co-Dealer Manager expressly for use in the Offer Materials and (y) clause (i) (E) of this subsection 6(a) that is found in a final judgment by a court of competent jurisdiction to have -9- 10 resulted from the bad faith, willful misconduct or gross negligence of such Co-Dealer Manager. Each of the Offerors recognizes and acknowledges for all purposes of this Agreement that the only information covered by clause (x) above consists of the third sentence of the first paragraph under the caption "Listing and Trading of Preferred Trust Receipts and Depositary Shares" in the Prospectus. The Offerors also agree that neither Co-Dealer Manager or any of its affiliates or any of their respective directors, officers, employees, agents and controlling persons shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Offerors or to the extent legally enforceable, to either of the Offerors' security holders or creditors claiming through or on or in behalf of the Offerors or either of them, in each case related to or arising out of the Offer or the engagement of such Co-Dealer Manager pursuant to, or the performance by such Co-Dealer Manager of the services contemplated by, this Agreement except to the extent that any loss, liability, claim, damage or expense is found in a final judgment by a court of competent jurisdiction to have resulted from such Co-Dealer Manager's bad faith, willful misconduct or gross negligence. The Offerors agree that, without the prior written consent of the Co-Dealer Managers, they will not settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding in respect of which indemnification could be sought under the indemnification provisions of this subsection 6(a) (whether or not either Co-Dealer Manager or any other indemnified party under this subsection 6(a) is an actual or potential party to such claim, action or proceeding), unless such settlement, compromise or consent includes an unconditional release of each such indemnified party from all liability arising out of such claim, action or proceeding. (b) Each Co-Dealer Manager agrees, severally and not jointly, to indemnify and hold harmless the Offerors and their respective controlling persons, partners, directors, employees, agents and officers to the same extent as the indemnity described in subsection 6(a) above from the Offerors to such Co-Dealer Manager, but only with respect to any untrue statement or omission or alleged untrue statement or omission made in the Offer Materials in reliance upon and in conformity with written information furnished to the Offerors by such Co-Dealer Manager expressly for use therein. Each of the Offerors recognizes and acknowledges that for purposes of the immediately preceding sentence the only written information provided by either Co-Dealer Manager consists of the third sentence of the first paragraph under the caption "Listing and Trading of Preferred Trust Receipts and Depositary Shares" in the -10- 11 Prospectus. In case any action shall be brought against the Offerors or any such controlling person, partner, director or officer in respect of which he or it may seek indemnity or reimbursement from any Co-Dealer Manager on account of its agreement contained in this subsection 6(b), such Co-Dealer Manager shall have the rights and duties given to the Offerors, and the Offerors and any such controlling person, partner, director, or officer shall have the rights and duties given to each Co-Dealer Manager, by subsection 6(c) below. (c) Promptly after the receipt by the Offerors or either of them of written notice thereof, the Offerors agree to notify each Co-Dealer Manager promptly of the assertion against any Co-Dealer Manager or any other person of any claim or the commencement of any action or proceeding relating to a transaction contemplated by this Agreement. Promptly after its receipt of written notice of any claim or commencement of any action or proceeding with respect to which indemnification is being sought hereunder, a Co-Dealer Manager will notify the Offerors in writing of such claim or of the commencement of such action or proceeding. Failure to notify the Offerors or the Co-Dealer Managers, as the case may be, will not relieve an Offeror or a Co- Dealer Manager from any liability which it may have for indemnification (i) under this Section 6, except to the extent that the indemnifying party is materially prejudiced by such failure. The Offerors or either of them may participate at its own expense in the defense of any action. If it so elects within a reasonable time after receipt of such notice, the Offeror or either of them may assume the defense of such action with counsel chosen by it or them and approved by the indemnified party (which approval shall not be unreasonably withheld), unless the indemnified party reasonably objects to such assumption on the ground that there may be legal defenses available to it which are different from or in addition to those available to the Offerors or either of them. If an Offeror assumes the defense of such action, the Offerors shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action. In no event shall the Offerors be liable for reasonable fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. (d) If the indemnification provided for in this Agreement and otherwise applicable by its terms is for any reason held unenforceable, each Co-Dealer Manager, on the one hand, and the Offerors, on the other hand, shall contribute, respectively, to the aggregate losses, liabilities, claims, damages and expenses for which such indemnification is held unenforceable, as incurred, in the proportion as is appropriate to reflect the -11- 12 relative benefits of the Offerors, on the one hand, and such Co-Dealer Manager, on the other hand, in connection with the matter giving rise to such claims, losses, expenses, damages or liabilities, subject to the limitation that in any event each Co-Dealer Manager's aggregate contribution to all claims, losses, expenses, damages and liabilities shall not exceed the amount of fees actually received by such Co-Dealer Manager with respect to the Offer pursuant to Section 4. It is hereby agreed that the relative benefits of a Co-Dealer Manager, on the one hand, and the Offerors, on the other hand, with respect to the Offer shall be deemed to be in the same proportion that (x) such Dealer- Manager's compensation payable hereunder bears to (y) the aggregate liquidation value of the Depositary Shares tendered and not withdrawn in the Offer, with such Co-Dealer Manager paying the smaller portion and the Offerors paying the larger portion. The foregoing contribution provision shall be in addition to any rights that any person or entity entitled to contribution may have at common law or otherwise. No investigation or failure to investigate by either Co-Dealer Manager shall impair the foregoing indemnification and contribution provisions or any rights the Co-Dealer Managers may have. 7. Representations and Warranties. The Offerors represent and warrant to each of the Co-Dealer Managers at the commencement of the Offer, at each mailing or other dissemination of any Offer Material and at the consummation of the exchange of securities pursuant to the Offer: (a) The Company is a validly existing corporation in good standing under the laws of the Commonwealth of Pennsylvania. Each of the Company's subsidiaries ("Subsidiaries") which constitutes a "gas utility company" or an "electric utility company," as defined in the Public Utility Holding Company Act of 1935, as amended (a "Utility Subsidiary"), is a validly existing corporation under the laws of its jurisdiction of incorporation. The Company and each Utility Subsidiary have all requisite power and authority to own or lease and occupy their respective properties and carry on their respective businesses as presently conducted and as described in the Prospectus and are duly qualified as foreign corporations to do business and in good standing in every jurisdiction in which the nature of the business conducted or property owned by them makes such qualification necessary and in which the failure to so qualify would have a materially adverse effect on the Company or the Company and its Subsidiaries taken as a whole. (b) The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Business Trust Act, is and will be treated as a "grantor trust" for Federal Income Tax purposes under existing law, has the trust power and authority to conduct its business as presently conducted and as described in the Offer Materials, and -12- 13 will not be required to be authorized to do business in any other jurisdiction. (c) PECO Energy Capital is a validly existing limited partnership in good standing under the laws of the State of Delaware. PECO Energy Capital has all requisite power and authority to issue the Series B Preferred Securities. (d) PECO Energy Capital has no subsidiaries. (e) The Offerors and the Trust have taken all corporate, partnership and trust action necessary to authorize this Agreement and the making and consummation of the Offer and the transactions contemplated hereby and thereby. This Agreement has been validly executed and delivered by each of the Offerors. (f) Each of the Offer Materials and the Offer complies in all material respects with the Securities Act and the Exchange Act, as such Acts may be applicable, and in each case the applicable rules and regulations of the Commission promulgated pursuant thereto, and with all applicable rules or regulations of governmental or regulatory authorities or bodies other than the blue sky or similar securities laws, and no authorization, consent or approval of, or filing with, any court or governmental body or agency is required in connection with the commencement or consummation of the Offer and the other transactions contemplated hereby, other than those which have been obtained or any filing which will have been made prior to the commencement or consummation, as the case may be, of the Offer. Neither of the Offerors nor any of their affiliates is presently doing business with the government of Cuba or with any person or affiliate located in Cuba. (g) None of the Offer Materials contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements made therein not misleading in light of the circumstances under which they were made; provided, however, that the representations and warranties in this subsection shall not apply to statements or omissions made in the Offer Materials in reliance upon and in conformity with written information furnished to the Offerors by a Co-Dealer Manager expressly for use in the Offer Materials. (h) Upon the consummation of the Offer, the Preferred Securities will have been duly authorized by PECO Energy Capital's Amended and Restated Limited Partnership Agreement, as amended (the "Partnership Agreement") and the Trust Agreement, as applicable, and, when the Preferred Trust Receipts are issued in exchange for Depositary Shares pursuant to the Offer, the Preferred Trust Receipts and the Series B Preferred Securities will be validly issued and fully paid and -13- 14 nonassessable beneficial interests in the Trust and limited partner interests in PECO Energy Capital, respectively, not subject to any preemptive or similar rights, and will conform to all statements relating thereto contained in the Offer Materials. (i) The Trust Agreement has been duly authorized, executed and delivered by PECO Energy Capital and PECO Energy Capital Corp., the general partner of PECO Energy Capital (the "General Partner") and, assuming due authorization, execution and delivery of the Trust Agreement by the Trustee, the Trust Agreement is a valid and binding obligation of PECO Energy Capital and the General Partner and the Trustee, enforceable against PECO Energy Capital and the General Partner and the Trustee in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (j) The Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended, and, assuming due authorization, execution and delivery by Meridian Trust Company, upon the consummation of the Offer, each of the Indenture and the Series B Subordinated Debentures will be a valid and binding agreement of PECO Energy Capital and the Company enforceable in accordance with its terms except as (a) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (b) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability, and will conform to all statements relating thereto contained in the Offer Materials. (k) Neither of the Offerors or the Trustee nor any of the Subsidiaries is in violation of its respective trust agreement, charter, bylaws, certificate of limited partnership or partnership agreement, as applicable. The issue of the Series B Preferred Securities by PECO Energy Capital, the issue of the Series B Subordinated Debentures by the Company, the issue of the Preferred Trust Receipts by the Trust, the execution, delivery and performance by the Company and PECO Energy Capital, as the case may be, of this Agreement and the Guarantee, and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company, PECO Energy Capital, the Trust or any other Subsidiary is a party or by which the Company, PECO Energy Capital, the Trust or any other Subsidiary is bound or to which any of the property or assets of the Company, PECO Energy Capital, the Trust or any other Subsidiary is subject, which breach, violation or default would -14- 15 be material to the issue of the Preferred Securities or would have a material adverse effect on the general affairs, management, prospects, financial position, stockholders' equity (or partnership net worth, as applicable) or results of operations of the Trust or of PECO Energy Capital or of the Company and its Subsidiaries taken as a whole, nor will such action result in any violation of the provisions of the Articles of Incorporation or Bylaws of the Company or the Certificate of Limited Partnership or Partnership Agreement of PECO Energy Capital or the Certificate of Trust or the Trust Agreement or any statute, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company, PECO Energy Capital or any other Subsidiary or the Trust or any of their properties. (l) Except (i) for the orders of the Commission making the Registration Statement effective and the filing of Schedule 13E-4 with the Commission, (ii) for the Notice of Registration of a Securities Certificate by the Pennsylvania Public Utility Commission in respect of the issuance of its Subordinated Debentures and Guarantee in connection with the issuance of an aggregate principal amount of up to $190 million (liquidation value) of preferred interests by a special purpose subsidiary of the Company permitting PECO Energy Capital to issue, inter alia, the Series B Preferred Securities as contemplated by this Agreement, (iii) for permits and similar authorizations required under the securities or "blue sky" laws of any jurisdiction, (iv) for an application for the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, and (v) to the extent, if any, required pursuant to the undertakings set forth under Item 17 of Part II of the Registration Statement, no consent, approval, authorization or other order of any governmental authority is legally required for the execution, delivery and performance of this Agreement by the Company and PECO Energy Capital and the consummation of the transactions contemplated hereby. (m) Coopers & Lybrand L.L.P. are independent certified public accountants as required by the Act and the rules and regulations of the Commission thereunder; (n) The financial statements of the Company included or incorporated by reference in the Offer Materials present fairly the financial position of the Company and the consolidated subsidiaries of the Company as of the dates indicated and the results of their operations for the periods specified; except as otherwise stated in the Offer Materials, said financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis. -15- 16 (o) Since the respective dates as of which information is given in the Offer Materials, and except as otherwise stated or contemplated therein, there has been no material adverse change and no development involving a prospective material adverse change in the financial condition, business, or results of operations of the Company and the Subsidiaries, considered as one enterprise, whether or not arising in the ordinary course of business. (p) Neither of the Offerors or the Trust is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (q) The Offerors and the Trust meet the registrant requirements for use of Form S-4 under the Securities Act and the rules and regulations promulgated thereunder. (r) The Offerors have not retained or caused to be retained and, during the term of this Agreement, will not retain or cause to be retained as financial advisor, placement agent, dealer manager or underwriter any other person to advise or assist them with the Offer or otherwise directly or indirectly to use any other person to contact, approach or negotiate with holders of the Depositary Shares with respect to the Offer other than the Co-Dealer Managers. (s) Any certificate signed by any officer of either of the Offerors and delivered to the Co-Dealer Managers or to their counsel shall be deemed a representation and warranty by the Offerors to the Co-Dealer Managers as to the matters covered thereby. 8. Conditions to Obligations. The Co-Dealer Managers' obligation to render services pursuant to this Agreement shall at all times be subject, in their discretion, to the following conditions: (a) The Offerors shall at all times during the Offer have performed all of their obligations hereunder theretofore to be performed. (b) All representations, warranties and other statements of the Offerors contained in this Agreement are now and, at the commencement of, and at all times during the continuance and upon consummation of, the Offer, shall be true and correct. (c) On the commencement date (the "Commencement Date") of the Offer and on the acceptance date (the "Acceptance Date"), the Offerors' counsel shall deliver to the Co-Dealer Managers the opinions, in each case satisfactory to the Co- Dealer -16- 17 Managers, covering the matters set forth in Appendix A hereto. The Offerors agree to furnish to the Co-Dealer Managers, at their request, (i) a letter, satisfactory in form to the Co-Dealer Managers and their counsel, dated the Commencement Date (and reaffirmed and updated upon the Acceptance Date) and addressed to the Co-Dealer Managers, of Coopers & Lybrand L.L.P., independent certified public accountants for the Company, containing statements and information of the type ordinarily included in accountants' comfort letters with respect to the financial statements and certain financial information contained in the Offer Materials, (ii) a certificate from PNC Bank, Delaware, as Trustee, dated the Commencement Date (and reaffirmed upon the Acceptance Date) and signed by appropriate officers of the Trustee, containing statements and information substantially as set forth in Appendix B hereto, and (iii) a certificate from the Company upon the Acceptance Date and signed by appropriate officers of the Company reaffirming that the representations and warranties of the Company contained in Section 7 are true and correct as of such date and that the Offerors have complied with all of the agreements and satisfied all of the conditions on their part to be performed or satisfied on or before the consummation of the Offer. (d) The Registration Statement shall have become effective not later than 6:00 P.M., New York City time on November 6, 1995, and no stop order, restraining order or injunction has been issued by the Commission or any court and no litigation shall have been commenced or threatened before the Commission or any court with respect to (i) the making or consummation of the Offer, (ii) the execution, delivery or performance by the Offerors of this Agreement, or (iii) any of the transactions in connection with, or contemplated by, the Offer Materials which either Co-Dealer Manager or their legal counsel believes makes it inadvisable for the Co-Dealer Managers to continue to render services pursuant hereto. (e) It shall not have become unlawful under any law or regulation, Federal, state or local, for the Co-Dealer Managers to render services pursuant to this Agreement, or to continue so to act, as the case may be. (f) The Offerors will have advised the Co-Dealer Managers promptly of (i) the occurrence of any event that could cause the Offerors to withdraw or terminate the Offer or would permit the Offerors not to consummate the Offer and (ii) the issuance of any comment or order by the Commission or any other governmental or regulatory agency or instrumentality concerning the Offer. (g) The Preferred Trust Receipts shall have been approved for listing on the New York Stock Exchange upon notice of issuance. -17- 18 (h) At the commencement of, and at all times during the continuance, and upon consummation of, the Offer, the Preferred Trust Receipts shall have a rating of at least "baa2" from Moody's Investors Service, Inc. and at least "BBB" from Standard & Poor's Ratings Group as evidenced in a letter from such rating agencies or other evidence satisfactory to you; the Preferred Trust Receipts and any preferred security of the Company or its Subsidiaries issued and outstanding (including any "MIPS," "TOPrS," or other similar securities which are equity securities under generally accepted accounting principles and are preferred as to the receipt of dividends) shall not have been downgraded or placed on any "watch list" for possible downgrading by any nationally recognized statistical rating organization. (i) Since the date of this Agreement, and except as otherwise stated or contemplated in the Offer Materials as of the date of this Agreement, there has been no material adverse change and no development involving a prospective material adverse change in the financial condition, business or results of operations of the Company and the Subsidiaries considered as one enterprise, whether or not in the ordinary course of business. 9. Reference to Co-Dealer Managers. The Offerors agree that any reference to any Co-Dealer Manager or any of its affiliates in any Offer Material, or any other release, publication or communication to any party outside the Offerors, is subject to such Co-Dealer Manager's prior approval. If either Co-Dealer Manager resigns or is terminated prior to the dissemination of any Offer Material or any other release or communication, no reference shall be made therein to such Co-Dealer Manager without its prior written permission. 10. Access to Information. In connection with their activities hereunder, the Offerors agree to furnish the Co-Dealer Managers and their counsel with all information concerning the Offerors that the Co-Dealer Managers reasonably deem appropriate and agree to provide the Co-Dealer Managers with reasonable access to the Offerors' officers, directors, accountants, counsel, consultants and other appropriate agents and representatives. 11. Survival of Certain Provisions. The indemnity and contribution agreements and other provisions contained in Section 6 of this Agreement, the representations and warranties of the Offerors made pursuant to Section 7 of this Agreement, the provisions contained in Sections 4 and 5 of this Agreement and this Section 11 shall remain operative and in full force and effect regardless of (a) any investigation made by or on behalf of either Co-Dealer Manager or by or on behalf of any Indemnified Party, (b) consummation of the Offer, or (c) any termination of this Agreement, and shall be binding upon, and shall inure to the benefit of, any successors, assigns, heirs and personal -18- 19 representatives of the Offerors, the Co-Dealer Managers, the Indemnified Persons and any such person. 12. Notices. Notice given pursuant to any of the provisions of this Agreement shall be in writing and shall be mailed or delivered (a) to the Offerors at: PECO Energy Company Financial Division S21-1 P.O. Box 8699 Philadelphia, PA 19101 Attention: J. Barry Mitchell with a copy to: Ballard Spahr Andrews & Ingersoll 1735 Market Street 51st Floor Philadelphia, PA 19103 Attention: Robert C. Gerlach, Esq. and (b) to the Co-Dealer Managers at: Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith, Incorporated World Financial Center North Tower New York, NY 10281-1327 Attention: Richard A. Vaccari Smith Barney Inc. 388 Greenwich St. New York, New York 10013 Attention: Paul Galant with a copy to: Drinker Biddle & Reath Philadelphia National Bank Building 1345 Chestnut Street Philadelphia, PA 19107-3496 Attention: Robert Mead Jones, Jr., Esq. 13. Construction. This Agreement incorporates the entire understanding of the parties and (except as otherwise provided herein) supersedes all previous agreements, and shall be governed by, and construed in accordance with, the laws of the State of New York as applied to contracts made and performed in such State, without regard to principles of conflicts of law. -19- 20 14. Severability. Any determination that any provision of this Agreement may be, or is, unenforceable shall not affect the enforceability of the remainder of this Agreement. 15. Headings. The section headings in this Agreement have been inserted as a matter of convenience of reference and are not to be deemed to be part of this Agreement. 16. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute but one and the same instrument. 17. Third Party Beneficiaries. This Agreement has been and is made solely for the benefit of the Offerors, the Co-Dealer Managers and the other Indemnified Parties referred to in Section 6 hereof and their respective successors, heirs, personal representatives and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. 18. Advertisements. The Offerors agree that the Co-Dealer Managers shall have the right to place advertisements in financial and other newspapers and journals at their own expense describing their services to the Offerors hereunder; provided that such advertisements shall have been approved in advance by the Company (which approval shall not be unreasonably withheld), and that the publication of such advertisements shall comply with applicable law. 19. Modification. This Agreement may not be modified or amended except in writing, duly executed by the parties hereto. 20. Further Agreements. This Agreement does not constitute any agreement, express or implied, on the part of the Co-Dealer Managers or any commitment by the Co-Dealer Managers to underwrite, purchase, place, or cause the placement of any securities or indebtedness. 21. Certain Actions. To the extent that any action(s) is (are) required to be taken by the Trust in order to permit the Offerors or either of them to comply in full with any or all of their respective representations, covenants, agreements, obligations or undertakings under this Agreement, the Offerors and each of them agree(s) to cause the Trust promptly to take such action or actions. If the foregoing terms correctly set forth our agreement, please confirm this by signing and returning a duplicate copy of this letter. Thereupon, this letter, as signed -20- 21 in counterpart, shall constitute our agreement on the subject matter herein. PECO ENERGY COMPANY By:_____________________________ Name: Title: PECO ENERGY CAPITAL, L.P., a Delaware limited partnership BY: PECO ENERGY CAPITAL CORP., its general partner By:______________________________ Name: Title: Confirmed and agreed to as of the date first above written: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By:___________________________________ Name: Title: SMITH BARNEY INC. By:___________________________________ Name: Title: 22 Appendix A (1) The favorable opinion of Ballard Spahr Andrews & Ingersoll to the effect that: (i) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and as currently proposed to be conducted, to consummate the Offer, to enter into the Dealer Manager Agreement, the Series B Guarantee and the Indenture, to issue the Series B Subordinate Debentures and to cause the General Partner of the PECO Energy Capital to enter into the Trust Agreement. (ii) The General Partner of PECO Energy Capital is a corporation duly incorporated, validly existing and in good standing under the laws of the state of Delaware and has all requisite corporate power and authority to own its properties, to carry on business as now conducted and as currently proposed to be conducted and to enter into the Trust Agreement. (iii) All of the partner interests of PECO Energy Capital other than the Preferred Securities and the Cumulative Monthly Income Preferred Securities, Series A, issued by PECO Energy Capital are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims. (iv) The execution, delivery and performance by the Company and/or PECO Energy Capital of the Dealer Manager Agreement, the Trust Agreement, the Series B Guarantee and the Indenture and the issuance of the Series B Subordinated Debentures by the Company, the issuance by PECO Energy Capital of the Series B Preferred Securities and the consummation of the transactions contemplated in the Dealer Manager Agreement and in the Offer Materials will not result in any violation of or be in conflict with or constitute a default under or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Trust, PECO Energy Capital, the Company or any of the Subsidiaries pursuant to any term of the Company's or such General Partner's Amended and Restated Articles of Incorporation or Bylaws, as applicable, or of the Certificate of Limited Partnership or Partnership Agreement of PECO Energy Capital, or, to the best of our knowledge after due inquiry of officials of the Company and PECO Energy Capital, any term of any material contract, note, lease, mortgage, loan agreement, indenture, or other A-1 23 instrument to which the Trust, the Company or PECO Energy Capital is a party or by which any of them is bound or to which any of the property or assets of the Trust, the Company or PECO Energy Capital are subject, or any statute, order, rule or regulation known to us of any local or governmental agency or body having jurisdiction over the Company or PECO Energy Capital or any of their respective properties. (v) The Pennsylvania Public Utility Commission has entered an appropriate order (with respect to Securities Certificate No. S-00950499) authorizing the Company to execute and deliver the Series B Guarantee and to issue the Series B Subordinated Debentures and an appropriate order and Certificate of Public Convenience authorizing the Company to acquire all of the stock of the general partner of PECO Energy Capital, such orders are in full force and effect and, to the best of our knowledge after due inquiry, no proceeding has been initiated upon appeal from or to review the effectiveness of such orders; and, except as specified in Paragraphs (viii) and (ix) hereof and the filing of Schedule 13E- 4, no other approval, authorization, order or consent of or declaration, registration or filing with, any governmental authority is required for the valid execution and delivery by the Company and PECO Energy Capital of the Trust Agreement or by the Company of the Dealer Manager Agreement, the Series B Guarantee and the Indenture, the valid issuance and delivery of the Series B Guarantee and the Series B Subordinated Debentures by the Company, or the valid issuance and delivery by PECO Energy Capital of the Series B Preferred Securities (other than in connection with the provisions of state securities or "blue sky" laws of any jurisdiction, as to which we express no opinion). (vi) The Series B Guarantee and the Indenture have been duly authorized, executed and delivered by the Company and constitute [or in the case of the opinion to be delivered on the Commencement Date, when executed and delivered will constitute] legal, valid and binding obligations of the Company enforceable in accordance with their respective terms except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and general principles of equity. (vii) The Series B Subordinated Debentures have been duly authorized by all necessary corporate action on the part of the Company, have been duly executed and delivered by duly authorized offices of the Company (or in the case of the opinion to be delivered on the Consummation Date when executed and delivered) and when authenticated by A-2 24 the Indenture Trustee and delivered to PECO Energy Capital will constitute legal, valid and binding obligations of the Company enforceable in accordance with their terms. (viii) The Dealer Manager Agreement has been duly authorized by the Offerors and by the General Partner respectively, and [in the case of the opinion to be delivered on the Acceptance Date, such agreements have been duly executed and delivered by such parties respectively]. (ix) The Trust Agreement has been duly authorized, executed and delivered by PECO Energy Capital and the General Partner respectively. (x) The Registration Statement has become effective under the Securities Act of 1933, as amended (the "Act"), and, to the best of our knowledge after due inquiry, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or contemplated. (xi) The Indenture has been qualified under the Trust Indenture Act of 1939, as amended. (xii) Under current law and interpretations of current law issued by the Securities and Exchange Commission, none of the Company, PECO Energy Capital and the Trust is an "investment company" required to register under the Investment Company Act of 1940, as amended. (xiii) The descriptions in the Registration Statement and the Prospectus of the Preferred Trust Receipts, Series B Preferred Securities, the Series B Guarantee Agreement and Series B Subordinated Debentures and of statutes, legal and governmental proceedings and other documents are accurate and fairly present the information required to be shown and we do not know of any legal or governmental proceedings required to be described in the Prospectus which are not described as required, nor or any documents of a character required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement which are not described and filed as required. (xiv) The Registration Statement and the Prospectus comply as to form in all material respects with the Act and the rules and regulations thereunder, and the documents incorporated therein by reference in the Prospectus complied, when filed, as to form in all material respects with the Securities Exchange Act of 1934, as amended (provided that we express no opinion as to financial A-3 25 statements, schedules or other financial data included in the Registration Statement or the Prospectus). (xv) The statements made under the caption "United States Taxation" in the Prospectus, insofar as they describe matters of United States law (including Pennsylvania law) and legal conclusions are fair summaries thereof and we confirm to the Co-Dealer Managers our opinion stated therein. We have acted as special counsel to the Company in connection with the Offer and the issuance and delivery of the Series B Subordinated Debentures and the Series B Guarantee and to PECO Energy Capital in connection with the issuance of the Series B Preferred Securities and to the Trust in connection with the issuance of the Preferred Trust Receipts and in connection therewith have participated in the preparation of the Registration Statement and have reviewed all of the documents incorporated therein by reference. Although we have not undertaken to determine independently and assume no responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or in the Prospectus, we do not believe that either the Registration Statement or the Prospectus, including the documents incorporated therein by reference (except for financial statements, schedules and other financial data included therein or incorporated therein by reference, as to which we express no opinion or belief), at the time the Registration Statement became effective, 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, including the documents incorporated therein by reference (except for financial statements, schedules and other financial data included therein or incorporated therein by reference, as to which we express no opinion or belief) contained on the date of the Prospectus or contains on the date hereof 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. (2) The favorable opinion of James W. Durham, Esq., Senior Vice President and General Counsel of the Company, or Todd Cutler, Esq., Assistant General Counsel of the Company, to the effect that: (i) The Company is a corporation duly organized and existing under the laws of the Commonwealth of Pennsylvania. (ii) Each of the Company's Utility Subsidiaries is a validly existing corporation under the laws of the A-4 26 jurisdiction of its incorporation. The Company and each Utility Subsidiary have all requisite corporate power and authority to own and occupy their respective properties and carry on their respective businesses as presently conducted and as described in the Prospectus and are duly qualified as foreign corporations to do business and in good standing in every jurisdiction in which the nature of the business conducted or property owned by them makes such qualification necessary and in which the failure to so qualify would have a materially adverse effect on the Company. The Company and each Utility Subsidiary have all such franchises, permits and licenses as are necessary to conduct their respective businesses, the absence of which would have a materially adverse effect on the Company. (iii) There is no pending or, to the best of my knowledge after due inquiry, threatened action, investigation or proceeding against or affecting the Company or any of its Subsidiaries before any court, governmental agency or arbitrator which is likely to have a material adverse effect on the business, financial condition or results of operations of the Company and its Subsidiaries taken as a whole, except as set forth in the Prospectus including the documents incorporated by reference therein. (3) The favorable opinion of Richards, Layton & Finger to the effect that: (i) PECO Energy Capital has been duly formed and is validly existing in good standing as a limited partnership under the Delaware Revised Uniform Limited Partnership Act (the "Delaware Act"). (ii) Under the Partnership Agreement and the Delaware Act, this Agreement and the Trust Agreement have been duly authorized for execution and delivery by PECO Energy Capital by all necessary partnership action on the part of PECO Energy Capital. (iii) Assuming that the Trust, as a limited partner of PECO Energy Capital, does not participate in the control of the business of PECO Energy Capital, the Series B Preferred Securities issued to the Trust have been duly and validly authorized and are validly issued and, subject to the qualifications set forth in this opinion (iii), are fully paid and nonassessable limited partner interests in PECO Energy Capital, as to which the Trust, as a limited partner of PECO Energy Capital, will have no liability in excess of its obligation to make payments provided for in the Partnership Agreement and its share of PECO Energy Capital's assets and undistributed profits (subject to the A-5 27 obligation of the Trust to repay and funds wrongfully distributed to it). (iv) There are no provisions in the Partnership Agreement the inclusion of which, subject to the terms and conditions therein, or, assuming that the Trust, as a limited partner of PECO Energy Capital, takes no action other than actions permitted by the Partnership Agreement, the exercise of which, in accordance with the terms and conditions therein, would cause the Trust, as a limited partner of PECO Energy Capital, to be deemed to be participating in the control of the business of PECO Energy Capital. (v) The execution and delivery by PECO Energy Capital of, and the performance by PECO Energy Capital of its obligations under, this Agreement and the Trust Agreement will not violate any provision of any material applicable law of the State of Delaware or the Certificate of Limited Partnership or the Partnership Agreement (excluding the securities or Blue Sky Laws of the State of Delaware, as to which no opinion is expressed). (vi) The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Business Trust Act, and under the Trust Agreement and the Delaware Business Trust Act has the trust power and authority to conduct its business as described in the Prospectus. (vii) Assuming due authorization, execution and delivery of the Trust Agreement by PECO Energy Capital Corp., PECO Energy Capital and the Trustee, the Trust Agreement is a legal, valid and binding agreement of PECO Energy Capital Corp., PECO Energy Capital and the Trustee, enforceable against PECO Energy Capital Corp., PECO Energy Capital and the Trustee, in accordance with its terms, except as the enforceability thereof may be subject to the effect upon the Trust Agreement of (a) bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent conveyance and other similar laws relating to or affecting the rights and remedies of creditors generally, (b) principles of equity (regardless of whether considered and applied in a proceeding in equity or at law), (c) applicable law relating to fiduciary duties, and (d) the effect of applicable public policy on the enforceability of provisions relating to indemnification or contribution. (viii) The Preferred Trust Receipts have been duly authorized by the Trust Agreement, and when issued and sold in accordance with the Trust Agreement, the Preferred Trust A-6 28 Receipts will be duly and validly issued and, subject to the qualifications set forth in opinion (ix) below, fully paid and nonassessable interests in the Trust. (ix) The holders of Preferred Trust Receipts, in their capacities as such, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. In rendering such opinion, such counsel may note that holders of Preferred Trust Receipts may be obligated to make other payments provided for in the Trust Agreement. (x) Under Delaware law and the Trust Agreement, the issuance of the Preferred Trust Receipts is not subject to preemptive rights. (xi) Under Delaware law and the Partnership Agreement, the issuance of the Series B Preferred Securities is not subject to preemptive rights. A-7 29 Appendix B TRUSTEE'S CERTIFICATE PNC Bank, Delaware, a Delaware banking corporation (the "Trustee"), hereby certifies that: 1. The Trust Agreement dated as of ________ __, 1995 (the "Trust Agreement"), by and among PECO Energy Capital Corp., a Delaware corporation ("PECO Energy"), PECO Energy Capital, L.P., a Delaware limited partnership ("PECO Energy Capital") and the Trustee has been duly executed and delivered in the name and on behalf of the Trustee. 2. Each person who, on behalf of the Trustee, executed and delivered the Trust Agreement was at the date thereof and is now duly elected, appointed or authorized, qualified and acting as an officer or authorized signatory of the Trustee and duly authorized to perform such act at the time of such act and the signatures of such persons appearing on such documents are their genuine signatures. 3. Attached hereto are (a) an extract from the By-laws of the undersigned, duly adopted by its Board of Directors, respecting the signing authority of the persons mentioned above in paragraph 2 above, and (b) a letter from a Senior Executive Vice President of the undersigned authorizing, pursuant to such By-laws, such signing authority, which By-laws and letter at the date hereof are in full force and effect. 4. To the knowledge of the Trustee, without any independent investigation, the trust created pursuant to the Trust Agreement (a) has conducted no business other than in connection with the matters described in the Registration Statement on Form S-4 (No. 33-60859) of PECO Energy Company, PECO Energy Capital and PECO Energy Capital Trust I (the "Registration B-1 30 Statement") and (b) has no liabilities other than in connection with the matters described in the Registration Statement. IN WITNESS WHEREOF, the Trustee has caused this certificate to be executed in its corporate name by an officer thereunto duly authorized and its corporate seal to be affixed hereto. Dated: ___________ __, 1995 PNC BANK, DELAWARE By: ________________________ Name: Title: [SEAL] B-2 EX-23.1 3 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23-1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-4, as amended, with respect to the offer to exchange Trust Receipts for up to 5,400,000 depositary shares each representing a one-fourth interest in a share of $7.96 Cumulative Preferred Stock of our report dated January 30, 1995, on our audits of the consolidated financial statements and financial statement schedules of PECO Energy Company. We also consent to the reference to our firm under the caption "Experts." /s/ COOPERS & LYBRAND LLP - ------------------------- COOPERS & LYBRAND L.L.P. 2400 Eleven Penn Center Philadelphia, Pennsylvania November 2, 1995 -----END PRIVACY-ENHANCED MESSAGE-----