UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE --- ACT OF 1934 For the fiscal year ended December 31, 2000 OR --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
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1-6047 GPU, Inc. 13-5516989
(a Pennsylvania corporation)
300 Madison Avenue
Morristown, New Jersey 07962-1911
Telephone (973) 401-8200
1-3141 Jersey Central Power & Light Company 21-0485010
(a New Jersey corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19640-0001
Telephone (610) 929-3601
1-446 Metropolitan Edison Company 23-0870160
(a Pennsylvania corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19640-0001
Telephone (610) 929-3601
1-3522 Pennsylvania Electric Company 25-0718085
(a Pennsylvania corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19640-0001
Telephone (610) 929-3601
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Registrant Title of each class which registered
------------------------ ------------------- ----------------------
GPU, Inc. Common Stock, par value
$2.50 per share New York Stock Exchange
Jersey Central Power & First Mortgage Bonds:
Light Company 6 3/8% Series due 2003 New York Stock Exchange
7 1/8% Series due 2004 New York Stock Exchange
7 1/2% Series due 2023 New York Stock Exchange
6 3/4% Series due 2025 New York Stock Exchange
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Name of each exchange
Registrant Title of each class which registered
------------------------ ------------------- ----------------------
Jersey Central Power & Cumulative Preferred
Light Company (continued) Stock, $100 stated value
4% Series New York Stock Exchange
7.52% Series New York Stock Exchange
8.65% Series New York Stock Exchange
Monthly Income Preferred
Securities, 8.56%
Series A, $25 stated
value (a) New York Stock Exchange
Metropolitan Edison Trust Preferred
Company Securities, 7.35% Series A,
$25 stated value (b) New York Stock Exchange
Pennsylvania Electric Trust Preferred
Company Securities, 7.34% Series A,
$25 stated value (c) New York Stock Exchange
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(a) Issued by JCP&L Capital, L.P., and unconditionally guaranteed by Jersey Central Power & Light Company.
(b) Issued by Met-Ed Capital Trust, and represents a beneficial interest in the trust equal to a cumulative preferred limited partnership interest in Met-Ed Capital II, L.P.
(c) Issued by Penelec Capital Trust, and represents a beneficial interest in the trust equal to a cumulative preferred limited partnership interest in Penelec Capital II, L.P.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of each registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the registrants' voting stock held by non-affiliates based on the closing price of $31.65 on March 12, 2001 was:
Registrant Amount ------------------------------------ -------------- GPU, Inc. $3,781,962,280 |
The number of shares outstanding of each of the registrants' classes of voting stock as of March 12, 2001 was as follows:
Shares
Registrant Title Outstanding
------------------------------------ ----------------------------- -----------
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GPU, Inc. Common Stock, $2.50 par value 119,493,279 Jersey Central Power & Light Company Common Stock, $10 par value 15,371,270 Metropolitan Edison Company Common Stock, no par value 859,500 Pennsylvania Electric Company Common Stock, $20 par value 5,290,596
DOCUMENTS INCORPORATED BY REFERENCE
This combined Form 10-K is separately filed by GPU, Inc., Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants.
Page
Number
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Part I
Item 1. Business 1
Item 2. Properties 28
Item 3. Legal Proceedings 30
Item 4. Submission of Matters to a Vote of Security Holders 30
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 31
Item 6. Selected Financial Data 32
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 32
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk 32
Item 8. Financial Statements and Supplementary Data 32
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 32
Part III
Item 10. Directors and Executive Officers of the Registrant 33
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial Owners
and Management 43
Item 13. Certain Relationships and Related Transactions 44
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 45
Signatures 59
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GPU, Inc. and Subsidiary Companies
ITEM 1. BUSINESS.
GPU, Inc., a Pennsylvania corporation, is a holding company registered under the Public Utility Holding Company Act of 1935 (1935 Act). GPU, Inc. does not directly operate any utility properties, but owns all the outstanding common stock of three domestic electric utilities serving customers in New Jersey -- Jersey Central Power & Light Company (JCP&L) -- and Pennsylvania -- Metropolitan Edison Company (Met-Ed) and Pennsylvania Electric Company (Penelec). These electric utilities are conducting business under the name GPU Energy. JCP&L, Met-Ed and Penelec considered together are referred to as the "GPU Energy companies." GPU Capital, Inc. and GPU Electric, Inc. and their subsidiaries own, operate and fund the acquisition of electric distribution and gas transmission systems in foreign countries, and are referred to as "GPU Electric." GPU Electric's foreign utility companies include Midlands Electricity plc (conducting business as GPU Power UK); Empresa Distribuidora Electrica Regional S.A. (Emdersa); and GPU GasNet. GPU Power, Inc. and its subsidiaries (GPU Power) develop, own and operate generation facilities in foreign countries. Other subsidiaries of GPU, Inc. include GPU Advanced Resources, Inc. (GPU AR), which sells electric energy at retail; GPU Telcom Services, Inc. (GPU Telcom), which is engaged in telecommunications-related businesses; MYR Group Inc. (MYR), which is a utility infrastructure construction services company; GPU Service, Inc. (GPUS), which provides legal, accounting, financial and other services to the GPU companies; GPU Diversified Holdings LLC; and GPU Nuclear, Inc. (GPUN). All of these companies considered together are referred to as "GPU."
GPU is subject to regulation by the Securities and Exchange Commission (SEC) under the 1935 Act. The GPU Energy companies' retail rates, conditions of service, and issuance of securities are subject to regulation in the state in which each utility operates - in New Jersey by the New Jersey Board of Public Utilities (NJBPU) and in Pennsylvania by the Pennsylvania Public Utility Commission (PaPUC). The Nuclear Regulatory Commission (NRC) regulates the ownership and operation of nuclear generating stations. The GPU Energy companies are also subject to wholesale rate and other regulation by the Federal Energy Regulatory Commission (FERC) under the Federal Power Act. In addition, certain foreign subsidiaries and affiliates are subject to rate and other regulation (see Regulation section).
Financial information with respect to the business segments of GPU is provided in Note 13, Segment Information, of the Combined Notes to Consolidated Financial Statements.
In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, GPU, Inc., JCP&L, Met-Ed and Penelec (the GPU registrants) are hereby filing cautionary statements identifying important factors that could cause their actual results to differ materially from those projected in forward-looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995) made by or on behalf of the GPU registrants in this Form 10-K. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or
GPU, Inc. and Subsidiary Companies
future events or performance (often, but not always, through the use of words or phrases such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "projects," "will likely," "result," "will continue" or similar expressions) are not statements of historical facts and may be forward-looking.
Forward-looking statements involve estimates, assumptions and uncertainties and are qualified in their entirety by reference to, and are accompanied by, the following important factors, which are difficult to predict, contain uncertainties, are beyond the control of the GPU registrants and may cause actual results to differ materially from those contained in those forward-looking statements: the consummation of the proposed merger of GPU, Inc. with FirstEnergy Corp. (FirstEnergy); the effects of regulatory decisions, including any conditions imposed upon the proposed merger with FirstEnergy; changes in law and other governmental actions and initiatives; economic or weather conditions affecting future sales and margins; the impact of deregulation and increased competition in the industry; industry restructuring; expected outcomes of legal proceedings; energy prices and availability; and uncertainties involved with foreign operations including political risks and foreign currency fluctuations.
Any forward-looking statement speaks only as of the date on which that statement is made, and the GPU registrants undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which that statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all of those factors, nor can it assess the impact of each of those factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.
In August 2000, GPU, Inc. entered into an agreement to merge with FirstEnergy, an Ohio corporation, headquartered in Akron, Ohio. Under the merger agreement, FirstEnergy would acquire all of the outstanding shares of GPU's common stock for approximately $4.5 billion in cash and FirstEnergy common stock.
The merger has been approved by the Boards of Directors and stockholders of GPU, Inc. and FirstEnergy and is expected to close promptly after all of the conditions to the consummation of the merger (including the receipt of all necessary regulatory approvals, provided that such approvals will not impose terms and conditions that would reasonably be expected to result in a "material adverse effect," as defined in the merger agreement, on the combined company, and there being no "material adverse effect" on either GPU or FirstEnergy since June 30, 2000 or March 31, 2000, respectively), are fulfilled or waived. Relevant factors would include the nature of any order issued by the regulatory authorities, the financial and business conditions of each company, and whether, and the extent to which, any developments relate to general economic conditions. In testimony before the PaPUC, FirstEnergy stated that FirstEnergy will carefully review the PaPUC's action with respect to GPU's requested provider of last resort (PLR) relief (see Domestic Energy Supply section) on the financial condition of GPU to determine whether the
GPU, Inc. and Subsidiary Companies
consequences would have a "material adverse effect" on GPU or the combined company. The receipt of all necessary regulatory approvals is expected to take approximately nine to twelve months from the date of the merger agreement. There can be no assurance as to the outcome of these matters.
As part of its plan to reduce ownership in non-core and under-performing assets, in June 2000 GPU completed the sale of GPU PowerNet, its Australian electric transmission company, to Singapore Power International for A$2.1 billion (US $1.26 billion). In addition, GPU completed the sale of GPU International, Inc., its domestic independent power production business, to Aquila Energy Corporation for $225 million in December 2000. GPU is retaining GPU GasNet, its Australian gas transmission business, pending improvement in local market conditions.
In August 2000, GPU sold the second of its two operating nuclear generating stations, the Oyster Creek Nuclear Generating Station (Oyster Creek), to AmerGen Energy Company (AmerGen), for $10 million, thereby essentially exiting the generation business.
During 2000, with the goal of improving customer service and service reliability, the GPU Energy companies committed to making additional investments in their transmission and distribution business. In addition, in 2000 the GPU Energy companies reorganized the structure of their operational divisions to enhance customer service throughout their service territory. In January 2001, the GPU Energy companies announced that they were offering Voluntary Enhanced Retirement Programs (VERP) to certain bargaining unit employees in Pennsylvania. Approximately 240 employees (Met-Ed 130 employees; Penelec 110 employees) are eligible for the VERP. If all of the eligible employees accept the offer, a pre-tax charge of approximately $23 million (Met-Ed $12 million; Penelec $11 million) would be recorded in 2001 earnings for the cost of pension and other postretirement benefits, exclusive of any severance benefits that would be paid to those employees.
In October 1999, GPU also initiated a program of planned cost reductions of $100 million. A significant portion of these planned cost reductions were achieved in 2000, and the remaining reductions are scheduled to be implemented during 2001.
In connection with GPU's strategy to pursue opportunities in non-regulated businesses related to its core utility infrastructure business, GPU completed the acquisition of MYR, a specialty construction company, for approximately $218 million in April 2000. MYR provides power line and commercial/industrial electrical construction services for electric utilities, telecommunications providers, commercial and industrial facilities and government agencies. MYR also builds cellular towers for the wireless communications market.
GPU also made investments in telecommunications-related businesses during the year. In March 2000, GPU announced its participation in America's Fiber Network LLC (AFN), of which GPU anticipates owning 25%. AFN is a high-speed fiber optics company with a network of more than 7,000 route miles, or 140,000 fiber miles, connecting major markets in the eastern US to secondary markets. GPU anticipates investing cash, as well as existing and new fiber routes and electronic equipment, in AFN. As of December 31, 2000, GPU had invested $5.3 million in AFN through GPU Telcom.
GPU, Inc. and Subsidiary Companies
GPU Telcom participated in the formation of Telergy Mid-Atlantic (TMA), a joint venture with Telergy, Inc. TMA provides telecommunications and marketing services for utilities' existing fiber networks. TMA's current market includes both New Jersey and Pennsylvania, with future expansions planned for contiguous regions currently served by the network of GPU Telcom. As of December 31, 2000, GPU Telcom had acquired $20 million of Telergy, Inc. convertible preferred securities.
The GPU Energy companies expect that they will continue to serve customers in markets where there will be capped rates for varying periods and their ability to seek rate increases will be limited. In addition, as a result of Restructuring Orders issued by the NJBPU and PaPUC, the GPU Energy companies are required to supply electricity to customers who do not choose an alternate supplier. Because the GPU Energy companies have essentially exited the generation business and will have to supply electricity to non-shopping customers almost entirely from contracted and open market purchases, there will be increased risks associated with supplying that electricity in an environment where there are capped rates.
In recent months, certain aspects of California's restructuring plan have created instability and price volatility in the electricity market, negatively affecting the California electric utilities. These utilities have defaulted on various contractual and financial obligations and have experienced rapid deterioration of their credit quality. Reaction of the financial markets, which did not anticipate the rapid deterioration of the California utilities' financial condition, has included a careful review of overall credit exposure to the electric utility industry. As a result, the amount of new financing capacity available to GPU may be less than it had previously been and renewal or refinancing of existing credit facilities will likely require GPU's acceptance of higher pricing and/or more restrictive terms and conditions. For additional information, see Financing Arrangements section.
GPU has made significant investments in foreign businesses and facilities through its subsidiaries, GPU Electric and GPU Power. At December 31, 2000, GPU's investments in GPU Electric and GPU Power were $881 million and $139 million, respectively. As of that date, GPU had also guaranteed an additional $899 million and $21 million of GPU Electric and GPU Power outstanding obligations, respectively. Although management attempts to mitigate the risks of investing in certain foreign countries by, among other things, securing political risk insurance, GPU faces additional risks inherent to operating in such locations, including foreign currency fluctuations.
With the transition to a competitive marketplace for generation service in New Jersey and Pennsylvania, certain generation-related costs, which generally would be recoverable in a regulated environment, may no longer be recoverable. These costs are generally referred to as stranded costs.
In March 2001, the NJBPU issued a Final Decision and Order (Final Order) with respect to JCP&L's rate unbundling, stranded cost and restructuring filings, which supersedes the Summary Order issued in May 1999. This Final Order provides for, among other things, the following:
GPU, Inc. and Subsidiary Companies
-- a 5% rate reduction commencing August 1, 1999; additional reductions of 1% in 2000 and 2% in 2001; and an additional net 3% reduction in 2002 inclusive of a 5% rate refund from rates in effect as of April 30, 1997, partially offset by a 2% increase in the Market Transition Charge (MTC). The total rate reduction of 11% will remain in effect through July 2003, with JCP&L to file, by no later than August 1, 2002, its proposed level of all unbundled rate components as of August 1, 2003, for NJBPU consideration (in a proceeding in which all interested parties may participate), in order to establish the appropriate level of rates effective on and after August 1, 2003;
-- the removal from regulation of the costs associated with providing electric generation service. JCP&L must provide basic generation service (BGS) through July 31, 2002 to retail customers who do not choose an alternative generation supplier, after which BGS will be bid out;
-- the average shopping credits will range from 5.14 cents per KWH in 1999 to 5.40 cents in 2003;
-- the ability to recover stranded costs. However, the NJBPU deferred making a final determination of the net proceeds and stranded costs related to the generating asset divestitures until an Internal Revenue Service (IRS) ruling regarding the treatment of associated federal income tax benefits is received;
-- the ability to securitize approximately $400 million of stranded costs associated with Oyster Creek;
-- the establishment of a non-bypassable societal benefits charge to recover costs associated with nuclear plant decommissioning, demand-side management, manufactured gas plant remediation, universal service fund and consumer education;
-- the NJBPU will conduct an annual review and assessment of the reasonableness and prudency of costs incurred by JCP&L in the procurement of energy and capacity needed to serve BGS load as well as of non-utility generation (NUG) and utility power purchase agreement stranded costs. JCP&L is permitted to defer for future collection from customers the amounts by which costs of supplying BGS to non-shopping customers and costs incurred under NUG agreements exceed amounts collected in connection therewith through BGS rates. While the Summary Order specifically authorized JCP&L to securitize the deferred NUG costs, the Final Order provides that upon application by JCP&L and a determination by the NJBPU that the conditions of the New Jersey restructuring legislation are met, JCP&L will be permitted to securitize deferred balances to the extent permitted by the restructuring legislation; and
-- the establishment of a non-bypassable MTC to recover, among other things, above-market costs associated with long-term NUG and utility power purchase agreements, any under-recovered deferred costs as of August 1, 1999 resulting from JCP&L's previous levelized energy adjustment clause and the amortization of Oyster Creek sunk costs, pending securitization.
GPU, Inc. and Subsidiary Companies
In 1998, the PaPUC issued amended Restructuring Orders approving Settlement Agreements entered into by Met-Ed and Penelec which, among other things, provide for customer choice of electric generation supplier beginning January 1, 1999 and a one-year (1999) reduction in retail distribution rates for all consumers. The Orders also provide for recovery of a substantial portion of what otherwise would have become stranded costs, subject to Phase II proceedings following the completion of Met-Ed's and Penelec's generating asset divestitures, to make a final determination of the extent of that stranded cost recovery. In 2000, Met-Ed and Penelec submitted Phase II Reports to the PaPUC supporting their actual net divestiture proceeds and providing a reconciliation of stranded costs pursuant to the 1998 Restructuring Orders.
On December 20, 2000, the PaPUC issued a Phase II Order which disallows $28 million (Met-Ed $16 million; Penelec $12 million) of the requested $304 million (Met-Ed $226 million; Penelec $78 million) of additional stranded costs above those amounts granted in the 1998 Orders. Met-Ed and Penelec had anticipated a disallowance of a portion of stranded costs, and established a $25 million (Met-Ed $19 million; Penelec $6 million) reserve in 1999. In addition, as a result of the Phase II Order, Met-Ed and Penelec recognized pre-tax income of $66 million (Met-Ed $45 million; Penelec $21 million) due primarily to pension curtailment gains associated with employees terminated as a result of the sale of generating facilities in 1999, and the reversal of certain liabilities and changes in estimates and assumptions related to Met-Ed's leasehold interest in the Merrill Creek Reservoir project. The Phase II Order also deferred a decision on Met-Ed's requested increase in rates, beginning in 2006, for recovery of Met-Ed's generation-related stranded costs. In addition, the Order requires Met-Ed and Penelec to seek an IRS ruling regarding the return of certain unamortized investment tax credits and excess deferred income tax benefits to ratepayers. For further information, see Note 6, Accounting for Extraordinary and Non-Recurring Items, of the Combined Notes to Consolidated Financial Statements.
As a result of the NJBPU's and the PaPUC's Restructuring Orders, the GPU Energy companies are required to supply electricity to customers who do not choose an alternate supplier. In 1999, the GPU Energy companies completed the sales of TMI-1 and substantially all their fossil-fuel and hydroelectric generating stations, and in 2000, JCP&L sold Oyster Creek. (For additional information regarding the sales of the GPU Energy companies' generating facilities, see Note 6, Accounting for Extraordinary and Non-Recurring Items, of the Combined Notes to Consolidated Financial Statements.) As a result, the GPU Energy companies now have to supply electricity to non-shopping customers almost entirely from contracted and open market purchases.
JCP&L is required to provide BGS to retail customers who choose to remain with JCP&L as generation customers for a three-year period ending July 31, 2002. Thereafter, BGS service is to be bid out at BGS rates, which are pre-determined through July 31, 2003. The specific details of the BGS bidding process will be the subject of a future NJBPU proceeding. Under its Restructuring Order, JCP&L is permitted to defer for future recovery the amount by which its reasonable and prudently incurred costs associated with providing BGS to non-shopping customers exceed amounts currently reflected in its rates for BGS.
GPU, Inc. and Subsidiary Companies
The PaPUC has approved a competitive bid process designed to assign PLR service to licensed generation suppliers, referred to as Competitive Default Service (CDS), for 20% of Met-Ed's and Penelec's retail customers on June 1, 2000, 40% on June 1, 2001, 60% on June 1, 2002 and 80% on June 1, 2003.
In 2000, the absence of acceptable bids required Met-Ed and Penelec to supply 550 megawatts (MW) (Met-Ed 250 MW; Penelec 300 MW)of electric power more than they had planned. In addition, customers requiring approximately 600 MW (Met-Ed 240 MW; Penelec 360 MW) of power returned to Met-Ed and Penelec from their alternate suppliers for the peak Summer months. During that same period, market prices at which Met-Ed and Penelec were required to purchase electricity for their retail supply customers at times substantially exceeded the amounts Met-Ed and Penelec were allowed to charge for that electricity under their capped generation rates. This situation resulted in GPU's Pennsylvania supply business recording a loss for 2000 of approximately $28 million (Met-Ed $14 million; Penelec $14 million) after-tax, or $0.22 per share.
Under the terms of their restructuring settlements, Met-Ed and Penelec are required to seek alternative providers through a CDS bidding process for a portion of their customers again in 2001. Should the 2001 CDS bidding process be successful, then up to 40% of Met-Ed's and Penelec's customers would be served by third party energy providers starting on June 1, 2001. However, if the bidding process is not successful and wholesale energy prices remain high, and Met-Ed and Penelec are not granted state regulatory relief, the companies expect substantial earnings losses to continue, as well as a reduction of cash flow. Based on their current projection of returning customers to whom they must supply electricity under their PLR obligations, Met-Ed and Penelec presently estimate approximately 800 MW (Met-Ed 410 MW; Penelec 390 MW) of additional load will return to them by June 1, 2001. If this projection proves to be correct, Met-Ed and Penelec estimate that the cost of providing energy to Pennsylvania customers, including the returning 800 MW of load, could result in GPU's Pennsylvania supply business recording a loss for 2001 of approximately $120 million (Met-Ed $60 million; Penelec $60 million) after-tax, or $1 per share, based on the companies' current assessment of market energy prices. Met-Ed and Penelec also estimate that if all their shopping customers were to return by June 1, 2001, their supply business losses could be up to approximately $150 million (Met-Ed $80 million; Penelec $70 million) after-tax, or $1.25 per share.
Given this situation, on November 29, 2000, Met-Ed and Penelec filed a petition with the PaPUC seeking permission to defer for future recovery their energy costs in excess of established generation rate caps. Various parties to the proceeding filed motions to dismiss the petition. On January 19, 2001, Met-Ed and Penelec made a further request that they be permitted to implement their proposed deferral mechanism pending the PaPUC's final action on their petition. On January 24, 2001, the PaPUC denied, without prejudice, the motions to dismiss Met-Ed's and Penelec's petition and recommended that the companies provide support for a rate cap exception based on the criteria in the Customer Choice and Competition Act. In addition, the PaPUC consolidated the petition with the GPU/FirstEnergy merger proceeding for consideration and resolution in accord with the merger procedural schedule, which establishes a May 2001 date for a PaPUC order in both cases. In February 2001, Met-Ed and Penelec filed a supplement to their petition and supporting testimony which they believe establish that the PaPUC should grant them exceptions to their rate caps. In addition, Met-Ed and Penelec stated that as an alternative to the deferral mechanism they previously proposed, the circumstances would
GPU, Inc. and Subsidiary Companies
warrant an immediate increase in their present rate caps. There can be no assurance regarding the degree, if any, to which Met-Ed and Penelec may be able to recover their costs to supply electricity in excess of amounts currently reflected in their capped rates.
The GPU Energy companies have 285 MW of generation capacity and related energy remaining to meet customer needs. The GPU Energy companies also have contracts with nonutility generators totaling 1,600 MW and agreements with other parties to provide varying amounts of capacity through May 31, 2004. These capacity amounts from third parties vary from a monthly high of approximately 1,740 MW in 2001 to 500 MW in May 2004. Based on the exercise of call options, the GPU Energy companies may take the energy associated with up to 150 MW of this capacity through May 2003. The GPU Energy companies have also purchased all of the capacity and energy from their previously owned TMI-1 and Oyster Creek (sold by JCP&L) stations through December 31, 2001 and March 31, 2003, respectively. In addition, the GPU Energy companies have the right to the capacity of Penelec's previously owned Homer City station (942 MW) through May 31, 2001 and the right to the capacity of several other generating stations they sold in 1999 (3,970 MW) through May 31, 2002. GPU Energy's remaining capacity and energy needs will be met by short- to intermediate-term commitments (one month to three years). Any residual needs will be purchased from the short-term market (one hour to one month).
Electric utility customers have traditionally been served by vertically integrated regulated monopolies; however, for the past several years the electric utility industry has been moving away from a rate regulated environment based on cost recovery to some combination of a competitive marketplace and regulation. The enactment of the Public Utility Regulatory Policies Act of 1978 (PURPA) facilitated the entry of competitors into the electric generation business. The Energy Policy Act of 1992 (EPAct) furthered competition among utilities and NUGs in the wholesale electric generation market, accelerating industry restructuring. The FERC has required utilities to provide open access and comparable transmission service to third parties, as well as to establish independent system operators. Pennsylvania and New Jersey have adopted comprehensive legislation providing for the restructuring of the electric utility industry, and implementing orders have been issued by the PaPUC and the NJBPU.
The electric generation and transmission facilities of the GPU Energy companies are physically interconnected and are operated as a single integrated and coordinated system serving a population of approximately five million in New Jersey and Pennsylvania. For the year 2000, the GPU Energy companies' revenues were about equally divided between Pennsylvania customers and New Jersey customers. During 2000, sales to customers by customer class were as follows:
GPU, Inc. and Subsidiary Companies
----- ----- ------ ------- ----- ----- ------ -------
Residential 48 48 53 45 36 42 35 29
Commercial 35 38 30 32 35 40 30 33
Industrial 15 13 16 19 28 17 35 35
Other* 2 1 1 4 1 1 - 3
--- --- --- --- --- --- --- ---
100 100 100 100 100 100 100 100
=== === === === === === === ===
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* Rural electric cooperatives, municipalities, street and highway lighting, and others.
Revenues of JCP&L, Met-Ed and Penelec derived from their largest single customers accounted for 1.4%, 0.4% and 1%, respectively, of their electric operating revenues for the year and their 25 largest customers, in the aggregate, accounted for approximately 9%, 5% and 7%, respectively, of such revenues. The GPU Energy companies also make interchange and spot market sales of electricity to other utilities.
The area served by the GPU Energy companies extends from the Atlantic Ocean to Lake Erie, is generally comprised of small communities, rural and suburban areas and includes a wide diversity of industrial enterprises, as well as substantial farming areas. JCP&L provides retail service in northern, western and east central New Jersey, having an estimated population of approximately 2.7 million. Met-Ed provides retail electric service in all or portions of 14 counties, in the eastern and south central parts of Pennsylvania, having an estimated population of about 1.3 million. Penelec provides retail and wholesale electric service within a territory located in western, northern and south central Pennsylvania extending from the Maryland state line northerly to the New York state line, with a population of about 1.6 million, approximately 28% of which is concentrated in 23 cities and boroughs, all with populations over 5,000. Penelec currently provides wholesale service to the Allegheny Electric Cooperative, Inc., which serves 13 rural electric cooperatives in Pennsylvania and one in New Jersey, under an agreement which is to be terminated as of April 1, 2001, subject to FERC approval. Penelec, as lessee of the property of the Waverly Electric Light & Power Company, also serves a population of about 13,400 in Waverly, New York and vicinity.
The GPU Energy companies' transmission facilities are physically interconnected with neighboring nonaffiliated utilities in Pennsylvania, New Jersey, Maryland, New York and Ohio. The interconnection facilities are used for substantial capacity and energy interchange and purchased power transactions, as well as emergency assistance. The GPU Energy companies are members of the PJM Power Pool and the Mid-Atlantic Area Council, an organization providing coordinated review of the planning by utilities in the PJM area. The PJM Power Pool is a limited liability company governed by an independent board of managers recognized by the FERC as an Independent System Operator.
GPU, Inc. and Subsidiary Companies
GPU, Inc. has SEC authorization to finance investments in foreign utility companies (FUCOs) and exempt wholesale generators (EWGs) up to an aggregate amount equal to 100% of GPU's average consolidated retained earnings, or approximately $2.4 billion as of December 31, 2000. At December 31, 2000, GPU, Inc. has remaining authorization to finance approximately $680 million of additional investments in FUCOs and EWGs. GPU, Inc.'s investments in FUCOs and EWGs are made through GPU Electric and GPU Power.
GPU Electric owns electric distribution and gas transmission businesses in England, Australia and Argentina. In June 2000, GPU Electric sold its electric transmission business in Australia and, as a result, recorded a pre-tax loss in 2000 of $372 million ($276.6 million after-tax, or $2.28 per share), including a $94 million foreign currency loss. At December 31, 2000, GPU, Inc.'s aggregate investment in GPU Electric was $881 million. GPU, Inc. has also guaranteed up to an additional $899 million of outstanding GPU Electric obligations.
GPU Power UK's primary business is the distribution of electricity in an area having an estimated population of approximately five million residents which includes Birmingham, parts of Staffordshire and the rural areas of Gloucestershire, Shropshire and Hereford and Worcester. Although historically industrial, the area's economy is less dominated by heavy manufacturing and has seen increased growth in the commercial sector. GPU Power UK also provides service connections for street lighting, traffic lights and other installations from its main networks.
Through its subsidiary Midlands Power International Limited (MPI), GPU Power UK also has investments in operating generating facilities located internationally totaling 4,201 MW (of which GPU Electric's equity interest represents 1,119 MW) of capacity. At this time, MPI does not intend to invest in any new generation projects.
GPU Power UK's non-regulated activities include electricity generation, electrical contracting, metering services and related businesses.
GPU GasNet owns and maintains a high pressure gas transmission pipeline system, which serves a total consumption base of approximately 1.3 million residential customers and approximately 40,000 industrial and commercial users throughout Victoria. GPU GasNet's primary purpose is to transport gas from the Longford gas treatment plant in South East Victoria and from gas fields in the Southwest to the major load centers in Victoria.
The transmission system consists of two networks - the Principal System and the smaller Western System which are connected by the Southwest pipeline. GPU GasNet's major assets are steel and other pipelines, compressors, regulating and injector stations, transfer meters and a liquefied natural gas storage facility. GPU GasNet has completed a number of construction projects to expand and augment its system, improve security of supply and take advantage of expected growth in gas consumption, including completion of a major interconnection between the Victorian and New South Wales transmission systems.
GPU, Inc. and Subsidiary Companies
GPU GasNet's business consists of three distinct segments: Gas Transmission, which is regulated by tariff and represents approximately 84% of total revenues; Excluded Services, such as custody transfer metering and LNG services which are regulated but not subject to formula-based price controls and which represent about 15% of total revenues; and Competitive Services, such as engineering and construction services, which are unregulated but account for less than 1% of total revenues.
GPU Electric acquired Emdersa, an Argentine holding company, in March 1999. Emdersa's principal business operations consist of the distribution of electricity through its three operating companies, Edesa, Edelar and Edesal. These companies service approximately 335,000 customers in a 124,300 square mile area in the three north western provinces of San Luis, La Rioja and Salta. The customer base includes residential, commercial, industrial, public lighting and irrigation customers.
Emdersa acquires electricity primarily from the Wholesale Electricity Market. Each of Emdersa's three operating companies distributes electricity to end users and operates on the basis of exclusive contracts to distribute electricity, which have been granted by the respective provincial governments. The operating companies' rates are embodied in and subject to specific tariff structures which are in effect for five years. The current tariff at La Rioja expired in June 2000 and the new tariff is under negotiation and anticipated to be agreed upon by the end of the first quarter 2001. The tariff at Salta expires in August 2001; and at Edesal in March 2003.
GPU Power has ownership interests in four operating generating facilities located in foreign countries totaling 1,229 MW (of which GPU Power's equity interest represents 424 MW) of capacity. At December 31, 2000, GPU, Inc.'s aggregate investment in GPU Power was $139 million. GPU, Inc. has also guaranteed up to an additional $21.3 million of GPU Power obligations.
GPU Telcom is a telecommunications infrastructure development and management company and wholesale telecommunications provider with operations primarily in the Mid-Atlantic region of the US. Its customers consist of telecommunications end-use service providers including: interexchange carriers; competitive local exchange carriers; competitive access providers and multiple system operators; commercial and industrial companies (private networks) and governmental agencies; cable television and telephone companies; and internet service providers. At December 31, 2000, GPU, Inc.'s aggregate investment in GPU Telcom was $67 million. See the Significant Developments section for additional information on GPU Telcom's recent business activities.
GPU, Inc. and Subsidiary Companies
In April 2000, GPU, Inc. acquired MYR for approximately $218 million. MYR, a suburban Chicago-based infrastructure construction services company, provides a complete range of power line and commercial/industrial electrical construction services for electric utilities, telecommunications providers, commercial and industrial facilities and government agencies across the US. MYR also builds cellular towers for the wireless communications market. At December 31, 2000, GPU, Inc.'s aggregate investment in MYR was $237 million.
GPU's capital spending for 2000 was $571 million and its estimated capital spending for 2001 is $667 million.
The GPU Energy companies' capital spending was $280 million (JCP&L $144 million; Met-Ed $59 million; Penelec $73 million; Other $4 million) in 2000, and was used primarily to expand and improve existing transmission and distribution (T&D) facilities and for new customer connections. In 2001, capital expenditures for the GPU Energy companies are estimated to be $371 million (JCP&L $184 million; Met-Ed $83 million; Penelec $97 million; Other $7 million), primarily for ongoing T&D system development. Management estimates that a substantial portion of the GPU Energy companies' 2001 capital spending will be supplied through internally generated funds.
GPU Electric's capital spending of $213 million in 2000 was used primarily to make improvements to Emdersa's, GPU Power UK's, and (prior to its sale in June 2000) GPU PowerNet's T&D networks. For 2001, GPU Electric's capital expenditures are estimated to be $200 million, and management expects that a substantial portion of this capital spending will be supplied through internally generated funds.
GPU Telcom's capital spending was $66 million in 2000, and was used primarily to make investments in telecommunications infrastructure and businesses. In 2001, GPU Telcom's capital expenditures are estimated to be $90 million, and management expects that this will be supplied by capital contributions and internally generated funds.
The California electricity market was deregulated in 1998. In recent months, certain aspects of that state's restructuring plan have created instability and price volatility in the electricity market, negatively affecting the California electric utilities. These utilities have defaulted on various contractual and financial obligations and have experienced rapid deterioration of their credit quality. Reaction of the financial markets, which did not anticipate the rapid deterioration of the California utilities' financial condition, has included a careful review of overall credit exposure to the electric utility industry.
GPU, Inc. and Subsidiary Companies
Furthermore, Met-Ed's and Penelec's energy cost exposure related to their PLR obligation in Pennsylvania has negatively affected Met-Ed's and Penelec's earnings. Consequently, the amount of new financing capacity available to GPU, Inc. or its subsidiaries may be less than it had previously been. While the GPU companies do not expect to require significant levels of new borrowings in 2001, certain existing credit facilities are due for renewal or refinancing during 2001. At December 31, 2000, these credit facilities include: $465 million available to GPU, Inc. and the GPU Energy companies under a $250 million revolving credit agreement and various committed bank lines of credit; $1 billion under GPU Capital, Inc.'s (GPU Capital) senior revolving credit agreement; $180 million under GPU Australia Holdings, Inc.'s (GPU Australia Holdings) senior revolving credit agreement; and $366 million under EI UK Holdings, Inc.'s (EI UK Holdings) two year term loan agreement.
Renewal or refinancing of these facilities will likely require GPU's acceptance of higher pricing and/or more restrictive terms and conditions. If renewal or refinancing of the existing credit facilities is limited or cannot be achieved, GPU will be required to reduce capital spending and other discretionary cash uses, including the amount and timing of future common stock dividends. Moreover, the failure to obtain PLR relief will likely result in a further increase in capital costs, more restrictive terms and conditions and reduced access to capital markets.
In addition, primarily as a result of these conditions (the companies' PLR exposure and the negative publicity surrounding the California utilities), in early 2001 Met-Ed and Penelec began experiencing difficulty in selling their commercial paper with maturities longer than overnight. Under normal circumstances, they issue commercial paper having maturities of up to 30 days or longer, if desired. As a result, Met-Ed and Penelec have temporarily withdrawn from the commercial paper market, and instead have resorted to borrowing against their various bank lines of credit.
There can be no assurance as to the outcome of these matters.
In January 1999, the GPU, Inc. Board of Directors authorized the repurchase of up to $350 million of GPU, Inc. common stock. Through December 31, 2000, 9.2 million shares of common stock, or approximately 8% of the outstanding shares, have been repurchased under the program, at an average price of $32.43 per share. No further repurchases of common stock are planned at this time.
In December 2000, GPU, Inc. issued and sold $300 million of unsecured debentures, the net proceeds from which were used to repay debt at GPU, Inc., GPU Capital and GPU Electric.
GPU has various credit facilities in place, the most significant of which are discussed below. These credit facilities generally provide GPU bank loans at negotiated market rates.
GPU, Inc. and the GPU Energy companies have available $465 million of short-term borrowing facilities, which include a $250 million revolving credit agreement and various bank lines of credit. In addition, GPU, Inc., JCP&L, Met-Ed and Penelec have commercial paper programs for up to $100 million, $150 million, $75 million and $100 million, respectively. From these sources, GPU, Inc. has regulatory authority to have $250 million outstanding at any one
GPU, Inc. and Subsidiary Companies
time. JCP&L, Met-Ed and Penelec are limited by their charters or SEC authorization to $266 million, $150 million and $150 million, respectively, of short-term debt outstanding at any one time.
JCP&L, Met-Ed and Penelec have regulatory approval to issue senior notes through December 31, 2002 in the amounts of $300 million, $150 million and $157 million, respectively. JCP&L and Met-Ed intend to issue secured senior notes (collateralized by first mortgage bonds (FMBs) issued to the senior note trustee) until such time as more than 80% of the outstanding FMBs are held by the senior note trustee. At that time, the FMBs will be cancelled and the outstanding senior notes will become unsecured obligations. Penelec's senior notes are unsecured.
Expenditures for maturing long-term debt are expected to total $40 million (JCP&L) in 2001, and $130 million (JCP&L $50 million; Met-Ed $30 million; Penelec $50 million) in 2002. Current plans call for each of the GPU Energy companies to issue senior notes during the next three years to fund the redemption of maturing senior securities, refinance outstanding senior securities and finance construction activities. Following their initial issuance of senior notes, the GPU Energy companies would not issue any additional FMBs other than as collateral for the senior notes. The senior note indentures prohibit (subject to certain exceptions) the GPU Energy companies from issuing any debt which is senior to the senior notes.
In August 1999, JCP&L filed a petition with the NJBPU requesting authorization to issue transition bonds to securitize the recovery of bondable stranded costs attributable to the projected net investment in Oyster Creek at September 1, 2000. The petition also requests that the NJBPU order provide for the imposition and collection of a usage-based non-bypassable transition bond charge (TBC) and for the transfer of the bondable transition property relating to the TBC to another entity. In August 2000, Oyster Creek was sold to AmerGen, a joint venture of PECO Energy and British Energy. JCP&L has amended its petition to include securitization of the up-front decommissioning payment it has made under the Oyster Creek sale agreement.
In 2000, Penelec issued four tranches, totaling $118 million, of variable and fixed rate senior notes. Two of these tranches, totaling $50 million of variable rate senior notes, were converted to fixed rate obligations through interest rate swap agreements.
In 2000, JCP&L and Met-Ed redeemed $40 million and $50 million, respectively, of maturing FMBs; and Penelec redeemed $25 million of senior notes. Also in 2000, JCP&L redeemed $21.7 million stated value of cumulative preferred stock pursuant to mandatory and optional sinking fund provisions.
In 1999, Met-Ed Capital Trust, a wholly-owned subsidiary of Met-Ed, issued $100 million of trust preferred securities (Met-Ed Trust Preferred Securities) at 7.35%, due 2039. The sole assets of Met-Ed Capital Trust are the 7.35% Cumulative Preferred Securities of Met-Ed Capital II, L.P. (Met-Ed Partnership Preferred Securities) and its only revenues are the quarterly cash distributions it receives on the Met-Ed Partnership Preferred Securities. Each Met-Ed Trust Preferred Security represents a Met-Ed Partnership Preferred Security. Met-Ed Capital II, L.P. is a wholly-owned subsidiary of Met-Ed and
GPU, Inc. and Subsidiary Companies
the sponsor of Met-Ed Capital Trust. The sole assets of Met-Ed Capital II, L.P. are Met-Ed's 7.35% Subordinated Debentures, Series A, due 2039, which have an aggregate principal amount of $103.1 million. Distributions were made on the Trust Preferred Securities during 2000 in the aggregate amount of $7,350,000. Expenses of Met-Ed Trust for 2000 were approximately $17,000, all of which were paid by Met-Ed Preferred Capital II, Inc., the general partner of Met-Ed Capital II, L.P. The Trust Preferred Securities are issued in book-entry form only so that there is only one holder of record. Met-Ed has fully and unconditionally guaranteed the Met-Ed Partnership Preferred Securities, and, therefore, the Met-Ed Trust Preferred Securities.
In 1999, Penelec Capital Trust, a wholly-owned subsidiary of Penelec, issued $100 million of trust preferred securities (Penelec Trust Preferred Securities) at 7.34%, due 2039. The sole assets of Penelec Capital Trust are the 7.34% Cumulative Preferred Securities of Penelec Capital II, L.P. (Penelec Partnership Preferred Securities) and its only revenues are the quarterly cash distributions it receives on the Penelec Partnership Preferred Securities. Each Penelec Trust Preferred Security represents a Penelec Partnership Preferred Security. Penelec Capital II, L.P. is a wholly-owned subsidiary of Penelec and the sponsor of Penelec Capital Trust. The sole assets of Penelec Capital II, L.P. are Penelec's 7.34% Subordinated Debentures, Series A, due 2039, which have an aggregate principal amount of $103.1 million. Distributions were made on the Trust Preferred Securities during 2000 in the aggregate amount of $7,340,000. Expenses of Penelec Trust for 2000 were approximately $17,000, all of which were paid by Penelec Preferred Capital II, Inc., the general partner of Penelec Capital II, L.P. The Trust Preferred Securities are issued in book-entry form only so that there is only one holder of record. Penelec has fully and unconditionally guaranteed the Penelec Partnership Preferred Securities, and, therefore, the Penelec Trust Preferred Securities.
In 2000, GPU GasNet refinanced A$451 million (US $250 million) of its A$747 million (two tranches totaling US $415 million) of bank debt utilizing A$250 million (US $139 million) of proceeds from a new commercial paper program; A$150 million (US $83 million) of proceeds from a new medium term note program; and A$51 million (US $28 million) of proceeds from the issuance of additional commercial paper by GPU Australia Holdings. At December 31, 2000, the following GPU GasNet debt was outstanding and included in Long-term debt on the Consolidated Balance Sheet: A$250 million (US $139 million) of commercial paper; A$211 million (US $117 million) of bank debt; and A$150 million (US $83 million) of medium term notes. In addition, GPU GasNet has established a A$750 million (US $417 million) revolving credit facility, which serves as backstop for the GPU GasNet commercial paper and medium term note programs. No borrowings were outstanding under this facility at December 31, 2000.
GPU Capital has a $1 billion 364-day senior revolving credit agreement due in November 2001 supporting the issuance of commercial paper for its $1 billion commercial paper program, which has been established to fund GPU, Inc. and GPU Electric acquisitions. GPU, Inc. has guaranteed GPU Capital's obligations under this program. At December 31, 2000, $633 million was outstanding under this commercial paper program and included in Notes payable on the Consolidated Balance Sheet. In early 2001, GPU Capital refinanced the majority of this outstanding commercial paper through its standby revolving credit agreement.
GPU, Inc. and Subsidiary Companies
GPU Electric has a $150 million credit facility due in May 2002 to accommodate short term borrowing needs. The facility is guaranteed by GPU, Inc. and there were no outstanding borrowings as of December 31, 2000.
GPU Australia Holdings has $180 million available under its senior revolving credit facility, which expires in November 2001. This facility is guaranteed by GPU, Inc. In 2000, GPU Australia Holdings borrowed $176 million under this facility, which is included in Notes payable on the Consolidated Balance Sheet at December 31, 2000, to repay all outstanding commercial paper.
EI UK Holdings has a (pound)245 million (US $366 million) credit facility, a portion of which is guaranteed by GPU, Inc. At December 31, 2000, the entire amount of this facility was outstanding and included in Long-term debt on the Consolidated Balance Sheet.
GPU Power UK maintains a (pound)150 million (US $224 million) revolving credit facility with six banks for working capital purposes, which expires at various dates through June 2005. At December 31, 2000, there was (pound)60 million (US $90 million) outstanding under this facility, which is included in Notes payable on the Consolidated Balance Sheet.
In addition, GPU Power UK maintains an ongoing (pound)75 million (US $112 million) facility with a bank whereby it may borrow funds for working capital purposes. Outstanding borrowings are collateralized by portions of trade accounts receivable. At December 31, 2000, (pound)75 million (US $112 million) was outstanding under this facility, which is included in Notes payable on the Consolidated Balance Sheet.
Expenditures for maturing long-term debt are expected to total $912 million in 2001 and $437 million in 2002.
In 2000, expenditures for maturing long-term debt were $7 million, and are expected to total $7 million in each of 2001 and 2002. Management anticipates meeting these obligations through internally generated funds.
MYR maintains a $50 million revolving credit facility, which expires in November 2003, of which up to $10 million is available for the issuance of standby letters of credit. As of December 31, 2000, $36 million was outstanding under this facility.
The GPU Energy companies' FMB indentures and/or charters contain provisions which limit the total amount of securities evidencing secured indebtedness and/or unsecured indebtedness which the GPU Energy companies may issue, the more restrictive of which are discussed below.
JCP&L's and Met-Ed's FMB indentures require that, for a period of any twelve consecutive months out of the fifteen calendar months immediately preceding the issuance of additional FMBs, net earnings (before income taxes, with other income limited to 5% of operating income before income taxes) available for interest on FMBs shall have been at least twice the annual
GPU, Inc. and Subsidiary Companies
interest requirements on all FMBs to be outstanding immediately after such issuance. They also restrict the ratio of the principal amount of FMBs which may be issued to not more than 60% of available bondable value of property additions, but in general, permit JCP&L and Met-Ed to issue additional FMBs against a like principal amount of previously issued and retired FMBs.
At December 31, 2000, JCP&L did not have bondable value of property additions available to issue any additional FMBs and Met-Ed had bondable value of property additions to permit the issuance of approximately $6 million principal amount of additional FMBs. However, JCP&L and Met-Ed can issue approximately $383 million and $160 million, respectively, of FMBs against previously issued and retired FMBs.
Penelec issued $118 million of senior notes in 2000. It does not intend to issue any additional FMBs under its FMB indenture.
In general, the FMB indentures permit the GPU Energy companies to direct the trustee to utilize cash on deposit to purchase callable or maturing bonds and to purchase bonds in the market at not more than 105% of their principal amount, plus accrued interest.
Among other restrictions, JCP&L's charter provides that without the consent of the holders of two-thirds of the outstanding preferred stock, no additional shares of preferred stock may be issued unless, for a period of any twelve consecutive months out of the fifteen calendar months immediately preceding such issuance, the after-tax net earnings available for the payment of interest on indebtedness shall have been at least one and one-half times the aggregate of (a) the annual interest charges on indebtedness and (b) the annual dividend requirements on all shares of preferred stock to be outstanding immediately after such issuance. At December 31, 2000, these provisions would have permitted JCP&L to issue $1.4 billion stated value of cumulative preferred stock at an assumed 8% dividend rate.
JCP&L's charter also provides that, without the consent of the holders of a majority of the total voting power of JCP&L's outstanding preferred stock, JCP&L may not issue or assume any securities representing short-term unsecured indebtedness, except to refund certain outstanding unsecured securities issued or assumed by JCP&L or to redeem all outstanding preferred stock, if immediately thereafter the total principal amount of all outstanding unsecured debt securities having an initial maturity of less than ten years (or within three years of maturity for all unsecured indebtedness having original maturities in excess of ten years) would exceed 10% of the aggregate of (a) the total principal amount of all outstanding secured indebtedness issued or assumed by JCP&L and (b) the capital and surplus of JCP&L. At December 31, 2000, these restrictions would have permitted JCP&L to have approximately $266 million of unsecured indebtedness outstanding.
JCP&L has obtained authorization from the SEC to incur short-term debt (including indebtedness under the revolving credit agreement and commercial paper program) up to its charter limitation.
In February 1999, Met-Ed and Penelec redeemed all their cumulative preferred stock. As a result, their charters no longer restrict the amount of preferred stock or unsecured indebtedness they may have outstanding. Met-Ed and Penelec are each limited by SEC authorization to $150 million of short-term debt outstanding at any one time.
GPU, Inc. and Subsidiary Companies
As a registered holding company, GPU, Inc. is subject to regulation by the SEC under the 1935 Act. GPU is also subject to regulation under the 1935 Act with respect to accounting, the issuance of securities, the acquisition and sale of utility assets, securities or any other interest in any business, the entering into, and performance of, service, sales and construction contracts, and certain other matters. The SEC has determined that the electric facilities of the GPU Energy companies constitute a single integrated public utility system under the standards of the 1935 Act. The 1935 Act also limits the extent to which GPU may engage in nonutility businesses or acquire additional utility businesses. Each of the GPU Energy companies' retail rates, conditions of service, issuance of securities and other matters are subject to regulation in the state in which each operates - in New Jersey by the NJBPU and in Pennsylvania by the PaPUC. Additionally, Penelec, as lessee, operates the facilities serving the village of Waverly, New York. Penelec's retail rates for New York customers, as well as Penelec's New York operations and property, are subject to regulation by the New York Public Service Commission. With respect to wholesale rates, the transmission of electric energy, accounting, the construction and maintenance of hydroelectric projects and certain other matters, the GPU Energy companies are subject to regulation by the FERC under the Federal Power Act. The NRC regulates the ownership and operation of nuclear generating stations and other related matters. See Environmental Matters section for additional information.
GPU Power UK's distribution operations are regulated under its Public Electricity Supply License (PES License). Accordingly, income generated by the distribution business is subject to a price cap regulatory framework, which provides for an allowed increase in revenue based on increases in the volume of electricity distributed. Under its PES License, GPU Power UK provides distribution services to virtually all electricity customers in its franchise area and, in addition, is obligated to offer electricity supply services to these customers. In June 1999, GPU Power UK sold its supply business to National Power and National Power assumed GPU Power UK's supply obligation under the PES License. An agency agreement with National Power serves as a backstop for the supply tariff GPU Power UK is allowed to charge its customers, since National Power has assumed any risks of the costs of supplying power exceeding the tariff rates.
GPU Power UK's distribution rates are determined in accordance with a formula set by the Gas and Electricity Markets Authority, which is ordinarily reviewed every five years. The effect of the most recent review was implemented in April 2000 and the next review is scheduled for implementation in April 2005.
GPU GasNet is presently regulated by the Australian Competition Control Commission according to a similar incentive-based regulatory mechanism. GPU GasNet's tariff order establishes an initial tariff and a CPI-X formula, which adjusts that tariff annually through December 31, 2002. The next regulatory review is scheduled for 2002, and will be effective for five years commencing January 1, 2003.
Edesa, Edelar and Edesal operate under a specific tariff structure that may be revised by the provincial regulators every five years in accordance with the Regulatory Framework Law. In general, tariffs for electricity distribution in Argentina are set in accordance with a model that takes four factors into consideration: 1) the pass-through cost of electricity purchased,
GPU, Inc. and Subsidiary Companies
2) the cost of electricity losses, 3) distribution cost and 4) quality of service. The rate structure allows distribution companies to retain the benefit of operational efficiencies they are able to achieve until tariffs are reset.
Empresa Guaracachi S.A., GPU Power's electric generation company in Bolivia, is subject to regulation under the Electricity Law of 1994. Twice each year, the Superintendency of Electricity recalculates the prices that Empresa Guaracachi S.A. and other electric generators may charge for capacity based upon an estimated cost of constructing a new generating unit. In addition, energy prices are recalculated semi-annually based upon a projected cost of generation, including fuel and non-fuel variable operation and maintenance costs.
In December 1999, the GPU Energy companies sold TMI-1 to AmerGen for approximately $100 million. In August 2000, JCP&L sold Oyster Creek to AmerGen for approximately $10 million. As part of the sales, AmerGen has assumed full responsibility for decommissioning the plants, and the GPU Energy companies have transferred $320 million and $430 million of TMI-1 and Oyster Creek decommissioning trust funds, respectively, to AmerGen. JCP&L, Met-Ed and Penelec jointly own TMI-2, which was damaged during a 1979 accident, in the percentages of 25%, 50% and 25%, respectively. JCP&L's net investment in TMI-2 as of December 31, 2000 was $55 million. JCP&L is collecting revenues for TMI-2 on a basis which provides for the recovery of its remaining investment in the plant by 2008. Met-Ed's and Penelec's remaining investments in TMI-2 were written off in 1998 after receiving the PaPUC's Restructuring Orders.
As a result of the 1979 TMI-2 accident, individual claims for alleged personal injury (including claims for punitive damages), which are material in amount, were asserted against GPU, Inc. and the GPU Energy companies. Approximately 2,100 of such claims were filed in the US District Court for the Middle District of Pennsylvania. Some of the claims also seek recovery for injuries from alleged emissions of radioactivity before and after the accident.
At the time of the TMI-2 accident, as provided for in the Price-Anderson Act, the GPU Energy companies had (a) primary financial protection in the form of insurance policies with groups of insurance companies providing an aggregate of $140 million of primary coverage, (b) secondary financial protection in the form of private liability insurance under an industry retrospective rating plan providing for up to an aggregate of $335 million in premium charges under such plan and (c) an indemnity agreement with the NRC for up to $85 million, bringing their total financial protection up to an aggregate of $560 million. Under the secondary level, the GPU Energy companies are subject to a retrospective premium charge of up to $5 million per reactor, or a total of $15 million.
In 1995, the US Court of Appeals for the Third Circuit ruled that the Price-Anderson Act provides coverage under its primary and secondary levels for punitive as well as compensatory damages, but that punitive damages could
GPU, Inc. and Subsidiary Companies
not be recovered against the Federal Government under the third level of financial protection. In so doing, the Court of Appeals referred to the "finite fund" (the $560 million of financial protection under the Price-Anderson Act) to which plaintiffs must resort to get compensatory as well as punitive damages.
The Court of Appeals also ruled that the standard of care owed by the defendants to a plaintiff was determined by the specific level of radiation which was released into the environment, as measured at the site boundary, rather than as measured at the specific site where the plaintiff was located at the time of the accident (as the defendants proposed). The Court of Appeals also held that each plaintiff still must demonstrate exposure to radiation released during the TMI-2 accident and that such exposure had resulted in injuries. In 1996, the US Supreme Court denied petitions filed by GPU, Inc. and the GPU Energy companies to review the Court of Appeals' rulings.
In 1996, the District Court granted a motion for summary judgment filed by GPU, Inc. and the GPU Energy companies, and dismissed the ten initial "test cases" which had been selected for a test case trial, as well as all of the remaining 2,100 pending claims. The Court ruled that there was no evidence which created a genuine issue of material fact warranting submission of plaintiffs' claims to a jury. The plaintiffs appealed the District Court's ruling to the Court of Appeals for the Third Circuit. In November 1999, the Third Circuit affirmed the District Court's dismissal of the ten "test cases," but set aside the dismissal of the additional pending claims, remanding them to the District Court for further proceedings. In remanding these claims, the Third Circuit held that the District Court had erred in extending its summary judgment decision to the other plaintiffs and imposing on these plaintiffs the District Court's finding that radiation exposures below 10 rems were too speculative to establish a causal link to cancer. The Court of Appeals stated that the non-test case plaintiffs should be permitted to present their own individual evidence that exposure to radiation from the accident caused their cancers. In June 2000, the US Supreme Court denied petitions for review filed by GPU, Inc., the GPU Energy companies and the plaintiffs.
In September 2000, the defendants filed a Motion for Summary Judgment in the District Court. Meanwhile, the plaintiffs have taken an interlocutory appeal to the Third Circuit seeking review of the District Court's determination that the remaining plaintiffs should be allowed to advance causation theories based only on the admissible evidence of record at the close of discovery in the case.
Oral arguments on the plaintiffs' appeal were held in January, 2001. There can be no assurance as to the outcome of this litigation.
GPU, Inc. and the GPU Energy companies believe that any liability to which they might be subject by reason of the TMI-2 accident will not exceed their financial protection under the Price-Anderson Act.
Retirement costs for nuclear plants include decommissioning the radiological portions of the plants and the cost of removal of nonradiological structures and materials. The disposal of spent nuclear fuel is covered separately by contracts with the Department of Energy (DOE).
GPU, Inc. and Subsidiary Companies
In 1995, a consultant performed a site-specific study of TMI-2 that considered various decommissioning methods and estimated the cost of decommissioning the radiological portion and the cost of removal of the nonradiological portion of the plant, using the prompt removal/dismantlement method. Management has reviewed the methodology and assumptions used in this study, is in agreement with them, and believes the results are reasonable. The TMI-2 funding completion date is 2014, consistent with TMI-2 remaining in long-term storage. The retirement cost estimate under the 1995 site-specific study, assuming decommissioning of TMI-2 in 2014, is $450 million for radiological decommissioning and $36 million for non-radiological removal costs (net of $12.6 million spent as of December 31, 2000)(in 2000 dollars).
Each of the GPU Energy companies is responsible for retirement costs in proportion to its respective ownership percentage. The ultimate cost of retiring TMI-2 may be different from the cost estimate contained in this site-specific study. Also, the cost estimate contained in this site-specific study is significantly greater than the decommissioning funding targets established by the NRC.
The estimated liability for future TMI-2 retirement costs (reflected as Three Mile Island Unit 2 future costs on the Consolidated Balance Sheet) as of December 31, 2000 is $515 million (JCP&L $129 million; Met-Ed $257 million; Penelec $129 million). This liability is based upon the 1995 site-specific study estimate (in 2000 dollars) discussed above and an estimate for remaining incremental monitored storage costs of $29 million (JCP&L $7 million; Met-Ed $15 million; Penelec $7 million) as of December 31, 2000, as a result of TMI-2 entering long-term monitored storage in 1993.
Offsetting the $515 million liability as of December 31, 2000 is $127 million (JCP&L $15 million; Met-Ed $93 million; Penelec $19 million), which management believes is probable of recovery from customers and included in Regulatory assets, net on the Consolidated Balance Sheet, and $374 million (JCP&L $115 million; Met-Ed $161 million; Penelec $98 million) in trust funds for TMI-2 and included in Nuclear decommissioning trusts, at market on the Consolidated Balance Sheet.
The NJBPU has granted JCP&L revenues for TMI-2 retirement costs based on the 1995 site-specific study estimate. In addition, JCP&L is recovering a portion of its share of TMI-2 incremental monitored storage costs. The PaPUC Restructuring Orders granted Met-Ed and Penelec recovery of TMI-2 decommissioning costs as part of the CTC; however, Penelec has recovered these costs through the divestiture of its generating assets. The 1996 Customer Choice Act also allows Met-Ed and Penelec to defer as a regulatory asset those amounts that are above the level provided for in the CTC for future recovery.
As of December 31, 2000, the accident-related portion of TMI-2 radiological decommissioning costs is estimated to be $80 million (JCP&L $20 million; Met-Ed $40 million; Penelec $20 million), which is based on the 1995 site-specific study (in 2000 dollars). In connection with rate case resolutions, JCP&L, Met-Ed and Penelec made contributions to irrevocable external trusts for their respective shares of the accident-related portion of the decommissioning liability in amounts of $15 million, $40 million and $20 million, respectively. These contributions were not recoverable from customers and were expensed in 1990, in the case of JCP&L, and in 1991 for Met-Ed and Penelec.
GPU, Inc. and Subsidiary Companies
The GPU Energy companies intend to seek recovery for any increases in TMI-2 retirement costs, but recognize that recovery cannot be assured.
The GPU Energy companies own all of the common stock of the Saxton Nuclear Experimental Corporation, which owns a small demonstration nuclear reactor. Decommissioning of the plant is expected to be completed in 2002. In December 2000, based on new estimates to complete the decommissioning of the plant, the decommissioning liability was increased by $13 million, to $52 million (JCP&L $23 million; Met-Ed $17 million; Penelec $12 million) as of December 31, 2000. The GPU Energy companies do not believe this increase is probable of recovery, and have charged the entire amount to expense.
GPU has insurance (subject to retentions and deductibles) for its operations and facilities including coverage for property damage, liability to employees and third parties, and loss of use and occupancy. There is no assurance that GPU will maintain all existing insurance coverages. Losses or liabilities that are not completely insured, unless allowed to be recovered through ratemaking, could have a material adverse effect on the financial position of GPU.
GPU has purchased property and decontamination insurance coverage for TMI-2 totaling $150 million.
The Price-Anderson Act limits an owner's liability to third parties resulting from a nuclear incident to approximately $9.5 billion. Coverage for the first $200 million of such liability is provided by private insurance. The remaining coverage, or secondary financial protection, is provided by retrospective premiums payable by all nuclear reactor owners. Although TMI-2 is exempt from retrospective premium assessments, the plant is still covered by the provisions of the Price-Anderson Act. In addition, the GPU Energy companies are subject to other retrospective premium assessments related to policies applicable to TMI-1 prior to its sale to AmerGen.
GPU is subject to a broad range of federal, state and local environmental and employee health and safety legislation and regulations. In addition, the GPU Energy companies are subject to licensing of hydroelectric projects by the FERC and of nuclear power projects by the NRC. Such licensing and other actions by federal agencies with respect to GPU's domestic operations are also subject to the National Environmental Policy Act.
As a result of existing and proposed legislation and regulations, and ongoing legal proceedings dealing with environmental matters including, but not limited to, air and water quality, global warming, electromagnetic fields, and storage and disposal of hazardous and/or toxic wastes, GPU may be required to incur substantial additional costs to construct new facilities; modify or replace existing and proposed equipment; or remediate, decommission or clean up waste disposal and other sites currently or formerly used by it, including formerly owned manufactured gas plants (MGP), coal mine refuse piles and generation facilities. In addition, federal and state law provides for payment by responsible parties for damage to natural resources.
GPU, Inc. and Subsidiary Companies
GPU records liabilities (on an undiscounted basis) where it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated, and adjusts these liabilities as required to reflect changes in circumstances. At December 31, 2000, GPU has liabilities recorded on its balance sheets for environmental matters, as follows:
Company Amount (in millions)
------- --------------------
JCP&L $56.6
Met-Ed 0.5
Penelec 7.9
GPUN 0.5
GPU, Inc. 3.5
----
Total $69.0
====
Nuclear: Reference is made to the Nuclear Facilities section for
-------
|
information regarding the TMI-2 accident, and its aftermath.
The GPU Energy companies have provided for future contributions to the Decontamination and Decommissioning Fund for the cleanup of uranium enrichment plants operated by the Federal Government. GPU's total liability at December 31, 2000 amounted to $22 million (JCP&L $14 million; Met-Ed $5 million; Penelec $3 million). JCP&L is recovering these costs from customers through its BGS and market transition charge rates, while Met-Ed and Penelec were denied recovery in the Phase II proceedings and wrote off their respective regulatory assets for DOE decontamination and decommissioning at December 31, 2000.
At December 31, 2000, GPU has recorded a liability of $210 million (JCP&L $157 million; Met-Ed $35 million; Penelec $18 million) owed to the Nuclear Waste Fund, related to spent nuclear fuel generated prior to the sales of TMI-1 and Oyster Creek to AmerGen. AmerGen has assumed all liability for disposal costs related to spent nuclear fuel generated following its purchase of the plants.
GPU, Inc. and Subsidiary Companies
Certain parties have alleged that exposure to electric and magnetic fields associated with the operation of transmission and distribution facilities will produce adverse impacts upon public health and safety and upon property values. Furthermore, regulatory actions under consideration by the New Jersey Committee on Radiation Protection, could, if enacted, establish a framework under which the intensity of the fields produced by electric transmission and distribution lines would be limited or otherwise regulated.
The GPU Energy companies cannot determine at this time what effect, if any, this matter will have on their results of operations and financial position.
Prior to 1953, the GPU Energy companies owned and operated MGP sites in New Jersey and Pennsylvania. Waste contamination associated with the operation and dismantlement of these MGP sites is, or may be, present both on-site and off-site. Claims have been asserted against the GPU Energy companies for the cost of investigation and remediation of these sites. The amount of such remediation costs and penalties may be significant and may not be covered by insurance. JCP&L has entered into agreements with the NJDEP for the investigation and remediation of 17 formerly owned MGP sites. JCP&L has also entered into various cost-sharing agreements with other utilities for most of the sites. As of December 31, 2000, JCP&L has spent approximately $44.5 million in connection with the cleanup of these sites. In addition, JCP&L has recorded an estimated environmental liability of $50.2 million relating to expected future costs of these sites (as well as two other
GPU, Inc. and Subsidiary Companies
properties). This estimated liability is based upon ongoing site investigations and remediation efforts, which generally involve capping the sites and pumping and treatment of ground water. Moreover, the cost to clean up these sites could be materially in excess of the $50.2 million due to significant uncertainties, including changes in acceptable remediation methods and technologies. In addition, federal and state law provides for payment by responsible parties for damage to natural resources.
In 1997, the NJBPU approved JCP&L's request to establish a Remediation Adjustment Clause for the recovery of MGP remediation costs. As a result of the NJBPU's Summary Order, effective August 1, 1999, the recovery of these costs was transferred to the Societal Benefits Charge. As of December 31, 2000, JCP&L had recorded on its Consolidated Balance Sheet a regulatory asset of $51.6 million. JCP&L is continuing to pursue reimbursement from its insurance carriers for remediation costs already spent and for future estimated costs. In 1994, JCP&L filed a complaint with the Superior Court of New Jersey against several of its insurance carriers, relating to these MGP sites, and has settled with all but one of those carriers.
In 1997, the EPA filed a complaint against GPU, Inc. in the US District Court for the District of Delaware for enforcement of its Unilateral Order (Order) issued against GPU, Inc. to clean up the former Dover Gas Light Company (Dover) manufactured gas production site (Site) in Dover, Delaware. Dover was part of the AGECO/AGECORP group of companies from 1929 until 1942; GPU, Inc. emerged from the AGECO/AGECORP reorganization proceedings in 1946. All of Dover's common stock, which was sold in 1942 to an unaffiliated entity, was subsequently acquired by Chesapeake Utilities Corporation (Chesapeake), which merged with Dover in 1960. Chesapeake is currently performing the cleanup at the Site. According to the complaint, the EPA is seeking (1) enforcement of the Order against GPU; (2) recovery of its past response costs; (3) a declaratory judgment that GPU is liable for any remaining cleanup costs of the Site; and (4) statutory penalties for noncompliance with the Order. The EPA has stated that it has incurred approximately $1.1 million of past response costs as of December 31, 2000. Chesapeake claims to have spent approximately $10 million in connection with remediation of the site. The EPA has more recently estimated the cost of ground water remediation to be on the order of $6 million. Consultants to Chesapeake have estimated the remaining remediation ground water costs to be approximately $12 million to $19 million. In accordance with its penalty policy, and in discussions with GPU, the EPA has demanded penalties calculated at a daily rate of $8,800, rather than the statutory maximum of $27,500 per day. As of December 31, 2000, if the statutory maximum were applied, the total amount of penalties would be approximately $44 million. GPU believes that it has meritorious defenses to the imposition of penalties, or that if a penalty is assessed, it should be at a lower daily rate. Chesapeake has also sued GPU, Inc. for contribution to the cleanup of the Dover Site. The US District Court for the District of Delaware has consolidated the case filed by Chesapeake with the case filed by the EPA and discovery is proceeding. There can be no assurance as to the outcome of these proceedings.
The Federal Resource Conservation and Recovery Act of 1976, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and the Superfund Amendment and Reauthorization Act of 1986 authorize the EPA to issue orders compelling responsible parties to take cleanup action at any location that is determined to present an imminent and substantial danger to the public or to the environment because of an actual or threatened release of one or more hazardous substances. Pennsylvania and New Jersey have
GPU, Inc. and Subsidiary Companies
enacted legislation giving similar authority to the PaDEP and the NJDEP, respectively. In addition, federal and state law provides for payment by responsible parties for damage to natural resources. Because of the nature of the GPU Energy companies' business, various by-products and substances are produced and/or handled that are classified as hazardous under one or more of these statutes. GPU generally provides for the treatment, disposal or recycling of such substances through licensed independent contractors, but these statutory provisions also impose potential responsibility for certain cleanup costs on the generators of the wastes. GPU has been formally notified by the EPA and state environmental authorities that it is among the potentially responsible parties (PRPs) who may be jointly and severally liable to pay for the costs associated with the investigation and remediation at hazardous and/or toxic waste sites in the following number of instances (in some cases, more than one company is named for a given site):
JCP&L MET-ED PENELEC GPUN GPU, INC. TOTAL ----- ------ ------- ---- --------- ----- 7 4 2 1 1 11 |
In addition, certain of the GPU companies have been requested to participate in the remediation or supply information to the EPA and state environmental authorities on several other sites for which they have not been formally named as PRPs, although the EPA and/or state authorities may nevertheless consider them as PRPs. Certain of the GPU companies have also been named in lawsuits requesting damages (which are material in amount) for hazardous and/or toxic substances allegedly released into the environment. As of December 31, 2000, a liability of approximately $6 million (JCP&L $2.2 million; Met-Ed $0.6 million; Penelec $0.2 million; Other $3 million) was recorded for PRP sites where it is probable that a loss has been incurred and the amount could be reasonably estimated.
The ultimate cost of remediation of all these and other hazardous waste sites will depend upon changing circumstances as site investigations continue, including (a) the existing technology required for site cleanup, (b) the remedial action plan chosen and (c) the extent of site contamination and the portion attributed to the GPU company involved.
In August 2000, Rochester Gas & Electric Corporation (RG&E) filed suit against GPU, Inc. in the US District Court for the Western District of New York for the reimbursement of $5.2 million of costs and damages it has allegedly incurred, and a declaratory judgement with respect to future costs and damages, in connection with two former MGP sites and a third property where wastes from one of those sites were allegedly deposited. All of the properties are located in Rochester, New York. According to the complaint, RG&E was an indirect subsidiary of AGECO from May 1929 until January 1946, and a subsidiary of GPU, Inc. from January 1946 until October 1949, when it was divested by order of the SEC under the 1935 Act. There can be no assurance as to the outcome of this matter.
JCP&L operates pursuant to franchises in the territory served by it and has the right to occupy and use the public streets and ways of the state with its poles, wires and equipment upon obtaining the consent in writing of the owners of the soil, and also to occupy the public streets and ways underground with its conduits, cables and equipment, where necessary, for its electric
GPU, Inc. and Subsidiary Companies
operation. JCP&L has the requisite legal franchise for the operation of its electric business within the State of New Jersey, including in incorporated cities and towns where designations of new streets, public ways, etc., may be obtained upon application to such municipalities. JCP&L holds a FERC license expiring in 2013 authorizing it to operate and maintain the Yards Creek Station in which JCP&L has a 50% ownership interest.
Met-Ed and Penelec have the necessary franchise rights to furnish electric service in the various respective municipalities or territories in which each company now supplies such services. These electric franchise rights, which are generally nonexclusive rights, consist generally of (a) charter rights and (b) certificates of public convenience issued by the PaPUC and/or "grandfather rights." Such electric franchise rights are free from unduly burdensome restrictions and unlimited as to time, except in a few relatively minor cases and except as otherwise described below. The secondary franchise granted by the Borough of Boyertown to Met-Ed contains a provision that the Borough shall have the right at any time to purchase the electric system in the Borough at a valuation to be fixed by appraisers. Met-Ed holds a FERC license expiring in 2014 for the continued operation and maintenance of the York Haven hydroelectric project.
GPU, Inc. and consolidated affiliates have approximately 14,100 employees worldwide, of whom 10,000 are employed in the US, 3,600 are in the United Kingdom (UK) and the remaining 500 are in South America and Australia. The majority of the US workforce is employed by the GPU Energy companies (4,880) and MYR (4,831), of which approximately 2,900 and 4,000, respectively, are represented by unions for collective bargaining purposes. In the UK, approximately 2,300 GPU Power UK employees are represented by unions, and the terms and conditions of various bargaining agreements are generally reviewed annually, on April 1. The JCP&L, Met-Ed and Penelec collective bargaining agreements with the International Brotherhood of Electrical Workers expire on October 31, 2002, May 1, 2003 and May 14, 2002, respectively. Penelec's collective bargaining agreement with the Utility Workers Union of America expires on June 30, 2001.
GPU, Inc. and Subsidiary Companies
ITEM 2. PROPERTIES.
At December 31, 2000, the generating stations of the GPU Energy companies had an aggregate effective capability of 285,000 net kilowatts (KW), as follows:
Name of GPU Energy Year of Net KW Station Company Installation (Summer) ------- ---------- ------------ -------- |
GAS/OIL-FIRED
COMBUSTION TURBINES:
Forked River JCP&L 1989 66,000
HYDROELECTRIC:
York Haven Met-Ed 1905-1930 19,000
PUMPED STORAGE:(a)
Yards Creek JCP&L 1965 200,000
-------
TOTAL 285,000
=======
|
(a) Represents JCP&L's undivided interest in this station, which is a net user rather than a net producer of electric energy.
Substantially all of the GPU Energy companies' properties are subject to the lien of their respective FMB indentures.
At December 31, 2000, GPU Electric had ownership interests in five operating natural gas-fired power production facilities located internationally, with an aggregate capability of 4,200,500 KW as follows:
Name of Year of Ownership
Facility Location Installation Total KW Interest (KW)
-------- -------- ------------ ---------- -------------
Teesside England 1993 1,875,000 498,800
Humber England 1997-1999 1,261,500 237,200
Marmara Turkey 1999 478,000 148,200
Uch Pakistan 2000 586,000 234,400
--------- ---------
Total 4,200,500 1,118,600
========= =========
|
At December 31, 2000, GPU Power had ownership interests in four operating natural gas-fired cogeneration and other nonutility power production facilities located internationally, with an aggregate capability of 1,229,300 KW as follows:
GPU, Inc. and Subsidiary Companies
Name of Year of Ownership
Facility Location Installation Total KW Interest (KW)
-------- -------- ------------ ---------- -------------
Termobarran-
quilla Colombia 1972-98 890,000 254,500
Guaracachi Bolivia 1975-99 287,700 143,900
Aranjuez Bolivia 1974-94 36,900 18,500
Karachipampa Bolivia 1982 14,700 7,400
--------- -------
Total 1,229,300 424,300
========= =======
|
At December 31, 2000, the GPU Energy companies owned the following transmission and distribution facilities:
JCP&L Met-Ed Penelec Total
---------- ---------- ---------- --------
Transmission and Distribution
Substations 302 247 471 1,020
=== === === =====
Aggregate Installed Transformer
Capacity of Substations
(in kilovoltamperes - KVA) 18,882,447 9,649,966 13,348,911 41,881,324
========== ========= ========== ==========
Transmission System (estimate):
-------------------
JCP&L Met-Ed Penelec Total
---------- ---------- ---------- --------
Lines (In Circuit Miles):
500 KV 18 188 235 441
345 KV - - 149 149
230 KV 570 383 650 1,603
138 KV - 3 11 14
115 KV 232 385 1,330 1,947
69 KV, 46 KV and 34.5 KV 1,769 469 364 2,602
----- ----- ----- -----
Total 2,589 1,428 2,739 6,756
===== ===== ===== =====
Distribution System (estimate):
-------------------
JCP&L Met-Ed Penelec Total
---------- ---------- ---------- --------
Line Transformer Capacity (KVA) 10,348,078 6,176,550 7,031,077 23,555,705
========== ========= ========= ==========
Pole Miles of Overhead Lines 16,080 12,613 22,656 51,349
====== ====== ====== ======
Trench Miles of Underground
Cable 7,311 2,287 2,013 11,611
===== ===== ===== ======
|
In addition, GPU Power UK, which provides service to 2.3 million customers in a 5,100 square mile area in England, owns a total of 37,000 miles of overhead and underground lines and has over 33,000 transformers mounted on poles and over 14,000 ground mounted transformers. Emdersa, which owns three electric distribution companies servicing three provinces in northwest Argentina with approximately 389,869 customers within 124,323 square miles, has over 7,364 transformers, and owns 12,745 miles of overhead and underground lines.
GPU, Inc. and Subsidiary Companies
GPU GasNet, a natural gas transmission business, encompasses 1,160 miles of pipeline consisting of two separate networks, the Principal System and the Western System, which supply all of the natural gas consumed in Victoria, Australia. The two networks service approximately 1.3 million residential customers and approximately 40,000 industrial and commercial customers throughout Victoria.
ITEM 3. LEGAL PROCEEDINGS.
Reference is made to Note 12, Commitments and Contingencies, of the Combined Notes to Consolidated Financial Statements contained in Item 8 for a description of certain pending legal proceedings involving GPU.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A special meeting of GPU, Inc. shareholders was held on November 21, 2000. At that meeting, GPU, Inc. shareholders voted on a proposal to approve and adopt the Agreement and Plan of Merger, dated as of August 8, 2000, between GPU, Inc. and FirstEnergy Corp. (Merger Agreement). Under the terms of the Merger Agreement, each GPU, Inc. shareholder would have the opportunity, prior to the completion of the merger, to elect to receive for each share of GPU, Inc. common stock owned, either: (a) $36.50 in cash, without interest; or (b) shares of FirstEnergy Corp. common stock intended to provide GPU, Inc. shareholders with FirstEnergy Corp. shares having a value of $36.50, subject to adjustment. The exact exchange ratio would be determined by dividing $36.50 by the average of the closing sale prices for a share of FirstEnergy Corp. common stock over the 20-day trading period ending on the seventh trading day before the merger is completed. The exchange ratio will be fixed at 1.2318 if the average closing price of FirstEnergy Corp. shares over this period is equal to or greater than $29.6313, and at 1.5055 if the average closing price of FirstEnergy Corp. shares over this period is equal to or less than $24.2438. The elections of GPU, Inc. shareholders will be subject to proration if the result of those elections would cause more than 50% of the outstanding GPU, Inc. shares to be converted into either cash or FirstEnergy Corp. shares. GPU, Inc. shareholders voted 81,932,364 for the adoption of the Merger Agreement, and 1,425,969 against. The special meeting did not involve the election of any GPU, Inc. directors.
GPU, Inc. and Subsidiary Companies
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
All of JCP&L's, Met-Ed's and Penelec's outstanding common stock is owned by GPU, Inc. During 2000, JCP&L, Met-Ed and Penelec paid dividends on their common stock to GPU, Inc. in the following amounts: JCP&L $130 million, Met-Ed $25 million and Penelec $55 million.
In general, the JCP&L, Met-Ed and Penelec FMB indentures restrict the payment of dividends or distributions on or with respect to their common stock to amounts credited to earned surplus since approximately the dates of the indentures. At such dates, the GPU Energy companies had balances in their earned surplus accounts (which would not be available for dividends or other distributions) as follows: JCP&L - $1.7 million; Met-Ed - $3.4 million; and Penelec - $10.1 million. Based on December 31, 2000 financial statements, JCP&L, Met-Ed and Penelec had retained earnings available to pay common stock dividends of $793 million, $67 million and $33 million, respectively, net of amounts restricted under each companies' respective FMB indentures.
GPU, Inc. is listed as GPU on the New York Stock Exchange. On March 8, 2001, there were 32,832 registered holders of GPU, Inc. common stock.
GPU, Inc. common stock dividend declaration dates are the first Thursdays of December, April, June and October. Dividend payment dates fall on the last Wednesday of February, May, August and November. Dividend declarations and quarterly stock price ranges for 2000 and 1999 are set forth below. See Financing Arrangements section in Part I regarding the amount and timing of future common stock dividends.
Common Stock
------------
Dividends Declared Price Ranges*
------------------------- -------------------------------------------------
2000 1999
2000 1999 Quarter High/Low High/Low
----- ----- ------- ------------------ ------------------
April $.545 $.53 First $30 3/4 $23 7/16 $45 $37 1/4
June .545 .53 Second 30 3/8 26 3/16 44 5/8 36 1/2
October .545 .53 Third 32 3/4 26 3/8 42 9/16 32
December .545 .53 Fourth 37 3/16 31 7/16 34 13/16 28 3/4
|
* Based on New York Stock Exchange Composite Transactions as reported in the Wall Street Journal.
In 1999, Met-Ed Capital Trust and Penelec Capital Trust issued $100 million each of Met-Ed Trust Preferred Securities and Penelec Trust Preferred Securities, respectively. The quarterly price ranges of these securities for 2000 and 1999 are as follows:
GPU, Inc. and Subsidiary Companies
Price Ranges
---------------------------------------------------------------------------------------------------------
Met-Ed Trust Preferred Securities (a) Penelec Trust Preferred Securities (b)
------------------------------------------ ----------------------------------------
2000 1999 2000 1999
Quarter High/Low High/Low High/Low High/Low
------- ------------------- ------------------- ------------------ ----------------
First $21 13/16 $19 1/2 $ - $ - $21 1/4 $19 $ - $ -
Second 21 15/16 19 3/4 24 5/8 23 1/8 22 13/16 20 1/8 - -
Third 22 7/8 21 7/16 24 1/8 21 9/16 23 1/2 21 7/16 25 1/2 21 9/16
Fourth 24 7/8 22 22 13/16 19 1/8 24 3/4 21 7/8 22 5/8 19 1/4
(a) Began trading on the New York Stock Exchange on May 28, 1999.
(b) Began trading on the New York Stock Exchange on July 1, 1999.
|
ITEM 6. SELECTED FINANCIAL DATA.
See pages F-1 and F-2 for references to each registrant's Selected Financial Data required by this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
See pages F-1 and F-2 for references to each registrant's Management's Discussion and Analysis of Financial Condition and Results of Operations required by this item.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See pages F-25 through F-27 for references to GPU, Inc.'s Quantitative and Qualitative Disclosures About Market Risk required by this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See pages F-1 and F-2 for references to each registrant's Financial Statements and Quarterly Financial Data (unaudited) required by this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
GPU, Inc. and Subsidiary Companies
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding GPU, Inc.'s directors is incorporated by reference to the Board of Directors section of GPU, Inc.'s Proxy Statement for the 2001 Annual Meeting of Stockholders. The current directors of JCP&L, Met-Ed and Penelec, their ages, positions held and business experience during the past five years are as follows:
Year First Elected
------------------
Name Age Position JCP&L Met-Ed Penelec
---- --- -------- ----- ------ -------
JCP&L/Met-Ed/Penelec:
--------------------
F. D. Hafer (a) 60 Chairman of the Board 1996 1978 1994
M. J. Chesser (b) 52 President and Chief 2000 2000 2000
Executive Officer
C. B. Snyder (c) 55 Director 1997 1997 1997
JCP&L only:
----------
G. E. Persson (d) 68 Director 1983
S. C. Van Ness (e) 66 Director 1983
|
(a) Mr. Hafer is Chairman, Chief Executive Officer and President of GPU, Inc. and GPUS (which he also serves as a director). He became President and Chief Operating Officer of GPU and GPUS in July 1996 and was elected to the additional positions of Chairman and Chief Executive Officer in May 1997. He is also Chairman of the Board, and a director of JCP&L, Met-Ed and Penelec (which do business as GPU Energy); Chairman of the Board and a director of GPUN and MYR; Chairman and a director of GPU Capital, Inc. (GPU Capital), GPU Electric, Inc. (GPU Electric), and Saxton Nuclear Experimental Corporation (Saxton); President, Chief Executive Officer, and a member of the Board of Managers of GPU Diversified Holdings, LLC (GPU Diversified Holdings); a director of GPU Power, Inc. (GPU Power), Avon Energy Partners Holdings (Avon), Midlands Electricity plc (Midlands) and GPU Telcom, all subsidiaries of GPU, Inc. Mr. Hafer, who has been associated with the GPU companies since 1962, served as President of Met-Ed from 1986 to 1996 and as President of Penelec from 1994 to 1996. Mr. Hafer is also a director of the U.S. Chamber of Commerce and Utilities Mutual Insurance Company, a director and past president of the Manufacturers Association of Berks County and a director and past Chairman of the Board of the Pennsylvania Electric Association. He is a director of the Reading Hospital and Medical Center, a trustee of the Caron Foundation and immediate past chairman and a member of the Board of Trustees of Drug-Free Pennsylvania.
(b) Mr. Chesser is also a director of GPUN, GPU Telcom, and Saxton. Prior to joining GPU in April 2000, Mr. Chesser was President and Chief Operating Officer of Atlantic Energy, Inc. since 1995.
GPU, Inc. and Subsidiary Companies
(c) Mrs. Snyder was elected Executive Vice President - Corporate Affairs of GPUS in 1998. She is also a director of GPUS, GPU Electric, MYR and Midlands; and a member of the Board of Managers of GPU Diversified Holdings. Previously, she served as Senior Vice President - Corporate Affairs of GPUS, Vice President - Public Affairs of JCP&L since 1996 and Vice President - Public Affairs of Met-Ed and Penelec since 1994.
(d) Mrs. Persson has served in the N.J. Division of Consumer Affairs Elder Fraud Investigation Unit since 1999. She previously served as liaison (Special Assistant Director) between the N.J. Division of Consumer Affairs and various state boards. Prior to 1995, she was owner and President of Business Dynamics Associates of Red Bank, NJ. Mrs. Persson is a member of the United States Small Business Administration National Advisory Board, the New Jersey Small Business Advisory Council, the Board of Advisors of Brookdale Community College and the Board of Advisors of Georgian Court College.
(e) Mr. Van Ness is Of Counsel in the firm of Hubert, Van Ness, Cayci and Goodell of Princeton, NJ since 1998. Prior to that he was affiliated with the law firm of Pico, Mack, Kennedy, Jaffe, Perrella and Yoskin of Trenton, NJ since 1990. He is also a director of The Prudential Insurance Company of America.
The directors of the GPU companies are elected at their respective annual meetings of stockholders to serve until the next meeting of stockholders and until their respective successors are duly elected and qualified. There are no family relationships among the directors of the GPU companies.
The current executive officers of GPU, Inc., JCP&L, Met-Ed and Penelec,
their ages, positions held and business experience during the past five years
are as follows:
Year First
Name Age Position Elected
---- --- -------- ----------
GPU, Inc.:
---------
F. D. Hafer (a) 60 Chairman, President and Chief 1996
Executive Officer
M. J. Chesser (b) 52 President and Chief Executive 2000
Officer, JCP&L, Met-Ed and Penelec
I. H. Jolles (c) 62 Senior Vice President and General 1990
Counsel
B. L. Levy (d) 45 Senior Vice President and Chief 1998
Financial Officer
P. E. Maricondo (e) 54 Vice President, Comptroller and 1998
Chief Accounting Officer
T. G. Howson (f) 52 Vice President and Treasurer 1994
S. L. Guibord (g) 52 Secretary 1999
C. B. Snyder (h) 55 Executive Vice President - 1997
Corporate Affairs, GPUS
|
GPU, Inc. and Subsidiary Companies
Year First Elected
Name Age Position JCP&L Met-Ed Penelec
---- --- -------- ----- ------ -------
JCP&L/Met-Ed/Penelec:
--------------------
F. D. Hafer (a) 60 Chairman 1996 1978 1994
M. J. Chesser (b) 52 President and Chief 2000 2000 2000
Executive Officer
B. L. Levy (d) 45 Vice President and 1998 1998 1998
Chief Financial Officer
T. G. Howson (f) 52 Vice President 1994 1994 1994
and Treasurer
S. L. Guibord (g) 52 Secretary 1996 1996 1996
C. Brooks (i) 51 Vice President 1997 1997 1997
M. J. Connolly (j) 48 Vice President - Law 2000 2000 2000
R. P. Lantzy (k) 51 Vice President - Generation 2000 2000 -
P. E. Maricondo(e) 54 Comptroller 2001 2001 2001
C. A. Mascari (l) 53 Vice President - Technical 1997 1997 1997
Services
M. B. Roche (m) 49 Vice President - Customer 1999 2000 2000
& Regulatory Services
(Met-Ed and Penelec)
Sr. Vice President - New
Jersey Operations/Customer
Regulatory Services (JCP&L)
|
R. S. Zechman (n) 57 Vice President 1996 1990 1994
(a) See Note (a) on page 33.
(b) See Note (b) on page 33.
(c) Mr. Jolles is also Executive Vice President, General Counsel and a director of GPUS, and a director of GPU Power, GPU Capital, GPU Electric, Avon and Midlands. He is also a director of Utilities Mutual Insurance Company.
(d) Mr. Levy is also Executive Vice President, Chief Financial Officer and a director of GPUS, and a director of GPU Power, GPU Capital, GPU Electric, Avon, Midlands and GPU Enertech Holdings, Inc. Mr. Levy is also President of GPU Capital. Prior to assuming his current position, Mr. Levy served as President, Chief Executive Officer and director of GPU International, Inc. (GPUI) since 1991.
(e) Mr. Maricondo was elected Comptroller and Chief Accounting Officer of GPUN in 2000. Mr. Maricondo is also Vice President, Comptroller and Chief Accounting Officer of GPU, Inc. and GPUS, and Vice President and Comptroller of GPU Capital. Prior to that he served as Vice President - Internal Auditing of GPUS since 1997 and as Vice President and Comptroller of GPUN from 1993.
(f) Mr. Howson is also Vice President and Treasurer of GPUN, GPU AR, and GPU Capital. He is Vice President of GPU Electric, and Treasurer of GPU Diversified Holdings and Saxton.
(g) Mr. Guibord served as Corporate Compliance Auditing Director of GPUS from 1994 to 1996. Mr. Guibord also serves as Secretary of GPUS, GPUN, GPU AR, GPU Capital, GPU Electric, GPU Power, GPU Diversified Holdings, GPU Enertech Holdings, Inc., GPU Telcom and Saxton.
GPU, Inc. and Subsidiary Companies
(h) See Note (c) on page 34.
(i) Mr. Brooks previously served as Vice President - Collect and Disburse Money of GPU Generation, Inc. since 1996. Prior to that, he was Vice President - Materials and Services of GPUS since 1990.
(j) Mr. Connolly is also Vice President - Law of GPUS, GPUN and GPU AR. He previously served as Director of Legal Services of GPUS since 1993.
(k) Mr. Lantzy is also Northern New Jersey Regional President of JCP&L (effective December 22, 2000) and President of GPU Power. He previously served as President and Chief Executive Officer of GPUI since 1999 and Senior Vice President and Chief Operating Officer of GPUI and GPU Power since 1998. Prior to that he served as Director - Technical Services, GPU Generation, Inc. since 1995.
(l) Mr. Mascari previously served as Vice President - System Planning of GPUS since 1994.
(m) Mr. Roche is also a director of GPUN. Prior to assuming his current position, Mr. Roche served as Vice President - Oyster Creek since June 1995.
(n) Mr. Zechman has also served as Vice President - Administrative Services of Met-Ed since 1992.
The executive officers of the GPU companies are elected each year by their respective Boards of Directors at the first meeting of the Board held following the annual meeting of stockholders. Executive officers hold office until the next meeting of directors following the annual meeting of stockholders and until their respective successors are duly elected and qualified. There are no family relationships among the executive officers.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item with respect to GPU, Inc. is incorporated by reference to the Executive Compensation section of GPU, Inc.'s Proxy Statement for the 2001 Annual Meeting of Stockholders. The following table sets forth remuneration paid, as required by this Item, to the Chief Executive Officer and the four other most highly compensated executive officers of JCP&L, Met-Ed and Penelec for the year ended December 31, 2000.
The managements of JCP&L, Met-Ed and Penelec were combined in a 1996 reorganization. Accordingly, the amounts shown below represent the aggregate remuneration paid to such executive officers by JCP&L, Met-Ed and Penelec during 2000, 1999 and 1998.
GPU, Inc. and Subsidiary Companies
SUMMARY COMPENSATION TABLE
--------------------------
Long-Term Compensation
--------------------------
Annual Compensation Awards Payouts
-------------------------------------- ------ -------
Other Securities
Name and Annual Underlying LTIP All Other
Principal Compens- Options Payouts Compens-
Position Year Salary($) Bonus($) ation($)(1) Granted(#) ($)(2) ation ($)
-------- ---- --------- -------- ----------- ---------- -------- ----------
M. J. Chesser
President and Chief
Executive Officer (3) (3) (3) (3) (3) (3) (3)
M. J. Connolly (4) 2000 185,385 25,000 - 6,500 - 15,319 (5)
Vice President - Law 1999 168,846 105,000 - 1,400 - 9,398
1998 150,000 35,000 - - - 6,782
R. S. Zechman 2000 184,615 - - 6,300 33,432 29,172 (6)
Vice President 1999 170,000 120,000 - 1,400 21,043 22,083
1998 170,000 60,000 538 4,850 18,669 17,623
C. A. Mascari 2000 170,000 - - 5,500 33,784 36,875 (7)
Vice President - 1999 170,000 112,000 - 1,400 20,218 27,090
Technical Services 1998 170,000 50,000 - 4,850 21,002 20,762
C. Brooks 2000 170,000 - - 5,200 33,960 22,943 (8)
Vice President 1999 170,000 90,000 460 1,400 20,424 19,041
1998 170,000 50,000 592 4,850 20,536 15,593
|
(1) Consists of earnings on "Long-Term Incentive Plan" ("LTIP") compensation paid in the year the award vests.
(2) Amounts reported in this column for the year 2000 represent each Named Executive Officer's 1995 performance-based restricted stock award that vested on June 4, 2000, at 90% of target, in accordance with the 1990 Stock Plan. The restricted units issued each year since 1995 under the 1990 Stock Plan have been performance based. For a discussion of how the 2000 performance percentages were determined, and for the 2000 restricted unit awards, see the Long-Term Incentive Plans - Awards in the Last Fiscal Year table (the "LTIP Table"). Dividends are earned on the aggregate restricted units awarded under the 1990 Stock Plan and reinvested in additional units.
Amounts reported in this column for the years 1998 and 1999 consist of Performance Cash Incentive Awards paid on the 1993 and 1994 restricted unit awards, respectively, which vested under the 1990 Stock Plan. These amounts were designed to compensate recipients of restricted unit awards for the amount of federal and state income taxes that are payable upon vesting of such awards. There was no Performance Cash Incentive Award associated with the vesting of the restricted units awarded in 1995 that vested in 2000.
GPU, Inc. and Subsidiary Companies
The aggregate number and value (based on the stock price per share at December 31, 2000) of unvested and deferred vested stock-equivalent restricted units (including reinvested dividend equivalents) which include the amounts shown on the LTIP table, at the end of 2000 were:
Aggregate Units Aggregate Value
--------------- ---------------
M. J. Chesser see note (3) see note (3)
M. J. Connolly 2,254 $ 82,975
R. S. Zechman 8,125 299,102
C. A. Mascari 9,313 342,835
C. Brooks 7,572 278,744
|
(3) Information with respect to Mr. Chesser's compensation is included in the Executive Compensation section of GPU, Inc.'s Proxy Statement for the 2001 Annual Meeting of Stockholders, which is incorporated herein by reference.
(4) Mr. Connolly was compensated by GPUS for his overall service on behalf of GPU and accordingly was not compensated directly by the other subsidiary companies for his services.
(5) Consists of GPU's matching contributions under the Savings Plan ($6,800), matching contributions under the non-qualified deferred compensation plan ($4,785), above-market interest accrued on the retirement portion of deferred compensation ($83), and earnings on LTIP compensation not paid in the current year ($3,651).
(6) Consists of GPU's matching contributions under the Savings Plan ($6,800), matching contributions under the non-qualified deferred compensation plan ($5,385), above-market interest accrued on the retirement portion of deferred compensation ($1,036), and earnings on LTIP compensation not paid in the current year ($15,951).
(7) Consists of GPU's matching contributions under the Savings Plan ($6,800), matching contributions under the non-qualified deferred compensation plan ($4,480), above-market interest accrued on the retirement portion of deferred compensation ($7,045), and earnings on LTIP compensation not paid in the current year ($18,550).
(8) Consists of GPU's matching contributions under the Savings Plan ($6,800), above-market interest accrued on the retirement portion of deferred compensation ($1,136), and earnings on LTIP compensation not paid in the current year ($15,007).
GPU, Inc. and Subsidiary Companies
The following table summarizes option grants made during 2000 to the executive officers named in the Summary Compensation Table. All of these options were granted with an exercise price equal to the fair market value of GPU stock on the date of grant.
Number of
Securities % of Total
Underlying Options
Options Granted to
Grant Granted(1) Employees in Base Price Expiration Grant Date
Name Date (#) Fiscal Year ($/Sh) Date Present Value (2)
------------- -------- ---------- ------------ ----------- ---------- ----------------
M. J. Chesser (3) (3) (3) (3) (3) (3)
M. J. Connolly 06/01/00 6,500 0.9% $29.25 06/01/10 $29,900
R. S. Zechman 06/01/00 6,300 0.9% 29.25 06/01/10 28,980
C. A. Mascari 06/01/00 5,500 0.8% 29.25 06/01/10 25,300
C. Brooks 06/01/00 5,200 0.7% 29.25 06/01/10 23,920
|
(1) Options become exercisable in three equal annual installments beginning on
the first anniversary of the date of the grant. These grants will fully
vest upon termination of employment resulting from death or disability.
Options may be exercised after retirement in accordance with the terms of
the 2000 Stock Option Agreement. In the event of a change in control
(which would include the Corporation's proposed merger with FirstEnergy)
of GPU during the option term, all options will immediately become
exercisable.
(2) Options are valued using a Black-Scholes option pricing model, a mathematical formula widely used to value options. The model as applied used the grant date and the exercise price shown on the table, and the fair market value of Common Stock on the grant date, which was the same as the exercise price. For the June 2000 grant, the model assumed (i) a risk-free rate of return of 6.38%, which approximates the yield on 10-year US Treasury zero coupon bonds on the grant date; (ii) a stock price volatility of 23.5%, based on the average historical volatility for the 36-month period ending on the grant date; (iii) an average dividend yield of 5.71%, based on the average yield for a 36-month period; (iv) the exercise of all options on the final day of their 10-year terms; and (v) 3% discount for risk of forfeiture prior to the options becoming exercisable. No discount from the theoretical value was taken to reflect the restrictions on the transfer of the options and the likelihood of the options being exercised in advance of the final day of their terms.
(3) Information with respect to Mr. Chesser's options is included in the Executive Compensation section of GPU, Inc.'s Proxy Statement for the 2001 Annual Meeting of Stockholders, which is incorporated herein by reference.
GPU, Inc. and Subsidiary Companies
The following table summarizes the number and value of all unexercised options held by the executive officers named in the Summary Compensation Table. In 2000, no options were exercised by any Named Executive Officer.
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
Fiscal Year-End (#) at Fiscal Year-End ($)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
M. J. Chesser (1) (1) (1) (1)
M. J. Connolly 467 7,433 - 49,156
R. S. Zechman 3,700 8,850 606 47,947
C. A. Mascari 3,700 8,050 606 41,897
C. Brooks 3,700 7,750 606 39,628
|
(1) Information with respect to Mr. Chesser's options is included in the Executive Compensation section of GPU, Inc.'s Proxy Statement for the 2001 Annual Meeting of Stockholders, which is incorporated herein by reference.
This table shows the LTIP awards made to the executive officers named in the Summary Compensation Table for the performance period January 1, 1999 through December 31, 2003.
Performance Estimated future payouts
Number of or other under non-stock price-
shares, period until based plans(1)
---------------------------
units or maturation Threshold Target Maximum
Name other rights or payout (#) (#) (#)
---- ------------ -------------- --------- ------ -------
M. J. Chesser (2) (2) (2) (2) (2)
M. J. Connolly 1,000 3 year vesting 500 1,000 2,000
R. S. Zechman 1,000 3 year vesting 500 1,000 2,000
C. A. Mascari 900 3 year vesting 450 900 1,800
C. Brooks 800 3 year vesting 400 800 1,600
|
(1) The restricted units awarded in 2000 under the 1990 Stock Plan provide for a performance adjustment to the aggregate number of units vesting for the recipient, including the accumulated reinvested dividend equivalents, based on the annualized GPU Total Shareholder Return (TSR) percentile ranking against all companies in the Standard & Poor's Electric Utility Index for the period between the award and vesting dates. With a 55th percentile ranking, the performance adjustment would be 100% as reflected in the "Target" column. In the event that the percentile ranking is below the 55th percentile, the performance adjustment would be reduced in steps reaching 0% below the 40th percentile. The minimum payout or "Threshold" begins at the 40th percentile, which results in a payout of 50% of target. A ranking below the 40th percentile would result in no award. Should the TSR percentile ranking exceed the 64th percentile, then the performance adjustment would be increased in steps reaching 200% at the 85th percentile as reflected in the "Maximum" column. Regular quarterly dividends are reinvested in additional units that are subject to the vesting restrictions of the award. Actual payouts, if any, under the Plan would
GPU, Inc. and Subsidiary Companies
be based on the aggregate number of units awarded and the units accumulated through dividend reinvestment at the time the restrictions lapse.
(2) Information with respect to Mr. Chesser's long-term incentive plans is included in the Executive Compensation section of GPU, Inc.'s Proxy Statement for the 2001 Annual Meeting of Stockholders, which is incorporated herein by reference.
None of the Named Executive Officers in the Summary Compensation Table has an employment contract. The compensation of executive officers is determined from time to time by the Personnel & Compensation Committee of the GPU, Inc. Board of Directors.
The GPU Companies' pension plans provide for pension benefits, payable for life after retirement, based upon years of creditable service with the GPU Companies and the employee's career average compensation as defined below. Federal law limits the amount of an employee's pension benefits that may be paid from a qualified trust established pursuant to a qualified pension plan (such as the GPU Companies' plans). The GPU Companies also have adopted non-qualified plans providing that the portion of a participant's pension benefits which, by reason of such limitations, cannot be paid from such a qualified trust shall be paid directly on an unfunded basis by the participant's employer.
The following table illustrates the amount of aggregate annual pension from funded and unfunded sources resulting from employer contributions to the qualified trust and direct payments payable upon retirement in 2001 (computed on a single life annuity basis) to persons in specified compensation and years of service classifications:
GPU, Inc. and Subsidiary Companies
(2001 Retirement)
Career
Average
Compen- Years of Service
----------------------------------------------------------
sation(1) 15 20 25 30 35 40
--------- -------- -------- -------- -------- -------- ----------
$ 50,000 $ 13,736 $18,315 $ 22,894 $ 27,473 $ 32,052 $ 36,399
100,000 28,736 38,315 47,894 57,473 67,052 75,999
150,000 43,736 58,315 72,894 87,473 102,052 115,599
200,000 58,736 78,315 97,894 117,473 137,052 155,199
250,000 73,736 98,315 122,894 147,473 172,052 194,799
300,000 88,736 118,315 147,894 177,473 207,052 234,399
350,000 103,736 138,315 172,894 207,473 242,052 273,999
400,000 118,736 158,315 197,894 237,473 277,052 313,599
450,000 133,736 178,315 222,894 267,473 312,052 353,199
500,000 148,736 198,315 247,894 297,473 347,052 392,799
550,000 163,736 218,315 272,894 327,473 382,052 432,399
600,000 178,736 238,315 297,894 357,473 417,052 471,999
650,000 193,736 258,315 322,894 387,473 452,052 511,599
700,000 208,736 278,315 347,894 417,473 487,052 551,199
750,000 223,736 298,315 372,894 447,473 522,052 590,799
800,000 238,736 318,315 397,894 477,473 557,052 630,399
|
(1) Career Average Compensation is the average annual compensation received from January 1, 1984 to retirement and includes Salary and Bonus. The career average compensation amounts for the following Named Executive Officers differ by more than 10% from the three year average annual compensation set forth in the Summary Compensation Table and are as follows: Messrs. Connolly - $104,273; Zechman - $142,358; Mascari - $140,752; and Brooks - $134,515.
(2) Years of Creditable Service at December 31, 2000: Messrs. Chesser - 1 year; Connolly - 21 years; Zechman - 31 years; Mascari - 27 years; and Brooks - 27 years.
(3) Based on an assumed retirement at age 65 in 2001. To reduce the above amounts to reflect a retirement benefit assuming a continual annuity to a surviving spouse equal to 50% of the annuity payable at retirement, multiply the above benefits by 90%. The estimated annual benefits are not subject to any reduction for Social Security benefits or other offset amounts.
(4) Annual retirement benefits under the basic pension per the above table cannot exceed 55%, as defined in the pension plan, of the average compensation during the highest paid 36 calendar months. As of December 31, 2000, none of the Named Executive Officers exceed the 55% limit.
Nonemployee directors receive an annual retainer of $15,000, a fee of $1,000 for each Board meeting attended, and a fee of $1,000 for each Committee meeting attended.
GPU, Inc. and Subsidiary Companies
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item for GPU, Inc. is incorporated by reference to the Security Ownership section of GPU, Inc.'s Proxy Statement for the 2001 Annual Meeting of Stockholders.
All of the outstanding shares of JCP&L (15,371,270), Met-Ed (859,500) and Penelec (5,290,596) common stock are owned beneficially and of record by their parent, GPU, Inc., 300 Madison Avenue, Morristown, NJ 07962.
The following table sets forth, as of February 1, 2001, the beneficial ownership of equity securities (and stock-equivalent units) of each of the directors and each of the executive officers named in the Summary Compensation Table, and of all directors and executive officers of each of the respective GPU Energy companies as a group. The shares of Common Stock owned by all directors and executive officers as a group constitute less than 1% of the total shares outstanding.
Amount and Nature of Beneficial Ownership
Shares(1) Stock-Equivalent
--------------------- ----------------
Name Title of Security Direct Indirect Units(2)
---- ----------------- ------ -------- --------
JCP&L/Met-Ed/Penelec:
--------------------
F. D. Hafer GPU Common Stock 13,345 166 48,709
M. J. Chesser GPU Common Stock - - 4,032
M. J. Connolly GPU Common Stock - 456 2,254
R. S. Zechman GPU Common Stock 1,914 - 8,124
C. A. Mascari GPU Common Stock - 6 9,313
C. Brooks GPU Common Stock 805 - 7,572
C. B. Snyder GPU Common Stock 1,643 - 10,262
JCP&L Only:
-----------
G. E. Persson GPU Common Stock None
S. C. Van Ness GPU Common Stock None
All Directors and
Executive Officers
as a Group GPU Common Stock 47,861 1,999 154,557
|
(1) The number of shares owned and the nature of such ownership, not being within the knowledge of GPU, have been furnished by each individual.
(2) Restricted units, which do not have voting rights, represent rights (which
are performance-based and subject to vesting) to receive shares of Common
Stock under the 1990 Stock Plan for Employees of GPU, Inc. and
Subsidiaries (the "1990 Stock Plan"). These amounts also include
restricted units, which have vested under the 1990 Stock Plan, but which
were deferred pursuant to that Plan by the following officers: Mr. Zechman
- 740 units, Mr. Mascari - 2,150 units, and Mr. Brooks - 718 units. See
Summary Compensation Table above.
GPU, Inc. and Subsidiary Companies
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
GPU and its subsidiaries have business arrangements with organizations with which certain GPU directors and certain owners of 5% or more of GPU stock are affiliated. These arrangements are conducted in the ordinary course of business, at arms-length, and on standard commercial terms and conditions.
GPU, Inc. and Subsidiary Companies
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) See pages F-1 and F-2 for references to Financial Statements and Financial Statement Schedules required by this item.
1. Exhibits:
3-A Articles of Incorporation of GPU, as amended through March 27, 1990 - Incorporated by reference to Exhibit 3-A, 1989 Annual Report on Form 10-K, SEC File No. 1-6047.
3-A-1 Articles of Amendment to Articles of Incorporation of GPU dated May 5, 1995 - Incorporated by reference to Exhibit A-4, Certificate Pursuant to Rule 24, SEC File No. 70-8569.
3-A-2 Articles of Incorporation of GPU, Inc. as amended August 1, 1996 - Incorporated by reference to Exhibit 3-A-2, 1996 Annual Report on Form 10-K, SEC File No. 1-6047.
3-B By-Laws of GPU, Inc. as amended May 6, 1999 - Incorporated by reference to Exhibit 3-B, 1999 Annual Report on Form 10-K, SEC File No. 1-6047.
3-C Restated Certificate of Incorporation of JCP&L, as amended - Incorporated by reference to Exhibit 3-A, 1990 Annual Report on Form 10-K, SEC File No. 1-3141.
3-C-1 Certificate of Amendment to Restated Certificate of Incorporation of JCP&L, dated June 19, 1992 - Incorporated by reference to Exhibit A-2(a), Certificate Pursuant to Rule 24, SEC File No. 70-7949.
3-C-2 Certificate of Amendment to Restated Certificate of Incorporation of JCP&L, dated June 19, 1992 - Incorporated by reference to Exhibit A-2(a)(i), Certificate Pursuant to Rule 24, SEC File No. 70-7949.
3-D By-Laws of JCP&L, as amended May 25, 1993 - Incorporated by reference to Exhibit 3-B, 1993 Annual Report on Form 10-K, SEC File No. 1-3141.
3-E Restated Articles of Incorporation of Met-Ed, dated March 8, 1999 - Incorporated by reference to Exhibit 3-E, 1999 Annual Report on Form 10-K, SEC File No. 1-446.
3-F By-Laws of Met-Ed as amended May 16, 2000.
3-G Restated Articles of Incorporation of Penelec, dated March 8, 1999 - Incorporated by reference to Exhibit 3-G, 1999 Annual Report on Form 10-K, SEC File No. 1-3522.
3-H By-Laws of Penelec as amended May 16, 2000.
GPU, Inc. and Subsidiary Companies
4-A Indenture of JCP&L, dated March 1, 1946, between JCP&L and United States Trust Company of New York, Successor Trustee, as amended and supplemented by eight supplemental indentures dated December 1, 1948 through June 1, 1960 - Incorporated by reference to JCP&L's Instruments of Indebtedness Nos. 1 to 7, inclusive, and 9 and 10 filed as part of Amendment No. 1 to 1959 Annual Report of GPU on Form U5S, SEC File Nos. 30-126 and 1-3292.
4-A-1 Ninth Supplemental Indenture of JCP&L, dated November 1, 1962
- Incorporated by reference to Exhibit 2-C, Registration No.
2-20732.
4-A-2 Tenth Supplemental Indenture of JCP&L, dated October 1, 1963 - Incorporated by reference to Exhibit 2-C, Registration No. 2-21645.
4-A-3 Eleventh Supplemental Indenture of JCP&L, dated October 1, 1964 - Incorporated by reference to Exhibit 5-A-3, Registration No. 2-59785.
4-A-4 Twelfth Supplemental Indenture of JCP&L, dated November 1, 1965 - Incorporated by reference to Exhibit 5-A-4, Registration No. 2-59785.
4-A-5 Thirteenth Supplemental Indenture of JCP&L, dated August 1, 1966 - Incorporated by reference to Exhibit 4-C, Registration No. 2-25124.
4-A-6 Fourteenth Supplemental Indenture of JCP&L, dated September 1, 1967 - Incorporated by reference to Exhibit 5-A-6, Registration No. 2-59785.
4-A-7 Fifteenth Supplemental Indenture of JCP&L, dated October 1, 1968 - Incorporated by reference to Exhibit 5-A-7, Registration No. 2-59785.
4-A-8 Sixteenth Supplemental Indenture of JCP&L, dated October 1, 1969 - Incorporated by reference to Exhibit 5-A-8, Registration No. 2-59785.
4-A-9 Seventeenth Supplemental Indenture of JCP&L, dated June 1, 1970 - Incorporated by reference to Exhibit 5-A-9, Registration No. 2-59785.
4-A-10 Eighteenth Supplemental Indenture of JCP&L, dated December 1, 1970 - Incorporated by reference to Exhibit 5-A-10, Registration No. 2-59785.
4-A-11 Nineteenth Supplemental Indenture of JCP&L, dated February 1, 1971 - Incorporated by reference to Exhibit 5-A-11, Registration No. 2-59785.
4-A-12 Twentieth Supplemental Indenture of JCP&L, dated November 1, 1971 - Incorporated by reference to Exhibit 5-A-12, Registration No. 2-59875.
GPU, Inc. and Subsidiary Companies
4-A-13 Twenty-first Supplemental Indenture of JCP&L, dated August 1, 1972 - Incorporated by reference to Exhibit 5-A-13, Registration No. 2-59785.
4-A-14 Twenty-second Supplemental Indenture of JCP&L, dated August 1, 1973 - Incorporated by reference to Exhibit 5-A-14, Registration No. 2-59785.
4-A-15 Twenty-third Supplemental Indenture of JCP&L, dated October 1, 1973 - Incorporated by reference to Exhibit 5-A-15, Registration No. 2-59785.
4-A-16 Twenty-fourth Supplemental Indenture of JCP&L, dated December 1, 1973 - Incorporated by reference to Exhibit 5-A-16, Registration No. 2-59785.
4-A-17 Twenty-fifth Supplemental Indenture of JCP&L, dated November 1, 1974 - Incorporated by reference to Exhibit 5-A-17, Registration No. 2-59785.
4-A-18 Twenty-sixth Supplemental Indenture of JCP&L, dated March 1, 1975 - Incorporated by reference to Exhibit 5-A-18, Registration No. 2-59785.
4-A-19 Twenty-seventh Supplemental Indenture of JCP&L, dated July 1, 1975 - Incorporated by reference to Exhibit 5-A-19, Registration No. 2-59785.
4-A-20 Twenty-eighth Supplemental Indenture of JCP&L, dated October 1, 1975 - Incorporated by reference to Exhibit 5-A-20, Registration No. 2-59785.
4-A-21 Twenty-ninth Supplemental Indenture of JCP&L, dated February 1, 1976 - Incorporated by reference to Exhibit 5-A-21, Registration No. 2-59785.
4-A-22 Supplemental Indenture No. 29A of JCP&L, dated May 31, 1976 - Incorporated by reference to Exhibit 5-A-22, Registration No. 2-59785.
4-A-23 Thirtieth Supplemental Indenture of JCP&L, dated June 1, 1976
- Incorporated by reference to Exhibit 5-A-23, Registration
No. 2-59785.
4-A-24 Thirty-first Supplemental Indenture of JCP&L, dated May 1, 1977 - Incorporated by reference to Exhibit 5-A-24, Registration No. 2-59785.
4-A-25 Thirty-second Supplemental Indenture of JCP&L, dated January 20, 1978 - Incorporated by reference to Exhibit 5-A-25, Registration No. 2-60438.
4-A-26 Thirty-third Supplemental Indenture of JCP&L, dated January 1, 1979 - Incorporated by reference to Exhibit A-20(b), Certificate Pursuant to Rule 24, SEC File No. 70-6242.
GPU, Inc. and Subsidiary Companies
4-A-27 Thirty-fourth Supplemental Indenture of JCP&L, dated June 1, 1979 - Incorporated by reference to Exhibit A-28, Certificate Pursuant to Rule 24, SEC File No. 70-6290.
4-A-28 Thirty-sixth Supplemental Indenture of JCP&L, dated October 1, 1979 - Incorporated by reference to Exhibit A-30, Certificate Pursuant to Rule 24, SEC File No. 70-6354.
4-A-29 Thirty-seventh Supplemental Indenture of JCP&L, dated September 1, 1984 - Incorporated by reference to Exhibit A-1(cc), Certificate Pursuant to Rule 24, SEC File No. 70-7001.
4-A-30 Thirty-eighth Supplemental Indenture of JCP&L, dated July 1, 1985 - Incorporated by reference to Exhibit A-1(dd), Certificate Pursuant to Rule 24, SEC File No. 70-7109.
4-A-31 Thirty-ninth Supplemental Indenture of JCP&L, dated April 1, 1988 - Incorporated by reference to Exhibit A-1(a), Certificate Pursuant to Rule 24, SEC File No. 70-7263.
4-A-32 Fortieth Supplemental Indenture of JCP&L, dated June 14, 1988
- Incorporated by reference to Exhibit A-1(ff), Certificate
Pursuant to Rule 24, SEC File No. 70-7603.
4-A-33 Forty-first Supplemental Indenture of JCP&L, dated April 1, 1989 - Incorporated by reference to Exhibit A-1(gg), Certificate Pursuant to Rule 24, SEC File No. 70-7603.
4-A-34 Forty-second Supplemental Indenture of JCP&L, dated July 1, 1989 - Incorporated by reference to Exhibit A-1(hh), Certificate Pursuant to Rule 24, SEC File No. 70-7603.
4-A-35 Forty-third Supplemental Indenture of JCP&L, dated March 1, 1991 - Incorporated by reference to Exhibit 4-A-35, Registration No. 33-45314.
4-A-36 Forty-fourth Supplemental Indenture of JCP&L, dated March 1, 1992 - Incorporated by reference to Exhibit 4-A-36, Registration No. 33-49405.
4-A-37 Forty-fifth Supplemental Indenture of JCP&L, dated October 1, 1992 - Incorporated by reference to Exhibit 4-A-37, Registration No. 33-49405.
4-A-38 Forty-sixth Supplemental Indenture of JCP&L, dated April 1, 1993 - Incorporated by reference to Exhibit C-15, 1992 Annual Report of GPU on Form U5S, SEC File No. 30-126.
4-A-39 Forty-seventh Supplemental Indenture of JCP&L, dated April 10, 1993 - Incorporated by reference to Exhibit C-16, 1992 Annual Report of GPU on Form U5S, SEC File No. 30-126.
4-A-40 Forty-eighth Supplemental Indenture of JCP&L, dated April 15, 1993 - Incorporated by reference to Exhibit C-17, 1992 Annual Report of GPU on Form U5S, SEC File No. 30-126.
GPU, Inc. and Subsidiary Companies
4-A-41 Forty-ninth Supplemental Indenture of JCP&L, dated October 1, 1993 - Incorporated by reference to Exhibit C-18, 1993 Annual Report of GPU on Form U5S, SEC File No. 30-126.
4-A-42 Fiftieth Supplemental Indenture of JCP&L, dated August 1, 1994
- Incorporated by reference to Exhibit C-19, 1994 Annual
Report of GPU on Form U5S, SEC File No. 30-126.
4-A-43 Fifty-first Supplemental Indenture of JCP&L, dated August 15, 1996 - Incorporated by reference to Exhibit 4-A-43, 1996 Annual Report on Form 10-K, SEC File No. 1-6047.
4-A-44 Fifty-second Supplemental Indenture of JCP&L, dated July 1, 1999 - Incorporated by reference to Exhibit 4-B-44, Registration No. 333-88783.
4-A-45 Fifty-third Supplemental Indenture of JCP&L, dated November 1, 1999 - Incorporated by reference to Exhibit 4-A-45, 1999 Annual Report on Form 10-K, SEC File No. 1-3141.
4-A-46 Subordinated Debenture Indenture of JCP&L, dated May 1, 1995 - Incorporated by reference to Exhibit A-8(a), Certificate Pursuant to Rule 24, SEC File No. 70-8495.
4-B Indenture of Met-Ed, dated November 1, 1944, between Met-Ed and United States Trust Company of New York, Successor Trustee, as amended and supplemented by fourteen supplemental indentures dated February 1, 1947 through May 1, 1960 - Incorporated by reference to Met-Ed's Instruments of Indebtedness Nos. 1 to 14 inclusive, and 16, filed as part of Amendment No. 1 to 1959 Annual Report of GPU on Form U5S, SEC File Nos. 30-126 and 1-3292.
4-B-1 Supplemental Indenture of Met-Ed, dated December 1, 1962 - Incorporated by reference to Exhibit 2-E(1), Registration No. 2-59678.
4-B-2 Supplemental Indenture of Met-Ed, dated March 20, 1964 - Incorporated by reference to Exhibit 2-E(2), Registration No. 2-59678.
4-B-3 Supplemental Indenture of Met-Ed, dated July 1, 1965 - Incorporated by reference to Exhibit 2-E(3), Registration No. 2-59678.
4-B-4 Supplemental Indenture of Met-Ed, dated June 1, 1966 - Incorporated by reference to Exhibit 2-B-4, Registration No. 2-24883.
4-B-5 Supplemental Indenture of Met-Ed, dated March 22, 1968 - Incorporated by reference to Exhibit 4-C-5, Registration No. 2-29644.
4-B-6 Supplemental Indenture of Met-Ed, dated September 1, 1968 - Incorporated by reference to Exhibit 2-E(6), Registration No. 2-59678.
GPU, Inc. and Subsidiary Companies
4-B-7 Supplemental Indenture of Met-Ed, dated August 1, 1969 - Incorporated by reference to Exhibit 2-E(7), Registration No. 2-59678.
4-B-8 Supplemental Indenture of Met-Ed, dated November 1, 1971 - Incorporated by reference to Exhibit 2-E(8), Registration No. 2-59678.
4-B-9 Supplemental Indenture of Met-Ed, dated May 1, 1972 - Incorporated by reference to Exhibit 2-E(9), Registration No. 2-59678.
4-B-10 Supplemental Indenture of Met-Ed, dated December 1, 1973 - Incorporated by reference to Exhibit 2-E(10), Registration No. 2-59678.
4-B-11 Supplemental Indenture of Met-Ed, dated October 30, 1974 - Incorporated by reference to Exhibit 2-E(11), Registration No. 2-59678.
4-B-12 Supplemental Indenture of Met-Ed, dated October 31, 1974 - Incorporated by reference to Exhibit 2-E(12), Registration No. 2-59678.
4-B-13 Supplemental Indenture of Met-Ed, dated March 20, 1975 - Incorporated by reference to Exhibit 2-E(13), Registration No. 2-59678.
4-B-14 Supplemental Indenture of Met-Ed, dated September 25, 1975 - Incorporated by reference to Exhibit 2-E(15), Registration No. 2-59678.
4-B-15 Supplemental Indenture of Met-Ed, dated January 12, 1976 - Incorporated by reference to Exhibit 2-E(16), Registration No. 2-59678.
4-B-16 Supplemental Indenture of Met-Ed, dated March 1, 1976 - Incorporated by reference to Exhibit 2-E(17), Registration No. 2-59678.
4-B-17 Supplemental Indenture of Met-Ed, dated September 28, 1977 - Incorporated by reference to Exhibit 2-E(18), Registration No. 2-62212.
4-B-18 Supplemental Indenture of Met-Ed, dated January 1, 1978 - Incorporated by reference to Exhibit 2-E(19), Registration No. 2-62212.
4-B-19 Supplemental Indenture of Met-Ed, dated September 1, 1978 - Incorporated by reference to Exhibit 4-A(19), Registration No. 33-48937.
4-B-20 Supplemental Indenture of Met-Ed, dated June 1, 1979 - Incorporated by reference to Exhibit 4-A(20), Registration No. 33-48937.
GPU, Inc. and Subsidiary Companies
4-B-21 Supplemental Indenture of Met-Ed, dated January 1, 1980 - Incorporated by reference to Exhibit 4-A(21), Registration No. 33-48937.
4-B-22 Supplemental Indenture of Met-Ed, dated September 1, 1981 - Incorporated by reference to Exhibit 4-A(22), Registration No. 33-48937.
4-B-23 Supplemental Indenture of Met-Ed, dated September 10, 1981 - Incorporated by reference to Exhibit 4-A(23), Registration No. 33-48937.
4-B-24 Supplemental Indenture of Met-Ed, dated December 1, 1982 - Incorporated by reference to Exhibit 4-A(24), Registration No. 33-48937.
4-B-25 Supplemental Indenture of Met-Ed, dated September 1, 1983 - Incorporated by reference to Exhibit 4-A(25), Registration No. 33-48937.
4-B-26 Supplemental Indenture of Met-Ed, dated September 1, 1984 - Incorporated by reference to Exhibit 4-A(26), Registration No. 33-48937.
4-B-27 Supplemental Indenture of Met-Ed, dated March 1, 1985 - Incorporated by reference to Exhibit 4-A(27), Registration No. 33-48937.
4-B-28 Supplemental Indenture of Met-Ed, dated September 1, 1985 - Incorporated by reference to Exhibit 4-A(28), Registration No. 33-48937.
4-B-29 Supplemental Indenture of Met-Ed, dated June 1, 1988 - Incorporated by reference to Exhibit 4-A(29), Registration No. 33-48937.
4-B-30 Supplemental Indenture of Met-Ed, dated April 1, 1990 - Incorporated by reference to Exhibit 4-A(30), Registration No. 33-48937.
4-B-31 Amendment dated May 22, 1990 to Supplemental Indenture of Met-Ed, dated April 1, 1990 - Incorporated by reference to Exhibit 4-A(31), Registration No. 33-48937.
4-B-32 Supplemental Indenture of Met-Ed, dated September 1, 1992 - Incorporated by reference to Exhibit 4-A(32)(a), Registration No. 33-48937.
4-B-33 Supplemental Indenture of Met-Ed, dated December 1, 1993 - Incorporated by reference to Exhibit C-58, 1993 Annual Report of GPU on Form U5S, SEC File No. 30-126.
4-B-34 Supplemental Indenture of Met-Ed, dated July 15, 1995 - Incorporated by reference to Exhibit 4-B-35, 1995 Annual Report on Form 10-K, SEC File No. 1-446.
GPU, Inc. and Subsidiary Companies
4-B-35 Supplemental Indenture of Met-Ed, dated August 15, 1996 - Incorporated by reference to Exhibit 4-B-35, 1996 Annual Report on Form 10-K, SEC File No. 1-446.
4-B-36 Supplemental Indenture of Met-Ed, dated May 1, 1997 - Incorporated by reference to Exhibit 4-B-36, 1997 Annual Report on Form 10-K, SEC File No. 1-446.
4-B-37 Supplemental Indenture of Met-Ed, dated July 1, 1999 - Incorporated by reference to Exhibit 4-B-38, 1999 Annual Report on Form 10-K, SEC File No. 1-446.
4-B-38 Indenture between Met-Ed and United States Trust Company of New York, dated May 1, 1999 - Incorporated by reference to Exhibit A-11(a), Certificate Pursuant to Rule 24, SEC File No. 70-9329.
4-B-39 Senior Note Indenture between Met-Ed and United States Trust Company of New York, dated July 1, 1999 Incorporated by reference to Exhibit C-154 to GPU, Inc.'s Annual Report on Form U5S for the year 1999, SEC File No. 30-126.
4-B-40 First Supplemental Indenture between Met-Ed and United States Trust Company of New York, dated August 1, 2000 - Incorporated by reference to Exhibit 4-A, June 30, 2000 Quarterly Report on Form 10-Q, SEC File No. 1-446.
4-C Mortgage and Deed of Trust of Penelec, dated January 1, 1942, between Penelec and United States Trust Company of New York, Successor Trustee, and indentures supplemental thereto dated March 7, 1942 through May 1, 1960 - Incorporated by reference to Penelec's Instruments of Indebtedness Nos. 1-20, inclusive, filed as a part of Amendment No. 1 to 1959 Annual Report of GPU on Form U5S, SEC File Nos. 30-126 and 1-3292.
4-C-1 Supplemental Indentures to Mortgage and Deed of Trust of Penelec, dated May 1, 1961 through December 1, 1977 - Incorporated by reference to Exhibit 2-D(1) to 2-D(19), Registration No. 2-61502.
4-C-2 Supplemental Indenture of Penelec, dated June 1, 1978 - Incorporated by reference to Exhibit 4-A(2), Registration No. 33-49669.
4-C-3 Supplemental Indenture of Penelec, dated June 1, 1979 - Incorporated by reference to Exhibit 4-A(3), Registration No. 33-49669.
4-C-4 Supplemental Indenture of Penelec, dated September 1, 1984 - Incorporated by reference to Exhibit 4-A(4), Registration No. 33-49669.
4-C-5 Supplemental Indenture of Penelec, dated December 1, 1985 - Incorporated by reference to Exhibit 4-A(5), Registration No. 33-49669.
GPU, Inc. and Subsidiary Companies
4-C-6 Supplemental Indenture of Penelec, dated December 1, 1986 - Incorporated by reference to Exhibit 4-A(6), Registration No. 33-49669.
4-C-7 Supplemental Indenture of Penelec, dated May 1, 1989 -
Incorporated by reference to Exhibit 4-A(7), Registration No.
33-49669.
4-C-8 Supplemental Indenture of Penelec, dated December 1,
1990-Incorporated by reference to Exhibit 4-A(8), Registration
No. 33-45312.
4-C-9 Supplemental Indenture of Penelec, dated March 1, 1992 - Incorporated by reference to Exhibit 4-A(9), Registration No. 33-45312.
4-C-10 Supplemental Indenture of Penelec, dated June 1, 1993 - Incorporated by reference to Exhibit C-73, 1993 Annual Report of GPU on Form U5S, SEC File No. 30-126.
4-C-11 Supplemental Indenture of Penelec, dated November 1, 1995 - Incorporated by reference to Exhibit 4-C-11, 1995 Annual Report on Form 10-K, SEC File No. 1-3522.
4-C-12 Supplemental Indenture of Penelec, dated August 15, 1996 - Incorporated by reference to Exhibit 4-C-12, 1996 Annual Report on Form 10-K, SEC File No. 1-3522.
4-C-13 Senior Note Indenture between Penelec and United States Trust Company of New York, dated April 1, 1999 - Incorporated by reference to Exhibit 4-C-13, 1999 Annual Report on Form 10-K, SEC File No. 1-3522.
4-C-14 Indenture between Penelec and United States Trust Company of New York, dated June 1, 1999 - Incorporated by reference to Exhibit A-11(a), Certificate Pursuant to Rule 24, SEC File No. 70-9327.
4-C-15 First Supplemental Indenture between Penelec and United States Trust Company of New York, dated August 1, 2000 - Incorporated by reference to Exhibit 4-B, June 30, 2000 Quarterly Report on Form 10-Q, SEC File No. 1-3522.
4-D Amended and Restated Limited Partnership Agreement of JCP&L Capital, L.P., dated May 11, 1995 - Incorporated by reference to Exhibit A-5(a), Certificate Pursuant to Rule 24, SEC File No. 70-8495.
4-E Action Creating Series A Preferred Securities of JCP&L Capital, L.P., dated May 11, 1995 - Incorporated by reference to Exhibit A-6(a), Certificate Pursuant to Rule 24, SEC File No. 70-8495.
4-F Payment and Guarantee Agreement of JCP&L, dated May 18, 1995 - Incorporated by reference to Exhibit B-1(a), Certificate Pursuant to Rule 24, SEC File No. 70-8495.
GPU, Inc. and Subsidiary Companies
4-G Payment and Guarantee Agreement of Met-Ed, dated May 28, 1999
- Incorporated by reference to Exhibit B-1(a), Certificate
Pursuant to Rule 24, SEC No. 70-9329.
4-H Amendment No. 1 to Payment and Guarantee Agreement of Met-Ed, dated November 23, 1999 - Incorporated by reference to Exhibit 4-H, 1999 Annual Report on Form 10-K, SEC File No. 1-446.
4-I Payment and Guarantee Agreement of Penelec, dated June 16, 1999 - Incorporated by reference to Exhibit B-1(a), Certificate Pursuant to Rule 24, SEC File No. 70-9327.
4-J Amendment No. 1 to Payment and Guarantee Agreement of Penelec, dated November 23, 1999 - Incorporated by reference to Exhibit 4-J, 1999 Annual Report on Form 10-K, SEC File No. 1-3522.
4-K Form of Rights Agreement between GPU, Inc. and ChaseMellon Shareholder Services, L.L.C. - Incorporated by reference to Exhibit 4, June 30, 1998 Quarterly Report on Form 10-Q, SEC File No. 1-6047.
4-L Indenture of GPU, Inc., dated as of December 1, 2000, between GPU, Inc. and United States Trust Company of New York.
10-A GPU Companies Deferred Compensation Plan as amended through August 8, 2000.
10-B Employee Incentive Compensation Plan of JCP&L, dated April 1, 1995 - Incorporated by reference to Exhibit 10-D, 1995 Annual Report on Form 10-K, SEC File No. 1-3141.
10-C Employee Incentive Compensation Plan of Met-Ed, dated April 1, 1995 - Incorporated by reference to Exhibit 10-E, 1995 Annual Report on Form 10-K, SEC File No. 1-446.
10-D Employee Incentive Compensation Plan of Penelec, dated April 1, 1995 - Incorporated by reference to Exhibit 10-F, 1995 Annual Report on Form 10-K, SEC File No. 1-3522.
10-E Incentive Compensation Plan for Elected Officers of JCP&L, dated February 6, 1997 - Incorporated by reference to Exhibit 10-G, 1997 Annual Report on Form 10-K, SEC File No. 1-3141.
10-F Incentive Compensation Plan for Elected Officers of Met-Ed, dated February 6, 1997 - Incorporated by reference to Exhibit 10-H, 1997 Annual Report on Form 10-K, SEC File No. 1-446.
10-G Incentive Compensation Plan for Elected Officers of Penelec, dated February 6, 1997 - Incorporated by reference to Exhibit 10-I, 1997 Annual Report on Form 10-K, SEC File No. 1-3522.
GPU, Inc. and Subsidiary Companies
10-H Deferred Remuneration Plan for Outside Directors of JCP&L, as amended and restated, effective August 8, 2000.
10-I JCP&L Supplemental and Excess Benefits Plan, dated June 5, 1997 - Incorporated by reference to Exhibit 10-K, 1997 Annual Report on Form 10-K, SEC File No. 1-3141.
10-J Met-Ed Supplemental and Excess Benefits Plan, dated June 5, 1997 - Incorporated by reference to Exhibit 10-L, 1997 Annual Report on Form 10-K, SEC File No. 1-446.
10-K Penelec Supplemental and Excess Benefits Plan, dated June 5, 1997 - Incorporated by reference to Exhibit 10-M, 1997 Annual Report on Form 10-K, SEC File No. 1-3522.
10-L Letter agreement dated August 8, 2000 relating to terms of employment and pension benefits for I.H. Jolles.
10-M GPU, Inc. Restricted Stock Plan for Outside Directors as amended and restated as of August 8, 2000.
10-N Retirement Plan for Outside Directors of GPU, Inc. as amended and restated as of August 8, 2000.
10-O Deferred Remuneration Plan for Outside Directors of GPU, Inc. as amended and restated effective August 8, 2000.
10-P Form of 1998 Stock Option Agreement under the 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries - Incorporated by reference to Exhibit 10-O, 1997 Annual Report on Form 10-K, SEC File No. 1-6047.
10-Q Form of 1998 Performance Units Agreement under the 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries- Incorporated by reference to Exhibit 10-O, 1997 Annual Report on Form 10-K, SEC File No. 1-6047.
10-R Amended and Restated GPU System Companies Master Directors' Benefits Protection Trust effective June 1, 1999 - Incorporated by reference to Exhibit 10-T, 1999 Annual Report on Form 10-K, SEC File No. 1-6047.
10-S Amended and Restated GPU System Companies Master Executives' Benefits Protection Trust effective June 1, 1999 -Incorporated by reference to Exhibit 10-U, 1999 Annual Report on Form 10-K, SEC File No. 1-6047.
10-T GPU, Inc. 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries as amended and restated to reflect amendments through June 3, 1999 - Incorporated by reference to Exhibit 10-V, 1999 Annual Report on Form 10-K, SEC File No. 1-6047.
10-U Form of 1999 Stock Option Agreement under the 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries - Incorporated by reference to Exhibit 10-W, 1999 Annual Report on Form 10-K, SEC File No. 1-6047.
GPU, Inc. and Subsidiary Companies
10-V Form of 1999 Performance Units Agreement under the 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries -Incorporated by reference to Exhibit 10-X, 1999 Annual Report on Form 10-K, SEC File No. 1-6047.
10-W Form of 2000 Stock Option Agreement under the 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries.
10-X Form of 2000 Performance Units Agreement under the 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries.
10-Y Deferred Stock Unit Plan for Outside Directors of GPU, Inc. as amended effective August 8, 2000.
10-Z Form of 2000 MYR Group Inc. Performance Units Agreement under the 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries.
10-AA Severance Protection Agreement for Fred D. Hafer, dated November 5, 1998 - Incorporated by reference to Exhibit C-24 to GPU, Inc.'s Annual Report on Form U5S for the year 1998, SEC File No. 30-126.
10-BB Severance Protection Agreement for Ira H. Jolles, dated November 5, 1998- Incorporated by reference to Exhibit C-25 to GPU, Inc.'s Annual Report on Form U5S for the year 1998, SEC File No. 30-126.
10-CC Severance Protection Agreement for Bruce L. Levy, dated December 16, 1998 - Incorporated by reference to Exhibit C-28 to GPU, Inc.'s Annual Report on Form U5S for the year 1998, SEC File No. 30-126.
10-DD Severance Protection Agreement for Carole B. Snyder, dated November 30, 1998 - Incorporated by reference to Exhibit C-27 to GPU, Inc.'s Annual Report on Form U5S for the year 1998, SEC File No. 30-126.
10-EE GPU Companies Supplemental Executive Retirement Plan, as amended through August 9, 2000.
10-FF Oyster Creek Nuclear Generating Station Purchase and Sale Agreement by and among GPU Nuclear, Inc. and JCP&L, as sellers, and AmerGen Energy Company, LLC, as buyer, dated as of October 15, 1999 - Incorporated by reference to Exhibit 10-GG, 1999 Annual Report on Form 10-K, SEC File No. 1-3141.
10-GG Agreement and Plan of Merger by and among GPU, Inc., MYR Group Inc. and GPX Acquisition Corp. - Incorporated by reference to Exhibit (c) (1) to GPU Inc.'s Schedule 14D-1 Tender Offer Statement, SEC File No. 1-6047.
10-HH Letter Agreement with Charles M. Brennan III and Byron D.
Nelson, dated December 21, 1999 - Incorporated by reference to
exhibit (c) (2) to GPU, Inc.'s Schedule 14D-1 Tender Offer
Statement, SEC File No. 1-6047.
GPU, Inc. and Subsidiary Companies
10-II Forms of Estate Enhancement Program Agreements - Incorporated by reference to Exhibit 10-JJ, 1999 Annual Report on Form 10-K, SEC File No. 1-6047.
10-JJ Severance Protection Agreement for Michael J. Chesser, dated April 17, 2000 - Incorporated by reference to Exhibit C-23, 1999 Annual Report of GPU, Inc. on Form U5S, SEC File No. 30-126.
10-KK Supplemental Pension Agreement for Michael J. Chesser, dated April 17, 2000 - Incorporated by reference to Exhibit C-24, 1999 Annual Report of GPU, Inc. on Form U5S, SEC File No. 30-126.
10-LL Agreement and Plan of Merger, dated August 8, 2000, between FirstEnergy Corp. and GPU, Inc. - Incorporated by reference to Exhibit (c)1, August 11, 2000 Current Report on Form 8-K, SEC File No. 1-6047.
12 Statements Showing Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
A - GPU, Inc. and Subsidiary Companies
B - JCP&L
C - Met-Ed
D - Penelec
21 Subsidiaries of the Registrants
A - JCP&L
B - Met-Ed
C - Penelec
23 Consent of Independent Accountants
A - GPU, Inc.
B - JCP&L
C - Met-Ed
D - Penelec
GPU, Inc. and Subsidiary Companies
(b) Reports on Form 8-K:
Dated January 22, 2001, under Item 5 (Other Events). Dated January 26, 2001, under Item 5 (Other Events). Dated March 7, 2001, under Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits).
Dated January 22, 2001, under Item 5 (Other Events). Dated January 26, 2001, under Item 5 (Other Events).
Dated January 22, 2001, under Item 5 (Other Events). Dated January 26, 2001, under Item 5 (Other Events).
GPU, Inc. and Subsidiary Companies
GPU, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GPU, INC.
Dated: March 21, 2001 BY: /s/ F. D. Hafer
------------------------
F. D. Hafer, Chairman
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature and Title Date
------------------- ---------------
/s/ F. D. Hafer March 21, 2001
----------------------------------------------
F. D. Hafer, Chairman (Chief Executive
Officer), President and Director
/s/ B. L. Levy March 21, 2001
----------------------------------------------
B. L. Levy, Senior Vice President
(Chief Financial Officer)
/s/ P. E. Maricondo March 21, 2001
----------------------------------------------
P. E. Maricondo, Vice President and
Comptroller (principal accounting officer)
/s/ T. B. Hagen March 21, 2001
----------------------------------------------
T. B. Hagen, Director
/s/ J. M. Pietruski March 21, 2001
---------------------------------------------
J. M. Pietruski, Director
/s/ R. N. Pokelwaldt March 21, 2001
---------------------------------------------
R. N. Pokelwaldt, Director
/s/ C. A. Rein March 21, 2001
----------------------------------------------
C. A. Rein, Director
/s/ B. S. Townsend March 21, 2001
----------------------------------------------
B. S. Townsend, Director
/s/ C. A. H. Trost March 21, 2001
----------------------------------------------
C. A. H. Trost, Director
/s/ K. L. Wolfe March 21, 2001
----------------------------------------------
K. L. Wolfe, Director
/s/ P. K. Woolf March 21, 2001
----------------------------------------------
P. K. Woolf, Director
|
Jersey Central Power & Light Company and Subsidiary Company
JERSEY CENTRAL POWER & LIGHT COMPANY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The Signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
JERSEY CENTRAL POWER & LIGHT COMPANY
Dated: March 21, 2001 BY: /s/ M. J. Chesser
------------------------
M. J. Chesser, President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature and Title Date
------------------- ---------------
/s/ F. D. Hafer March 21, 2001
----------------------------------------------
F. D. Hafer, Chairman and Director
/s/ M. J. Chesser March 21, 2001
----------------------------------------------
M. J. Chesser, President
(Chief Executive Officer) and Director
/s/ B. L. Levy March 21, 2001
----------------------------------------------
B. L. Levy, Vice President
(Chief Financial Officer)
/s/ P. E. Maricondo March 21, 2001
---------------------------------------------
P. E. Maricondo, Comptroller
(principal accounting officer)
/s/ C. B. Snyder March 21, 2001
----------------------------------------------
C. B. Snyder, Director
/s/ G. E. Persson March 21, 2001
----------------------------------------------
G. E. Persson, Director
/s/ S. C. Van Ness March 21, 2001
----------------------------------------------
S. C. Van Ness, Director
|
Metropolitan Edison Company and Subsidiary Companies
METROPOLITAN EDISON COMPANY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The Signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
METROPOLITAN EDISON COMPANY
Dated: March 21, 2001 BY: /s/ M. J. Chesser
------------------------
M. J. Chesser, President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature and Title Date
------------------- ---------------
/s/ F. D. Hafer March 21, 2001
----------------------------------------------
F. D. Hafer, Chairman and Director
/s/ M. J. Chesser March 21, 2001
---------------------------------------------
M. J. Chesser, President
(Chief Executive Officer) and Director
/s/ B. L. Levy March 21, 2001
----------------------------------------------
B. L. Levy, Vice President
(Chief Financial Officer)
/s/ P. E. Maricondo March 21, 2001
----------------------------------------------
P. E. Maricondo, Comptroller
(principal accounting officer)
/s/ C. B. Snyder March 21, 2001
----------------------------------------------
C. B. Snyder, Director
|
Pennsylvania Electric Company and Subsidiary Companies
PENNSYLVANIA ELECTRIC COMPANY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The Signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
PENNSYLVANIA ELECTRIC COMPANY
Dated: March 21, 2001 BY: /s/ M. J. Chesser
-----------------------
M. J. Chesser, President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature and Title Date
------------------- ---------------
/s/ F. D. Hafer March 21, 2001
----------------------------------------------
F. D. Hafer, Chairman and Director
/s/ M. J. Chesser March 21, 2001
----------------------------------------------
M. J. Chesser, President
(Chief Operating Officer) and Director
/s/ B. L. Levy March 21, 2001
----------------------------------------------
B. L. Levy, Vice President
(Chief Financial Officer)
/s/ P. E. Maricondo March 21, 2001
----------------------------------------------
P. E. Maricondo, Comptroller
(principal accounting officer)
/s/ C. B. Snyder March 21, 2001
----------------------------------------------
C. B. Snyder, Director
|
INDEX TO SUPPLEMENTARY DATA, FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
GPU, INC.
Page
Supplementary Data
Selected Financial Data F-3
Quarterly Financial Data F-4
Combined Management's Discussion and Analysis of
Financial Condition and Results of Operations F-5
Financial Statements
Report of Independent Accountants F-42
Consolidated Balance Sheets as of December 31, 2000 and 1999 F-43
Consolidated Statements of Income for the
Years Ended December 31, 2000, 1999 and 1998 F-45
Consolidated Statements of Comprehensive Income for the
Years Ended December 31, 2000, 1999 and 1998 F-46
Consolidated Statements of Retained Earnings for the
Years Ended December 31, 2000, 1999 and 1998 F-46
Consolidated Statements of Cash Flows for the
Years Ended December 31, 2000, 1999 and 1998 F-47
Combined Notes to Consolidated Financial Statements F-48
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
Years 2000, 1999 and 1998 F-113
|
JERSEY CENTRAL POWER & LIGHT COMPANY
Supplementary Data Selected Financial Data F-114 Quarterly Financial Data F-115 Financial Statements Report of Independent Accountants F-116 Consolidated Balance Sheets as of December 31, 2000 and 1999 F-117 Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998 F-119 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2000, 1999 and 1998 F-120 Consolidated Statements of Retained Earnings for the Years Ended December 31, 2000, 1999 and 1998 F-120 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 F-121 Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts for the Years 2000, 1999 and 1998 F-122 |
INDEX TO SUPPLEMENTARY DATA, FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
METROPOLITAN EDISON COMPANY
Page
Supplementary Data
Selected Financial Data F-123
Quarterly Financial Data F-124
Financial Statements
Report of Independent Accountants F-125
Consolidated Balance Sheets as of December 31, 2000 and 1999 F-126
Consolidated Statements of Income for the
Years Ended December 31, 2000, 1999 and 1998 F-128
Consolidated Statements of Comprehensive Income for the
Years Ended December 31, 2000, 1999 and 1998 F-129
Consolidated Statements of Retained Earnings for the
Years Ended December 31, 2000, 1999 and 1998 F-129
Consolidated Statements of Cash Flows for the
Years Ended December 31, 2000, 1999 and 1998 F-130
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the
Years 2000, 1999 and 1998 F-131
|
PENNSYLVANIA ELECTRIC COMPANY
Supplementary Data Selected Financial Data F-132 Quarterly Financial Data F-133 Financial Statements Report of Independent Accountants F-134 Consolidated Balance Sheets as of December 31, 2000 and 1999 F-135 Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998 F-137 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2000, 1999 and 1998 F-138 Consolidated Statements of Retained Earnings for the Years Ended December 31, 2000, 1999 and 1998 F-138 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 F-139 Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts for the Years 2000, 1999 and 1998 F-140 |
Schedules other than those listed above have been omitted since they are not required, are inapplicable or the required information is presented in the Financial Statements or Notes thereto.
GPU, Inc. and Subsidiary Companies SELECTED FINANCIAL DATA For The Years Ended December 31, 2000(1) 1999(2) 1998(3) 1997(4) 1996(5) ---------------------------------------------------------------------------------------------- Common Stock Data Earnings per common share before extraordinary item: Basic $ 1.92 $ 3.66 $ 3.03 $ 2.78 $ 2.48 Diluted $ 1.92 $ 3.66 $ 3.03 $ 2.77 $ 2.47 Earnings per common share: Basic $ 1.92 $ 3.66 $ 2.83 $ 2.78 $ 2.48 Diluted $ 1.92 $ 3.66 $ 2.83 $ 2.77 $ 2.47 Cash dividends paid per share $ 2.165 $ 2.105 $ 2.045 $ 1.985 $ 1.925 Book value per share $ 27.81 $ 28.45 $ 27.01 $ 25.59 $ 25.21 Closing market price per share $36 13/16 $ 29 3/4 $ 44 3/16 $ 42 1/8 $ 33 5/8 Common shares outstanding (in thousands): Basic average 121,161 125,368 127,093 120,722 120,513 Diluted average 121,259 125,570 127,312 121,002 120,751 At year-end 119,440 121,766 127,996 120,833 120,611 Market price to book value at year-end 132% 105% 164% 165% 133% Price/earnings ratio 19.2 8.1 15.6 15.2 13.6 Return on average common equity 6.9% 13.0% 10.7% 10.7% 9.8% Financial Data (in millions) Operating revenues $5,196 $4,757 $4,249 $4,143 $3,971 Other operation and maintenance expense 1,372 1,443 1,107 994 1,115 Income before extraordinary item 234 459 386 335 298 Net income 234 459 360 335 298 Net utility plant in service 6,892 7,836 6,565 7,101 5,942 Total assets 19,262 21,698 16,288 12,823 10,851 Long-term debt 3,917 5,261 3,826 4,326 3,177 Long-term capital lease obligations 2 2 3 3 7 Subsidiary-obligated trust preferred securities 200 200 - - - Subsidiary-obligated mandatorily redeemable preferred securities 125 125 330 330 330 Cumulative preferred stock with mandatory redemption 52 73 87 92 114 Capital expenditures and investments 571 461 468 470 462 Employees 14,100 10,830 8,957 9,346 9,345 |
(1) Results for 2000 include a non-recurring charge of $276.6 million
(after-tax), or $2.28 per share, as a result of the sale of GPU PowerNet; a
gain of $89.2 million (after-tax), or $0.73 per share, as a result of the
sale of GPUI; a gain of $40.8 million (after-tax), or $0.34 per share, for
the net impact of the PaPUC's Phase II Order on Met-Ed and Penelec; a net
gain of $26.2 million (after-tax), or $0.22 per share, related primarily to
a restructured power purchase agreement between a GPU independent power
project and Niagara Mohawk; and a gain of $16.5 million (after-tax), or
$0.13 per share, for the elimination of deferred taxes and realization of an
investment tax credit related to the sale of the Oyster Creek nuclear
generating plant.
(2) Results for 1999 include net gains of $36.1 million (after-tax), or $0.29
per share, as a result of the sales of substantially all the GPU Energy
companies' electric generating stations as well as a gain on the sale of the
GPU Power UK supply business of $6.8 million (after-tax), or $0.05 per
share. Also in 1999, as a result of the NJBPU Restructuring Order, GPU
recorded a non-recurring charge of $68 million (after-tax), or $0.54 per
share.
(3) Results for 1998 include an extraordinary charge of $25.8 million
(after-tax), or $0.20 per share, as a result of the PaPUC's Restructuring
Orders on Met-Ed's and Penelec's restructuring plans. Also in 1998, as a
result of the PaPUC Orders, GPU recorded a non-recurring charge of $40
million (after-tax), or $0.32 per share, related to the obligation to refund
1998 revenues; and for the establishment of a sustainable energy fund.
(4) Results for 1997 reflect a non-recurring charge of $109.3 million, or $0.90
per share, for a windfall profits tax imposed on privatized utilities,
including GPU Power UK, by the Government of the United Kingdom.
(5) Results for 1996 reflect a non-recurring charge of $74.5 million
(after-tax), or $0.62 per share, for costs related to voluntary enhanced
retirement programs.
GPU, Inc. and Subsidiary Companies
QUARTERLY FINANCIAL DATA (UNAUDITED)
First Quarter Second Quarter
----------------------- -----------------------
in thousands, except
per share data 2000 1999 (4) 2000 (1) 1999 (5)
---------------------------------------------------------------------------------------------
Operating revenues $1,176,444 $1,068,703 $1,280,374 $892,700
Operating income/(loss) 340,312 298,633 (142,003) 132,027
Income before extraordinary item 130,998 190,719 (210,813) 47,262
Net income/(loss) 130,998 190,719 (210,813) 47,262
Basic earnings/(loss) per share before
extraordinary item 1.08 1.49 (1.74) 0.39
Diluted earnings/(loss) per share before
extraordinary item 1.08 1.49 (1.74) 0.38
Basic earnings/(loss) per share 1.08 1.49 (1.74) 0.39
Diluted earnings/(loss) per share 1.08 1.49 (1.74) 0.38
Third Quarter Fourth Quarter
----------------------- -----------------------
in thousands, except
per share data 2000 (2) 1999 2000 (3) 1999 (6)
---------------------------------------------------------------------------------------------
Operating revenues $1,455,286 $1,424,286 $1,284,152 $1,371,435
Operating income 192,162 376,970 394,176 201,200
Income before extraordinary item 103,510 147,547 209,843 73,486
Net income 103,510 147,547 209,843 73,486
Basic earnings per share before
extraordinary item 0.86 1.18 1.72 0.60
Diluted earnings per share before
extraordinary item 0.86 1.18 1.72 0.60
Basic earnings per share 0.86 1.18 1.72 0.60
Diluted earnings per share 0.86 1.18 1.72 0.60
|
(1) Results for the second quarter of 2000 include a reduction of $295 million
after-tax, or $2.43 per share, for the loss on GPU Electric's sale of GPU
PowerNet.
(2) Results for the third quarter of 2000 include a net gain of $26.2 million
after-tax, or $0.22 per share, related primarily to a restructured power
purchase agreement between a GPU independent power project and Niagara
Mohawk; and an after-tax increase of $16.5 million, or $0.13 per share, for
the elimination of deferred taxes and realization of an investment tax
credit related to the sale of the Oyster Creek nuclear generating plant.
(3) Results for the fourth quarter of 2000 include an increase of $89.2 million
after-tax, or $0.73 per share, as a result of the sale of GPUI; and an
increase of $40.8 million, or $0.34 per share, for the net impact of the
PaPUC's Phase II Order. In addition, during the fourth quarter 2000 there
was a change in estimate of tax benefits associated with the second quarter
sale of GPU PowerNet which reduced GPU's loss on the sale by $18.4 million,
or $0.15 per share. The aggregate effect on earnings of other fourth quarter
2000 adjustments was a loss of approximately $17.6 million after-tax, or
approximately $0.15 per share.
(4) Results for the first quarter of 1999 include an increase of $27.8 million
after-tax, or $0.22 per share, for the gain on the sale of Penelec's Homer
City Station, related to wholesale operations.
(5) Results for the second quarter of 1999 include a reduction of $68 million
after-tax, or $0.54 per share, as a result of the NJBPU's Restructuring
Order on JCP&L ; and an after-tax increase of $9.7 million, or $0.08 per
share, for the gain on the sale of the GPU Power UK supply business.
(6) Results for the fourth quarter of 1999 include an increase of $8.3 million
after-tax, or $0.07 per share, for the net gains on the sales of
substantially all of GPU Energy's remaining generating assets; and, as a
result of adjustments to the working capital estimate, a reduction of $2.9
million after-tax, or $0.03 per share, was taken against the previously
recorded gain on the sale of the GPU Power UK supply business. The aggregate
effect on earnings of other fourth quarter 1999 adjustments was a loss of
approximately $23 million after-tax, or approximately $0.19 per share.
GPU, Inc. and Subsidiary Companies
GPU, Inc. owns all the outstanding common stock of three domestic electric utilities -- Jersey Central Power & Light Company (JCP&L), Metropolitan Edison Company (Met-Ed) and Pennsylvania Electric Company (Penelec). These electric utilities are conducting business under the name GPU Energy and considered together are referred to as the "GPU Energy companies." GPU Capital, Inc. and GPU Electric, Inc. and their subsidiaries own, operate and fund the acquisition of electric distribution and gas transmission systems in foreign countries, and are referred to as "GPU Electric." GPU Electric's foreign utility companies include Midlands Electricity plc (conducting business as GPU Power UK); Empresa Distribuidora Electrica Regional S.A. (Emdersa); and GPU GasNet. GPU Power, Inc. and its subsidiaries (GPU Power) develop, own and operate generation facilities in foreign countries. Other subsidiaries of GPU, Inc. include GPU Advanced Resources, Inc. (GPU AR), which is involved in retail energy sales; GPU Telcom Services, Inc. (GPU Telcom), which is engaged in telecommunications-related businesses; MYR Group Inc. (MYR), which is a utility infrastructure construction services company; GPU Service, Inc. (GPUS), which provides legal, accounting, financial and other services to the GPU companies; GPU Diversified Holdings LLC; and GPU Nuclear, Inc. (GPUN). All of these companies considered together are referred to as "GPU."
In 2000, GPU, Inc. sold GPU PowerNet, its Australian electric transmission company, to Singapore Power International. In addition, GPU, Inc. sold GPU International, Inc. (GPUI) to Aquila Energy Corporation. This sale included GPUI's interests in six domestic electric generating plants, and one development stage project. For further information, see Note 6, Accounting for Extraordinary and Non-Recurring Items, of the Combined Notes to Consolidated Financial Statements.
In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, GPU, Inc., JCP&L, Met-Ed and Penelec (the GPU registrants) are hereby filing cautionary statements identifying important factors that could cause their actual results to differ materially from those projected in forward-looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995) made by or on behalf of the GPU registrants in this Form 10-K. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "projects," "will likely," "result," "will continue" or similar expressions) are not statements of historical facts and may be forward-looking.
Forward-looking statements involve estimates, assumptions and uncertainties and are qualified in their entirety by reference to, and are accompanied by, the following important factors, which are difficult to predict, contain uncertainties, are beyond the control of the GPU registrants and may cause actual results to differ materially from those contained in
GPU, Inc. and Subsidiary Companies
those forward-looking statements: the consummation of the proposed merger of GPU, Inc. with FirstEnergy Corp.; the effects of regulatory decisions, including any conditions imposed upon the proposed merger with FirstEnergy Corp.; changes in law and other governmental actions and initiatives; economic or weather conditions affecting future sales and margins; the impact of deregulation and increased competition in the industry; industry restructuring; expected outcomes of legal proceedings; energy prices and availability; and uncertainties involved with foreign operations including political risks and foreign currency fluctuations.
Any forward-looking statement speaks only as of the date on which that statement is made, and the GPU registrants undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which that statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all of those factors, nor can it assess the impact of each of those factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.
EARNINGS PER SHARE CONTRIBUTION:
Change (per share)
-----------------------
(on a diluted basis) 2000 1999 1998 2000 vs. 1999 1999 vs. 1998
---- ---- ---- ------------- -------------
Operations:
GPU Energy companies $ 2.21 $ 3.51 $ 2.89 $(1.30) $ 0.62
GPU Electric 0.61 0.38 0.44 0.23 (0.06)
GPU Power and GPUI 0.14 0.15 0.11 (0.01) 0.04
GPU AR (0.01) (0.04) (0.01) 0.03 (0.03)
GPU Telcom (0.02) - 0.01 (0.02) (0.01)
MYR 0.04 - - 0.04 -
GPU, Inc. (Corporate) (0.19) (0.14) (0.09) (0.05) (0.05)
----- ----- ----- ----- -----
Total operations 2.78 3.86 3.35 (1.08) 0.51
Non-recurring items:
GPU Energy companies 0.47 (0.25) (0.52) 0.72 0.27
GPU Electric (2.28) 0.05 - (2.33) 0.05
GPUI 0.22 - - 0.22 -
GPU, Inc. 0.73 - - 0.73 -
----- ----- ----- ----- -----
Total $ 1.92 $ 3.66 $ 2.83 $(1.74) $ 0.83
===== ===== ===== ===== =====
|
GPU's 2000 earnings were $233.5 million, or $1.92 per share, compared with earnings of $459 million, or $3.66 per share, for 1999. Both periods reflect non-recurring items. GPU's return on average common equity was 6.9% in 2000, compared to 13% in 1999. Excluding the non-recurring items discussed below, return on average common equity for 2000 and 1999 would have been 9.6% and 13.7%, respectively.
GPU's earnings for 2000 would have been $337.4 million, or $2.78 per share, if the following non-recurring items are excluded: the loss of $276.6 million after-tax, or $2.28 per share, on the sale of GPU PowerNet; the gain of $89.2 million after-tax, or $0.73 per share, on the sale of GPUI; the net increase in income of $40.8 million, or $0.34 per share, for the impact of the Pennsylvania Public Utility Commission's (PaPUC) Phase II Order; the net gain of $26.2 million after-tax, or $0.22 per share, primarily related to a restructured power supply agreement between a GPU independent power project
GPU, Inc. and Subsidiary Companies
and Niagara Mohawk Corporation (NIMO); and the gain of $16.5 million, or $0.13 per share, for the reversal of certain deferred taxes and realization of an investment tax credit related to the sale of the Oyster Creek Nuclear Generating Station (Oyster Creek).
Excluding the following non-recurring items, earnings for 1999 would have been $484.1 million, or $3.86 per share: the net gain of $36.1 million after-tax, or $0.29 per share, on the sales of the GPU Energy companies' generating facilities, related to Met-Ed's and Penelec's wholesale operations; the non-recurring charge of $68 million after-tax, or $0.54 per share, resulting from a Summary Restructuring Order (Summary Order) issued to JCP&L by the New Jersey Board of Public Utilities (NJBPU); and the gain on the sale of the GPU Power UK supply business of $6.8 million after-tax, or $0.05 per share.
The $1.08 per share earnings decrease for 2000 versus 1999, excluding non-recurring items, was primarily due to the impact of electric utility restructuring in New Jersey and Pennsylvania; increased energy costs for Met-Ed and Penelec due to their need to purchase substantially all their energy requirements following the sales of their generating facilities in 1999, and the absence of deferred accounting treatment for these costs; and lower electric rates charged to customers in New Jersey. Partially offsetting the decrease was lower operation and maintenance (O&M) and depreciation expenses at the GPU Energy companies, and increased GPU Electric earnings primarily due to the acquisition of the remaining 50% ownership interest of GPU Power UK in July 1999.
GPU's 1998 earnings of $360.1 million, or $2.83 per share included a non-recurring charge of $65.8 million after-tax, or $0.52 per share, as a result of the PaPUC's Restructuring Orders. Excluding the impact of this non-recurring item, GPU's 1998 earnings would have been $425.9 million, or $3.35 per share.
The $0.51 per share earnings increase for 1999 versus 1998, excluding non-recurring items, was due to increased earnings from the GPU Energy companies primarily as a result of higher sales to other utilities, lower O&M expenses and lower depreciation expenses. Also contributing to the increase was higher profits from operations at GPU Power UK. Partially offsetting these increases were lower generation sales to customers by the GPU Energy companies as a result of some customers choosing alternate suppliers; and the absence of gains realized in 1998 on the sale of GPU Electric's interest in Solaris Power and the sale of AllGas Energy stock.
Operating revenues increased $439.1 million to $5.2 billion in 2000, and increased $508.3 million to $4.8 billion in 1999. The components of the changes are as follows:
GPU, Inc. and Subsidiary Companies
Change (in millions)
--------------------------------------
2000 vs. 1999 1999 vs. 1998
------------- -------------
GPU Energy companies:
Kilowatt-hour (KWH) revenues $(382.4) $(570.8)
Energy and restructuring-related
revenues (NJ) 242.0 220.2
Obligation to refund revenues 115.0 (58.6)
Competitive transition charge
(CTC) revenues (PA) 0.5 138.7
Other revenues (7.3) 12.7
----- ------
Total GPU Energy companies (32.2) (257.8)
GPU Electric 58.0 683.5
GPU Power and GPUI (4.3) 18.6
GPU AR (24.3) 73.7
GPU Telcom 4.2 (9.7)
MYR 437.7 -
------ ------
Total increase $ 439.1 $ 508.3
====== ======
GPU Energy companies
Kilowatt-hour revenues
----------------------
|
2000 vs. 1999
The decrease was due to lower sales to other utilities in 2000 of
approximately $50 million, as a result of GPU Energy having additional power
available in 1999 due to the delay in the divestiture of its generating assets;
and lower rates charged to JCP&L's customers and an increase in the number of
customers choosing alternate electricity suppliers in New Jersey, resulting in a
decrease in revenues of approximately $132 million. In addition, certain JCP&L
revenues related to stranded cost recovery of approximately $212 million, that
were previously included in KWH revenues, are now included in energy and
restructuring-related revenues, effective August 1, 1999.
1999 vs. 1998
The decrease was primarily due to lower generation-related revenues of
approximately $430 million as a result of some Pennsylvania customers choosing
other electricity suppliers, and a decrease of approximately $325 million in
nonutility generation (NUG) revenues for Met-Ed and Penelec (which did not have
an impact on earnings since NUG-related revenues are now being collected through
the CTC effective January 1, 1999). Partially offsetting these decreases were
increased sales to other utilities of approximately $160 million, the absence of
an earnings cap adjustment (since JCP&L was not in an over earnings position in
1999) which reduced JCP&L's 1998 revenues, and higher weather-related sales.
2000 vs. 1999
Changes in energy and restructuring-related revenues do not affect
earnings as they are offset by corresponding changes in expense. The increase
was primarily due to the inclusion of certain revenues, effective August 1,
1999, for the recovery of stranded costs due to restructuring in New Jersey. In
addition, JCP&L changed its estimate for unbilled revenue, which resulted in the
recording of additional revenues of approximately $25 million in 1999, partially
offsetting the increase in the current year.
GPU, Inc. and Subsidiary Companies
1999 vs. 1998
The increase was primarily due to a change in the estimate for unbilled
revenue and the inclusion of revenues, effective August 1, 1999, for the
recovery of stranded costs due to restructuring in New Jersey.
2000 vs. 1999
The increase was due to the absence this year of a reduction in operating
revenues of $115 million, recorded in 1999, as a result of the NJBPU's Summary
Order issued to JCP&L. The Summary Order requires JCP&L to refund customers 5%
from rates in effect as of April 30, 1997.
1999 vs. 1998
The decrease was primarily due to the NJBPU's Summary Order discussed
above. Partially offsetting the effect of the decrease was the absence of rate
reductions from operating revenues of $56.4 million, recorded in 1998, as a
result of PaPUC Restructuring Orders for Met-Ed and Penelec.
2000 vs. 1999 / 1999 vs. 1998
CTC revenues represent Pennsylvania stranded cost recoveries permitted by
the PaPUC in accordance with Met-Ed's and Penelec's final Restructuring Orders
effective January 1, 1999. Changes in CTC revenues generally do not affect
earnings as they are offset by corresponding changes in expense.
2000 vs. 1999
The decrease was due to decreased transmission revenues as a result of
less load served by alternative suppliers in Pennsylvania.
1999 vs. 1998
The increase was due primarily to increased transmission revenues at
Met-Ed and Penelec as a result of customer shopping in Pennsylvania.
GPU Electric
2000 vs. 1999
The increase in revenues was primarily due to the inclusion of a full year
of revenues from: GPU Power UK (GPU acquired the remaining 50% ownership
interest in July 1999), approximately $90 million; Emdersa (acquired in March
1999), approximately $45 million; and GPU GasNet (acquired in June 1999),
approximately $25 million. Offsetting these increases was a reduction in
revenues at GPU PowerNet due to its sale in June 2000.
1999 vs. 1998
The increase in revenues was primarily due to the inclusion of revenues
from GPU Power UK, following the acquisition of the remaining 50% ownership
interest in 1999, approximately $505 million; and the inclusion of Emdersa,
approximately $135 million, and GPU GasNet, approximately $30 million, following
their acquisitions in 1999.
GPU Power and GPUI
1999 vs. 1998
The increase was primarily due to an increase in energy and capacity
revenues at Empresa Guaracachi, GPU's 50% owned subsidiary in Bolivia, $2.4
GPU, Inc. and Subsidiary Companies
million, and the full year effect of consolidating Onondaga Cogen, L.P. (Onondaga), $11 million.
GPU AR
2000 vs. 1999
The decrease was due to GPU AR having fewer customers as compared to last
year.
1999 vs. 1998
The increase was primarily due to an increase in electricity sales to
customers who chose GPU AR as their electric energy supplier as part of retail
customer choice in Pennsylvania.
MYR
2000 vs. 1999
The increase was due to the inclusion of revenues from MYR following its acquisition by GPU, Inc. in the second quarter 2000.
Operating income decreased $224.2 million to $784.6 million in 2000, and increased $112.8 million to $1.01 billion in 1999. The components of the changes are as follows:
Change (in millions)
--------------------------------------
2000 vs. 1999 1999 vs. 1998
------------- -------------
GPU Energy companies $ (89.4) $(26.8)
GPU Electric (276.5) 143.9
GPU Power and GPUI (1.4) 11.5
GPU AR 3.7 (3.6)
GPU Telcom (1.7) (3.4)
MYR 17.6 -
GPU, Inc. 123.5 (8.8)
------ -----
Total increase/(decrease) $(224.2) $112.8
====== =====
GPU Energy companies
|
2000 vs. 1999
The decrease was primarily due to lower revenues as discussed above (see
Operating Revenues section for additional information) and higher energy costs
for Met-Ed and Penelec due to increased electricity purchases (approximately
$343 million) following the sale of their generating assets. JCP&L defers for
future collection its energy costs in excess of amounts in rates. Also
contributing to the decrease was higher bad debt expenses in 2000, approximately
$40 million; and a charge of $13 million in 2000 for increased costs associated
with decommissioning the Saxton Nuclear Experimental facility. Partially
offsetting this decrease was: lower 2000 O&M expenses resulting from a
non-recurring credit to expense of $66.1 million due to the impact of the
PaPUC's Phase II Order received by Met-Ed and Penelec (for additional
information, see Note 6, Accounting for Extraordinary and Non-recurring Items,
of the Combined Notes to Consolidated Financial Statements); a reduction in
expense of approximately $14 million for the receipt of additional cash
distributions in 2000, compared to 1999, related to Oyster Creek property
insurance; a reduction in operating expenses associated with the operation of
generating stations due to the sale of essentially all GPU Energy's generating
assets in 1999 (this was more than
GPU, Inc. and Subsidiary Companies
offset by increased purchased power expenses, as discussed above), approximately $330 million; and lower depreciation expense due to the 1999 sales of generating assets, approximately $75 million.
1999 vs. 1998
The decrease was due to lower revenues as discussed above. Also
contributing to the decrease was a pre-tax reserve of $25 million for Met-Ed and
Penelec related to the regulatory uncertainty of the full recoverability of
stranded costs in Phase II of the Pennsylvania restructuring proceedings.
Partially offsetting this decrease was lower O&M expenses primarily due to the
sale of Penelec's interest in the Homer City Station (Homer City), lower
depreciation expense due to the effect of the impairment write-down of the
Oyster Creek nuclear generating station and Three Mile Island Unit 1 (TMI-1)
nuclear generating facility in 1999 and 1998, respectively; and the sale of
Homer City.
GPU Electric
2000 vs. 1999
The decrease was due to the pre-tax loss of $372 million in 2000 on the
sale of GPU PowerNet. Partially offsetting this decrease was increased operating
income at GPU Power UK due primarily to the acquisition of the remaining 50%
ownership interest in 1999, and the inclusion of Emdersa and GPU GasNet
following their acquisitions. Prior to its purchase of the remaining 50%
ownership interest, GPU accounted for its investment in GPU Power UK under the
equity method and included its share of GPU Power UK's income in Equity in
undistributed earnings of affiliates, net on the Consolidated Statements of
Income. Further offsetting the decrease was a credit to income of $15.9 million
pre-tax resulting from a reduction in the estimated liability of certain
long-term purchase obligations under natural gas supply contracts entered into
by GPU Power UK; and a pre-tax gain of $4.5 million realized on closed out
forward exchange contracts.
1999 vs. 1998
The increase was due primarily to the consolidation of GPU Power UK
following the acquisition of the remaining 50% ownership in 1999, and the
inclusion of Emdersa and GPU GasNet following their acquisitions in 1999.
GPU Power and GPUI
1999 vs. 1998
The increase was primarily due to higher revenues as discussed above, and
the full year effect of consolidating the Onondaga cogeneration project.
GPU AR
2000 vs. 1999
The decrease in operating loss resulted primarily from lower electricity
purchases due to GPU AR having fewer customers to supply energy, as compared to
last year, partially offset by lower revenues as discussed above.
1999 vs. 1998
The decrease was primarily due to increased prices for power purchases due
to the hot summer of 1999, partially offset by higher revenues as discussed
above.
GPU, Inc. and Subsidiary Companies
MYR
2000 vs. 1999
The increase was due to the inclusion of MYR following its acquisition by
GPU, Inc. in the second quarter 2000.
GPU, Inc.
2000 vs. 1999
The increase was primarily due to the $133 million pre-tax gain on the
sale of GPUI in 2000. Partially offsetting the increase was merger-related costs
of approximately $12 million associated with the pending merger of GPU and
FirstEnergy Corp. (FirstEnergy).
1999 vs. 1998
The decrease was primarily due to higher expenses for corporate
activities.
Other income and deductions increased $3 million to $178.8 million in 2000, and increased $54.5 million to $175.8 million in 1999. The components of the changes are as follows:
Change (in millions)
--------------------------------------
2000 vs. 1999 1999 vs. 1998
------------- -------------
GPU Energy companies $(24.4) $ 78.9
GPU Electric (7.0) (25.6)
GPU Power and GPUI 35.0 0.4
GPU AR 0.7 0.1
GPU Telcom (2.9) (0.1)
MYR 0.9 -
GPU, Inc. 0.7 0.8
----- -----
Total increase $ 3.0 $ 54.5
===== =====
GPU Energy companies
|
2000 vs. 1999
The decrease was due to the absence in 2000 of net non-recurring gains,
related to Met-Ed's and Penelec's wholesale operations, of $61.3 million
pre-tax, recognized as a result of the sale of substantially all the GPU Energy
companies' electric generating stations. Partially offsetting the decrease was
higher interest income of approximately $12 million; and the reversal of an
estimated 1999 tax penalty of $10 million.
1999 vs. 1998
The increase was primarily due to the recognition of the net non-recurring
gains of $61.3 million pre-tax as discussed above. Also contributing to the
increase was the absence of a charge for start-up payments for the establishment
of an environmental fund for Met-Ed and Penelec; and the absence of a charge to
terminate a contract with one of Met-Ed's wholesale customers, both in 1998.
GPU Electric
2000 vs. 1999
The decrease was due primarily to the consolidation of GPU Power UK
following the acquisition of the remaining 50% ownership interest in 1999.
GPU, Inc. and Subsidiary Companies
Prior to that, the GPU Power UK investment was accounted for under the equity method and GPU's share of GPU Power UK's income was included in Equity in undistributed earnings of affiliates, net on the Consolidated Statements of Income. Partially offsetting this was income from GPU Power UK's investments in independent power projects accounted for under the equity and cost methods, amounting to approximately $29 million in 2000.
1999 vs. 1998
The decrease was primarily due to a pre-tax loss of $8.5 million for the
write-down, to market value, of the investment in certain marketable securities
due to GPU Electric's pending sale of this investment; and the absence of a
pre-tax gain of $45 million realized in 1998 from the sale of Solaris Power.
Offsetting the decrease was the pre-tax gain on the sale of the GPU Power UK
supply business of $10.5 million and increased earnings from GPU Power UK's
operations prior to the acquisition from Cinergy Corp. of the remaining 50%.
GPU Power and GPUI
2000 vs. 1999
The increase was primarily due to the recognition in 2000 of a
non-recurring $42.8 million pre-tax net gain related to a restructured power
supply agreement between a GPU independent power project and NIMO. For
additional information, see Note 6, Accounting for Extraordinary and
Non-recurring Items, to the Consolidated Financial Statements.
1999 vs. 1998
In 1999, GPUI sold its interests in two cogeneration projects and its
shares of NIMO stock (that it received as part of the 1998 master restructuring
agreement for the Onondaga cogeneration project) for a total pre-tax gain of $12
million. Offsetting this increase was the recording of an impairment of $6.5
million, in 1999, related to the investment in the Lake cogeneration project and
the absence of a pre-tax gain from the 1998 sale of a 50% interest in the
Mid-Georgia cogeneration project of $9.1 million, which is offset by $2.5
million of deferred revenues recognized in income in 1999.
Interest charges and preferred dividends increased $67.8 million to $550.3 million in 2000, and increased $93.3 million to $482.5 million in 1999. The components of the changes are as follows:
Change (in millions)
--------------------------------------
2000 vs. 1999 1999 vs. 1998
------------- -------------
GPU Energy companies $ (6.9) $(21.1)
GPU Electric 57.1 114.6
GPU Power and GPUI 2.2 1.5
GPU Telcom - -
MYR 7.3 -
GPU, Inc. 8.1 (1.7)
----- -----
Total increase $ 67.8 $ 93.3
===== =====
GPU Energy companies
|
2000 vs. 1999
The decrease was primarily due to the following: in 2000, JCP&L redeemed
$16.7 million stated value cumulative preferred stock pursuant to mandatory and
optional sinking fund provisions; Penelec redeemed $25 million
GPU, Inc. and Subsidiary Companies
of long-term debt; JCP&L and Met-Ed redeemed $40 million and $50 million, respectively, of first mortgage bonds (FMBs); and in 1999, Met-Ed and Penelec redeemed all their company-obligated mandatorily redeemable preferred securities and cumulative preferred stock; and Penelec redeemed $600 million of FMBs. Partially offsetting these decreases were increased interest expense associated with Penelec's issuance of $350 million of senior notes in 1999, the issuance of $118 million of senior notes in 2000; and the issuance of $100 million each of company-obligated trust preferred securities by Met-Ed and Penelec in 1999.
1999 vs. 1998
The decrease was primarily due to the following: in 1999 Met-Ed and
Penelec redeemed all their company-obligated mandatorily redeemable preferred
securities and cumulative preferred stock (the redemption of preferred stock
resulted in losses of $0.5 million and $0.7 million, respectively, for Met-Ed
and Penelec); and Penelec redeemed $600 million of FMBs. Also in 1999, JCP&L
redeemed $30 million of cumulative preferred stock (which resulted in a loss of
$0.8 million). Partially offsetting these decreases was increased interest
expense associated with Penelec's issuance of $350 million of senior notes in
1999.
GPU Electric
2000 vs. 1999
The increase was primarily due to higher debt levels from the 1999
acquisitions of GPU Power UK (the remaining 50% ownership interest), Emdersa and
GPU GasNet, which resulted in additional interest expense of approximately $120
million, offset by lower interest expense due to the sale of GPU PowerNet.
1999 vs. 1998
The increase was primarily due to higher debt levels from the 1999
acquisitions of Emdersa, GPU GasNet and GPU Power UK (the remaining 50%
ownership interest), which resulted in additional interest expense of
approximately $90 million.
MYR
2000 vs. 1999
The increase was due to the inclusion of MYR following its acquisition by GPU, Inc. in the second quarter 2000.
GPU, Inc.
2000 vs. 1999
The increase was due to higher average debt levels in 2000 due to the
issuance of $300 million of debentures, and the acquisition of MYR, which was
partially financed with short-term debt.
1999 vs. 1998
The 1998 extraordinary loss was due to the impact of the PaPUC
Restructuring Orders received by Met-Ed and Penelec.
Jersey Central Power & Light Company and Subsidiary Company
JCP&L's earnings for 2000 were $203.9 million, compared to 1999 earnings of $162.9 million. JCP&L's return on average common equity was 14.5% in 2000, compared to 10.7% in 1999. The increase was primarily due to a non-recurring gain of $16.5 million, in 2000, for the reversal of certain deferred taxes and realization of an investment tax credit related to the sale of Oyster Creek; and the absence of a non-recurring charge of $68 million after-tax as a result of the NJBPU's Summary Order issued to JCP&L in 1999. Excluding the non-recurring items, earnings for 2000 would have been $187.4 million, compared to 1999 earnings of $230.9 million. The decrease in earnings on this basis was due primarily to the impact of electric utility restructuring in New Jersey; and lower electric delivery rates charged to customers. Partially offsetting the decrease was lower O&M and depreciation expenses.
JCP&L's earnings for 1998 were $212.4 million and its return on average common equity was 13.5%. The decrease in earnings for 1999 versus 1998 was due to the non-recurring charge of $68 million after-tax, as a result of the NJBPU's Summary Order. Excluding the non-recurring charge, the increase in earnings on this basis was due primarily to increased sales to new customers, higher weather-related sales and a decrease in depreciation expense.
Operating revenues decreased $38.9 million to $1.98 billion in 2000, and decreased $51.4 million to $2.02 billion in 1999. The components of the changes are as follows:
Changes (in millions)
---------------------------------------
2000 vs. 1999 1999 vs. 1998
------------- -------------
KWH revenues $(392.2) $(156.3)
Energy and restructuring-related
revenues 242.0 220.2
Obligation to refund revenues 115.0 (115.0)
Other revenues (3.7) (0.3)
------ ------
Decrease in revenues $ (38.9) $ (51.4)
====== ======
KWH revenues
|
2000 vs. 1999
The decrease was primarily due to the fact that certain revenues related
to stranded cost recovery of approximately $212 million, that were previously
included in KWH revenues, are now included in energy and restructuring-related
revenues, effective August 1, 1999. Also contributing the decrease was lower
distribution rates charged to JCP&L's customers and an increase in the number of
customers choosing alternate electricity suppliers, resulting in a decrease in
revenues of approximately $132 million.
Residential 42% Commercial 40% Industrial/Other 18% |
Jersey Central Power & Light Company and Subsidiary Company
1999 vs. 1998
The decrease was primarily due to decreased customer usage and decreased
sales to other utilities of approximately $10 million. Partially offsetting the
decreases was the absence of an earnings cap adjustment (since JCP&L was not in
an over earnings position through July 1999) which reduced JCP&L's 1998
revenues; increased sales to new customers; and higher weather-related sales.
2000 vs. 1999
Changes in energy and restructuring-related revenues do not affect
earnings as they are offset by corresponding changes in expense. The increase
was primarily due to the inclusion of certain revenues, effective August 1,
1999, for the recovery of stranded costs due to restructuring in New Jersey. In
addition, in 1999 JCP&L changed its estimate for unbilled revenue, which
resulted in the recording of additional revenues of approximately $25 million,
partially offsetting the increase in the current year.
1999 vs. 1998
The increase was primarily due to a change in the estimate for unbilled
revenue and the inclusion of revenues, effective August 1, 1999, for the
recovery of stranded costs due to restructuring in New Jersey.
2000 vs. 1999
The increase was due to the absence this year of a reduction in operating
revenues of $115 million, recorded in 1999, as a result of the NJBPU's Summary
Order issued to JCP&L. The Summary Order requires JCP&L to refund customers 5%
from rates in effect as of April 30, 1997.
1999 vs. 1998
The decrease was primarily due to the NJBPU's Summary Order discussed
above.
Operating income increased $41.4 million to $407.2 million in 2000, and decreased $96.3 million to $365.8 million in 1999.
2000 vs. 1999
The increase was primarily due to a reduction in operating expenses
associated with the operation of generating stations of approximately $110
million; and lower depreciation expense of approximately $13 million, resulting
from the sale of generating assets in 1999. Also contributing to the increase
was a reduction in expense of approximately $13 million for the receipt of
additional cash distributions in 2000, compared to 1999, related to Oyster Creek
property insurance. Partially offsetting these increases was: lower revenues as
discussed above; higher bad debt expenses in 2000, approximately $16 million;
and a charge of $5.7 million in 2000 for increased costs associated with
decommissioning the Saxton Nuclear Experimental facility.
1999 vs. 1998
The decrease was due to the obligation to make refunds to customers and
lower KWH revenues as discussed above. Partially offsetting this decrease
Jersey Central Power & Light Company and Subsidiary Company
was lower depreciation expense due to the effect of the impairment write-down of Oyster Creek and TMI-1 in 1999 and 1998, respectively.
Other income and deductions increased $15.5 million to $28 million in 2000, and decreased $1.5 million to $12.5 million in 1999.
2000 vs. 1999
The increase was due to higher interest income of approximately $14
million; and the reversal of an estimated 1999 tax penalty of $1.3 million.
Interest charges and preferred dividends decreased $3 million to $111.4 million in 2000, and decreased $4.2 million to $114.4 million in 1999.
2000 vs. 1999
The decrease was primarily due to, in 2000, the redemption of $16.7
million stated value cumulative preferred stock pursuant to mandatory and
optional sinking fund provisions; and the redemption of $40 million FMBs.
1999 vs. 1998
The decrease was primarily due to lower other interest expense (excludes
interest on debt). Also contributing to the decrease was the redemption of $30
million of cumulative preferred stock, which resulted in a loss of $0.8 million.
Metropolitan Edison Company and Subsidiary Companies
Met-Ed's earnings for 2000 were $81.9 million, compared to 1999 earnings of $94.5 million. Met-Ed's return on average common equity was 16.1% in 2000 compared to 13.9% in 1999. Excluding an after-tax gain of $32 million for the impact of the PaPUC's Phase II order, earnings for 2000 would have been $49.9 million. Excluding the net gain from the sales of Met-Ed's generating facilities related to wholesale operations, earnings for 1999 would have been $93.3 million. The decrease in earnings excluding non-recurring items was primarily due to the impact of electric utility restructuring in Pennsylvania; increased energy costs resulting from Met-Ed's need to purchase substantially all its energy requirements following the sales of its generating assets in 1999, and the absence of deferred accounting treatment for these costs. Partially offsetting these was lower O&M and depreciation expenses.
Met-Ed's earnings for 1998 were $50.4 million and its return on average common equity was 7.5%. Excluding the effect of PaPUC rate actions, earnings for 1998 would have been $76.4 million. The increase in earnings for 1999 versus 1998 on this basis was primarily due to increased sales to other utilities, higher weather-related sales and a decrease in depreciation expense.
Operating revenues decreased $60.5 million to $842.3 million in 2000, and decreased $16.8 million to $902.8 million in 1999. The components of the changes are as follows:
Changes (in millions)
2000 vs. 1999 1999 vs.1998
------------- ------------
KWH revenues $ (64.7) $(152.0)
Obligation to refund revenues - 27.2
CTC revenues 4.2 90.0
Other revenues - 18.0
------ ------
Decrease in revenues $ (60.5) $ (16.8)
====== ======
KWH revenues
|
2000 vs. 1999
The decrease was primarily due to lower sales to other utilities in 2000
of approximately $93 million, as a result of Met-Ed having additional power
available in 1999 due to the delay of the divestiture of its generating assets.
Residential 35% Commercial 30% Industrial/Other 35% |
Metropolitan Edison Company and Subsidiary Companies
1999 vs. 1998
The decrease was primarily due to lower generation-related revenues of
approximately $220 million as a result of some Pennsylvania customers choosing
another electric energy supplier and a decrease of approximately $155 million in
NUG revenues (which did not have an impact on earnings since NUG-related
revenues are now being collected through the CTC effective January 1, 1999).
Partially offsetting these decreases was increased sales to other utilities of
approximately $130 million and higher weather-related sales.
1999 vs. 1998
The increase was due to the absence of rate refunds of $27.2 million,
recorded in 1998, as a result of the PaPUC Restructuring Order for Met-Ed.
2000 vs. 1999 / 1999 vs. 1998
CTC revenues represent Pennsylvania stranded cost recoveries permitted by
the PaPUC in accordance with Met-Ed's final Restructuring Order effective
January 1, 1999. Changes in CTC revenues generally do not affect earnings as
they are offset by corresponding changes in expense.
1999 vs. 1998
The increase was due primarily to increased transmission revenues as a
result of customer shopping in Pennsylvania.
Operating income decreased $44.7 million to $168.5 million in 2000, and increased $45.8 million to $213.2 million in 1999.
2000 vs. 1999
The decrease was primarily due to lower revenues as discussed above and
higher energy costs due to increased electricity purchases of approximately $160
million following the sale of Met-Ed's generating assets. Also contributing to
the decrease was higher bad debt expenses in 2000, approximately $12 million;
and a charge of $4.2 million in 2000 for increased costs associated with
decommissioning the Saxton Nuclear Experimental facility. Partially offsetting
these decreases was: lower 2000 O&M expenses resulting from a non-recurring
credit to expense of $44.6 million due to the impact of the PaPUC's Phase II
Order (for additional information, see Note 6, Accounting for Extraordinary and
Non-recurring Items, of the Combined Notes to Consolidated Financial
Statements); a reduction in operating expenses associated with the operation of
generating stations due to the sale of essentially all Met-Ed's generating
assets in 1999, approximately $130 million; and lower depreciation expense of
approximately $30 million due to the 1999 sale of generating assets.
1999 vs. 1998
The increase was primarily due to increased sales to other utilities, the
absence of rate refunds of $27.2 million recorded in 1998, lower depreciation
expense due to the effect of the impairment write-down of TMI-1 in 1998 and
lower O&M expenses. Partially offsetting this increase was lower revenues due to
customer shopping and the recording of a pre-tax reserve of $18.7 million
related to the regulatory uncertainty of the full
Metropolitan Edison Company and Subsidiary Companies
recoverability of stranded costs in Phase II of the Pennsylvania restructuring proceedings.
Other income and deductions increased $8.1 million to $12.2 million in 2000, and increased $17.5 million to $4.1 million in 1999.
2000 vs. 1999
The increase was primarily due to higher interest income of approximately
$5 million; and the reversal of an estimated 1999 tax penalty of $1.8 million.
1999 vs. 1998
The increase was primarily due to the absence of a charge for start-up
payments for the establishment of an environmental fund; and the absence of a
charge to terminate a contract with Middletown, both in 1998. Also contributing
to the increase was the recognition of net gains of $2 million pre-tax, as a
result of the sale of substantially all of Met-Ed's electric generating
stations.
Interest charges and preferred dividends decreased $6.7 million to $54.7 million in 2000, and increased $2.1 million to $61.4 million in 1999.
2000 vs. 1999
The decrease was primarily due to the retirement of $50 million of FMBs in
2000; and the redemption of $100 million of company-obligated mandatorily
redeemable preferred securities and $12 million of cumulative preferred stock,
both in 1999. Partially offsetting the decreases was increased interest expense
associated with the issuance of $100 million company-obligated trust preferred
securities in 1999.
1999 vs. 1998
The increase was due to the issuance of $100 million of trust preferred
securities. Partially offsetting the increase was a decrease in interest on debt
due to lower debt levels and lower preferred stock dividends due to the
redemption of all of Met-Ed's preferred stock ($12 million), which resulted in a
loss of $0.5 million.
1999 vs. 1998
The 1998 extraordinary loss was due to the impact of the PaPUC
Restructuring Order received by Met-Ed.
Pennsylvania Electric Company and Subsidiary Companies
Penelec's earnings for 2000 were $39.2 million, compared to 1999 earnings of $151.6 million. Penelec's return on average common equity was 8.8% in 2000 compared to 26.6% in 1999. Excluding an after-tax gain of $8.8 million for the impact of the PaPUC's Phase II order, earnings for 2000 would have been $30.4 million. Excluding the net gain from the sales of Penelec's generating facilities related to wholesale operations, earnings for 1999 would have been $116.7 million. The decrease in earnings excluding non-recurring items was primarily due to the impact of electric utility restructuring in Pennsylvania; increased energy costs resulting from Penelec's need to purchase substantially all its energy requirements following the sales of its generating assets in 1999, and the absence of deferred accounting treatment for these costs. Partially offsetting these was lower O&M and depreciation expenses.
Penelec's earnings in 1998 were $38.9 million and its return on average common equity was 5%. Excluding the effect of PaPUC rate actions, earnings for 1998 would have been $78.7 million. The increase in earnings for 1999 versus 1998 on this basis was primarily due to increased sales to other utilities, higher weather-related sales and a decrease in depreciation expense.
Operating revenues decreased $20.1 million to $901.9 million in 2000, and decreased $110.3 million to $922 million in 1999. The components of the changes are as follows:
Changes (in millions)
---------------------------------------
2000 vs. 1999 1999 vs.1998
------------- ------------
KWH revenues $ (9.8) $(203.3)
Obligation to refund revenues - 29.2
CTC revenues (3.7) 48.7
Other revenues (6.6) 15.1
------ ------
Decrease in revenues $ (20.1) $(110.3)
====== ======
KWH revenues
|
2000 vs. 1999
The decrease was primarily due to lower sales to other utilities in 2000
of approximately $33 million, as a result of Penelec having additional power
available in 1999 due to the delay of the divestiture of its generating assets.
Residential 29% Commercial 33% Industrial/Other 38% |
1999 vs. 1998
The decrease was primarily due to lower generation-related revenues of
approximately $210 million as a result of some Pennsylvania customers choosing
another electric energy supplier and a decrease of approximately $170 million in
NUG revenues (which did not have an impact on earnings since
Pennsylvania Electric Company and Subsidiary Companies
NUG-related revenues are now being collected through the CTC effective January 1, 1999). Partially offsetting these decreases was increased sales to other utilities of approximately $40 million and higher weather-related sales.
1999 vs. 1998
The increase was due to the absence of rate refunds of $29.2 million,
recorded in 1998, as a result of the PaPUC Restructuring Order for Penelec.
2000 vs. 1999 / 1999 vs. 1998
CTC revenues represent Pennsylvania stranded cost recoveries permitted by
the PaPUC in accordance with Penelec's Restructuring Order effective January 1,
1999. Changes in CTC revenues generally do not affect earnings as they are
offset by corresponding changes in expense.
2000 vs. 1999
The decrease was due to decreased transmission revenues as a result of
less load served by alternative suppliers in Pennsylvania.
1999 vs. 1998
The increase was due primarily to increased transmission revenues as a
result of customer shopping in Pennsylvania.
Operating income decreased $85.9 million to $105.7 million in 2000, and increased $20.8 million to $191.6 million in 1999.
2000 vs. 1999
The decrease was primarily due to lower revenues as discussed above and
higher energy costs due to increased electricity purchases of approximately $183
million following the sale of Penelec's generating assets. Also contributing to
the decrease was higher bad debt expenses in 2000, approximately $12 million;
and a charge of $3.1 million in 2000 for increased costs associated with
decommissioning the Saxton Nuclear Experimental facility. Partially offsetting
these decreases was: lower 2000 O&M expenses resulting from a non-recurring
credit to expense of $21.5 million due to the impact of the PaPUC's Phase II
Order (for additional information, see Note 6, Accounting for Extraordinary and
Non-recurring Items, of the Combined Notes to Consolidated Financial
Statements); a reduction in operating expenses associated with the operation of
generating stations due to the sale of essentially all Penelec's generating
assets in 1999, approximately $92 million; and lower depreciation expense of
approximately $32 million due to the 1999 sale of generating assets.
1999 vs. 1998
The increase was primarily due to increased sales to other utilities, the
absence of rate refunds of $29.2 million recorded in 1998, lower O&M expenses
primarily due to the sale of Penelec's interest in Homer City, lower
depreciation expense due to the effect of the impairment write-down of TMI-1 in
1998 and the sale of Homer City. Partially offsetting these was lower KWH
revenues as discussed above and a pre-tax reserve of $6.3 million related to
Pennsylvania Electric Company and Subsidiary Companies
the regulatory uncertainty of the full recoverability of stranded costs in Phase II of the Pennsylvania restructuring proceedings.
Other income and deductions decreased $48.2 million to $11.1 million in 2000, and increased $65.7 million to $59.3 million in 1999.
2000 vs. 1999
The decrease was due to the absence in 2000 of net non-recurring gains of
$59.3 million pre-tax, as a result of the sale of substantially all Penelec's
electric generating stations; and lower interest income of approximately $7
million. Partially offsetting these was the reversal of an estimated 1999 tax
penalty of $6.9 million.
1999 vs. 1998
The increase was primarily due to the recognition of net gains of $59.3
million pre-tax, as a result of the sale of substantially all Penelec's electric
generating stations. Also contributing to the increase was the absence of a
charge for start-up payments for the establishment of an environmental fund in
1998.
Interest charges and preferred dividends increased $2.8 million to $47.8 million in 2000, and decreased $18.9 million to $45 million in 1999.
2000 vs. 1999
The increase was primarily due to the issuance of $118 million of senior
notes in 2000; and the issuance of $350 million of senior notes and $100 million
of company-obligated trust preferred securities, both in 1999. Partially
offsetting these increases were decreased interest expense due to the following:
in 2000, the redemption of $25 million of long-term debt; in 1999, the
redemption of $105 million of company-obligated mandatorily redeemable preferred
securities and $16.5 million of cumulative preferred stock; and the redemption
of $600 million of FMBs.
1999 vs. 1998
The decrease was primarily due to Penelec's redemption of all its
company-obligated mandatorily redeemable preferred securities ($105 million) and
cumulative preferred stock ($16.5 million), which resulted in a loss of $0.7
million (redemption of cumulative preferred stock); and the redemption of $600
million of FMBs. Partially offsetting the decrease was increased interest
expense associated with Penelec's issuance of $350 million of senior notes in
1999.
1999 vs. 1998
The 1998 extraordinary loss was due to the impact of the PaPUC
Restructuring Order received by Penelec.
GPU, Inc. and Subsidiary Companies
On August 8, 2000, GPU, Inc. entered into an agreement to merge with FirstEnergy, an Ohio corporation, headquartered in Akron, Ohio. Under the merger agreement, FirstEnergy would acquire all of the outstanding shares of GPU's common stock for approximately $4.5 billion in cash and FirstEnergy common stock.
The merger has been approved by the Boards of Directors and stockholders of GPU, Inc. and FirstEnergy and is expected to close promptly after all of the conditions to the consummation of the merger (including the receipt of all necessary regulatory approvals, provided that such approvals will not impose terms and conditions that would reasonably be expected to result in a "material adverse effect," as defined in the merger agreement, on the combined company, and there being no "material adverse effect" on either GPU or FirstEnergy since June 30, 2000 or March 31, 2000, respectively), are fulfilled or waived. Relevant factors would include the nature of any order issued by the regulatory authorities, the financial and business conditions of each company, and whether, and the extent by which, any developments relate to general economic conditions. In testimony before the PaPUC, FirstEnergy stated that FirstEnergy will carefully review the PaPUC's action with respect to GPU's requested provider of last resort (PLR) relief on the financial condition of GPU to determine whether the consequences would have a "material adverse effect" on GPU or the combined company. The receipt of all necessary regulatory approvals is expected to take approximately nine to twelve months from the date of the merger agreement. There can be no assurance as to the outcome of these matters.
GPU, Inc. has Securities and Exchange Commission (SEC) authorization to finance investments in foreign utility companies (FUCOs) and exempt wholesale generators (EWGs) up to an aggregate amount equal to 100% of GPU's average consolidated retained earnings, or approximately $2.4 billion as of December 31, 2000. At December 31, 2000, GPU, Inc. has remaining authorization to finance approximately $680 million of additional investments in FUCOs and EWGs. GPU, Inc.'s investments in FUCOs and EWGs are made through GPU Electric and GPU Power.
GPU Electric owns electric distribution and gas transmission businesses in England, Australia and Argentina. In June 2000, GPU Electric sold its electric transmission business in Australia and, as a result, recorded a pre-tax loss in the quarter ended June 30, 2000 of $372 million ($295 million after-tax, or $2.43 per share), including a $94 million foreign currency loss. During the fourth quarter 2000, there was a change in the estimated tax benefits, which reduced GPU's after-tax loss on the sale to $276.6 million, or $2.28 per share. Through its ownership in GPU Power UK, GPU Electric also has investments in operating generating facilities located in foreign countries totaling 4,201 megawatts (MW) (of which GPU Electric's equity interest represents 1,119 MW) of capacity. At December 31, 2000, GPU, Inc.'s aggregate investment in GPU Electric was $881 million. GPU, Inc. has also guaranteed up to an additional $899 million of outstanding GPU Electric obligations.
GPU, Inc. and Subsidiary Companies
GPU Power has ownership interests in four operating generating facilities located in foreign countries totaling 1,229 MW (of which GPU Power's equity interest represents 424 MW) of capacity. At December 31, 2000, GPU, Inc.'s aggregate investment in GPU Power was $139 million. GPU, Inc. has also guaranteed up to an additional $21.3 million of GPU Power obligations.
GPU Telcom is a telecommunications infrastructure development and management company and wholesale telecommunications provider with operations primarily in the Mid-Atlantic region of the US. Its customers consist of telecommunications end-use service providers including: interexchange carriers; competitive local exchange carriers; competitive access providers and multiple system operators; commercial and industrial companies (private networks) and governmental agencies; cable television and telephone companies; and internet service providers. At December 31, 2000, GPU, Inc.'s aggregate investment in GPU Telcom was $67 million.
For a discussion of GPU Telcom's participation in certain recent joint ventures, see the GPU Business Plan section.
In April 2000, GPU, Inc. acquired MYR for approximately $217.5 million. MYR, a suburban Chicago-based infrastructure construction services company, provides a complete range of power line and commercial/industrial electrical construction services for electric utilities, telecommunications providers, commercial and industrial facilities and government agencies across the US. MYR also builds cellular towers for the wireless communications market. At December 31, 2000, GPU, Inc.'s aggregate investment in MYR was $237 million. For additional information, see Note 7, Acquisitions, of the Combined Notes to Consolidated Financial Statements.
GPU uses various market risk sensitive instruments primarily to manage the risk of price, interest rate and foreign currency fluctuations. None of these instruments are held for trading purposes.
The GPU Energy companies use New York Mercantile Exchange (NYMEX) futures and Over-the-Counter (OTC) forward contracts and options on forward contracts to manage the risk of fluctuations in the market price of electricity and capacity. The GPU Energy companies also manage the natural gas requirements of certain NUG facilities that generate and sell energy to JCP&L under long-term contracts.
Penelec and GPU Electric (through GPU GasNet and GPU Power UK) use interest rate swap agreements to manage the risk of increases in variable
GPU, Inc. and Subsidiary Companies
interest rates. All of the agreements effectively convert variable rate debt to fixed rate debt. The following summarizes the principal characteristics of the swap agreements in effect as of December 31, 2000:
(in thousands)
Fixed Variable
Notional Fair Termination Pay/Receive Interest Interest Rate
Amount Value(a) Date Characteristic Rate at 12/31/00
---------- --------- -------- -------------- --------- --------------
Penelec $ 25,000 $ (385) 04/11/02 fixed/variable 7.12% 6.95%
$ 25,000 $ (550) 10/11/02 fixed/variable 7.19% 7.00%
-------- --------
$ 50,000 $ (935)
======== ========
GPU GasNet A$ 300,000 A$ (878) 06/03/02 fixed/variable 5.90% 6.31%
A$ 225,000 A$ (4,274) 06/02/06 fixed/variable 6.33% 6.31%
-------- --------
A$ 525,000 A$ (5,152)
======== ========
GPU Power UK BP 65,000 BP (660) 09/11/03 fixed/variable 5.98% 5.99%
BP 60,000 BP (661) 09/11/03 fixed/variable 6.02% 5.99%
-------- --------
BP 125,000 BP (1,321)
======== ========
|
BP - Represents British pounds.
Exchange rates at December 31, 2000 were as follows: A$1.7999/US$ and BP 0.6694/US$.
(a)Represents the amount Penelec and GPU Electric would (pay)/receive to terminate the swap agreements as of December 31, 2000 (prior to their scheduled termination dates).
The amount of debt obligations covered by swap agreements and the expected variable interest rates of such debt, for each of the next five years, are as follows:
(in thousands)
Penelec GPU GasNet GPU Power UK
-----------------------------------------------------------------
Expected Expected Expected
Average Variable Average Variable Average Variable
Debt Interest Debt Interest Debt Interest
Year Covered Rates Covered Rates Covered Rates
---------------------------------------------------------------------------------------
2001 $ 50,000 5.67% A$525,000 5.37-6.31% BP125,000 5.63-5.99%
2002 $ 26,597 5.61-5.86% A$375,000 5.42-5.83% BP125,000 5.58-5.61%
2003 - - A$225,000 5.83-6.00% BP 93,750 5.61-5.66%
2004 - - A$225,000 6.00-6.04% - -
2005 - - A$225,000 6.04-6.09% - -
|
The expected variable interest rates included above, for the years 2001 through 2005, were provided by the financial institutions with which the swap agreements were executed, and were derived from their proprietary models based upon recognized financial principles.
At December 31, 2000, these agreements covered approximately $528 million of debt and are scheduled to expire on various dates through June 2006. For the year ended December 31, 2000, fixed rate interest expense exceeded variable rate interest by approximately $0.3 million.
GPU Electric uses currency swap agreements to manage currency risk caused by fluctuations in the US dollar exchange rate related to bonds issued in the US by Avon Energy Partners Holdings (Avon), which owns GPU Power UK. These swap agreements effectively convert principal and interest payments on this US dollar debt to fixed sterling principal and interest payments, and expire on the maturity dates of the bonds. Interest expense is recorded based on the fixed sterling interest rate. The following summarizes the characteristics of the currency swap agreements as of December 31, 2000:
GPU, Inc. and Subsidiary Companies
(in thousands)
Fixed Fixed
Currency USD Sterling Sterling USD USD
Swap Notional Notional Termination Interest Interest Fair
Type Value Value Date Rate Rate Value(a)
-------- --------- --------- ----------- -------- -------- --------
$/BP $350,000 BP212,122 12/11/02 7.66% 6.73% $27,255
$/BP $100,000 BP 60,606 12/11/07 7.75% 7.05% $ 9,596
$/BP $150,000 BP 90,909 12/11/07 7.70% 7.05% $ 5,122
$/BP $250,000 BP153,374 03/04/08 6.94% 6.46% $11,974
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(a) Represents the amount GPU Electric would (pay)/receive to terminate the swap agreements as of December 31, 2000 (prior to their scheduled termination dates).
Interest expense for the year ended December 31, 2000 would have been BP 37.8 million (US $57.3 million) had these agreements not been in place as compared to actual interest expense of BP 38.6 million (US $58.4) million.
The California electricity market was deregulated in 1998. In recent months, certain aspects of that state's restructuring plan have created instability and price volatility in the electricity market, negatively affecting the California electric utilities. These utilities have defaulted on various contractual and financial obligations and have experienced rapid deterioration of their credit quality. Reaction of the financial markets, which did not anticipate the rapid deterioration of the California utilities' financial condition, has included a careful review of overall credit exposure to the electric utility industry.
Furthermore, Met-Ed's and Penelec's energy cost exposure related to their PLR obligation in Pennsylvania (see Competitive Environment and Rate Matters section) has negatively affected Met-Ed's and Penelec's earnings. Consequently, the amount of new financing capacity available to GPU, Inc. or its subsidiaries may be less than it had previously been. While the GPU companies do not expect to require significant levels of new borrowings in 2001, certain existing credit facilities are due for renewal or refinancing during 2001. At December 31, 2000, these credit facilities include: $465 million available to GPU, Inc. and the GPU Energy companies under a $250 million revolving credit agreement and various committed bank lines of credit; $1 billion under GPU Capital, Inc.'s (GPU Capital) senior revolving credit agreement; $180 million under GPU Australia Holdings, Inc.'s (GPU Australia Holdings) senior revolving credit agreement; and $366 million under EI UK Holdings, Inc.'s two year term loan agreement.
Renewal or refinancing of these facilities will likely require GPU's acceptance of higher pricing and/or more restrictive terms and conditions. If renewal or refinancing of the existing credit facilities is limited or cannot be achieved, GPU will be required to reduce capital spending and other discretionary cash uses, including the amount and timing of future common stock dividends. Moreover, the failure to obtain PLR relief will likely result in a further increase in capital costs, more restrictive terms and conditions and reduced access to capital markets.
In addition, primarily as a result of these conditions (the companies' PLR exposure and the negative publicity surrounding the California utilities), in early 2001 Met-Ed and Penelec began experiencing difficulty in selling their commercial paper with maturities longer than overnight. Under
GPU, Inc. and Subsidiary Companies
normal circumstances, they issue commercial paper having maturities of up to 30 days or longer, if desired. As a result, Met-Ed and Penelec have temporarily withdrawn from the commercial paper market, and instead have resorted to borrowing against their various bank lines of credit.
There can be no assurance as to the outcome of these matters.
GPU's actual capital expenditures for the years 1996 through 2000, and its estimated capital spending for 2001, are as follows:
(in millions)
2001* 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ----
GPU Energy companies $371 $280 $289 $327 $356 $404
GPU Electric 200 213 138 59 2 -
GPU Power and GPUI - 8 32 81 112 58
GPU Telcom 90 66 2 1 - -
MYR 6 4 - - - -
--- --- --- --- --- ---
Total $667 $571 $461 $468 $470 $462
=== === === === === ===
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* Estimate.
GPU Energy companies
The GPU Energy companies' capital spending was $280 million (JCP&L $144 million; Met-Ed $59 million; Penelec $73 million; Other $4 million) in 2000, and was used primarily to expand and improve existing transmission and distribution (T&D) facilities and for new customer connections. In 2001, capital expenditures for the GPU Energy companies are estimated to be $371 million (JCP&L $184 million; Met-Ed $83 million; Penelec $97 million; Other $7 million), primarily for ongoing T&D system development. Management estimates that a substantial portion of the GPU Energy companies' 2001 capital spending will be satisfied through internally generated funds.
GPU Electric
GPU Electric's capital spending was $213 million in 2000, and was used primarily to make improvements to GPU PowerNet's (prior to its sale in June 2000), Emdersa's and GPU Power UK's transmission and distribution network. For 2001, GPU Electric's capital expenditures are estimated to be $200 million, and management expects that a substantial portion of this amount will be satisfied through internally generated funds.
GPU Telcom
GPU Telcom's capital spending was $66 million in 2000, and was used primarily to make investments in telecommunications infrastructure and businesses. In 2001, GPU Telcom's capital expenditures are estimated to be $90 million, which management expects will be funded by capital contributions and internally generated funds.
GPU, Inc.
In January 1999, the GPU, Inc. Board of Directors authorized the repurchase of up to $350 million of GPU, Inc. common stock. Through December 31, 2000, 9.2 million shares of common stock, or approximately 8% of the
GPU, Inc. and Subsidiary Companies
outstanding shares, have been repurchased under the program, at an average price of $32.43 per share. GPU, Inc. has no plans to make further common stock repurchases at this time.
In December 2000, GPU, Inc. issued and sold $300 million of unsecured debentures, the net proceeds from which were used to repay debt at GPU, Inc., GPU Capital and GPU Electric.
GPU has various credit facilities in place, the most significant of which are discussed below. These credit facilities generally provide GPU bank loans at negotiated market rates.
GPU, Inc. and the GPU Energy companies have available $465 million of short-term borrowing facilities, which include a $250 million revolving credit agreement and various bank lines of credit. In addition, GPU, Inc., JCP&L, Met-Ed and Penelec can issue commercial paper in amounts of up to $100 million, $150 million, $75 million and $100 million, respectively. From these sources, GPU, Inc. has regulatory authority to have $250 million outstanding at any one time. JCP&L, Met-Ed and Penelec are limited by their charters or SEC authorization to $266 million, $150 million and $150 million, respectively, of short-term debt outstanding at any one time. As of December 31, 2000, GPU, Inc. and the GPU Energy companies had $113 million and $132 million (JCP&L $29 million; Met-Ed $47 million; Penelec $56 million), respectively, of short-term debt outstanding.
GPU Energy companies
JCP&L, Met-Ed and Penelec have regulatory approval to issue senior notes through December 31, 2002 in the amounts of $300 million, $150 million and $157 million, respectively. JCP&L and Met-Ed intend to issue secured senior notes (collateralized by FMBs issued to the senior note trustee) until such time as more than 80% of the outstanding FMBs are held by the senior note trustee. At that time, the FMBs will be cancelled and the outstanding senior notes will become unsecured obligations. Penelec's senior notes are unsecured.
Expenditures for maturing long-term debt are expected to total $40 million (JCP&L) in 2001, and $130 million (JCP&L $50 million; Met-Ed $30 million; Penelec $50 million) in 2002. Current plans call for each of the GPU Energy companies to issue senior notes during the next three years to fund the redemption of maturing senior securities, refinance outstanding senior securities and finance construction activities. Following their initial issuance of senior notes, the GPU Energy companies would not issue any additional FMBs other than as collateral for the senior notes. The senior note indentures prohibit (subject to certain exceptions) the GPU Energy companies from issuing any debt which is senior to the senior notes.
JCP&L's and Met-Ed's bond indentures include provisions that limit the amount of FMBs the companies may issue. JCP&L's and Met-Ed's interest coverage ratios are currently in excess of indenture restrictions. In addition, JCP&L's certificate of incorporation includes provisions that limit the amount of preferred stock it may issue. JCP&L's preferred dividend coverage ratio is currently in excess of this charter restriction.
In August 1999, JCP&L filed a petition with the NJBPU requesting authorization to issue transition bonds to securitize the recovery of bondable stranded costs attributable to the projected net investment in Oyster Creek at September 1, 2000. The petition also requests that the NJBPU order provide for the imposition and collection of a usage-based non-
GPU, Inc. and Subsidiary Companies
bypassable transition bond charge (TBC) and for the transfer of the bondable transition property relating to the TBC to another entity. In August 2000, Oyster Creek was sold to AmerGen Energy Company LLC (AmerGen), a joint venture of PECO Energy and British Energy. JCP&L has amended its petition to include securitization of the up-front decommissioning payment it has agreed to make under the Oyster Creek sale agreement.
In 2000, Penelec issued four tranches, totaling $118 million, of variable and fixed rate senior notes. Two of these tranches, totaling $50 million of variable rate senior notes, were converted to fixed rate obligations through interest rate swap agreements.
In 2000, JCP&L and Met-Ed redeemed $40 million and $50 million, respectively, of maturing FMBs; and Penelec redeemed $25 million of senior notes. Also in 2000, JCP&L redeemed $21.7 million stated value of cumulative preferred stock pursuant to mandatory and optional sinking fund provisions.
GPU Electric
In 2000, GPU GasNet refinanced A$451 million (US $250 million) of its A$747 million (two tranches totaling US $415 million) of bank debt utilizing A$250 million (US $139 million) of proceeds from a new commercial paper program; A$150 million (US $83 million) of proceeds from a new medium term note program; and A$51 million (US $28 million) of proceeds from the issuance of additional commercial paper by GPU Australia Holdings. At December 31, 2000, the following GPU GasNet debt was outstanding and included in Long-term debt on the Consolidated Balance Sheet: A$250 million (US $139 million) of commercial paper; A$211 million (US $117 million) of bank debt; and A$150 million (US $83 million) of medium term notes. In addition, GPU GasNet has established a A$750 million (US $417 million) revolving credit facility, which serves as backstop for the GPU GasNet commercial paper and medium term note programs. No borrowings were outstanding under this facility at December 31, 2000.
GPU Capital has a $1 billion 364-day senior revolving credit agreement due in November 2001 supporting the issuance of commercial paper for its $1 billion commercial paper program, which has been established to fund GPU, Inc. and GPU Electric acquisitions. GPU, Inc. has guaranteed GPU Capital's obligations under this program. At December 31, 2000, $633 million was outstanding under this commercial paper program and included in Notes payable on the Consolidated Balance Sheet. In early 2001, GPU Capital refinanced the majority of this outstanding commercial paper through its standby revolving credit agreement.
GPU Electric has a $150 million credit facility due in May 2002 to accommodate short-term borrowing needs. The facility is guaranteed by GPU, Inc. and there were no outstanding borrowings as of December 31, 2000.
GPU Australia Holdings has $180 million available under its senior revolving credit facility, which expires in November 2001. This facility is guaranteed by GPU, Inc. In 2000, GPU Australia Holdings borrowed $176 million under this facility, which is included in Notes payable on the Consolidated Balance Sheet at December 31, 2000, to repay all outstanding obligations under its $180 million commercial paper program.
The above-mentioned GPU Australia Holdings commercial paper program is supported by GPU, Inc. credit facilities and GPU, Inc. has guaranteed all obligations under this program. No borrowings were outstanding at December 31, 2000.
GPU, Inc. and Subsidiary Companies
EI UK Holdings, Inc. has a BP 245 million (US $366 million) credit facility, a portion of which is guaranteed by GPU, Inc. At December 31, 2000, the entire amount of this facility was outstanding and included in Securities due within one year on the Consolidated Balance Sheet.
GPU Power UK maintains a BP 150 million (US $224 million) revolving credit facility with six banks for working capital purposes, which expires at various dates through June 2005. At December 31, 2000, there was BP 60 million (US $90 million) outstanding under this facility, which is included in Notes payable on the Consolidated Balance Sheet.
In addition, GPU Power UK maintains an ongoing BP 75 million (US $112 million) bank facility for working capital purposes. Outstanding borrowings are collateralized by portions of trade accounts receivable. At December 31, 2000, BP 75 million (US $112 million) was outstanding under this facility, which is included in Notes payable on the Consolidated Balance Sheet.
Expenditures for maturing long-term debt are expected to total $912 million in 2001 and $437 million in 2002.
GPU Power
In 2000, expenditures for maturing long-term debt were $7 million, and are expected to total $7 million in each of 2001 and 2002. Management anticipates meeting these obligations through internally generated funds.
MYR Group
MYR maintains a $50 million revolving credit facility, which expires in November 2003, of which up to $10 million is available for the issuance of standby letters of credit. As of December 31, 2000, $36 million was outstanding under this facility and included in Notes payable on the Consolidated Balance Sheet.
Each of the GPU companies' target capitalization ratios is designed to provide credit quality ratings that permit capital market access at reasonable costs. The target capitalization ratios vary by subsidiary depending upon their business and financial risk. GPU's and the GPU Energy companies' actual capitalization ratios at December 31 for the years indicated were as follows:
GPU, Inc. and Subsidiary Companies 2000 1999 1998
---------------------------------- ---- ---- ----
Common equity 33% 30% 40%
Preferred securities 4 4 6
Debt 63 66 54
--- --- ----
Total 100% 100% 100%
=== === ===
JCP&L
-----
Common equity 52% 50% 50%
Preferred securities 7 8 8
Debt 41 42 42
--- --- ----
Total 100% 100% 100%
=== === ===
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GPU, Inc. and Subsidiary Companies
Met-Ed 2000 1999 1998
------ ---- ---- ----
Common equity 45% 44% 47%
Preferred securities 9 9 8
Debt 46 47 45
--- --- ---
Total 100% 100% 100%
=== === ===
Penelec
-------
Common equity 41% 44% 47%
Preferred securities 9 10 7
Debt 50 46 46
--- --- ---
Total 100% 100% 100%
=== === ===
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The increase in GPU's debt ratio in 1999 resulted mainly from GPU Electric's acquisition of three FUCOs, including the remaining 50% of GPU Power UK that GPU did not already own.
In 2000, the quarterly dividend on GPU, Inc.'s common stock was increased by 2.8% to an annualized rate of $2.18 per share. GPU, Inc.'s dividend payout rate in 2000 was 79% of earnings (excluding the non-recurring items).
Based on December 31, 2000 financial statements, JCP&L, Met-Ed and Penelec had retained earnings available to pay common stock dividends of $793 million, $67 million and $33 million, respectively, net of amounts restricted under each companies' respective FMB indentures.
With the goal of improving customer service and service reliability, the GPU Energy companies have committed to making additional investments in their transmission and distribution business. In addition, in 2000 the GPU Energy companies reorganized the structure of their operational divisions to enhance customer service throughout their service territory. In January 2001, the GPU Energy companies announced that they were offering Voluntary Enhanced Retirement Programs (VERP) to certain bargaining unit employees in Pennsylvania. Approximately 240 employees (Met-Ed 130 employees; Penelec 110 employees) are eligible for the VERP. If all of the eligible employees accept the offer, a pre-tax charge of approximately $23 million (Met-Ed $12 million; Penelec $11 million) would be recorded in 2001 earnings for the cost of pension and other postretirement benefits, exclusive of any severance benefits that would be paid to those employees.
In October 1999, GPU also initiated a program to enhance shareholder value through planned cost reductions of $100 million and through the sale of non-core and under-performing assets. A significant portion of these planned cost reductions were achieved in 2000, and the remaining reductions will be implemented during 2001. Furthermore, GPU believes the sales of GPU PowerNet and GPUI advance its plan to enhance shareholder value by reducing its ownership in non-core and under-performing assets.
In March 2000, GPU announced its participation in America's Fiber Network LLC (AFN), of which GPU anticipates owning 25%. AFN is a high-speed fiber optics company with a network of more than 7,000 route miles, or 140,000 fiber miles, connecting major markets in the eastern US to secondary markets with a growing need for broadband access. GPU anticipates investing cash, as well as existing and new fiber routes and electronic equipment, in
GPU, Inc. and Subsidiary Companies
AFN through GPU Telcom. As of December 31, 2000, GPU Telcom had invested $5.3 million in AFN.
In April 2000, GPU announced the formation of Telergy Mid-Atlantic (TMA), a joint venture between GPU Telcom and Telergy, Inc. TMA combines established telecommunications services and marketing expertise with utilities' existing fiber networks. TMA's initial target market includes New Jersey and Pennsylvania, with future expansions planned for contiguous regions currently served by the network of GPU Telcom. TMA plans to offer telecommunications service, and ultimately electricity, marketing them jointly to businesses, hospitals and educational institutions, among others. As of December 31, 2000, GPU Telcom had acquired $20 million of Telergy, Inc. convertible preferred securities.
With the transition to a competitive marketplace for generation service in New Jersey and Pennsylvania, certain generation-related costs, which generally would be recoverable in a regulated environment, may no longer be recoverable. These costs are generally referred to as stranded costs.
New Jersey Restructuring
In 1999, the NJBPU issued a Summary Order with respect to JCP&L's rate unbundling, stranded cost and restructuring filings. JCP&L is awaiting a final NJBPU order. The Summary Order provides for, among other things, full recovery of what otherwise would have become stranded costs, as well as customer choice of electric generation supplier beginning August 1, 1999 and rate reductions for all consumers. In addition, the NJBPU issued separate Orders approving the sales of JCP&L's generating assets; however, the NJBPU deferred making a final determination of the net proceeds and stranded costs related to the generating asset divestitures until an Internal Revenue Service (IRS) ruling regarding the treatment of associated federal income tax benefits is received.
In August 1999, JCP&L filed a petition with the NJBPU requesting authorization to issue transition bonds to securitize the recovery of bondable stranded costs attributable to the projected net investment in Oyster Creek at September 1, 2000. (For additional information, see Financing section of Liquidity and Capital Resources.) There can be no assurance as to the extent, if any, that the NJBPU will allow JCP&L to securitize these stranded costs.
Pennsylvania Restructuring
In 1998, the PaPUC issued amended Restructuring Orders approving Settlement Agreements entered into by Met-Ed and Penelec which, among other things, provide for customer choice of electric generation supplier beginning January 1, 1999 and a one-year (1999) reduction in retail distribution rates for all consumers. The Orders also provide for recovery of a substantial portion of what otherwise would have become stranded costs, subject to Phase II proceedings following the completion of Met-Ed's and Penelec's generating asset divestitures, to make a final determination of the extent of that stranded cost recovery. In 2000, Met-Ed and Penelec submitted Phase II Reports to the PaPUC supporting their actual net divestiture proceeds and
GPU, Inc. and Subsidiary Companies
providing a reconciliation of stranded costs pursuant to the 1998 Restructuring Orders.
On December 20, 2000, the PaPUC issued a Phase II Order which disallows $28 million (Met-Ed $16 million; Penelec $12 million) of the requested $304 million (Met-Ed $226 million; Penelec $78 million) of additional stranded costs above those amounts granted in the 1998 Orders. Met-Ed and Penelec had anticipated a disallowance of a portion of stranded costs, and established a $25 million (Met-Ed $19 million; Penelec $6 million) reserve in 1999. In addition, as a result of the Phase II Order, Met-Ed and Penelec recognized pre-tax income of $66 million (Met-Ed $45 million; Penelec $21 million) due primarily to pension curtailment gains associated with employees terminated as a result of the sale of generating facilities in 1999, and the reversal of certain liabilities and changes in estimates and assumptions related to Met-Ed's leasehold interest in the Merrill Creek Reservoir project. The Phase II Order also deferred a decision on Met-Ed's requested increase in rates, beginning in 2006, for recovery of Met-Ed's generation-related stranded costs. In addition, the Order requires Met-Ed and Penelec to seek an IRS ruling regarding the return of certain unamortized investment tax credits and excess deferred income tax benefits to ratepayers. For further information, see Note 6, Accounting for Extraordinary and Non-Recurring Items, of the Combined Notes to Consolidated Financial Statements.
As a result of the NJBPU's and the PaPUC's Restructuring Orders, the GPU Energy companies are required to supply electricity to customers who do not choose an alternate supplier. In 1999, the GPU Energy companies completed the sales of TMI-1 and substantially all their fossil-fuel and hydroelectric generating stations, and in 2000, JCP&L sold Oyster Creek. (For additional information regarding the sales of the GPU Energy companies' generating facilities, see Note 6, Accounting for Extraordinary and Non-Recurring Items, of the Combined Notes to Consolidated Financial Statements.) As a result, the GPU Energy companies now have to supply electricity to non-shopping customers almost entirely from contracted and open market purchases, as discussed below. (For additional information regarding the increased risks associated with supplying that electricity, see GPU Energy Supply Market Risk section.)
Generation Agreements
The GPU Energy companies have 285 MW (JCP&L 266 MW; Met-Ed 19 MW) of generation capacity and related energy remaining to meet customer needs. The GPU Energy companies also have power purchase agreements with NUGs totaling 1,600 MW (JCP&L 926 MW; Met-Ed 273 MW; Penelec 401 MW) and contracts with other parties to provide varying amounts of capacity through May 31, 2004. These capacity amounts from third parties vary from a monthly high of approximately 1,740 MW in 2001 to 500 MW in May 2004. Based on the exercise of call options, JCP&L may take the energy associated with up to 150 MW of this capacity through May 2003. The GPU Energy companies have also purchased all of the capacity and energy from the TMI-1 and Oyster Creek nuclear generating stations (which they sold to AmerGen) through December 31, 2001 and through March 31, 2003, respectively. In addition, the GPU Energy companies have the right to the capacity of the Homer City Station (in which Penelec sold its 50% interest to a subsidiary of Edison Mission Energy) (942 MW) through May 31, 2001 and the right to the capacity of the generating stations sold in 1999 (3,970 MW) through May 31, 2002. The GPU Energy companies' remaining capacity and energy needs will be met by short- to
GPU, Inc. and Subsidiary Companies
intermediate-term commitments (one month to three years). Any residual needs will be purchased from the short-term market (one hour to one month).
Pursuant to the mandates of the Public Utility Regulatory Policies Act and state regulatory directives, the GPU Energy companies were required to enter into power purchase agreements with NUGs for the purchase of energy and capacity for terms of up to 20 years. The NJBPU Summary Order provides JCP&L full recovery of its NUG costs (including above-market NUG costs and certain buyout costs); and the PaPUC Restructuring Orders provide Met-Ed and Penelec full recovery of their above-market NUG costs and certain NUG buyout costs. The GPU Energy companies have recorded, on a present value basis, a total liability of $3.3 billion (JCP&L $1.7 billion; Met-Ed $0.7 billion; Penelec $0.9 billion) on the Consolidated Balance Sheets for above-market NUG costs. These amounts are offset by corresponding regulatory assets. The GPU Energy companies are continuing efforts to reduce the above-market costs of these agreements; however, there can be no assurance as to the extent to which these efforts will be successful.
In 1999, Penelec deposited a portion of the proceeds from its generation asset sale into a NUG Trust, which has a balance at December 31, 2000 of $191 million. To the extent Penelec incurs above-market NUG costs in excess of the CTC revenues allocated for such costs, Penelec may withdraw amounts from the trust.
Basic Generation Service Provider
JCP&L is required to provide basic generation services (BGS) to retail customers who choose to remain with JCP&L as generation customers for a three-year period ending July 31, 2002. Thereafter, BGS service will be bid out at BGS rates, which are pre-determined through July 31, 2003. The specific details of the BGS bidding process will be the subject of a future NJBPU proceeding. Under its Summary Order, JCP&L is permitted to defer for future recovery the amount by which its reasonable and prudently incurred costs associated with providing BGS to non-shopping customers exceed amounts currently reflected in its rates for BGS.
Provider of Last Resort
Under the 1998 PaPUC Restructuring Orders, Met-Ed and Penelec customers have been permitted to shop for their generation supplier since January 1, 1999. The PaPUC approved a competitive bid process designed to assign PLR service to licensed generation suppliers, referred to as Competitive Default Service (CDS), for 20% of Met-Ed's and Penelec's retail customers on June 1, 2000, 40% on June 1, 2001, 60% on June 1, 2002 and 80% on June 1, 2003. Any retail customers assigned to CDS may return to Met-Ed and Penelec as the default PLR. Met-Ed and Penelec may meet any remaining PLR obligation at rates not less than the lowest rate charged by the winning CDS provider, but no higher than Met-Ed's and Penelec's rate cap.
In February 2000, Met-Ed and Penelec announced that they had not received any bids in response to their offer to auction CDS service for up to 20% of their retail customers and, as a result, would be increasing their forward purchasing of electric power to accommodate these customers for whom they will now continue to be the default supplier. At the PaPUC's direction, Met-Ed and Penelec initiated a collaborative process in June 2000 with all interested parties from the 1998 Restructuring Orders, including the PaPUC, to address the companies' PLR risks. This process was concluded without resolution of the issues surrounding the companies' PLR risk.
GPU, Inc. and Subsidiary Companies
In 2000, the lack of bidders required Met-Ed and Penelec to supply 550 MW (Met-Ed 250 MW; Penelec 300 MW) of electric power more than they had planned. In addition, customers requiring approximately 600 MW (Met-Ed 240 MW; Penelec 360 MW) of power returned to Met-Ed and Penelec from their alternate suppliers for the peak Summer months. During that same period, market prices at which Met-Ed and Penelec were required to purchase electricity for their retail supply customers at times substantially exceeded the amounts Met-Ed and Penelec were allowed to charge for that electricity under their capped generation rates. This situation resulted in GPU's Pennsylvania supply business recording a loss for 2000 of approximately $28 million (Met-Ed $14 million; Penelec $14 million) after-tax, or $0.22 per share.
Under the terms of their restructuring settlements, Met-Ed and Penelec are required to seek alternative providers through a CDS bidding process for a portion of their customers again in 2001. Should the 2001 CDS bidding process be successful, then up to 40% of Met-Ed's and Penelec's customers would be served by third party energy providers starting on June 1, 2001. However, if the bidding process is not successful and wholesale energy prices remain high, and Met-Ed and Penelec are not granted state regulatory relief, the companies expect substantial earnings losses to continue, as well as a reduction of cash flow. Based on their current projection of returning customers to whom they must supply electricity under their PLR obligations, Met-Ed and Penelec presently estimate approximately 800 MW (Met-Ed 410 MW; Penelec 390 MW) of additional load will return to them by June 1, 2001. If this projection proves to be correct, Met-Ed and Penelec estimate that the cost of providing energy to Pennsylvania customers, including the returning 800 MW of load, could result in GPU's Pennsylvania supply business recording a loss for 2001 of approximately $120 million (Met-Ed $60 million; Penelec $60 million) after-tax, or $1 per share, based on the companies' current assessment of market energy prices. Met-Ed and Penelec also estimate that if all their shopping customers were to return by June 1, 2001, their supply business losses could be up to approximately $150 million (Met-Ed $80 million; Penelec $70 million) after-tax, or $1.25 per share.
Given this situation, on November 29, 2000, Met-Ed and Penelec filed a petition with the PaPUC seeking permission to defer for future recovery their energy costs in excess of established generation rate caps. Various parties to the proceeding filed motions to dismiss the petition. On January 19, 2001, Met-Ed and Penelec made a further request that they be permitted to implement their proposed deferral mechanism pending the PaPUC's final action on their petition. On January 24, 2001, the PaPUC denied, without prejudice, the motions to dismiss Met-Ed's and Penelec's petition and recommended that the companies provide support for a rate cap exception based on the criteria in the Customer Choice and Competition Act. In addition, the PaPUC consolidated the petition with the GPU/FirstEnergy merger proceeding for consideration and resolution in accord with the merger procedural schedule, which establishes a May 2001 date for a PaPUC order in both cases. In February 2001, Met-Ed and Penelec filed a supplement to their petition and supporting testimony which they believe establish that the PaPUC should grant them exceptions to their rate caps. In addition, Met-Ed and Penelec stated that as an alternative to the deferral mechanism they previously proposed, the circumstances would warrant an immediate increase in their present rate caps. There can be no assurance regarding the degree, if any, to which Met-Ed and Penelec may be able to recover their costs to supply electricity in excess of amounts currently reflected in their capped rates.
GPU, Inc. and Subsidiary Companies
With the divestiture of essentially all their generating plants, the GPU Energy companies are in a net short position (load in excess of supply). Consequently, the GPU Energy companies must manage their purchase and sale of installed capacity and ancillary services to minimize business risk associated with their reliability obligation in PJM. Supply/risk management transactions will be made based on the objective of decreasing price uncertainty. The GPU Energy companies will enter into supply/hedging market arrangements for hedging purposes only.
Electricity
The GPU Energy companies are generally at risk of rising prices for electricity and electricity-related products and services. These risks may differ during some months of the year. To manage these risks, the GPU Energy companies employ a portfolio approach which primarily consists of two party forward purchases and options, but may also include NYMEX PJM electricity futures and similar instruments, as they become widely available. This portfolio includes transactions of various durations ranging from one hour to greater than one year.
The GPU Energy companies' electricity market risks can be price-related, volume-related or cost recovery-related as follows:
- Price-related risk refers to the price exposure associated with having to purchase amounts of electricity, installed capacity and ancillary services for load requirements from the PJM interchange spot market. To the extent the GPU Energy companies must rely on the PJM pool to satisfy load requirements, financial exposure exists for the difference between the PJM energy and installed capacity spot market prices and the fixed rates paid by customers.
- Volume-related risk refers to the uncertainty associated with the amount of load the GPU Energy companies are required to serve. Deregulation of the electric utility industry has resulted in the ability of customers to purchase electricity from other electric suppliers. This customer shopping, combined with weather changes, which affect customer energy usage, can affect the GPU Energy companies' position.
- Cost recovery-related risk refers to the financial risk associated with the potential prudency audits of the NJBPU that are part of JCP&L's deferred energy and capacity cost recovery mechanism (Market Transition Charge). Cost recovery-related risk also refers to the prudency risk associated with future NUG cost recovery under the Restructuring Orders approved by the PaPUC and the NJBPU which require continued mitigation of above-market NUG costs.
Natural Gas
GPU Energy purchases natural gas for JCP&L's Forked River generating facility. In addition, as part of its NUG cost mitigation program, GPU Energy also manages the natural gas requirements of certain NUGs that produce and sell energy to JCP&L under long-term contracts. Prudently incurred costs associated with natural gas commodity and transportation are included in JCP&L's BGS costs to be recovered through BGS charges and the Market Transition Charge.
GPU, Inc. and Subsidiary Companies
GPU Energy employs a portfolio approach consisting of two party forward purchases and NYMEX natural gas futures contracts. GPU Energy is exposed to price-related, volume-related and cost recovery-related market risks for its natural gas purchases, similar to those electricity market risks previously described.
In 2000, Allegheny Electric Cooperative (AEC), a wholesale customer, filed a complaint with the Federal Energy Regulatory Commission (FERC) against Penelec claiming, among other things, that Penelec should not be permitted to charge AEC increased purchased power costs which Penelec has incurred following Penelec's divestiture of its generating plants.
On January 5, 2001, Penelec and AEC entered into a settlement agreement, which is subject to approval by FERC and the Rural Utilities Service. Under the agreement, Penelec would no longer be obligated to supply energy to AEC under its existing wheeling and power supply contract, effective March 2001. In addition, in February 2001 Penelec paid AEC $16 million, subject to refund in the event the agreement is not approved or AEC defaults on certain of its obligations in the agreement.
As a result of existing and proposed legislation and regulations, and ongoing legal proceedings dealing with environmental matters including, but not limited to, air and water quality, global warming, electromagnetic fields, and storage and disposal of hazardous and/or toxic wastes, GPU may be required to incur substantial additional costs to construct new facilities; modify or replace existing and proposed equipment; or remediate, decommission or clean up waste disposal and other sites currently or formerly used by it, including formerly owned manufactured gas plants (MGP), coal mine refuse piles and generation facilities.
GPU records environmental liabilities (on an undiscounted basis) where it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated, and adjusts these liabilities as required to reflect changes in circumstances. At December 31, 2000, the GPU Energy companies have liabilities recorded on their balance sheets for environmental remediation totaling $66 million (JCP&L $56 million; Met-Ed $2 million; Penelec $8 million).
For more information, see the Environmental Matters section of Note 12, Commitments and Contingencies, of the Combined Notes to Consolidated Financial Statements.
As a result of the 1979 Three Mile Island Unit 2 (TMI-2) accident, individual claims for alleged personal injury (including claims for punitive damages), which are material in amount, were asserted against GPU, Inc. and the GPU Energy companies. Approximately 2,100 of such claims were filed in the US District Court for the Middle District of Pennsylvania. Some of the claims also seek recovery for injuries from alleged emissions of radioactivity before and after the accident.
GPU, Inc. and Subsidiary Companies
In 1996, the District Court granted a motion for summary judgment filed by GPU, Inc. and the GPU Energy companies, and dismissed the ten initial "test cases" which had been selected for a test case trial, as well as all of the remaining 2,100 pending claims. The Court ruled that there was no evidence which created a genuine issue of material fact warranting submission of plaintiffs' claims to a jury. The plaintiffs appealed the District Court's ruling to the Court of Appeals for the Third Circuit. In November 1999, the Third Circuit affirmed the District Court's dismissal of the ten "test cases," but set aside the dismissal of the additional pending claims, remanding them to the District Court for further proceedings. In remanding these claims, the Third Circuit held that the District Court had erred in extending its summary judgment decision to the other plaintiffs and imposing on these plaintiffs the District Court's finding that radiation exposures below 10 rems were too speculative to establish a causal link to cancer. The Court of Appeals stated that the non-test case plaintiffs should be permitted to present their own individual evidence that exposure to radiation from the accident caused their cancers. In June 2000, the US Supreme Court denied petitions for review filed by GPU, Inc., the GPU Energy companies and the plaintiffs.
In September 2000, the defendants filed a Motion for Summary Judgment in the District Court. Meanwhile, the plaintiffs have taken an interlocutory appeal to the Third Circuit seeking review of the District Court's determination that the remaining plaintiffs should be allowed to advance causation theories based only on the admissible evidence of record at the close of discovery in the case.
Oral arguments on the plaintiffs' appeal were held in January 2001. There can be no assurance as to the outcome of this litigation.
GPU, Inc. and the GPU Energy companies believe that any liability to which they might be subject by reason of the TMI-2 accident will not exceed their financial protection under the Price-Anderson Act.
Statement of Financial Accounting Standards No. 71 (FAS 71), "Accounting for the Effects of Certain Types of Regulation," applies to regulated utilities that have the ability to recover their costs through rates established by regulators and charged to customers. In June 1997, the Financial Accounting Standards Board's (FASB) Emerging Issues Task Force (EITF) (Issue 97-4) concluded that utilities are no longer subject to FAS 71, for the relevant portion of their business, when they know details of their individual transition plans to a competitive electric generation marketplace. The EITF also concluded that utilities can continue to carry previously recorded regulated assets, as well as any newly established regulated assets (including those related to generation), on their balance sheets if regulators have assured a regulated cash flow stream to recover the cost of these assets.
On May 24, 1999, the NJBPU issued a Summary Order regarding JCP&L's unbundling, stranded cost and restructuring filings which essentially deregulated the electric generation portion of JCP&L's business. Accordingly, in the second quarter of 1999, JCP&L discontinued the application of FAS 71 and adopted the provisions of Statement of Financial Accounting Standards No. 101 (FAS 101), "Regulated Enterprises - Accounting for the Discontinuation of Application of FASB Statement No. 71" and EITF Issue 97-4 with respect to its electric generation operations. In 1998,
GPU, Inc. and Subsidiary Companies
Met-Ed and Penelec, in conjunction with receiving their Restructuring Orders, discontinued the application of FAS 71 and adopted the provisions of FAS 101 and EITF 97-4 for their generation operations. The transmission and distribution portion of the GPU Energy companies' operations continues to be subject to the provisions of FAS 71.
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by FAS 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133" and FAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - An Amendment of FASB Statement No. 133" (collectively, FAS 133), establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. In general, FAS 133 requires that companies recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. FAS 133 (as amended) provides an exemption for certain contracts that qualify as normal purchases and sales. To qualify for this exclusion, certain criteria must be met, including that it must be probable that the contract will result in physical delivery. GPU adopted FAS 133 on January 1, 2001.
GPU's use of derivative instruments is intended to manage the risk of fluctuations in commodity prices, interest rates and foreign currencies. GPU does not intend to hold or issue derivative instruments for trading purposes. GPU enters into fixed-price contracts for future purchases of electricity and natural gas with individual counterparties or through traded exchanges. The majority of these commodity contracts entered into by GPU are considered "normal purchases," as defined by FAS 133, and, therefore, are excluded from the statement's scope. Commodity contracts accounted for as derivatives under FAS 133 are designated as cash flow hedges of the underlying commodity purchases, to the extent they qualify for such treatment. FAS 133 requires that the effective portion of the gain or loss on a derivative instrument designated and qualifying as a cash flow hedge be reported as a component of Other Comprehensive Income, net of tax. GPU also enters into third party energy option contracts. These derivative instruments are accounted for as cash flow hedges of the underlying commodity purchases, to the extent they are effective hedges. Upon adoption of this statement at January 1, 2001, the impact of FAS 133 as it relates to forward, futures and option contracts was immaterial to GPU's earnings or financial position.
To hedge against high transmission rates along certain routes during periods of high congestion, GPU enters into fixed transmission rights (FTRs) agreements. Upon adoption of FAS 133 at January 1, 2001, the impact of this statement as it relates to FTRs was immaterial to GPU's earnings or financial position.
GPU uses various types of interest rate swaps to convert floating-rate loans to fixed rates. These instruments are accounted for as cash flow hedges, to the extent they are effective hedges. Upon adoption of this statement on January 1, 2001, derivative liabilities of approximately $7 million (Penelec $1 million; GPU Power $1.5 million; GPU Electric $4.5 million)were recognized on the Consolidated Balance Sheet, with an offset, net of tax, of $5 million (Penelec $1 million; GPU Power $1.5 million; GPU Electric $2.5 million) to Accumulated other comprehensive income and a $2 million (GPU Electric) charge to income.
GPU, Inc. and Subsidiary Companies
GPU uses currency swap agreements to manage currency risk caused by fluctuations in the US dollar exchange rate related to debt issued in the US by Avon Energy Partners Holdings. These instruments will be accounted for as cash flow hedges, to the extent they are effective hedges. Upon adoption of FAS 133 on January 1, 2001, derivative assets of approximately $54 million (GPU Power UK) were recognized on the Consolidated Balance Sheet, with an offset, net of tax, to Accumulated other comprehensive income.
GPU, Inc. and Subsidiary Companies
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of GPU, Inc.:
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of GPU, Inc. and Subsidiary Companies at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 31, 2001
GPU, Inc. and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31,
2000 1999
-------------------------------------------------------------------------------------
ASSETS
Utility Plant:
Utility plant in service $10,138,233 $11,766,446
Accumulated depreciation (3,246,175) (3,929,963)
---------- ----------
Net utility plant in service (Note 1) 6,892,058 7,836,483
Construction work in progress 153,417 170,317
Other, net 16,572 18,128
---------- ----------
Net utility plant 7,062,047 8,024,928
---------- ----------
Other Property and Investments:
Goodwill, net (Note 1) 1,986,449 2,615,301
Nuclear decommissioning trusts, at market (Note 12) 367,805 636,284
Nuclear fuel disposal trust, at market 126,336 119,293
Other, net 765,783 923,171
---------- ----------
Total other property and investments 3,246,373 4,294,049
---------- ----------
Current Assets:
Cash and temporary cash investments 392,004 471,548
Marketable securities 17,114 26,946
Special deposits 126,149 42,687
Accounts receivable:
Customers, less provision for doubtful accounts
of $92,714 for 2000 and $59,403 for 1999 540,166 445,745
Other 162,048 185,968
Unbilled revenues (Note 1) 221,810 152,263
Cost and estimated earnings in excess of
billings on uncompleted contracts (Note 1) 29,377 -
Materials and supplies, at average cost or less 79,679 101,255
Deferred income taxes (Note 8) 33,857 72,249
Prepayments 154,775 141,352
---------- ----------
Total current assets 1,756,979 1,640,013
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets, net (Notes 1 & 12) 5,033,004 4,716,246
Deferred income taxes (Note 8) 1,732,537 2,528,393
Other 431,521 494,203
---------- ----------
Total deferred debits and other assets 7,197,062 7,738,842
---------- ----------
Total Assets $19,262,461 $21,697,832
========== ==========
|
The accompanying notes are an integral part of the consolidated financial statements.
GPU, Inc. and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31,
2000 1999
-------------------------------------------------------------------------------------
LIABILITIES AND CAPITALIZATION
Capitalization:
Common stock $ 331,958 $ 331,958
Capital surplus 1,014,326 1,011,721
Retained earnings 2,395,384 2,426,350
Accumulated other comprehensive income/(loss) (62,624) (6,341)
---------- ----------
Total 3,679,044 3,763,688
Reacquired common stock, at cost (357,994) (298,735)
---------- ----------
Total common stockholders' equity (Note 5) 3,321,050 3,464,953
Cumulative preferred stock: (Note 4)
With mandatory redemption 51,500 73,167
Without mandatory redemption 12,649 12,649
Subsidiary-obligated mandatorily redeemable
preferred securities (Note 4) 125,000 125,000
Subsidiary-obligated trust preferred securities (Note 4) 200,000 200,000
Long-term debt (Note 3) 3,917,069 5,261,070
---------- ----------
Total capitalization 7,627,268 9,136,839
---------- ----------
Current Liabilities:
Securities due within one year (Notes 3 & 4) 992,090 581,147
Notes payable (Note 2) 1,480,667 1,761,395
Bank overdraft (Note 1) 276,456 224,585
Obligations under capital leases (Note 11) 485 48,165
Accounts payable 481,712 468,825
Billings in excess of cost and estimated
earnings on uncompleted contracts (Note 1) 21,315 -
Taxes accrued 37,604 309,509
Interest accrued 95,083 76,246
Other 447,154 732,110
---------- ----------
Total current liabilities 3,832,566 4,201,982
---------- ----------
Deferred Credits and Other Liabilities:
Deferred income taxes (Note 8) 3,093,826 3,563,078
Unamortized investment tax credits 44,344 61,364
Three Mile Island Unit 2 future costs (Note 12) 514,922 496,944
Power purchase contract loss liability (Note 12) 3,273,968 3,300,878
Other 875,567 936,747
---------- ----------
Total deferred credits and other liabilities 7,802,627 8,359,011
---------- ----------
Commitments and Contingencies (Note 12)
Total Liabilities and Capitalization $19,262,461 $21,697,832
========== ==========
|
The accompanying notes are an integral part of the consolidated financial statements.
GPU, Inc. and Subsidiary Companies
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
For The Years Ended December 31,
2000 1999 1998
-----------------------------------------------------------------------------------------------
Operating Revenues (Note 1) $5,196,256 $4,757,124 $4,248,792
---------- ---------- ----------
Operating Expenses:
Fuel 62,630 304,621 407,105
Power purchased and interchanged 2,196,847 1,305,521 1,122,841
Deferred costs, net (Note 1) (229,321) (38,108) (25,542)
Other operation and maintenance (Note 9) 1,372,447 1,443,109 1,106,913
Net loss on sale of businesses (Note 6) 239,510 - -
Depreciation and amortization (Note 1) 548,259 542,939 522,094
Taxes, other than income taxes (Note 9) 221,237 190,212 219,302
---------- ---------- ----------
Total operating expenses 4,411,609 3,748,294 3,352,713
---------- ---------- ----------
Operating Income 784,647 1,008,830 896,079
---------- ---------- ----------
Other Income and Deductions:
Allowance for other funds used during construction 747 432 916
Equity in undistributed earnings of affiliates, net 28,456 89,746 72,012
Other income, net 149,635 85,616 48,366
---------- ---------- ----------
Total other income and deductions 178,838 175,794 121,294
---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 963,485 1,184,624 1,017,373
---------- --------- ----------
Interest Charges and Preferred Dividends:
Long-term debt and notes payable 510,826 432,368 345,172
Subsidiary-obligated trust preferred securities 13,690 8,345 -
Subsidiary-obligated mandatorily
redeemable preferred securities 10,700 24,627 28,888
Other interest 10,655 10,048 8,277
Allowance for borrowed funds used
during construction (2,506) (3,897) (4,348)
Preferred stock dividends of subsidiaries,
inclusive of $2,116 loss on 1999 reacquisitions 6,904 11,006 11,243
---------- ---------- ----------
Total interest charges and preferred dividends 550,269 482,497 389,232
---------- ---------- ----------
Income Before Income Taxes and Minority Interest 413,216 702,127 628,141
Income taxes (Note 8) 176,807 239,623 240,089
Minority interest net income 2,871 3,490 2,171
---------- ---------- ----------
Income Before Extraordinary Item 233,538 459,014 385,881
Extraordinary item, net of income tax benefit of
$16,300 (Note 6) - - (25,755)
---------- ---------- ----------
Net Income $ 233,538 $ 459,014 $ 360,126
========== ========== ==========
Basic - Earnings Per Average Common Share
Before Extraordinary Item $ 1.92 $ 3.66 $ 3.03
Extraordinary Item - - (0.20)
---------- ---------- ----------
Earnings Per Average Common Share $ 1.92 $ 3.66 $ 2.83
========== ========== ==========
Average Common Shares Outstanding 121,161 125,368 127,093
========== ========== ==========
Diluted - Earnings Per Average Common Share
Before Extraordinary Item $ 1.92 $ 3.66 $ 3.03
Extraordinary Item - - (0.20)
---------- ---------- ----------
Earnings Per Average Common Share $ 1.92 $ 3.66 $ 2.83
========== ========== ==========
Average Common Shares Outstanding 121,259 125,570 127,312
========== ========== ==========
Cash Dividends Paid Per Share $ 2.165 $ 2.105 $ 2.045
========== ========== ==========
|
The accompanying notes are an integral part of the consolidated financial statements.
GPU, Inc. and Subsidiary Companies
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
---------------------------------------------------------------------------------------------
Net income $233,538 $459,014 $360,126
------- ------- -------
Other comprehensive income/(loss), net of tax: (Note 5)
Net unrealized (loss)/gain on investments (20,779) 5,838 8,987
Foreign currency translation (31,884) 13,859 (9,461)
Minimum pension liability (3,620) 5,266 (1,534)
------- ------- -------
Total other comprehensive (loss)/income (56,283) 24,963 (2,008)
------- ------- -------
Comprehensive income $177,255 $483,977 $358,118
======= ======= =======
|
The net unrealized loss on investments, reflected above for 2000, is due to the reclassification of previous unrealized gains totaling $31.8 million, from Accumulated other comprehensive income to Regulatory assets, net on the Consolidated Balance Sheets. See Nuclear Plant Retirement Costs section of Note 12, Commitments and Contingencies.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
-------------------------------------------------------------------------------------------
Balance at beginning of year $2,426,350 $2,230,425 $2,140,712
Net income 233,538 459,014 360,126
Cash dividends declared on common stock (264,504) (263,089) (263,561)
Other adjustments, net - - (6,852)
--------- --------- ---------
Balance at end of year $2,395,384 $2,426,350 $2,230,425
========= ========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
GPU, Inc. and Subsidiary Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
-----------------------------------------------------------------------------------------------
Operating Activities:
Net income $ 233,538 $ 459,014 $ 360,126
Extraordinary item (net of income tax
benefit of $16,300) - - 25,755
---------- ---------- ----------
Income before extraordinary item 233,538 459,014 385,881
Adjustments to reconcile income to cash provided:
Depreciation and amortization 583,804 568,832 552,795
Provision for doubtful accounts 66,516 25,091 16,169
Regulatory assets, net (189,968) (20,123) (65,959)
Amortization of property under capital leases 11,472 47,584 49,913
Gain on restructured supply agreement (42,781) - -
NJBPU / PaPUC restructuring rate orders (66,130) 115,000 68,500
Loss/(Gain) on sale of businesses / investments 232,059 (64,019) (43,548)
Equity in undistributed earnings of affiliates,
net of distributions received 14,036 (62,170) (44,621)
Deferred income taxes and investment tax
credits, net 344,177 (717,768) (165,860)
Deferred costs, net (229,321) (37,841) (24,482)
Changes in working capital:
Receivables (235,654) (109,373) 75,116
Materials and supplies 13,381 81,297 704
Special deposits and prepayments (16,772) 42,247 (18,514)
Payables and accrued liabilities (168,781) (22,972) (18,645)
Nonutility generation contract buyout costs (5,660) (94,034) (54,018)
Other, net 30,900 (59,513) 79,435
---------- ---------- ----------
Net cash provided by operating activities 574,816 151,252 792,866
---------- ---------- ----------
Investing Activities:
Acquisitions, net of cash acquired (220,243) (1,670,739) -
Capital expenditures and investments (570,574) (460,952) (468,223)
Proceeds from sale of businesses / investments 1,459,576 2,581,151 160,244
Contributions to nonutility generation trusts - (266,701) -
Proceeds from nonutility generation trusts 75,991 - -
Contributions to decommissioning trusts (139,184) (168,657) (51,039)
Trust fund established for repayment of debt (112,634) - -
Other, net (4,142) 61,560 (37,876)
---------- ---------- ----------
Net cash provided/(required)
by investing activities 488,790 75,662 (396,894)
---------- ---------- ----------
Financing Activities:
Issuance of long-term debt 491,587 1,787,094 749,724
Retirement of long-term debt (1,086,086) (1,883,850) (1,036,110)
Increase/(Decrease) in notes payable, net (119,654) 882,352 (62,292)
Issuance of subsidiary-obligated trust
preferred securities - 193,070 -
Redemption of subsidiary-obligated mandatorily
redeemable preferred securities - (205,383) -
Redemption of preferred stock of subsidiaries (21,667) (60,944) (15,000)
Capital lease principal payments (48,515) (51,040) (50,663)
Issuance of common stock - - 269,448
Reacquisition of common stock (71,913) (225,821) -
Dividends paid on common stock (262,965) (264,448) (258,058)
---------- ---------- ----------
Net cash provided/(required)
by financing activities (1,119,213) 171,030 (402,951)
---------- ---------- ----------
Effect of exchange rate changes on cash (23,937) 849 (5,365)
---------- ---------- ----------
Net increase/(decrease) in cash and temporary cash
investments from above activities (79,544) 398,793 (12,344)
Cash and temporary cash investments, beginning of year 471,548 72,755 85,099
---------- ---------- ----------
Cash and temporary cash investments, end of year $ 392,004 $ 471,548 $ 72,755
========== ========== ==========
Supplemental Disclosure:
Interest and preferred dividends paid $ 548,989 $ 459,496 $ 370,303
========== ========== ==========
Income taxes paid $ 99,116 $ 702,355 $ 333,994
========== ========== ==========
New capital lease obligations incurred $ 41,580 $ 37,662 $ 37,793
========== ========== ==========
Common stock dividends declared but not paid $ 65,095 $ 64,557 $ 65,917
========== ========== ==========
|
The accompanying notes are an integral part of the consolidated financial statements.
GPU, Inc. and Subsidiary Companies
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GPU, Inc. owns all the outstanding common stock of three domestic electric utilities -- Jersey Central Power & Light Company (JCP&L), Metropolitan Edison Company (Met-Ed) and Pennsylvania Electric Company (Penelec). These electric utilities are conducting business under the name GPU Energy and considered together are referred to as the "GPU Energy companies." GPU Capital, Inc. and GPU Electric, Inc. and their subsidiaries own, operate and fund the acquisition of electric distribution and gas transmission systems in foreign countries, and are referred to as "GPU Electric." GPU Electric's foreign utility companies include Midlands Electricity plc (conducting business as GPU Power UK); Empresa Distribuidora Electrica Regional S.A. (Emdersa); and GPU GasNet. GPU Power, Inc. and its subsidiaries (GPU Power) develop, own and operate generation facilities in foreign countries. Other subsidiaries of GPU, Inc. include GPU Advanced Resources, Inc. (GPU AR), which is involved in retail energy sales; GPU Telcom Services, Inc. (GPU Telcom), which is engaged in telecommunications-related businesses; MYR Group Inc. (MYR), which is a utility infrastructure construction services company; GPU Service, Inc. (GPUS), which provides legal, accounting, financial and other services to the GPU companies; GPU Diversified Holdings LLC; and GPU Nuclear, Inc. (GPUN). All of these companies considered together are referred to as "GPU."
In 2000, GPU, Inc. sold GPU PowerNet, its Australian electric transmission company, to Singapore Power International (SPI). In addition, GPU, Inc. sold GPU International, Inc. (GPUI) to Aquila Energy Corporation (Aquila). This sale included GPUI's interests in six domestic electric generating plants, and one development stage project. For further information, see Note 6, Accounting for Extraordinary and Non-Recurring Items.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from those estimates.
Certain reclassifications of prior years' data have been made to conform with the current presentation. The GPU Energy companies' accounting records are maintained in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission (FERC) and adopted by the Pennsylvania Public Utility Commission (PaPUC) and the New Jersey Board of Public Utilities (NJBPU). GPU's accounting records also comply with the Securities and Exchange Commission's (SEC) rules and regulations.
The GPU consolidated financial statements include the accounts of its wholly-owned subsidiaries and any affiliates in which it has a controlling financial interest (generally evidenced by a greater than 50% ownership
GPU, Inc. and Subsidiary Companies
interest). All significant intercompany transactions and accounts are eliminated in consolidation. GPU also uses the equity method of accounting for investments in affiliates in which it has the ability to exercise significant influence.
GPU began accounting for GPU Power UK as a consolidated entity in the third quarter of 1999, following its acquisition of the remaining 50% ownership interest from Cinergy Corp. (Cinergy).
Statement of Financial Accounting Standards No. 71 (FAS 71), "Accounting
for the Effects of Certain Types of Regulation," applies to regulated utilities
that have the ability to recover their costs through rates established by
regulators and charged to customers. The GPU Energy companies' transmission and
distribution operations are currently accounted for under the provisions of FAS
71. In accordance with FAS 71, GPU has deferred certain costs pursuant to
actions of the NJBPU and PaPUC and is recovering or expects to recover such
costs in regulated rates charged to customers. Regulatory assets and liabilities
are reflected net in the Deferred Debits and Other Assets section of the
Consolidated Balance Sheets. For additional information about regulatory assets
and liabilities, see Note 12, Commitments and Contingencies.
With the receipt of the NJBPU Summary Restructuring Order (Summary Order)
in 1999 and the PaPUC Restructuring Orders (Restructuring Orders) in 1998, GPU
determined that the GPU Energy companies' electric generation operations no
longer met the criteria for the continued application of FAS 71, and therefore
adopted, for that portion of its business, the provisions of Statement of
Financial Accounting Standards No. 101 (FAS 101), "Regulated Enterprises -
Accounting for the Discontinuation of Application of FASB Statement No. 71" and
Emerging Issues Task Force Issue 97-4 (EITF)(Issue 97-4), Deregulation of the
Pricing of Electricity - Issues Related to the Application of FASB Statement No.
71 "Accounting for the Effects of Certain Types of Regulation" and No. 101
"Regulated Enterprises - Accounting for the Discontinuation of Application of
FASB Statement No. 71."
In accordance with Statement of Financial Accounting Standards No. 52 (FAS 52), "Foreign Currency Translation," balance sheet accounts of foreign operations are translated from foreign currencies into US dollars at year-end rates, while income statement accounts are translated at the average month-end exchange rates for the relevant period. The resulting translation adjustments are included in Accumulated other comprehensive income/(loss), net of deferred taxes, on the Consolidated Balance Sheets. Gains and losses resulting from foreign currency transactions are included in Net Income.
GPU recognizes operating revenues for services rendered to the end of the relevant accounting period. Therefore, the electric operating revenues of GPU Electric and the GPU Energy companies include an estimate for unbilled revenues.
MYR recognizes revenue on construction contracts using the percentage-of-completion accounting method determined in each case by the ratio of cost incurred to date on the contract (excluding uninstalled direct materials) to management's estimate of the contract's total cost. Contract cost includes
GPU, Inc. and Subsidiary Companies
all direct material, subcontract and labor costs and those indirect costs related to contract performance, such as supplies, tool repairs and depreciation. MYR charges selling, general and administrative costs, including indirect costs associated with maintaining district offices, to expense as incurred.
Provisions for estimated losses on uncompleted contracts are recorded in the period in which such losses are determined. Changes in estimated revenues and costs are recognized in the periods in which such estimates are revised. Significant claims are included in revenue in accordance with industry practice.
The asset, "Costs and estimated earnings in excess of billings on uncompleted contracts," represents revenues recognized in excess of amounts billed. The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts," represents amounts billed in excess of revenues recognized.
The length of MYR's contracts vary, with some larger contracts exceeding one year. In accordance with industry practice, MYR includes in current assets and current liabilities amounts realizable and payable under contracts which may extend beyond one year.
JCP&L recovers its prudently incurred generation-related costs, including nonutility generation (NUG) costs, through a Basic Generation Service (BGS) charge and a Market Transition Charge (MTC), and defers any differences between actual costs and amounts recovered from customers through rates. Met-Ed and Penelec use deferred accounting for the above-market portion of NUG costs which are collected through the Competitive Transition Charge (CTC).
On November 29, 2000, Met-Ed and Penelec filed a petition with the PaPUC seeking recovery of their power purchase costs in excess of established rate caps. Currently, Met-Ed and Penelec do not have authority to defer these costs for future recovery. The PaPUC consolidated this petition for consideration with the GPU/FirstEnergy Corp. (FirstEnergy) merger proceeding, which establishes a May 2001 date for a PaPUC order in both cases, based on the current merger procedural schedule.
Prior to the sale of the Oyster Creek Nuclear Generation Station (Oyster Creek) in 2000, the plant was written down to its sale price of $10 million. All other utility plant, including the GPU Energy companies' remaining generation plants, and additions are valued at cost. The assets of acquired companies are carried at their fair value as of the acquisition date, less accumulated depreciation.
GPU generally provides for depreciation at annual rates determined and revised periodically, on the basis of studies, to be sufficient to depreciate the original cost of depreciable property over estimated remaining service lives, which are generally longer than those employed for tax purposes.
GPU, Inc. and Subsidiary Companies
These rates, on an aggregate composite basis, resulted in annual rates as
follows:
GPU JCP&L Met-Ed Penelec
--- ----- ------ -------
2000 3.16% 3.30% 2.87% 2.72%
1999 2.96% 2.94% 3.01% 2.81%
1998 3.43% 3.65% 3.53% 3.25%
|
GPU GasNet uses the volumetric depreciation method to amortize the cost of its gas pipeline.
At December 31, 2000, $55 million is included in Regulatory assets, net on
the Consolidated Balance Sheets for JCP&L's investment in Three Mile Island Unit
2 (TMI-2). JCP&L is collecting annual revenues for the amortization of TMI-2 of
$9.6 million. This level of revenue will be sufficient to recover the remaining
investment by 2008. Met-Ed and Penelec have collected all of their TMI-2
investment attributable to retail customers. At December 31, 2000, $48 million
is included in Regulatory assets, net on the Consolidated Balance Sheets for
JCP&L's Forked River project. JCP&L is collecting annual revenues for the
amortization of this project of $11.2 million, which will be sufficient to
recover its remaining investment by 2006. Because JCP&L has not been provided
revenues for a return on the unamortized balances of the damaged TMI-2 facility
and the cancelled Forked River project, these investments are being carried at
their discounted present values.
Prior to the sale of Three Mile Island Unit 1 (TMI-1) in 1999 and Oyster Creek in 2000, the GPU Energy companies amortized nuclear fuel on a unit-of-production basis and rates were determined and periodically revised to amortize the cost of the fuel over its useful life.
At December 31, 2000 and 1999, the liability of the GPU Energy companies for future contributions to the Federal Decontamination and Decommissioning Fund for the cleanup of uranium enrichment plants operated by the Federal Government amounted to $22 million (JCP&L $14 million; Met-Ed $5 million; Penelec $3 million) and $25 million (JCP&L $15 million; Met-Ed $7 million; Penelec $3 million), respectively, and is primarily reflected in Deferred Credits and Other Liabilities - Other. Annual contributions, which began in 1993, are being made over a 15-year period. JCP&L is recovering these costs from customers through its BGS and MTC rates. Met-Ed and Penelec are not recovering these costs in rates.
Goodwill, resulting from GPU's purchase of various businesses, is recorded on the Consolidated Balance Sheets and amortized to expense, on a straight-line basis, over its useful life not to exceed 40 years. Goodwill amortization expense amounted to $54.7 million, $51.6 million and $14 million for the years ended December 31, 2000, 1999 and 1998, respectively. GPU periodically reviews undiscounted projections of future cash flows from operations to assess whether any potential intangible impairment exists on its goodwill. For additional information of goodwill resulting from acquisitions, see Note 7, Acquisitions.
GPU, Inc. and Subsidiary Companies
The GPU Energy companies are providing for estimated future disposal costs for spent nuclear fuel at Oyster Creek and TMI-1 in accordance with the Nuclear Waste Policy Act of 1982. The GPU Energy companies entered into contracts in 1983 with the US Department of Energy (DOE) for the disposal of spent nuclear fuel. For a discussion of the DOE's current inability to begin acceptance of spent nuclear fuel from the GPU Energy companies and other standard contract holders, see Note 12, Commitments and Contingencies.
The total liability under these contracts, including interest, at December 31, 2000, all of which relates to spent nuclear fuel from nuclear generation through April 1983, amounted to $210.1 million (JCP&L $157 million; Met-Ed $35.4 million; Penelec $17.7 million), and is reflected in Deferred Credits and Other Liabilities - Other. As the actual liability is substantially in excess of the amount recovered to date from ratepayers, the GPU Energy companies have reflected such excess in Regulatory assets, net. The distribution rates presently charged to customers provide for the collection of these costs, plus interest, over a remaining period of seven years for JCP&L. For Met-Ed and Penelec, these costs are a component of their respective CTC. The GPU Energy companies' current rates provide for the recovery of costs for spent nuclear fuel disposal costs resulting from nuclear generation subsequent to April 1983.
GPU files a consolidated federal income tax return. All participants are jointly and severally liable for the full amount of any tax, including penalties and interest, which may be assessed against the group.
Deferred income taxes, which result primarily from purchase accounting adjustments, liberalized depreciation methods, deferred costs, decommissioning funds and discounted Forked River and TMI-2 investments, reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes. Investment tax credits (ITC) are amortized over the estimated service lives of the related facilities.
The carrying amounts of Temporary cash investments, Special deposits, Securities due within one year and Notes payable on the Consolidated Balance Sheets approximate fair value due to the short period to maturity. The carrying amounts of the Nuclear decommissioning trusts and Nuclear fuel disposal trust, whose assets are invested in cash equivalents and debt and equity securities, also approximate fair value.
GPU's use of derivative instruments is intended to manage the risk of price, interest rate and foreign currency fluctuations. GPU does not intend to hold or issue derivative instruments for trading purposes.
The GPU Energy companies use New York Mercantile Exchange (NYMEX) futures and Over-the-Counter (OTC) forward contracts and options on forward contracts to manage the risk of fluctuations in the market price of electricity. The GPU Energy companies also manage the natural gas requirements of certain NUG facilities that generate and sell energy to JCP&L
GPU, Inc. and Subsidiary Companies
under long-term contracts. These commodity derivatives qualify for hedge accounting treatment under current accounting rules since price movements of GPU, Inc. and Subsidiary Companies
the commodity derivatives are highly correlated with the underlying hedged commodities and the transactions are designated as hedges at inception. Accordingly, under the deferral method of accounting, gains and losses related to commodity derivatives are recognized in Power purchased and interchanged in the Consolidated Statements of Income when the hedged transaction closes or if the commodity derivative is no longer sufficiently correlated. Prior to income or loss recognition, deferred gains and losses relating to these transactions are recorded in Current Assets or Current Liabilities in the Consolidated Balance Sheets.
Penelec and GPU Electric (through GPU GasNet and GPU Power UK) use interest rate swap agreements to manage the risk of increases in variable interest rates. As of December 31, 2000, these agreements covered approximately $528 million (Penelec $50 million; GPU Electric $478 million) of debt, and were scheduled to expire on various dates through June 2006. Differences between the amounts paid and received under interest rate swaps are recorded as adjustments to the interest expense of the underlying debt since the swaps are related to specific assets, liabilities or anticipated transactions. All of the agreements effectively convert variable rate debt to fixed rate debt. For the year ended December 31, 2000, fixed rate interest expense exceeded variable rate interest by approximately $0.3 million (Penelec $0.1 million; GPU Electric $0.2 million).
GPU Electric uses currency swap agreements to manage currency risk caused by fluctuations in the US dollar exchange rate related to debt issued in the US by Avon Energy Partners Holdings (Avon). These swap agreements effectively convert principal and interest payments on this US dollar debt to fixed sterling principal and interest payments, and expire on the maturity dates of the bonds. Interest expense is recorded based on the fixed sterling interest rate. As of December 31, 2000, these currency swap agreements covered BP 517 million (US $850 million) of debt. Interest expense would have been BP 37.8 million (US $57.3 million) as compared to British pounds (BP) 38.6 million (US $58.4 million) for the year ended December 31, 2000 had these agreements not been in place.
GPU may be subject to loss contingencies resulting from environmental laws and regulations, which include obligations to mitigate the effects on the environment of the disposal or release of certain hazardous wastes and substances at various sites. GPU records liabilities (on an undiscounted basis) for hazardous waste sites where it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated and adjusts these liabilities as required to reflect changes in circumstances.
For the purpose of the consolidated statements of cash flows, temporary investments include all unrestricted liquid assets, such as cash deposits and debt securities, with maturities generally of three months or less. Cash flows are reported using the US dollar equivalent of the functional currencies in effect at the time of the cash transaction. The effect of
GPU, Inc. and Subsidiary Companies
exchange rate changes on cash balances held in foreign currencies are reported as a separate line item on the Consolidated Statements of Cash Flows.
Avon and GPU Power UK have a formal agreement with a United Kingdom bank, under which they maintain available cash balances in a number of subsidiary bank accounts and an overdraft in the main GPU Power UK operating account. The overdraft balance was $276.5 million as of December 31, 2000, while total cash at GPU Power UK was $314.3 million. Since GPU Power UK manages the overdraft balance in such a way that it does not exceed the available cash balances in the other associated accounts, no interest or fees are paid under this arrangement. In effect, GPU Power UK uses the overdraft facility to utilize the available cash in the other bank accounts. The overdraft position and the offsetting cash balances subject to this arrangement are shown on the Consolidated Balance Sheets in Bank overdraft and Cash and temporary cash investments, respectively.
2. SHORT-TERM BORROWING ARRANGEMENTS
At December 31, 2000 and 1999, short-term debt outstanding consisted of the following:
2000 1999
--------------------- ----------------------
Balance Weighted Balance Weighted
Company Facility Outstanding Avg. Rate Outstanding Avg. Rate
------- -------- ----------- --------- ----------- ---------
(in millions) (in millions)
GPU, Inc. Bank Loans $ 113 7.2% $ 123 7.0%
JCP&L Bank Loans 2 7.0 - -
Commercial Paper 27 7.4 - -
Met-Ed Commercial Paper 47 6.8 - -
Penelec Commercial Paper 56 6.7 54 6.9
MYR Bank Loans 36 7.2 - -
GPU Electric Bank Loans 476 7.0 366 6.1
Commercial Paper/
Medium Term Notes 724 8.0 1,218 6.5
----- -----
Total $1,481 $1,761
===== =====
|
GPU's weighted average interest rate on the short-term borrowings was 7.5% and 6.5% at December 31, 2000 and 1999, respectively.
GPU has various credit facilities in place, the most significant of which are discussed below. These credit facilities generally provide GPU bank loans at negotiated market rates. In addition, commitment fees or facility fees are determined by market rates at the time the facility is put in place, and can change based on the borrower's current bond rating.
In recent months, certain aspects of California's restructuring plan have created instability and price volatility in the electricity market, negatively affecting the California electric utilities. These utilities have defaulted on various contractual and financial obligations and have experienced rapid deterioration of their credit quality. Reaction of the financial markets, which did not anticipate the rapid deterioration of the California utilities' financial condition, has included a careful review of overall credit exposure to the electric utility industry.
Furthermore, Met-Ed's and Penelec's energy cost exposure related to their provider of last resort (PLR) obligation in Pennsylvania has negatively affected Met-Ed's and Penelec's earnings. Consequently, the amount of new
GPU, Inc. and Subsidiary Companies
financing capacity available to GPU, Inc. or its subsidiaries may be less than it had previously been and renewal or refinancing of existing credit facilities will likely require GPU's acceptance of higher pricing and/or more restrictive terms and conditions. The credit facilities that expire in 2001 include: $465 million available to GPU, Inc. and the GPU Energy companies under a $250 million revolving credit agreement and various committed bank lines of credit; $1 billion under GPU Capital, Inc.'s (GPU Capital) senior revolving credit agreement; $180 million under GPU Australia Holdings, Inc.'s (GPU Australia Holdings) senior revolving credit agreement; and $366 million under EI UK Holdings, Inc.'s two year term loan agreement.
In addition, primarily as a result of these conditions (the companies' PLR exposure and the negative publicity surrounding the California utilities), in early 2001 Met-Ed and Penelec began experiencing difficulty in selling their commercial paper with maturities longer than overnight. Under normal circumstances, they issue commercial paper having maturities of up to 30 days or longer, if desired. As a result, Met-Ed and Penelec have temporarily withdrawn from the commercial paper market, and instead have resorted to borrowing against their various bank lines of credit.
GPU, Inc. and GPU Energy companies
GPU, Inc. and the GPU Energy companies have available $465 million of short-term borrowing facilities, which include a $250 million revolving credit agreement and various bank lines of credit. In addition, GPU, Inc., JCP&L, Met-Ed and Penelec can issue commercial paper in amounts of up to $100 million, $150 million, $75 million and $100 million, respectively. From these sources, GPU, Inc. has regulatory authority to have $250 million outstanding at any one time. JCP&L, Met-Ed and Penelec are limited by their charters or SEC authorization to $266 million, $150 million and $150 million, respectively, of short-term debt outstanding at any one time. As of December 31, 2000, GPU, Inc. and the GPU Energy companies had $113 million and $132 million (JCP&L $29 million; Met-Ed $47 million; Penelec $56 million), respectively, of short-term debt outstanding.
GPU Electric
GPU Capital has a $1 billion 364-day senior revolving credit agreement due in November 2001 supporting the issuance of commercial paper for its $1 billion commercial paper program, which has been established to fund GPU, Inc. and GPU Electric acquisitions. GPU, Inc. has guaranteed GPU Capital's obligations under this program. At December 31, 2000 and 1999, $633 million and $768 million was outstanding under this commercial paper program, respectively, and included in Notes payable on the Consolidated Balance Sheets. In early 2001, GPU Capital refinanced the majority of this outstanding commercial paper through its standby revolving credit agreement.
GPU Electric has a $150 million credit facility due in May 2002 to accommodate short-term borrowing needs. The facility is guaranteed by GPU, Inc. and there were no outstanding borrowings as of December 31, 2000.
GPU Australia Holdings has $180 million available under its senior revolving credit facility, which expires in November 2001. This facility is guaranteed by GPU, Inc. In 2000, GPU Australia Holdings borrowed $176 million under this facility, which is included in Notes payable on the Consolidated Balance Sheet, to repay all outstanding obligations under its $180 million commercial paper program. There were no outstanding borrowings under this revolving credit facility as of December 31, 1999.
GPU, Inc. and Subsidiary Companies
The above-mentioned GPU Australia Holdings commercial paper program is supported by GPU, Inc. credit facilities and GPU, Inc. has also guaranteed all obligations under this program. At December 31, 1999, $182 million was outstanding under this commercial paper program and included in Notes payable on the Consolidated Balance Sheet. No borrowings were outstanding at December 31, 2000.
In August 2000, GPU GasNet entered into a A$750 million (US $417 million) commercial paper program to refinance maturing bank debt. In addition, GPU GasNet established a A$750 million (US $417 million) credit facility to serve as a backstop for this commercial paper program. At December 31, 2000, there was A$250 million (US $139 million) of commercial paper outstanding under this program and included in Long-term debt on the Consolidated Balance Sheet since it is management's intent to reissue this amount of commercial paper on a long-term basis.
GPU Power UK maintains a BP 150 million (approximately US $224 million) revolving credit facility with six banks for working capital purposes, which expires at various dates through June 2005. At December 31, 2000 and 1999, there was BP 60 million (US $90 million) and BP 87 million (US $140 million) outstanding under this facility, respectively, which is included in Notes payable on the Consolidated Balance Sheets.
In addition, GPU Power UK maintains an ongoing BP 75 million (US $112 million) bank facility for working capital purposes. Outstanding borrowings are collateralized by portions of trade accounts receivable. At December 31, 2000 and 1999, BP 75 million (US $112 million) and BP 75 million (US $121 million) was outstanding under this facility, respectively, which is included in Notes payable on the Consolidated Balance Sheets.
MYR
MYR maintains a $50 million revolving credit facility, which expires in November 2003, of which up to $10 million is available for the issuance of standby letters of credit. As of December 31, 2000, $36 million was outstanding under this facility and included in Notes payable on the Consolidated Balance Sheet.
3. LONG-TERM DEBT
At December 31, 2000 and 1999, long-term debt outstanding consisted of the following:
GPU, Inc. and Subsidiary Companies
(in millions)
Total Due
2000 Interest Debt Within
----
Maturities Rates Outstanding One Year
---------- ----- ----------- --------
GPU Energy companies, GPUS
& GPU, Inc.:
First mortgage bonds 2001-2027 5.35-9.20% $1,695 (1) $ 40
Senior notes 2002-2019 5.75-7.77% 441 (2) -
Other long-term debt 2001-2039 7.05-7.69% 334 22
GPU Electric:
Bank loans 2001-2014 5.98-10.5% 1,184 912
Bonds 2002-2008 7.38-7.46% 983 -
Commercial
paper/Medium
term notes 2001-2003 5.98-10.5% 222 (3) -
GPU Power 2003-2022 4.5-9.5% 39 7
----- -----
Total $4,898 $ 981
===== =====
|
(1) Amount is less unamortized net discount of $3.1 million.
(2) Amount is less unamortized net discount of $1.6 million.
(3) Amount includes $139 million of Australian commercial paper, which is included in Long-term debt on the Consolidated Balance Sheet since it is management's intent to reissue this amount on a long-term basis.
(in millions)
Total Due
1999 Interest Debt Within
----
|
First mortgage bonds(a) 2000-2027 5.35-9.48% $1,785 (1) $ 90
Senior notes 2004-2019 5.75-6.63% 348 (2) -
Other long-term debt 2000-2039 6.76-7.69% 34 -
GPU Electric:
Bank loans 2000-2014 4.16-6.56% 2,264 475
Bonds 2002-2008 7.38-7.46% 1,092 -
Medium term notes 2001-2002 6.33% 263 -
GPUI Group 2000-2022 4.5 -7% 46 5
----- ----
Total $5,832 $ 570
===== ====
|
(1) Amount is less unamortized net discount of $2.8 million.
(2) Amount is less unamortized net discount of $1.8 million.
GPU, Inc. and Subsidiary Companies
2000 1999
---------- ---------
First Mortgage Bonds - Series as noted (a):
6.04% due 2000 $ - $ 40,000
6.45% due 2001 40,000 40,000
9% due 2002 50,000 50,000
6.375% due 2003 150,000 150,000
7.125% due 2004 160,000 160,000
6.78% due 2005 50,000 50,000
8.25% due 2006 50,000 50,000
6.85% due 2006 40,000 40,000
7.90% due 2007 40,000 40,000
7.125% due 2009 6,300 6,300
7.10% due 2015 12,200 12,200
9.20% due 2021 50,000 50,000
8.55% due 2022 30,000 30,000
8.82% due 2022 12,000 12,000
8.85% due 2022 38,000 38,000
8.32% due 2022 40,000 40,000
7.98% due 2023 40,000 40,000
7.5% due 2023 125,000 125,000
8.45% due 2025 50,000 50,000
6.75% due 2025 150,000 150,000
--------- ---------
Subtotal 1,133,500 1,173,500
Amounts due within one year (40,000) (40,000)
Unamortized net discount (2,511) (2,752)
--------- ---------
Total 1,090,989 1,130,748
--------- ---------
Other long-term debt
(excludes amounts due within one year
of $14 for 2000 and $13 for 1999) 2,998 3,012
--------- ---------
Total long-term debt $1,093,987 $1,133,760
========= =========
|
GPU, Inc. and Subsidiary Companies
Met-Ed (in thousands)
------
2000 1999
--------- ----------
First Mortgage Bonds - Series as noted (a):
6.2% due 2000 $ - $ 30,000
9.48% due 2000 - 20,000
8.05% due 2002 30,000 30,000
6.6% due 2003 20,000 20,000
7.22% due 2003 40,000 40,000
9.1% due 2003 30,000 30,000
6.34% due 2004 40,000 40,000
6.77% due 2005 30,000 30,000
7.35% due 2005 20,000 20,000
6.36% due 2006 17,000 17,000
6.40% due 2006 33,000 33,000
6.00% due 2008 8,700 8,700
6.1% due 2021 28,500 28,500
8.6% due 2022 30,000 30,000
8.8% due 2022 30,000 30,000
6.97% due 2023 30,000 30,000
7.65% due 2023 30,000 30,000
8.15% due 2023 60,000 60,000
5.95% due 2027 13,690 13,690
------- --------
Subtotal 490,890 540,890
Amounts due within one year - (50,000)
Unamortized net discount (27) (31)
------- -------
Total 490,863 490,859
------- -------
Other long-term debt
(excludes amounts due within one year
of $27 for 2000 and $25 for 1999) 5,997 6,024
------- -------
Total long-term debt $496,860 $496,883
======= =======
|
Penelec (in thousands)
-------
2000 1999
--------- ---------
First Mortgage Bonds - Series as noted (a):
6.125% due 2007 $ 4,110 $ 4,110
6.55% due 2009 - -
5.35% due 2010 12,310 12,310
5.35% due 2010 12,000 12,000
5.80% due 2020 20,000 20,000
6.05% due 2025 25,000 25,000
------- -------
Subtotal 73,420 73,420
Amounts due within one year - -
Unamortized net discount (8) (10)
------- -------
Total 73,412 73,410
------- -------
|
GPU, Inc. and Subsidiary Companies
Penelec (continued) (in thousands)
-------
2000 1999
--------- ---------
Senior Notes - Series as noted:
6.42% due 2002 25,000 -
6.47% due 2002 25,000 -
5.75% due 2004 125,000 125,000
7.50% due 2005 8,000 -
6.125% due 2009 100,000 100,000
7.77% due 2010 35,000 -
6.625% due 2019 125,000 125,000
------- -------
Subtotal 443,000 350,000
Unamortized net discount (1,597) (1,781)
------- -------
Total 441,403 348,219
------- -------
Other long-term debt
(excludes amounts due within one year
of $14 for 2000 and $13 for 1999) 2,998 3,012
------- -------
Total long-term debt $517,813 $424,641
======= =======
|
(a) Substantially all of the utility plant owned by the GPU Energy companies is subject to the liens of their respective mortgages.
For the years 2001, 2002, 2003, 2004 and 2005, GPU has long-term debt maturities as follows:
(in millions)
Company 2001 2002 2003 2004 2005
------- ---- ---- ---- ---- ----
JCP&L $ 40 $ 50 $150 $160 $50
Met-Ed - 30 90 40 50
Penelec - 50 - 125 8
GPU Electric 912 436 176 11 12
GPU Power 7 7 6 6 2
GPU, Inc. - - - - 300
GPUS 22 - - - -
--- --- --- --- ---
Total $981 $573 $422 $342 $422
=== === === === ===
|
At December 31, 2000, EI UK Holdings, Inc. had long-term debt outstanding of BP 245 million (US $366 million) under its BP 245 million credit facility, a portion of which is guaranteed by GPU, Inc.
As discussed in Note 2, Short-Term Borrowing Arrangements, the amount of new financing capacity available to GPU, Inc. or its subsidiaries may be less than it had previously been and renewal or refinancing of existing credit facilities will likely require GPU's acceptance of higher pricing and/or more restrictive terms and conditions.
GPU, Inc. and Subsidiary Companies
The fair value of long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to GPU for debt of the same remaining maturities and credit qualities. The estimated fair value of GPU's long-term debt, including amounts due within one year, as of December 31, 2000 and 1999 is as follows:
(in millions)
------------------------------------------------
2000 1999
----------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- --------
JCP&L $1,134 $1,125 $1,174 $1,139
Met-Ed 497 504 547 532
Penelec 518 497 424 392
GPU Electric 2,389 2,469 3,619 4,186
GPU Power 39 35 46 41
GPU, Inc. 299 300 - -
GPUS 22 22 22 22
----- ----- ----- -----
Total $4,898 $4,952 $5,832 $6,312
===== ===== ===== =====
|
4. PREFERRED SECURITIES
Cumulative preferred stock, without par value, 15,600,000 shares authorized, 748,334 and 965,000 shares issued and outstanding in 2000 and 1999, respectively.
(in thousands)
2000 1999
-------- --------
Cumulative preferred stock -
with mandatory redemption (b)(c)(d):
8.65% Series J,
333,334 and 500,000 shares at 12/31/00
and 12/31/99, respectively $33,333 $50,000
7.52% Series K,
290,000 and 340,000 shares at 12/31/00
and 12/31/99, respectively 29,000 34,000
------ ------
Subtotal 62,333 84,000
Amounts due within one year (d) (10,833) (10,833)
------ ------
Total cumulative preferred stock -
with mandatory redemption $51,500 $73,167
====== ======
Cumulative preferred stock - without mandatory redemption (c)(e):
4% Series, 125,000 shares,
callable at $106.50 a share $12,500 $12,500
Premium on cumulative preferred stock 149 149
------ ------
Total cumulative preferred stock -
without mandatory redemption $12,649 $12,649
====== ======
|
GPU, Inc. and Subsidiary Companies
(a) In 1999, Met-Ed and Penelec redeemed all of their outstanding shares of cumulative preferred stock for $12.5 million and $17.4 million, respectively. At December 31, 2000 and 1999, the GPU Energy companies were authorized to issue 37,035,000 of cumulative preferred stock. If dividends on any of the cumulative preferred stock of JCP&L are in arrears for four quarters, the holders of cumulative preferred stock, voting as a class, are entitled to elect a majority of the Board of Directors until all dividends in arrears have been paid. If JCP&L has failed to pay dividends in full on any outstanding shares of cumulative preferred stock, thereafter and until dividends in full on all such shares of cumulative preferred stock have been paid, or declared and set apart for payment, for all past quarterly dividend periods, JCP&L shall not redeem any cumulative preferred stock unless all the shares of cumulative preferred stock outstanding are redeemed and shall not purchase or otherwise acquire for value any shares of cumulative preferred stock except in accordance with an offer (which may vary with respect to shares of different series) made to all holders of share of cumulative preferred stock.
(b) The 7.52% and 8.65% Series are callable at various prices above their stated values beginning in 2002 and 2000, respectively. Pursuant to mandatory sinking fund provisions, the 7.52% Series is to be redeemed ratably over the next fourteen years. The 8.65% Series is to be redeemed ratably over the next four years.
(c) During 2000, JCP&L redeemed $5 million stated value of its 7.52% cumulative preferred stock and $16.7 million stated value of its 8.65% cumulative preferred stock pursuant to mandatory and optional sinking fund provisions. During 1999, JCP&L redeemed all of its outstanding shares of 7.88% cumulative preferred stock with a stated value of $25 million and $5 million stated value of its 7.52% cumulative preferred stock pursuant to mandatory and optional sinking fund provisions. JCP&L's total redemption cost for 2000 and 1999 was $21.7 million and $30.9 million, respectively.
(d) The shares with mandatory redemption have redemption requirements of $10.8 million for each year of the next four years, and $2.5 million in year five. The fair value of the preferred stock with mandatory redemption, including amounts due within one year, based on market price quotations at December 31, 2000 and 1999, was $65.6 million and $86.5 million, respectively.
(e) The outstanding shares of preferred stock without mandatory redemption are callable at various prices above their stated values. At December 31, 2000, JCP&L could call the 4% Series for $13.3 million.
JCP&L Capital, L.P., Met-Ed Capital, L.P. and Penelec Capital, L.P. are special-purpose partnerships in which a subsidiary of JCP&L, Met-Ed and Penelec, respectively, is the sole general partner. In 1995, JCP&L Capital, L.P. issued $125 million at 8.56% (5 million shares at $25 per share) of mandatorily redeemable preferred securities (MIPS) and in 1994, Met-Ed Capital, L.P. and Penelec Capital, L.P. issued $100 million at 9% (4 million shares at $25 per share) and $105 million at 8.75% (4.2 million shares at $25 per share), respectively, of MIPS. The proceeds were loaned to JCP&L, Met-Ed and Penelec, respectively, which, in turn, issued their deferrable interest subordinated debentures to the partnerships. In 1999, Met-Ed and Penelec
GPU, Inc. and Subsidiary Companies
redeemed all of their outstanding shares of MIPS for $100 million and $105 million, respectively. At December 31, 2000, JCP&L's outstanding shares of MIPS had a fair value of $122.2 million.
The MIPS of JCP&L Capital, L.P. mature in 2044 and are redeemable at the option of JCP&L beginning in May of 2000 at 100% of their principal amount. JCP&L has fully and unconditionally guaranteed payment of distributions, to the extent there is sufficient cash on hand to permit such payments and legally available funds, and payments on liquidation or redemption of its Preferred Securities. Distributions on the MIPS (and interest on the subordinated debentures) may be deferred for up to 60 months, but JCP&L may not pay dividends on, or redeem or acquire, any of its cumulative preferred or common stock until deferred payments on its subordinated debentures are paid in full.
In 1999, Met-Ed Capital Trust, a wholly-owned subsidiary of Met-Ed, issued $100 million of trust preferred securities (Met-Ed Trust Preferred Securities) at 7.35%, due 2039. The sole assets of Met-Ed Capital Trust are the 7.35% Cumulative Preferred Securities of Met-Ed Capital II, L.P. (Met-Ed Partnership Preferred Securities) and its only revenues are the quarterly cash distributions it receives on the Met-Ed Partnership Preferred Securities. Each Met-Ed Trust Preferred Security represents a Met-Ed Partnership Preferred Security. Met-Ed Capital II, L.P. is a wholly-owned subsidiary of Met-Ed and the sponsor of Met-Ed Capital Trust. The sole assets of Met-Ed Capital II, L.P. are Met-Ed's 7.35% Subordinated Debentures, Series A, due 2039, which have an aggregate principal amount of $103.1 million. Met-Ed has fully and unconditionally guaranteed the Met-Ed Partnership Preferred Securities, and, therefore, the Met-Ed Trust Preferred Securities.
In 1999, Penelec Capital Trust, a wholly-owned subsidiary of Penelec, issued $100 million of trust preferred securities (Penelec Trust Preferred Securities) at 7.34%, due 2039. The sole assets of Penelec Capital Trust are the 7.34% Cumulative Preferred Securities of Penelec Capital II, L.P. (Penelec Partnership Preferred Securities) and its only revenues are the quarterly cash distributions it receives on the Penelec Partnership Preferred Securities. Each Penelec Trust Preferred Security represents a Penelec Partnership Preferred Security. Penelec Capital II, L.P. is a wholly-owned subsidiary of Penelec and the sponsor of Penelec Capital Trust. The sole assets of Penelec Capital II, L.P. are Penelec's 7.34% Subordinated Debentures, Series A, due 2039, which have an aggregate principal amount of $103.1 million. Penelec has fully and unconditionally guaranteed the Penelec Partnership Preferred Securities, and, therefore, the Penelec Trust Preferred Securities.
The fair value of the Met-Ed and Penelec Trust Preferred Securities at December 31, 2000 was $96.5 million and $97 million, respectively.
GPU, Inc. and Subsidiary Companies
5. STOCKHOLDERS' EQUITY
The following table presents information relating to the common stock ($2.50 par value) of GPU, Inc.:
2000 1999 1998
---- ---- ----
Authorized shares 350,000,000 350,000,000 350,000,000
Issued shares 132,783,338 132,783,338 132,783,338
Reacquired shares 13,343,387 11,017,798 4,787,657
Outstanding shares 119,439,951 121,765,540 127,995,681
Outstanding restricted units 312,520 283,602 268,360
Outstanding stock options 1,175,069 389,250 335,950
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In 2000, GPU, Inc. reacquired 2.8 million shares of common stock at a total cost of $71.9 million.
At December 31, 2000 and 1999, the following issues of common stock were outstanding:
(in thousands)
2000 1999
- -------- ---------
GPU, Inc.
--------
Common stock, par value $2.50 per share $331,958 $331,958
======= =======
JCP&L
-----
Common stock, par value $10 per share,
16,000,000 shares authorized, 15,371,270
shares issued and outstanding $153,713 $153,713
======= =======
Met-Ed
------
Common stock, no par value, 900,000 shares
authorized, 859,500 shares issued
and outstanding $ 66,273 $ 66,273
====== ======
Penelec
-------
Common stock, par value $20 per share,
5,400,000 shares authorized, 5,290,596
shares issued and outstanding $105,812 $105,812
======= =======
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Pursuant to the 1990 Employee Stock Plan (as restated to reflect amendments through June 1, 2000), awards may be granted in the form of incentive stock options, nonqualified stock options, restricted shares of common stock, performance units and stock appreciation rights, which may accompany options.
In 2000, GPU, Inc. granted stock options to officers and selected employees to purchase 722,700 shares at $29.25 per share. During the year, 17,100 of these options were forfeited leaving a total of 705,600 outstanding at December 31, 2000. Also in 2000, as part of the acquisition of MYR, options held by MYR employees to purchase MYR stock were converted to 97,524 options to purchase GPU, Inc. common stock. The average exercise price of the 97,524 options is $9.93 per share and 6,305 of these options were exercised at an average price of $4.90 during 2000. No additional options
GPU, Inc. and Subsidiary Companies
were exercised in 2000. In 1999, GPU, Inc. granted stock options to officers to purchase 90,600, 1,000 and 1,000 shares at $42.9375, $34.50 and $34.6875 per share, respectively. In 1998, GPU, Inc. granted stock options to officers to purchase 305,950 and 30,000 shares at $36.625 per share and $44.25 per share, respectively. In 2000, 7,300 and 3,700 options exercisable at $36.625 and $42.9375 per share, respectively, were forfeited. No options were exercised in 1999 and 1998.
At December 31, 2000 and 1999, there were 274,892 and 101,607 options exercisable at weighted average exercise prices of $32.66 and $37.38 per option, respectively. There were no options exercisable at December 31, 1998. All options, other than the MYR converted options have an exercise price equal to the fair market per share value of GPU, Inc. common stock on the grant date. All options vest in three equal annual installments, have a 10-year term and are exercisable in accordance with the terms set forth in the Stock Option Agreement. In the event of a change in control of GPU during the option term (which would include GPU, Inc.'s proposed merger with FirstEnergy), all options would immediately become exercisable. The weighted-average remaining contractual life of options outstanding as of December 31, 2000 was 8.7 years.
The weighted average fair value of options granted during 2000, 1999 and 1998 was $4.60, $6.60 and $4.41 per option, respectively. The options were valued using the Black-Scholes pricing model. For the years 2000, 1999 and 1998, the assumptions used in these valuations were as follows: a risk-free rate of return of 6.38%, 6.14% and 5.70%, respectively; a stock price volatility of 23.5%, 20.21% and 17.36%, respectively; an average dividend yield of 5.71%, 5.42% and 5.67%, respectively; and the exercise of all options on the final day of their 10-year terms.
Also pursuant to the 1990 Employee Stock Plan, in 2000, 1999 and 1998, GPU, Inc. issued performance units to officers and selected employees representing rights to receive shares of common stock, on a one-for-one basis, at the end of the restriction period. The number of shares eventually issued will depend upon the degree to which GPU's performance goals have been met for the performance period and could range from 0% to 200% of the originally awarded units plus additional units resulting from reinvested dividend equivalents. These performance units vest on a pro-rata basis over three or five years. In the event of a change in control of GPU during the performance period (which would include GPU, Inc.'s proposed merger with FirstEnergy), all performance units would immediately vest within the range of 100% to 200% of the original units awarded.
Since 1997, pursuant to the Deferred Stock Unit Plan for Outside Directors, restricted units were issued to outside directors representing rights to receive shares of GPU, Inc. common stock, on a one-for-one basis. All restricted units are considered common stock equivalents and, accordingly, are reflected in the computation of diluted earnings per share shown on the Consolidated Statements of Income. The restricted units accrue dividend equivalents on a quarterly basis, which are reinvested in additional restricted units. The restricted units vest upon the outside director completing 54 months of service or immediately in the case of a change in control.
Through the above-mentioned plans, officers, selected employees and outside directors were awarded 72,327, 56,994 and 53,260 performance units or restricted units in 2000, 1999 and 1998, respectively. Also in 2000, as part of the acquisition of MYR, restricted units held by MYR employees were converted to GPU, Inc. common stock restricted shares. As of December 31,
GPU, Inc. and Subsidiary Companies
2000, 208,136 of these shares were outstanding. In 2000, 1999 and 1998, through these plans, GPU, Inc. issued a total of 247,845, 20,215 and 20,611 shares of common stock, respectively, from previously reacquired shares. At December 31, 2000, there were 1,974,190 shares of common stock authorized for issuance as awards of restricted shares, units, options or rights, in the aggregate.
In 1996, GPU adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123 (FAS 123), "Accounting for Stock-Based Compensation," which establishes a fair value-based method of accounting for employee stock-based compensation. As permitted by FAS 123, GPU continues to follow the intrinsic value method set forth in APB Opinion No. 25, "Accounting for Stock Issued to Employees." Had the fair value-based method of accounting been applied instead, the fair value of options would have been expensed, and net income for 2000, 1999 and 1998 would have been $231.4 million, $458.7 million and $359.3 million, respectively, and earnings per share for the same periods would have been $1.91, $3.66 and $2.83, respectively.
In 1997, GPU adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." At December 31, 2000 and 1999, GPU had the following amounts in Accumulated other comprehensive income/(loss) on the Consolidated Balance Sheets:
(in thousands)
2000 1999
---- ----
GPU, Inc. and Subsidiary Companies
----------------------------------
Net unrealized gains on investments (1) $ 13,404 $ 34,183
Foreign currency translation (72,402) (40,518)
Minimum pension liability (3,626) (6)
------ ------
Accumulated other comprehensive income/(loss) $(62,624) $( 6,341)
====== ======
JCP&L
-----
Net unrealized gain on investments $ 7 $ 7
Minimum pension liability (15) -
----- -------
Accumulated other comprehensive income/(loss) $ (8) $ 7
===== ======
Met-Ed
------
Net unrealized gain on investments (1) $ 74 $ 21,369
Minimum pension liability (10) (6)
------ ------
Accumulated other comprehensive income $ 64 $ 21,363
====== ======
Penelec
-------
Net unrealized gain on investments (1) $ 23 $ 10,619
Minimum pension liability - -
------ -------
Accumulated other comprehensive income $ 23 $ 10,619
====== ======
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(1) The change in the net unrealized gain on investments includes the reclassification of previously unrealized gains totaling $31.8 million (Met-Ed $21.2 million; Penelec $10.6 million), from Accumulated other
GPU, Inc. and Subsidiary Companies
comprehensive income to Regulatory assets, net on the Consolidated Balance Sheets. See Nuclear Plant Retirement Costs section of Note 12, Commitments and Contingencies.
The components of the change in accumulated other comprehensive
income/(loss), and the related tax effects, for the years 2000, 1999 and 1998
are as follows:
(in thousands)
Amount Income Tax Amount
Before (Expense) Net of
Taxes Benefit Taxes
-------- ---------- ---------
GPU, Inc. and Subsidiary Companies
----------------------------------
2000
----
Net unrealized gains/(loss) on investments $(38,042) $ 17,263 $(20,779)
------ ------ ------
Foreign currency translation adjustments (43,240) 15,134 (28,106)
Adjustment for amounts included in income (5,813) 2,035 (3,778)
------ ------ ------
Net change in accumulated other
comprehensive income (49,053) 17,169 (31,884)
------ ------ ------
Minimum pension liability (6,183) 2,563 (3,620)
------ ------ ------
Total change in accumulated other
comprehensive income/(loss) $(93,278) $ 36,995 $(56,283)
====== ====== ======
1999
----
Net unrealized gains on investments $ 12,516 $( 4,680) $ 7,836
Adjustment for amounts included in income ( 1,998) - ( 1,998)
------ ------ ------
Net change in accumulated other
comprehensive income 10,518 ( 4,680) 5,838
------ ------ ------
Foreign currency translation adjustments 19,735 ( 6,907) 12,828
Adjustment for amounts included in income 1,586 (555) 1,031
------ ------ ------
Net change in accumulated other
comprehensive income 21,321 ( 7,462) 13,859
------ ------ ------
Minimum pension liability 8,957 ( 3,691) 5,266
------ ------ ------
Total change in accumulated other
comprehensive income/(loss) $ 40,796 $(15,833) $ 24,963
====== ====== ======
1998
----
Net unrealized gains on investments $ 13,235 $( 4,248) $ 8,987
------ ------ -------
Foreign currency translation adjustments (23,295) 8,233 (15,062)
Adjustment for amounts included in income 8,737 ( 3,136) 5,601
------ ------ ------
Net change in accumulated other
comprehensive income/(loss) (14,558) 5,097 ( 9,461)
------ ------ ------
Minimum pension liability ( 2,605) 1,071 ( 1,534)
------ ------ ------
Total change in accumulated other
comprehensive income/(loss) $( 3,928) $ 1,920 $( 2,008)
====== ====== ======
|
2000
----
Net unrealized gain on investments $ - $ - $ -
Minimum pension liability (26) 11 (15)
------ ------ ------
Total change in accumulated
other comprehensive income/(loss) $ (26) $ 11 $ (15)
====== ====== ======
|
GPU, Inc. and Subsidiary Companies
(in thousands)
Amount Income Tax Amount
Before (Expense) Net of
Taxes Benefit Taxes
-------- ---------- ---------
JCP&L (continued)
-----
1999
----
Net unrealized gain on investments $ 7 $ - $ 7
Minimum pension liability 718 (293) 425
------ ------ ------
Total change in accumulated
other comprehensive income/(loss) $ 725 $ (293) $ 432
====== ====== ======
1998
----
Net unrealized gain on investments $ - $ - $ -
Minimum pension liability (718) 293 (425)
------ ------ ------
Total change in accumulated
other comprehensive income/(loss) $ (718) $ 293 $ (425)
====== ====== ======
Met-Ed
------
2000
----
Net unrealized gain on investments $(36,312) $ 15,016 $(21,296)
Minimum pension liability (6) 3 (3)
------ ------ ------
Total change in accumulated
other comprehensive income/(loss) $(36,318) $ 15,019 $(21,299)
====== ====== ======
1999
----
Net unrealized gain on investments $ 7,388 $ (3,073) $ 4,315
Minimum pension liability 901 (373) 528
------ ------ ------
Total change in accumulated
other comprehensive income/(loss) $ 8,289 $ (3,446) $ 4,843
====== ====== ======
1998
----
Net unrealized gain on investments $ 6,990 $ (2,842) $ 4,148
Minimum pension liability (196) 81 (115)
------ ------ ------
Total change in accumulated
other comprehensive income/(loss) $ 6,794 $ (2,761) $ 4,033
====== ====== ======
Penelec
-------
2000
----
Net unrealized gain on investments $(18,173) $ 7,577 $(10,596)
Minimum pension liability - - -
------ ------ ------
Total change in accumulated
other comprehensive income/(loss) $(18,173) $ 7,577 $(10,596)
====== ====== ======
1999
----
Net unrealized gain on investments $ 3,708 $ (1,607) $ 2,101
Minimum pension liability 282 (117) 165
------ ------ ------
Total change in accumulated
other comprehensive income/(loss) $ 3,990 $ (1,724) $ 2,266
====== ====== ======
1998
----
Net unrealized gain on investments $ 3,470 $ (1,406) $ 2,064
Minimum pension liability (73) 30 (43)
------ ------ ------
Total change in accumulated
other comprehensive income/(loss) $ 3,397 $ (1,376) $ 2,021
====== ====== ======
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GPU, Inc. and Subsidiary Companies
6. ACCOUNTING FOR EXTRAORDINARY AND NON-RECURRING ITEMS
In June 2000, GPU, Inc. sold GPU PowerNet, its Australian electric transmission company, to SPI for A$2.1 billion (approximately US $1.26 billion). As part of the sales price, SPI assumed liability for A$230 million (US $137.8 million) of medium term notes. A significant portion of the net proceeds from the sale were used to repay debt in 2000, and the remaining proceeds have been placed in a trust and will be used to further reduce debt. As a result of the sale, GPU recorded in Operating Income on the Consolidated Statement of Income, a pre-tax loss in the quarter ended June 30, 2000 of $372 million ($295 million after-tax, or $2.43 per share), including a $94 million foreign currency loss. During the fourth quarter 2000, there was a change in the estimated tax benefits, which reduced GPU's after-tax loss on the sale to $276.6 million, or $2.28 per share.
In December 2000, GPU, Inc. sold GPUI to Aquila for $225 million. The sale included GPUI's interests in six domestic operating plants and one development stage project. The net proceeds from the sale were used primarily to reduce debt at GPU Capital.
As a result of the sale, GPU realized a pre-tax gain of $133 million ($89.2 million after-tax, or $0.73 per share).
In June 1998, Onondaga Cogeneration L.P. (Onondaga), a GPUI independent power project, and Niagara Mohawk Power Corporation (NIMO) renegotiated their existing power purchase agreement and entered into a 10-year indexed swap agreement and power put.
In September 2000 (prior to the sale of GPUI), Onondaga terminated its rights under the power put thereby terminating all agreements Onondaga had with NIMO to sell energy and capacity under the restructured power purchase agreement. As a result, in 2000, a net pre-tax gain of $42.8 million ($27.8 million after-tax, or $0.23 per share) was recorded in Other Income and Deductions on the Consolidated Statement of Income, as follows: the deferred gain of $86.7 million pre-tax related to the restructured power purchase agreement with NIMO was recognized in income; and the indexed swap agreement was marked to market and the associated deferred revenue was taken to income resulting in a pre-tax gain of $90.8 million. In addition, as a result of terminating the power put with NIMO and based on information supplied by an outside independent expert, management determined that the Onondaga plant would not operate on an economically profitable basis in the merchant generation market, and that the equipment would be technologically obsolete. As the result of an impairment test performed under Statement of Financial Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," using the undiscounted cash flows of the plant's operations, management determined that the plant was impaired, and the carrying value of the plant was written down by $69.1 million pre-tax. Also, as a result of the termination of Onondaga's rights under the power put, a review of firmly committed long-term executory gas transportation contracts was performed and the contracts were determined to be out of market, which resulted in a charge to income of $65.6 million. Management's analysis utilized gas and energy pricing supplied by an independent expert.
GPU, Inc. and Subsidiary Companies
In addition, in 2000 a pre-tax charge of $2.5 million ($1.6 million after-tax, or $0.01 per share) was recorded in other operation and maintenance expense for settlement amounts paid in connection with the termination of Onondaga's steam supply agreement.
On December 20, 2000, the PaPUC issued a Phase II Order providing a final determination of Met-Ed's and Penelec's stranded cost recovery related to the divestiture of their generating assets. The net impact of the Phase II Order was a credit to income of $66.1 million pre-tax (Met-Ed $44.6 million; Penelec $21.5 million), or $40.8 million after-tax (Met-Ed $32 million; Penelec $8.8 million), or $0.34 per share, the major components of which are discussed below.
As a result of the sales of their generating facilities in 1999, Met-Ed and Penelec recognized a pension curtailment gain (per Statement of Financial Accounting Standards No. 88 (FAS 88), "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and Statement of Financial Accounting Standards No. 106 (FAS 106), "Employers' Accounting for Postretirement Benefits Other Than Pensions"), associated with employees who were terminated from the companies at the time of the sale. This gain, which amounted to $50.5 million pre-tax (Met-Ed $26.2 million; Penelec $24.3 million), was deferred pending the outcome of the Phase II proceedings. Upon receipt of the Phase II Order, the deferred gain was recognized in income.
In their Phase II filings, Met-Ed and Penelec requested recovery of an additional $303.8 million (Met-Ed $226.3 million; Penelec $77.5 million) of stranded costs. The Phase II Order disallows recovery of $27.9 million (Met-Ed $16 million; Penelec $11.9 million) of this amount. However, Met-Ed and Penelec anticipated a disallowance of a portion of their stranded costs, and established a reserve of $24.9 million (Met-Ed $18.7 million; Penelec $6.2 million) in 1999. Therefore, in 2000, the remaining disallowance of $3 million pre-tax (Met-Ed $(2.7) million; Penelec $5.7 million) was (credited)/charged to income.
Met-Ed requested recovery of stranded costs associated with its leasehold interest in the Merrill Creek Reservoir project. The Phase II Order granted Met-Ed full recovery of these costs. Met-Ed had previously recorded liabilities which were reversed upon review of the Phase II Order. In addition, during the proceedings, certain estimates and assumptions used in calculating the lease expense were revised. The reversal of related liabilities and the changes in estimates and assumptions resulted in a credit to income of $13.8 million pre-tax.
The Phase II Order deferred a decision on Met-Ed's requested rate increase in 2006 for future consideration. The Order also requires Met-Ed and Penelec to seek a ruling from the Internal Revenue Service (IRS) approving the credit to ratepayers of unamortized investment tax credits and excess deferred income tax benefits associated with their divested generating stations, which were recognized in operating income in 1999. If the IRS ruling ultimately supports returning these tax benefits to ratepayers, Met-Ed and Penelec would then reduce stranded costs by $40 million and record a corresponding charge to income.
GPU, Inc. and Subsidiary Companies
GPU Energy companies
During 2000 and 1999, the GPU Energy companies completed the sales of substantially all their electric generating facilities. The PaPUC has made a final determination of Met-Ed's and Penelec's stranded cost recovery, as discussed above. The NJBPU, however, has deferred making a final determination of the net proceeds and stranded cost recovery related to JCP&L's generating asset divestitures until an IRS ruling regarding the treatment of associated federal income tax benefits is received.
In August 2000, JCP&L sold Oyster Creek to AmerGen Energy Company, LLC (AmerGen), a joint venture of PECO Energy and British Energy, for approximately $10 million. As a result of the sale, a non-recurring gain of $16.5 million, or $0.13 per share, was recognized in income for the reversal of certain deferred taxes and realization of an investment tax credit related to the sale. If JCP&L receives an IRS ruling that supports returning these tax benefits to ratepayers, JCP&L would then reduce its stranded costs by this amount and record a corresponding charge to income. As part of the sale, AmerGen has assumed full responsibility for decommissioning the plant and JCP&L has transferred $440 million of Oyster Creek decommissioning trust funds to AmerGen, of which approximately $114 million was paid into the trust by JCP&L at closing. JCP&L has agreed to fund the station's outage cost (up to a maximum of $88 million), including the fuel reload, for the refueling outage completed in November 2000. Outage costs of approximately $88 million were incurred, and are presently being reviewed by GPU. AmerGen will repay these outage costs to JCP&L in nine equal annual installments without interest, beginning August 2001. As discussed below, the Oyster Creek plant was written down to its fair market value in 1999.
In 1999, the GPU Energy companies sold TMI-1 to AmerGen for a total purchase price of approximately $100 million. The sale did not have a significant impact on 1999 earnings since TMI-1 had been written down to its fair market value in 1998, resulting in a loss of $528.3 million pre-tax (JCP&L $133.1 million; Met-Ed $270.7 million; Penelec $124.5 million), which was deferred as a regulatory asset.
Penelec sold its 50% interest in the Homer City Station to a subsidiary of Edison Mission Energy for approximately $900 million in 1999. As a result, Penelec recorded a pre-tax gain of $38.2 million ($22.6 million after-tax, or $0.18 per share) for the portion of the gain related to wholesale operations and deferred as a regulatory liability the remaining pre-tax gain of $590.7.
Penelec sold its 20% interest in the Seneca Pumped Storage Hydroelectric Generating Station to The Cleveland Electric Illuminating Company for $43 million in 1999. The sale resulted in a pre-tax gain of $2 million ($1.2 million after-tax, or $0.01 per share) for the portion of the gain related to wholesale operations and the deferral of the remaining pre-tax gain of $30.2 million as a regulatory liability.
In addition, during 1999 the GPU Energy companies completed the sales of their remaining fossil fuel and hydroelectric generating facilities to Sithe Energies (Sithe) for approximately $1.6 billion (JCP&L $416 million; Met-Ed $641 million; Penelec $558 million) (JCP&L's Forked River combustion turbines and 50% interest in Yards Creek, as well as Met-Ed's York Haven hydroelectric station, were not included in the sales). The sales resulted in a pre-tax gain of $22.9 million (Met-Ed $2.4 million; Penelec $20.5
GPU, Inc. and Subsidiary Companies
million), or $13.4 million after-tax (Met-Ed $1.4 million; Penelec $12 million), or $0.11 per share, for the portion of the gain related to wholesale operations, and deferral of the remaining pre-tax gain of $706.5 million (Met-Ed $389.1 million; Penelec $317.4 million) as a regulatory liability.
GPU Power UK
Prior to GPU's purchase of the 50% of GPU Power UK it did not already own, GPU Power UK sold its electric supply business to National Power plc for approximately $300 million. As a result, in 1999 GPU recorded a pre-tax gain on the sale of $10.5 million ($6.8 million after-tax, or $0.05 per share).
In 1999, the NJBPU issued a Summary Order regarding JCP&L's unbundling, stranded cost and restructuring filings. Accordingly, in 1999 JCP&L discontinued the application of FAS 71 and adopted the provisions of FAS 101 and EITF Issue 97-4 with respect to its electric generation operations. The transmission and distribution operations of JCP&L continue to be subject to the provisions of FAS 71.
In 1999, JCP&L recorded a reduction in operating revenues of $115 million ($68 million after-tax, or $0.54 per share) relating to the Summary Order. This reduction reflects JCP&L's obligation to refund to customers 5% from rates in effect as of April 30, 1997. The refund will be made to customers from August 1, 2002 through July 31, 2003.
Since JCP&L is no longer subject to FAS 71 for the generation portion of its business, GPU performed an impairment test on Oyster Creek in accordance with FAS 121. Management determined that JCP&L's net investment in Oyster Creek, including plant, nuclear fuel and materials and supplies inventories, was impaired. This investment was written down by a total of $678 million pre-tax in 1999 to reflect the plant's fair market value. This impairment, which was recorded as an extraordinary deduction, was reversed and re-established as a regulatory asset since the NJBPU Summary Order provides for rate recovery.
In 1998, Met-Ed and Penelec received PaPUC Restructuring Orders which, among other things, essentially removed from regulation the costs associated with providing electric generation service to Pennsylvania consumers, effective January 1, 1999. Accordingly, in 1998 Met-Ed and Penelec discontinued the application of FAS 71 and adopted the provisions of FAS 101 and EITF Issue 97-4 with respect to their electric generation operations. The transmission and distribution operations of Met-Ed and Penelec continue to be subject to the provisions of FAS 71.
As a result of the Restructuring Orders, Met-Ed and Penelec recorded a pre-tax extraordinary charge of $42.1 million (Met-Ed $11.5 million; Penelec $30.6 million), or $25.8 million after-tax (Met-Ed $6.8 million; Penelec $19 million), or $0.20 per share, and a pre-tax non-recurring charge of $68.5 million (Met-Ed $32.9 million; Penelec $35.6 million), or $40 million after-tax (Met-Ed $19.2 million; Penelec $20.8 million), or $0.32 per share, for customer refunds of 1998 revenues and for the establishment of a sustainable energy fund.
GPU, Inc. and Subsidiary Companies
In accordance with FAS 121, impairment tests were performed and determined that the net investment in TMI-1 was impaired at December 31, 1998, resulting in a write-down of $518 million pre-tax (JCP&L $134 million; Met-Ed $257 million; Penelec $127 million) to reflect TMI-1's fair market value. Of the amount written down for TMI-1, $508 million (JCP&L $134 million; Met-Ed $255 million; Penelec $119 million) was deferred as a regulatory asset pending the outcome of the Phase II proceedings and $10 million (Met-Ed $2 million; Penelec $8 million) (the FERC jurisdictional portion) was charged to expense as an extraordinary item in 1998.
7. ACQUISITIONS
In April 2000, GPU, Inc. acquired MYR for approximately $217.5 million. The fair value of the assets acquired totaled approximately $154.6 million and the amount of liabilities assumed totaled approximately $99.7 million.
MYR, a suburban Chicago-based infrastructure construction services company, provides a complete range of power line and commercial/industrial electrical construction services for electric utilities, telecommunications providers, commercial and industrial facilities and government agencies across the US. MYR also builds cellular towers for the wireless communications market.
The acquisition was partially financed through the issuance of GPU, Inc. short-term debt and was accounted for under the purchase method of accounting. The total acquisition cost exceeded the estimated value of net assets acquired by approximately $162.9 million. This excess is considered goodwill and is being amortized on a straight-line basis over 40 years.
In March 1999, GPU Electric acquired Empresa Distribuidora Electrica Regional, S.A. (Emdersa) for US $375 million. The fair value of the assets acquired totaled approximately $320 million and the amount of liabilities assumed totaled approximately $153 million, including debt of $76 million. Emdersa owns three electric distribution companies that serve three provinces in northwest Argentina.
The acquisition was financed through the issuance of commercial paper by GPU Capital, guaranteed by GPU, Inc., and a $50 million capital contribution from GPU, Inc.
The acquisition was accounted for under the purchase method of accounting. The total acquisition cost exceeded the estimated value of net assets by approximately $208 million. This excess is considered goodwill and is being amortized on a straight-line basis over 40 years.
In June 1999, GPU Electric acquired Transmission Pipelines Australia (TPA), a natural gas transmission business, from the State of Victoria, Australia for A$1.025 billion (approximately US $675 million). TPA has been renamed GPU GasNet. The fair value of the assets acquired totaled approximately US $704 million and the amount of liabilities assumed totaled approximately US $116 million.
GPU, Inc. and Subsidiary Companies
The acquisition was financed through: (1) an A$750 million (approximately
US $495 million) senior credit facility, which is non-recourse to GPU, Inc.; and
(2) an equity contribution from GPU Capital of A$275 million (approximately US
$180 million) provided through the issuance of commercial paper guaranteed by
GPU, Inc.
The acquisition was accounted for under the purchase method. The total acquisition cost exceeded the estimated value of net assets acquired by approximately $88 million. This excess is considered goodwill and is being amortized on a straight-line basis over 40 years.
In July 1999, GPU Electric acquired Cinergy's 50% ownership interest in Avon, which owns GPU Power UK, for BP 452.5 million (approximately US $714 million). GPU and Cinergy had jointly formed Avon in 1996 to acquire GPU Power UK. The fair value of the assets acquired totaled approximately US $2.1 billion and the liabilities totaled approximately US $1.5 billion, including debt of US $1 billion.
GPU Electric financed the acquisition through a combination of equity and debt. The equity was funded from: (1) a US $250 million contribution from GPU, Inc., and (2) the issuance of US $50 million of commercial paper by GPU Capital, which is guaranteed by GPU, Inc. The debt has been provided through a two-year BP 245 million (approximately US $382 million) credit agreement entered into by EI UK Holdings, of which GPU, Inc. has guaranteed approximately US $100 million.
As a result of GPU's purchase of Cinergy's 50% ownership in GPU Power UK, effective in the third quarter of 1999, GPU began accounting for GPU Power UK as a consolidated entity, rather than under the equity method of accounting as was previously the practice. Consequently, Goodwill, net on the Consolidated Balance Sheet increased by approximately $1.8 billion in the third quarter of 1999. Of this amount, $1.7 billion relates to the previous 1996 acquisition of GPU Power UK by GPU and Cinergy and approximately $119 million represents goodwill resulting from GPU's purchase of Cinergy's 50% share of GPU Power UK. The goodwill is being amortized on a straight-line basis over 40 years.
Pro Forma Information (1999 Acquisitions)
The consolidated unaudited pro forma results of operations for 1999 and
1998 present information assuming Emdersa, GPU GasNet and the 50% of GPU Power
UK (that GPU did not already own) were acquired January 1, 1998. The pro forma
amounts include certain adjustments, primarily to recognize interest expense,
amortization of goodwill and depreciation of assets having stepped-up bases, and
are not necessarily indicative of the actual results that would have been
realized had the acquisitions occurred on the assumed date of January 1, 1998,
nor are they necessarily indicative of future results. The consolidated
unaudited pro forma information is as follows for 1999 and 1998, respectively:
operating revenues of $6 billion and $6.9 billion; income before extraordinary
item of $493 million and $442 million; net income of $493 million and $416
million; basic and diluted earnings per share before extraordinary item of $3.94
and $3.47; and basic and diluted earnings per share of $3.94 and $3.27.
GPU, Inc. and Subsidiary Companies
8. INCOME TAXES
As of December 31, 2000 and 1999, Regulatory assets, net on the Consolidated Balance Sheets reflected $301 million and $296 million, respectively, of Income taxes recoverable through future rates (primarily related to liberalized depreciation), and Income taxes refundable through future rates of $23 million and $28 million, respectively (related to unamortized ITC), substantially due to the recognition of amounts not previously recorded with the adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in 1993, as follows:
(in millions)
2000 1999
---- ----
Income Taxes Recoverable Through Future Rates:
JCP&L $ 18 $ 2
Met-Ed 124 124
Penelec 159 170
--- ---
Total $301 $296
=== ===
Income Taxes Refundable Through Future Rates:
JCP&L $ 4 $ 14
Met-Ed 10 8
Penelec 9 6
--- ---
Total $ 23 $ 28
=== ===
|
Summaries of the components of deferred taxes as of December 31, 2000 and 1999 are as follows:
GPU, Inc. and Subsidiary Companies
(in millions)
Deferred Tax Assets Deferred Tax Liabilities
------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
Current: Current:
Unbilled revenue $ 24 $ 12 Revenue taxes $ 6 $ 5
Other 10 60 Deferred energy 3 3
----- ----- ----- -----
Total $ 34 $ 72 Total $ 9 $ 8
===== ===== ===== =====
Noncurrent: Noncurrent:
Unamortized ITC $ 32 $ 36 Liberalized
Decommissioning 111 77 depreciation:
Above-market NUGs 725 798 Previously flowed
Customer transition through $ 205 $ 222
charge - 533 Future revenue
NUG Costs 62 - requirements 150 147
----- -----
Net gain on genera- Subtotal 355 369
tion asset sales 184 499 Liberalized
Deferred foreign depreciation 552 659
tax credits 145 137 Customer transition
Other 474 448 charge 795 1,451
----- -----
Total $1,733 $2,528 Net loss on genera-
===== =====
tion asset sales 292 218
Market transition
charge 100 -
Decommissioning 116 -
Purchase accounting
basis difference 482 573
Other 402 293
----- -----
Total $3,094 $3,563
===== =====
|
(in millions)
Deferred Tax Assets Deferred Tax Liabilities
------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
Current: Current:
Unbilled revenue $ 21 $ 2 Revenue taxes $ 6 $ 5
=== ===
Deferred Energy 2 3
--- ---
Total $ 8 $ 8
=== ===
Noncurrent: Noncurrent:
Unamortized ITC $ 13 $ 23 Liberalized
Decommissioning 15 31 depreciation:
Contributions in aid Previously flowed
of construction 20 21 through $ 41 $ 35
Revenues subject Future revenue
to refund 47 47 requirements 33 29
--- ---
Net gain on genera- Subtotal 74 64
tion asset sales 93 73 Liberalized
Other - 27 depreciation 261 368
--- ---
Total $188 $222 Forked River - 7
=== ===
Net loss on genera-
tion asset sales 291 58
Market transition
charge 100 -
Decommissioning 56 -
Other 84 74
--- ---
Total $866 $571
=== ===
|
GPU, Inc. and Subsidiary Companies
Met-Ed:
------
(in millions)
Deferred Tax Assets Deferred Tax Liabilities
------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
Current: Noncurrent:
Unbilled revenue $ 2 $ 3 Liberalized
=== ===
depreciation:
Noncurrent: Previously flowed
Unamortized ITC $ 10 $ 8 through $ 71 $ 81
Decommissioning 63 27 Future revenue
Above-market NUGs 296 303 requirements 51 49
--- ---
Customer transition Subtotal 122 130
charge - 160 Liberalized
Generation revenue depreciation 132 129
requirements 24 24 Customer transition
Net gain on genera- charge 382 594
tion asset sales 2 161 Net loss on genera-
Other 53 55 tion asset sales - 110
--- ---
Total $448 $738 Decommissioning 62 -
=== ===
Other 30 30
--- ---
Total $728 $993
=== ===
Penelec:
-------
(in millions)
Deferred Tax Assets Deferred Tax Liabilities
------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
Current: Noncurrent:
Unbilled revenue $ 2 $ 8 Liberalized
===== =====
depreciation:
Noncurrent: Previously flowed
Unamortized ITC $ 9 $ 5 through $ 92 $ 103
Decommissioning 35 19 Future revenue
Above-market NUGs 428 494 requirements 66 69
----- -----
Customer transition Subtotal 158 172
charge - 374 Liberalized
NUG Costs 83 - depreciation 158 155
Generation revenue Customer transition
requirements 23 23 charge 412 856
Net gain on genera- Net loss on genera-
tion asset sales 89 264 tion asset sales - 51
Other 42 46 Other 8 16
----- ----- ----- -----
Total $ 709 $1,225 Total $ 736 $1,250
===== ===== ===== =====
|
The reconciliations of net income to book income subject to tax and of the federal statutory rate to combined federal and state effective tax rates, are as follows:
GPU, Inc. and Subsidiary Companies
GPU, Inc. and Subsidiary Companies:
----------------------------------
(in millions)
2000 1999 1998
---- ---- -----
Net income $234 $459 $360
Preferred stock dividends 7 9 11
Loss on preferred stock reacquisition - 2 -
Income tax expense 182 294 250
--- --- ---
Book income subject to tax $423* $764* $621*
=== === ===
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 9 5 5
Amortization of ITC (4) (6) (1)
Australian tax rate reduction (2) - -
PowerNet sale 8 - -
Other, net (3) 4 1
--- --- ---
Effective income tax rate 43% 38% 40%
=== === ===
|
* Includes pre-tax foreign operations income of $228 million, $331 million and $238 million, of which $15 million, $85 million and $88 million, respectively for 2000, 1999 and 1998, are included in Equity in undistributed earnings/(loss) of affiliates in the Consolidated Statements of Income. For 2000, pre-tax foreign operations income excludes a loss of $372 million on sale of PowerNet.
JCP&L:
----- (in millions)
2000 1999 1998
---- ---- -----
Net income $211 $172 $222
Income tax expense 120 101 145
--- --- ---
Book income subject to tax $331 $273 $367
=== === ===
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 7 6 5
Amortization of ITC, net (4) (5) -
Other, net (2) 1 (1)
--- --- ---
Effective income tax rate 36% 37% 39%
=== === ===
Met-Ed:
------
(in millions)
2000 1999 1998
---- ---- ----
Net income $ 82 $ 96 $ 51
Income tax expense 44 61 33
--- --- ---
Book income subject to tax $126 $157 $ 84
=== === ===
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 6 7 6
Amortization of ITC (1) (8) (2)
Other, net (5) 5 -
--- --- ---
Effective income tax rate 35% 39% 39%
=== === ===
|
GPU, Inc. and Subsidiary Companies
Penelec:
-------
(in millions)
2000 1999 1998
---- ---- ----
Net income $ 39 $153 $ 40
Income tax expense 30 54 31
--- --- ---
Book income subject to tax $ 69 $207 $ 71
=== === ===
Federal statutory rate 35% 35% 35%
State tax, net of federal benefit 5 7 8
Amortization of ITC, net (2) (11) -
Other, net 5 (5) 1
--- --- ---
Effective income tax rate 43% 26% 44%
=== === ===
|
Federal and state income tax expense is comprised of the following:
(in millions)
2000 1999 1998
---- ---- -----
Provisions for taxes currently payable:
Domestic $(174) $ 775 $290
Foreign 34 60 22
--- --- ---
Total provision for taxes (140) 835 312
--- --- ---
Deferred income taxes:
Liberalized depreciation (100) (252) 2
Foreign deferred taxes 27 80 31
Unbilled revenues 6 19 -
Gain/(loss) on sale of property 395 (406) -
Decommissioning 26 87 (19)
PA Restructuring (FAS 71) - 61 (15)
Operating nonutility generators (187) - -
Customer transition charge 124 - -
Market transition charge 76 21 -
Nonutility generation contract buyout costs (56) (14) (11)
Provision for rate refunds - (47) (10)
OPEBs - 2 (12)
Other 28 (45) (19)
--- --- ---
Deferred income taxes, net 339 (494) (53)
--- --- ---
Amortization of ITC, net (17) (47) (9)
--- --- ---
Income tax expense $ 182 $ 294 $250
=== === ===
|
The foreign taxes in the above table for 2000, 1999 and 1998 include $5 million ($19 million Current; $(14) million Deferred), $53 million ($16 million Current; $37 million Deferred) and $27 million ($10 million Current; $17 million Deferred) in foreign tax expense which is netted in Equity in undistributed earnings/(loss) of affiliates in the Consolidated Statements of Income. Included in the ITC Amortization is the recognition of $10 million and $36 million for 2000 and 1999, respectively of ITC benefit resulting from the sale of generation plants.
GPU, Inc. and Subsidiary Companies
JCP&L: (in millions)
-----
2000 1999 1998
---- ---- -----
Provisions for taxes currently payable $(135) $197 $187
--- --- ---
Deferred income taxes:
Liberalized depreciation (106) (49) (11)
Decommissioning 62 22 (12)
Nonutility generation contract buyout costs (20) (19) -
Provision for rate refund - (47) -
Unbilled revenue (3) 19 -
Gain/(loss) sale of property 226 (16) -
Market transition charge 76 21 -
Other postemployment benefits - 4 (5)
Gain/Loss on reacquired debt - - 3
New Jersey revenue tax 4 - (2)
Deferral of energy costs - (1) 10
Abandonment loss - Forked River - (4) (4)
Nuclear outage maintenance costs 34 3 3
Accretion income - - 4
Pension expense/VERP - (2) (2)
Demand-side management 4 (7) -
Global settlement - 2 (8)
Gas site & investigation MGP
insurance recovery - - (8)
Other (7) (10) (6)
--- --- ---
Deferred income taxes, net 270 (84) (38)
--- --- ---
Amortization of ITC, net (15) (12) (4)
--- --- ---
Income tax expense $ 120 $101 $145
=== === ===
Met-Ed: (in millions)
------
2000 1999 1998
---- ---- ----
Provisions for taxes currently payable $ 22 $140 $ 56
--- --- ---
Deferred income taxes:
Liberalized depreciation 3 (88) 5
Decommissioning (31) 42 (5)
PA Restructuring (FAS 71) - 30 15
Operating nonutility generators (99) - -
Customer transition charge 118 - -
Nonutility generation contract buyout costs - 2 (9)
Provision for rate refund - - (11)
Unbilled revenue 3 - -
Gain/(loss) sale of property 49 (51) -
Other postemployment benefits - - (5)
Pension expense/VERP (5) - (3)
Nuclear outage maintenance costs - 3 (3)
Nonutility generation contract
over collections - - 8
CTC NUG deferrals - - (5)
Sustainable energy fund - - (2)
Other (15) (5) (6)
--- --- ---
Deferred income taxes, net 23 (67) (21)
--- --- ---
Amortization of ITC, net (1) (12) (2)
--- --- ---
Income tax expense $ 44 $ 61 $ 33
=== === ===
|
GPU, Inc. and Subsidiary Companies
Penelec: (in millions)
-------
2000 1999 1998
---- ---- ----
Provisions for taxes currently payable $ 15 $472 $ 47
--- --- ---
Deferred income taxes:
Liberalized depreciation 3 (114) 2
Decommissioning (4) 23 (2)
PA Restructuring (FAS 71) - 31 (11)
Operating nonutility generators (89) - -
Customer transition charge 6 - -
Nonutility generation contract buyout costs (36) 3 (1)
Unbilled revenue 7 - -
Gain/(loss) sale of property 120 (339) -
Other postemployment benefits - (2) (2)
Pension expense/VERP (4) - (2)
Nuclear outage maintenance costs - 2 (1)
Nonutility generation contract
over collections - - 6
CTC NUG deferrals (15) - 2
Sustainable energy fund 2 - (3)
Other 26 1 (2)
--- --- ---
Deferred income taxes, net 16 (395) (14)
--- --- ---
Amortization of ITC, net (1) (23) (2)
--- --- ---
Income tax expense $ 30 $ 54 $ 31
=== === ===
|
The IRS has completed its examinations of GPU's federal income tax returns through 1995.
9. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance expense and other taxes charged to operating expenses consisted of the following:
(in millions)
2000 1999 1998
---- ---- ----
Maintenance:
JCP&L $ 79 $ 84 $ 91
Met-Ed 23 48 49
Penelec 31 54 62
Other 51 24 -
--- --- ---
Total maintenance $184 $210 $202
=== === ===
|
GPU, Inc. and Subsidiary Companies
(in millions)
2000 1999 1998
---- ---- ----
Other taxes:
New Jersey Transitional Energy
Facility Assessment $ 48 $ 59 $ 67
--- --- ---
Pennsylvania state gross receipts:
Met-Ed 36 27 39
Penelec 37 27 40
--- --- ---
Total 73 54 79
--- --- ---
Real estate and personal property:
JCP&L 4 5 9
Met-Ed 2 4 6
Penelec 1 6 8
Other 41 24 -
--- --- ---
Total 48 39 23
--- --- ---
Stamp taxes (U.K.) - 6 -
--- --- ---
Other:
JCP&L 13 13 19
Met-Ed 6 9 13
Penelec 8 9 16
Other 25 2 2
--- --- ---
Total 52 33 50
--- --- ---
Total other taxes $221 $191 $219
=== === ===
|
The cost of services rendered to the GPU Energy companies by their
affiliates is as follows:
(in millions)
2000 1999 1998
---- ---- ----
JCP&L:
-----
Cost of services rendered by GPUN $211 $189 $182
Cost of services rendered by GPUS 253 322 26
Cost of services rendered by
GPU Generation, Inc. (Genco) - 69 51
--- --- ---
Total $464 $580 $259
=== === ===
Amount Charged to Income $259 $393 $239
=== === ===
Met-Ed:
------
Cost of services rendered by GPUN $ 2 $102 $ 59
Cost of services rendered by GPUS 97 152 40
Cost of services rendered by Genco - 96 108
--- --- ---
Total $ 99 $350 $207
=== === ===
Amount Charged to Income $ 77 $264 $180
=== === ===
Penelec:
-------
Cost of services rendered by GPUN $ 1 $ 51 $ 30
Cost of services rendered by GPUS 138 184 17
Cost of services rendered by Genco - 102 163
--- --- ---
Total $139 $337 $210
=== === ===
Amount Charged to Income $109 $259 $170
=== === ===
|
GPU, Inc. and Subsidiary Companies
For the years 2000, 1999 and 1998, JCP&L purchased $14 million, $22 million and $26 million, respectively, of energy from a cogeneration project in which an affiliate has a 50% partnership interest.
10. EMPLOYEE BENEFITS
GPU maintains defined benefit pension plans covering substantially all employees. GPU also provides certain retiree health care and life insurance benefits for substantially all US employees who reach retirement age while working for GPU. The following tables provide a reconciliation of the changes in the plans' benefit obligation and fair value of assets for the years ended December 31, 2000 and 1999, a statement of the funded status of the plans, the amounts recognized in the Consolidated Balance Sheets as of December 31, 2000 and 1999 and the weighted average assumptions used in the measurement of the benefit obligation. The pension benefit disclosure amounts for GPU, Inc. and Subsidiary Companies for the year 1999 reflect the acquisition of the remaining 50% of GPU Power UK by GPU in July of that year. Accordingly, the July 1999 benefit obligation and fair value of plan assets balances for GPU Power UK are shown next to the line items entitled "Acquisitions" and the post-acquisition amounts occurring in the second half of 1999 are included in the tables.
(in millions)
Other
Postretirement
Pension Benefits Benefits
---------------------- ------------------
2000 1999 2000 1999
---- ---- ---- ----
GPU, Inc. and Subsidiary Companies
----------------------------------
Change in benefit obligation:
Benefit obligation
at January 1: $ 3,157.8 $ 1,897.0 $ 737.1 $ 790.5
Acquisitions - 1,502.5 - -
Service cost 37.0 46.2 11.4 15.9
Interest cost 201.8 158.0 53.9 52.2
Plan amendments - 2.5 8.2 -
Actuarial (gain)/loss and
other items (102.3) (182.8) (57.8) (36.9)
Currency exchange (104.9) (4.0) - -
Benefits paid (205.4) (171.0) (37.2) (39.8)
Curtailments and settlements (18.9) (139.4) (5.7) (44.8)
Termination benefits 27.1 48.8 - -
------- ------- ----- ------
Benefit obligation
at December 31: $ 2,992.2 $ 3,157.8 $ 709.9 $ 737.1
======= ======= ===== =====
Change in plan assets:
Fair value of plan assets
at January 1: $ 4,343.4 $ 2,258.8 $ 543.3 $ 507.1
Acquisitions - 1,710.2 - -
Actual return on plan assets (172.4) 579.4 (7.2) 61.0
Employer contributions 1.4 1.8 11.2 15.0
Benefits paid (205.4) (171.0) (37.2) (39.8)
Currency exchange (117.5) (5.8) - -
Settlement and other items (35.4) (30.0) - -
------- ------- ----- -----
Fair value of plan assets
at December 31: $ 3,814.1 $ 4,343.4 $ 510.1 $ 543.3
======= ======= ===== =====
|
GPU, Inc. and Subsidiary Companies
(in millions)
Other
Postretirement
Pension Benefits Benefits
---------------------- ------------------
2000 1999 2000 1999
---- ---- ---- ----
GPU, Inc. and Subsidiary Companies (continued)
----------------------------------
Funded Status:
Funded status at December 31: $ 821.9 $ 1,185.6 $(199.8) $(193.8)
Unrecognized net actuarial
(gain)/loss (575.1) (953.0) (61.7) (54.2)
Unrecognized prior service cost 19.4 21.5 15.2 2.9
Unrecognized net transition
(asset)/obligation (0.9) (1.4) 111.8 143.3
------- ------- ------ -----
Net amount recognized $ 265.3 $ 252.7 $(134.5) $(101.8)
======= ======= ====== =====
Amounts recognized in the
Consolidated Balance Sheet
at December 31:
Prepaid benefit cost $ 286.0 $ 297.2 $ - $ 24.2
Accrued benefit liability (28.5) (45.3) (134.5) (126.0)
Intangible asset 1.6 0.8 - -
Accumulated other comprehensive
income 2.6 - - -
Deferred income taxes 3.6 - - -
------- ------- ----- ------
Net amount recognized $ 265.3 $ 252.7 $(134.5) $(101.8)
======= ======= ===== =====
|
Change in benefit obligation:
Benefit obligation
at January 1: $ 4.9 $ 509.7 $ 0.5 $ 198.2
Transfer to GPUS - (502.4) - (197.7)
Service cost 0.5 0.1 - -
Interest cost 1.5 0.4 - -
Actuarial (gain)/loss (1.7) (2.8) - -
Benefits paid (0.1) (0.1) - -
------- ------- ----- -----
Benefit obligation
at December 31: $ 5.1 $ 4.9 $ 0.5 $ 0.5
======= ======= ===== =====
Change in plan assets:
Fair value of plan assets
at January 1: $ 6.2 $ 639.9 $ 0.1 $ 137.0
Transfer to GPUS - (634.4) - (136.9)
Actual return on plan assets (0.1) 0.8 - -
Benefits paid (0.1) (0.1) - -
Change in allocations (2.6) - - -
------- ------- ----- -----
Fair value of plan assets
at December 31: $ 3.4 $ 6.2 $ 0.1 $ 0.1
======= ======= ===== =====
|
GPU, Inc. and Subsidiary Companies
(in millions)
Other
Postretirement
Pension Benefits Benefits
---------------------- ------------------
2000 1999 2000 1999
---- ---- ---- ----
JCP&L (continued)
-----
Funded Status:
Funded status at December 31: $ (1.7) $ 1.3 $ (0.4) $ (0.4)
Unrecognized net actuarial
(gain)/loss (0.1) (3.2) 0.2 (0.2)
Unrecognized net transition
(asset)/obligation 0.1 0.1 0.1 0.1
------- ------- ----- -----
Net amount recognized $ (1.7) $ (1.8) $ (0.1) $ (0.5)
======= ======= ===== =====
Amounts recognized in the
Consolidated Balance Sheet
at December 31:
Accrued benefit liability $ (1.8) $ (1.9) $ (0.1) $ (0.5)
Intangible Asset 0.1 0.1 - -
------- ------- ----- -----
Net amount recognized $ (1.7) $ (1.8) $ (0.1) $ (0.5)
======= ======= ===== =====
|
Met-Ed
------
Change in benefit obligation:
Benefit obligation
at January 1: $ 10.3 $ 377.9 $ 1.9 $ 163.0
Transfer to GPUS - (367.9) - (160.8)
Service cost 0.2 0.2 0.1 0.1
Interest cost 0.8 0.5 0.2 0.2
Plan amendments - - 0.1 -
Actuarial (gain)/loss (1.0) (0.2) (0.3) (0.6)
Benefits paid (0.1) (0.2) - -
------- ------- ----- -----
Benefit obligation
at December 31: $ 10.2 $ 10.3 $ 2.0 $ 1.9
======= ======= ===== =====
Change in plan assets:
Fair value of plan assets
at January 1: $ 9.0 $ 428.3 $ 0.6 $ 62.4
Transfer to GPUS - (420.2) - (61.9)
Actual return on plan assets (0.4) 1.1 - 0.1
Benefits paid (0.1) (0.2) - -
Change in allocations 3.0 - (0.1) -
------- ------- ----- -----
Fair value of plan assets
at December 31: $ 1.5 $ 9.0 $ 0.5 $ 0.6
======= ======= ===== =====
Funded Status:
Funded status at December 31: $ 1.3 $ (1.3) $ (1.5) $ (1.3)
Unrecognized net actuarial
(gain)/loss (2.2) 0.4 0.8 0.7
Unrecognized net transition
(asset)/obligation - - 0.3 0.3
------- ------- ----- -----
Net amount recognized $ (0.9) $ (0.9) $ (0.4) $ (0.3)
======= ======= ===== =====
|
GPU, Inc. and Subsidiary Companies
(in millions)
Other
Postretirement
Pension Benefits Benefits
-------------------- ------------------
2000 1999 2000 1999
---- ---- ---- ----
Met-Ed (continued)
------
Amounts recognized in the
Consolidated Balance Sheet at
December 31:
Accrued benefit liability $ (0.9) $ (0.9) $ (0.4) $ (0.3)
------- ------- ----- -----
Net amount recognized $ (0.9) $ (0.9) $ (0.4) $ (0.3)
======= ======= ===== =====
|
Penelec
-------
Change in benefit obligation:
Benefit obligation
at January 1: $ 3.0 $ 419.7 $ - $ -
Transfer to GPUS - (416.1) - -
Interest cost 0.2 0.2 - -
Actuarial (gain)/loss 0.1 (0.7) - -
Benefits paid (0.1) (0.1) - -
------- ------- ----- -----
Benefit obligation
at December 31: $ 3.2 $ 3.0 $ - $ -
======= ======= ===== =====
Change in plan assets:
Fair value of plan assets
at January 1: $ 1.9 $ 535.2 $ - $ -
Transfer to GPUS - (533.5) - -
Actual return on plan assets (0.1) 0.3 - -
Benefits paid (0.1) (0.1) - -
Change in allocations (0.1) - - -
------- ------- ----- -----
Fair value of plan assets
at December 31: $ 1.6 $ 1.9 $ - $ -
======= ======= ===== =====
Funded Status:
Funded status at December 31: $ (1.6) $ (1.1) $ - $ -
Unrecognized net actuarial
(gain)/loss 0.6 0.1 - -
Unrecognized net transition
obligation 0.1 0.1 - -
------- ------- ----- -----
Net amount recognized $ (0.9) $ (0.9) $ - $ -
======= ======= ===== =====
Amounts recognized in the
Consolidated Balance Sheet
at December 31:
Accrued benefit liability $ (1.0) $ (1.0) $ - $ -
Intangible Asset 0.1 0.1 - -
------- ------- ----- -----
Net amount recognized $ (0.9) $ (0.9) $ - $ -
======= ======= ===== =====
|
GPU, Inc. and Subsidiary Companies
Other
Postretirement
Pension Benefits Benefits
---------------- -----------------
2000 1999 2000 1999
---- ---- ---- ----
Weighted average assumptions
as of December 31 for GPU, Inc.
and Subsidiary Companies:
Discount rate 7.1% 7.0% 7.5% 7.5%
Expected return on plan assets 8.5% 8.1% 9.25% 8.5%
Rate of compensation increase 4.7% 4.7% - -
Weighted average assumptions
as of December 31 for JCP&L,
Met-Ed and Penelec:
Discount rate 7.5% 7.5% 7.5% 7.5%
Expected return on plan assets 9.25% 8.5% 9.25% 8.5%
Rate of compensation increase - 4.5% - -
|
The following tables provide the components of net periodic pension and other postretirement benefit costs. As previously discussed, the 1999 net periodic pension cost for GPU, Inc. and Subsidiary Companies reflects post-acquisition amounts related to GPU Power UK for the second half of the year.
Pension Plans:
(in millions)
2000 1999 1998
---- ---- ----
GPU, Inc. and Subsidiary Companies
----------------------------------
Service cost $ 37.0 $ 46.2 $ 36.1
Interest cost 201.8 158.0 121.6
Expected return on plan assets (273.9) (198.0) (140.1)
Amortization of transition (asset)/obligation (0.5) (0.5) (0.5)
Other amortization (12.0) 2.1 1.1
----- ----- -----
Net periodic pension cost $ (47.6) $ 7.8 $ 18.2
===== ===== =====
|
Service cost $ 0.5 $ 0.1 $ 7.2
Interest cost 1.5 0.4 33.7
Expected return on plan assets (2.2) (0.3) (39.6)
Amortization of transition (asset)/obligation - - (0.3)
Other amortization (0.3) - 0.6
----- ----- ------
Net periodic pension cost $ (0.5) $ 0.2 $ 1.6
===== ===== =====
Met-Ed
------
Service cost $ 0.2 $ 0.2 $ 6.3
Interest cost 0.8 0.5 23.4
Expected return on plan assets (0.9) (0.5) (25.4)
Amortization of transition (asset)/obligation - - (0.1)
Other amortization - - 0.4
----- ----- -----
Net periodic pension cost $ 0.1 $ 0.2 $ 4.6
===== ===== =====
|
GPU, Inc. and Subsidiary Companies
(in millions)
2000 1999 1998
---- ---- ----
Penelec
-------
Service cost $ - $ - $ 4.1
Interest cost 0.2 0.2 27.2
Expected return on plan assets (0.1) (0.1) (33.1)
Amortization of transition (asset)/obligation - - 0.3
Other amortization - - 0.4
----- ----- -----
Net periodic pension cost $ 0.1 $ 0.1 $ (1.1)
===== ===== =====
|
In 2000, the effects of lower than expected salary increases and the GPU PowerNet divestiture resulted in decreases in the benefit obligation as of December 31, 2000 of $30 million and $36 million, respectively. No significant portions of these amounts relate to JCP&L, Met-Ed or Penelec. In 1999, the effect of increasing the discount rate assumption for the US pension plans from 6.75% to 7.5% resulted in a $162 million (JCP&L $0.5 million; Met-Ed $1.0 million; Penelec $0.3 million; Other $160.2 million) decrease in the benefit obligation as of December 31, 1999.
The above net periodic pension cost amount for 2000 excludes pre-tax charges of $9 million related to JCP&L, which were deferred pending future rate recovery, resulting from employee terminations related to continuing generation asset divestiture. The above net periodic pension cost amount for 1999 excludes pre-tax credits of $31 million, of which $30 million was deferred for return to customers, resulting from employee terminations related to generation asset divestiture. No portion of these amounts relate to JCP&L, Met-Ed or Penelec. The above net periodic pension cost amount for 1998 excludes pre-tax charges of $30 million (JCP&L $8 million; Met-Ed $11 million; Penelec $9 million; Other $2 million), of which $22 million (JCP&L $6 million; Met-Ed $9 million; Penelec $7 million) was deferred pending future rate recovery, resulting from early retirement programs in 1998.
Other Postretirement Benefits:
(in millions)
2000 1999 1998
---- ---- ----
GPU, Inc. and Subsidiary Companies
----------------------------------
Service cost $ 11.4 $ 15.9 $ 16.4
Interest cost 53.9 52.2 54.4
Expected return on plan assets (41.8) (37.5) (29.5)
Amortization of transition (asset)/obligation 10.8 14.6 15.8
Other amortization (0.8) 1.6 5.0
---- ---- ----
Net periodic postretirement benefit cost $ 33.5 $ 46.8 $ 62.1
==== ==== ====
JCP&L
-----
Service cost $ - $ - $ 2.9
Interest cost - - 13.9
Expected return on plan assets - - (7.3)
Amortization of transition obligation - - 4.4
Other amortization - - 0.7
---- ---- ----
Net periodic postretirement benefit cost $ - $ - $ 14.6
==== ==== ====
|
GPU, Inc. and Subsidiary Companies
(in millions)
2000 1999 1998
---- ---- ----
Met-Ed
------
Service cost $ 0.1 $ 0.1 $ 2.9
Interest cost 0.2 0.2 11.2
Expected return on plan assets (0.1) - (3.9)
Amortization of transition obligation - - 3.1
Other amortization - - 1.7
---- ---- ----
Net periodic postretirement benefit cost $ 0.2 $ 0.3 $ 15.0
==== ==== ====
Penelec
-------
Service cost $ - $ - $ 2.0
Interest cost - - 15.1
Expected return on plan assets - - (8.9)
Amortization of transition obligation - - 4.8
Other amortization - - 1.4
---- ---- ----
Net periodic postretirement benefit cost $ - $ - $ 14.4
==== ==== ====
|
In 2000, lower than expected claims experience resulted in a $32 million decrease in the benefit obligation as of December 31, 2000. No significant portion of this amount relates to JCP&L, Met-Ed or Penelec. In 1999, the effect of increasing the assumption associated with medical inflation rates was partially offset by the effect of increasing the discount rate assumption from 6.75% to 7.5% and resulted in a $45 million increase in the benefit obligation as of December 31, 1999. No significant portion of this amount relates to JCP&L, Met-Ed or Penelec. The benefit obligation was determined by application of the terms of the medical and life insurance plans, including the effects of established maximums on covered costs, together with relevant actuarial assumptions and health-care cost trend rates of 9.5% for those not eligible for Medicare and 10.5% for those eligible for Medicare, then decreasing gradually to 6% in 2009 and thereafter. These costs also reflect the implementation of an annual cost-cap of 6% for individuals who retire after December 31, 1995 and reach age 65. The effect of a 1% change in these assumed cost trend rates would increase or decrease the benefit obligation by $36.9 million or $36.6 million, respectively. In addition, such a 1% change would increase or decrease the aggregate service and interest cost components of net periodic postretirement health-care cost by $3.4 million or $3.3 million, respectively. No significant portion of the effect of such a 1% change relates to JCP&L, Met-Ed or Penelec.
The above net periodic postretirement benefit cost amount for 2000 excludes pre-tax charges of $7 million, which were deferred pending future rate recovery, resulting from employee terminations related to continuing generation asset divestiture. No portion of this amount relates to JCP&L, Met-Ed or Penelec. The above net periodic postretirement benefit cost amount for 1999 excludes pre-tax charges of $3 million, which were deferred pending future rate recovery, resulting from employee terminations related to generation asset divestiture. No portion of this amount relates to JCP&L, Met-Ed or Penelec. The above net periodic postretirement benefit cost amount for 1998 excludes pre-tax charges of $20 million (JCP&L $6 million; Met-Ed $6 million; Penelec $7 million; Other $1 million), of which $12 million (JCP&L $3 million; Met-Ed $5 million; Penelec $4 million) was deferred pending future rate recovery, resulting from early retirement programs in 1998.
GPU, Inc. and Subsidiary Companies
In JCP&L's 1993 base rate proceeding, the NJBPU allowed JCP&L to collect $3 million annually for incremental postretirement benefit costs, charged to expense, and recognized as a result of FAS 106. Based on the final order, and in accordance with EITF Issue 92-12, "Accounting for OPEB Costs by Rate-Regulated Enterprises," JCP&L has deferred the amounts above that level. A 1997 Stipulation of Final Settlement (Final Settlement) allows JCP&L to recover and amortize the deferred balance at December 31, 1997 over a fifteen-year period. In addition, the Final Settlement allows JCP&L to recover current amounts accrued pursuant to FAS 106, including amortization of the transition obligation. Met-Ed has deferred the incremental postretirement benefit costs associated with the adoption of FAS 106 and in accordance with EITF Issue 92-12, as authorized by the PaPUC in its 1993 base rate order. In accordance with EITF Issue 92-12, effective January 1998, Met-Ed has ceased deferring these costs. The approximately one-third generation-related portion of the deferred balance at December 31, 1997 is to be recovered in rates over a twelve-year period pursuant to the PaPUC's Restructuring Orders. The remaining two-thirds for the transmission and distribution-related portion is to be amortized over a fourteen-year period beginning January 1999, pursuant to the Restructuring Orders. In 1994, Penelec determined that its FAS 106 costs, including costs deferred since January 1993, were not probable of recovery and charged those deferred costs to expense.
Certain employees of MYR are covered by union-sponsored collectively bargained defined benefit plans. Expenses for these plans amounted to approximately $26 million, $27 million and $26 million in 2000, 1999 and 1998, respectively, as determined in accordance with negotiated labor contracts.
GPU also maintains savings plans for substantially all US employees. These plans provide for employee contributions up to specified limits and various levels of employer matching contributions. The matching contributions for GPU were as follows:
(in millions)
Company 2000 1999 1998
------- ---- ---- ----
JCP&L $ 0.1 $ 0.1 $ 2.8
Met-Ed 0.1 0.1 3.4
Penelec - - 1.6
Other 10.8 13.8 5.8
---- ---- ----
Total $11.0 $14.0 $13.6
==== ==== ====
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11. LEASES
GPU Energy companies
Capital lease obligations at December 31, 2000 and 1999 totaled $2 million and $48 million (consisting primarily of Oyster Creek nuclear fuel, as discussed below), respectively.
Prior to the sales of TMI-1 and Oyster Creek to AmerGen in December 1999 and August 2000, respectively, the GPU Energy companies had nuclear fuel lease agreements with nonaffiliated fuel trusts for the plant. Upon the sales of TMI-1 and Oyster Creek, the related fuel leases were terminated and
GPU, Inc. and Subsidiary Companies
all outstanding amounts due under the related credit facilities were paid. Lease expense consists of an amount designed to amortize the cost of the nuclear fuel as consumed plus interest costs. For the years ended December 31, 2000, 1999 and 1998, these amounts were as follows:
(in millions)
Company 2000 1999 1998
------- ---- ---- ----
JCP&L $ 13 $ 34 $ 30
Met-Ed - 13 16
Penelec - 6 8
---- ---- ----
Total $ 13 $ 53 $ 54
==== ==== ====
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Met-Ed and JCP&L have sold and leased back a portion of their respective ownership interests in the Merrill Creek Reservoir project. The annual minimum lease payments under these operating leases, which have remaining terms of 32 years, range from approximately $3.6 million to $6.7 million (Met-Ed $1.6 million to $2.9 million; JCP&L $2 million to $3.8 million) over the next five years, net of reimbursements from sub-lessees. JCP&L is recovering its Merrill Creek lease payments, net of reimbursements, through distribution rates. Met-Ed's Merrill Creek lease payments were offset against the actual net divestiture proceeds received from the 1999 sales of its generation assets.
GPU, Inc.
A subsidiary of GPUI sold and leased back the Lake electric cogeneration facility for an initial term of eleven years, expiring in August 2004, for which GPU, Inc. has guaranteed payments of up to $8.1 million. Although GPU, Inc. sold GPUI (including Lake) in 2000, GPU, Inc. has remained on the guaranty, and has obtained an indemnity from Aquila's parent. In addition, a 20-year site lease was entered into for the Lake facility expiring in 2013. Prior to its sale to Aquila, GPUI accounted for these leases as operating leases and GPU's related rent expense for 2000 and 1999 totaled $11.3 million and $12.3 million, respectively.
12. COMMITMENTS AND CONTINGENCIES
On August 8, 2000, GPU, Inc. entered into an agreement to merge with FirstEnergy, an Ohio corporation, headquartered in Akron, Ohio. Under the merger agreement, FirstEnergy would acquire all of the outstanding shares of GPU's common stock for approximately $4.5 billion in cash and FirstEnergy common stock.
Under the agreement, GPU stockholders would receive $36.50 for each share of GPU common stock they own, payable in cash or the equivalent of $36.50 per share in FirstEnergy common stock, as long as FirstEnergy's common stock price is between $24.24 and $29.63. Each GPU stockholder would be able to elect the form of consideration, subject to proration so that the aggregate consideration to all GPU stockholders will be 50 percent cash and 50 percent FirstEnergy common stock. Each GPU stockholder's share converted into FirstEnergy common stock would be exchanged for not less than 1.2318 and not more than 1.5055 shares of FirstEnergy common stock, depending on the average closing price of FirstEnergy stock during the 20-day trading period ending on the sixth trading date prior to the merger closing.
GPU, Inc. and Subsidiary Companies
The merger has been approved by the Boards of Directors and stockholders of GPU, Inc. and FirstEnergy and is expected to close promptly after all of the conditions to the consummation of the merger (including the receipt of all necessary regulatory approvals, provided that such approvals will not impose terms and conditions that would reasonably be expected to result in a "material adverse effect," as defined in the merger agreement, on the combined company, and there being no "material adverse effect" on either GPU or FirstEnergy since June 30, 2000 or March 31, 2000, respectively), are fulfilled or waived. Relevant factors would include the nature of any order issued by the regulatory authorities, the financial and business conditions of each company, and whether, and the extent by which, any developments relate to general economic conditions. In testimony before the PaPUC, FirstEnergy stated that FirstEnergy will carefully review the PaPUC's action with respect to GPU's requested PLR relief on the financial condition of GPU to determine whether the consequences would have a "material adverse effect" on GPU or the combined company. The receipt of all necessary regulatory approvals is expected to take approximately nine to twelve months from the date of the merger agreement. There can be no assurance as to the outcome of these matters.
With the transition to a competitive marketplace for generation service in New Jersey and Pennsylvania, certain generation-related costs, which generally would be recoverable in a regulated environment, may no longer be recoverable. These costs are generally referred to as stranded costs.
In 1999, the NJBPU issued a Summary Order with respect to JCP&L's rate unbundling, stranded cost and restructuring filings. JCP&L is awaiting a final NJBPU order. The Summary Order provides for, among other things, full recovery of what otherwise would have become stranded costs, as well as customer choice of electric generation supplier beginning August 1, 1999 and rate reductions for all consumers. In addition, the NJBPU issued separate Orders approving the sales of JCP&L's generating assets; however, the NJBPU deferred making a final determination of the net proceeds and stranded costs related to the generating asset divestitures until an IRS ruling regarding the treatment of associated federal income tax benefits is received.
In 1998, the PaPUC issued amended Restructuring Orders approving Settlement Agreements entered into by Met-Ed and Penelec which, among other things, provide for customer choice of electric generation supplier beginning January 1, 1999 and a one-year (1999) reduction in retail distribution rates for all consumers. The Orders also provide for recovery of a substantial portion of what otherwise would have become stranded costs, subject to Phase II proceedings following the completion of Met-Ed's and Penelec's generating asset divestitures, to make a final determination of the extent of that stranded cost recovery. In 2000, Met-Ed and Penelec submitted Phase II Reports to the PaPUC supporting their actual net divestiture proceeds and providing a reconciliation of stranded costs pursuant to the 1998 Restructuring Orders.
On December 20, 2000, the PaPUC issued a Phase II Order which disallows $28 million (Met-Ed $16 million; Penelec $12 million) of the requested $304 million (Met-Ed $226 million; Penelec $78 million) of additional stranded costs above those amounts granted in the 1998 Orders. Met-Ed and Penelec had anticipated a disallowance of a portion of stranded costs, and established a
GPU, Inc. and Subsidiary Companies
$25 million pre-tax (Met-Ed $19 million; Penelec $6 million) reserve in 1999. In addition, as a result of the Phase II Order, Met-Ed and Penelec recognized pre-tax income of $66 million (Met-Ed $45 million; Penelec $21 million) due primarily to pension curtailment gains associated with employees terminated as a result of the sale of generating facilities in 1999, and the reversal of certain liabilities and changes in estimates and assumptions related to Met-Ed's leasehold interest in the Merrill Creek Reservoir project. The Phase II Order also deferred a decision on Met-Ed's requested increase in rates, beginning in 2006, for recovery of Met-Ed's generation-related stranded costs. In addition, the Order requires Met-Ed and Penelec to seek an IRS ruling regarding the return of certain unamortized investment tax credits and excess deferred income tax benefits to ratepayers. If the IRS ruling ultimately supports returning these tax benefits to ratepayers, Met-Ed and Penelec would then reduce stranded costs by $40 million and record a corresponding charge to income. For further information, see Note 6, Accounting for Extraordinary and Non-Recurring Items.
As a result of the NJBPU's and the PaPUC's Restructuring Orders, the GPU Energy companies are required to supply electricity to customers who do not choose an alternate supplier. Given that the GPU Energy companies have essentially exited the generation business and will have to supply electricity to non-shopping customers almost entirely from contracted and open market purchases, there will be increased risks associated with supplying that electricity. JCP&L is permitted to defer for future recovery the amount by which its reasonable and prudently incurred costs associated with providing basic generation service to non-shopping customers exceed amounts currently reflected in its rates for basic generation service. Met-Ed and Penelec, however, are unable to recover energy costs in excess of their established rate caps, which are in effect for varying periods.
During 2000, market prices at which Met-Ed and Penelec were required to purchase electricity for their retail supply customers at times substantially exceeded the amounts Met-Ed and Penelec were allowed to charge for that electricity under their capped generation rates. This situation has resulted in a substantial loss of earnings for Met-Ed and Penelec in 2000, especially during the peak Summer months, and this condition is expected to continue so long as wholesale energy prices remain high, and Met-Ed and Penelec are not granted regulatory relief.
Given this situation, on November 29, 2000, Met-Ed and Penelec filed a petition with the PaPUC seeking permission to defer for future recovery their energy costs in excess of established generation rate caps. Various parties to the proceeding filed motions to dismiss the petition. On January 19, 2001, Met-Ed and Penelec made a further request that they be permitted to implement their proposed deferral mechanism pending the PaPUC's final action on their petition. On January 24, 2001, the PaPUC denied, without prejudice, the motions to dismiss Met-Ed's and Penelec's petition and recommended that the companies provide support for a rate cap exception based on the criteria in the Customer Choice and Competition Act. In addition, the PaPUC consolidated the petition with the GPU/FirstEnergy merger proceeding for consideration and resolution in accord with the merger procedural schedule, which establishes a May 2001 date for a PaPUC order in both cases. In February 2001, Met-Ed and Penelec filed a supplement to their petition and supporting testimony which they believe establish that the PaPUC should grant them exceptions to their rate caps. In addition, Met-Ed and Penelec stated that as an alternative to the deferral mechanism they previously proposed, the circumstances would warrant an immediate increase in their present rate
GPU, Inc. and Subsidiary Companies
caps. There can be no assurance regarding the degree, if any, to which Met-Ed and Penelec may be able to recover their costs to supply electricity in excess of amounts currently reflected in their capped rates.
The evolving competitive generation market has created uncertainty regarding the forecasting of the GPU Energy companies' energy supply needs, which has caused the GPU Energy companies to seek shorter-term agreements offering more flexibility. The GPU Energy companies' supply plan focuses on short- to intermediate-term commitments (one month to three years), with any residual needs then being purchased from the short-term market (one hour to one month).
The GPU Energy companies have entered into agreements with third party suppliers to purchase capacity and energy through 2004. Payments pursuant to these agreements, which include firm commitments as well as certain assumptions regarding, among other things, call/put arrangements, are estimated to be $1.2 billion in 2001, $265 million in 2002, $92 million in 2003 and $5 million in 2004.
Pursuant to the mandates of the federal Public Utility Regulatory Policies Act and state regulatory directives, the GPU Energy companies were required to enter into power purchase agreements with nonutility generators (NUGs) for the purchase of energy and capacity, which agreements have remaining terms of up to 20 years. The rates under virtually all of the GPU Energy companies' NUG agreements are substantially in excess of current and projected prices from alternative sources. The following table shows actual payments from 1998 through 2000, and estimated payments thereafter through 2005:
Payments Under NUG Agreements
-----------------------------
(in millions)
Total JCP&L Met-Ed Penelec
----- ----- ------ -------
1998 $788 $403 $174 $211
1999 774 388 167 219
2000 734 364 153 217
2001 775 438 145 192
2002 804 466 148 190
2003 813 465 153 195
2004 816 458 157 201
2005 798 443 160 195
|
The NJBPU Summary Order provides JCP&L assurance of full recovery of its NUG costs (including above-market NUG costs and certain buyout costs); and the PaPUC Restructuring Orders provide Met-Ed and Penelec assurance of full recovery of their above-market NUG costs and certain NUG buyout costs. At December 31, 2000, the GPU Energy companies have recorded, on a present value basis, a total estimated liability of $3.3 billion (JCP&L $1.7 billion; Met-Ed $0.7 billion; Penelec $0.9 billion) on the Consolidated Balance Sheet for above-market NUG costs which is offset by corresponding regulatory assets. The GPU Energy companies are continuing efforts to reduce the above-market costs of these agreements. There can be no assurance as to the extent to which these efforts will be successful.
GPU, Inc. and Subsidiary Companies
In 1997, the NJBPU approved a Stipulation of Final Settlement which, among other things, provided for the recovery of costs associated with the buyout of the Freehold Cogeneration power purchase agreement (Freehold buyout). The NJBPU approved the cost recovery of up to $135 million, over a seven-year period, on an interim basis subject to refund. The NJBPU's Summary Order provides for the continued recovery of the Freehold buyout in the MTC, but has not altered the interim nature of such recovery, pending a final decision by the NJBPU. There can be no assurance as to the outcome of this matter.
JCP&L, in 1999, and Met-Ed and Penelec in 1998, discontinued the application of Statement of Financial Accounting Standards No. 71 (FAS 71), "Accounting for the Effects of Certain Types of Regulation," and adopted the provisions of Statement of Financial Accounting Standards No. 101 (FAS 101), "Regulated Enterprises - Accounting for the Discontinuation of Application of FASB Statement No. 71," and Emerging Issues Task Force (EITF) Issue 97-4, "Deregulation of the Pricing of Electricity - Issues Related to the Application of FAS 71 and FAS 101," with respect to their electric generation operations. The transmission and distribution portion of the GPU Energy companies' operations continues to be subject to the provisions of FAS 71. Regulatory assets, net as reflected in the December 31, 2000 and December 31, 1999 Consolidated Balance Sheets in accordance with the provisions of FAS 71 and EITF Issue 97-4 were as follows:
(in thousands)
--------------------------
2000 1999
----------- ----------
GPU, Inc. and Subsidiaries
--------------------------
Market transition charge (MTC) / basic
generation service $2,732,926 $2,397,071
Competitive transition charge (CTC) 1,680,484 1,709,258
Income taxes recoverable through future
rates, net 263,942 280,268
Costs recoverable through distribution rates 257,135 296,842
Societal benefits charge 195,011 116,941
Three Mile Island Unit 2 (TMI-2)
decommissioning costs 60,362 100,794
Above-market deferred NUG costs (178,573) (252,348)
Other, net 21,717 67,420
--------- ---------
Total regulatory assets, net $5,033,004 $4,716,246
========= =========
JCP&L
-----
Regulatory assets, net:
MTC / basic generation service $2,732,926 $2,397,071
Costs recoverable through distribution rates 257,135 296,842
Societal benefits charge 195,011 116,941
--------- ---------
Total regulatory assets, net $3,185,072 $2,810,854
========= =========
Met-Ed
------
Regulatory assets, net:
CTC $1,048,211 $ 999,623
Income taxes recoverable through future
rates, net 114,543 115,713
TMI-2 decommissioning costs 27,610 65,455
Above-market NUG deferral costs 8,485 545
Other, net 29,132 51,529
--------- ---------
Total regulatory assets, net $1,227,981 $1,232,865
========= =========
|
GPU, Inc. and Subsidiary Companies
(in thousands)
--------------------------
2000 1999
---------- ---------
Penelec
-------
Regulatory assets, net:
CTC $ 632,273 $ 709,635
Income taxes recoverable through future
rates, net 149,399 164,555
TMI-2 decommissioning costs 32,752 35,339
Above-market NUG deferral costs (187,058) (252,893)
Other, net (7,415) 15,891
--------- ---------
Total regulatory assets, net $ 619,951 $ 672,527
========= =========
|
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by FAS 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133" and FAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - An Amendment of FASB Statement No. 133" (collectively, FAS 133), establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. In general, FAS 133 requires that companies recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. FAS 133 (as amended) provides an exemption for certain contracts that qualify as normal purchases and sales. To qualify for this exclusion, certain criteria must be met, including that it must be probable that the contract will result in physical delivery. GPU adopted FAS 133 on January 1, 2001.
GPU's use of derivative instruments is intended to manage the risk of fluctuations in commodity prices, interest rates and foreign currencies. GPU does not intend to hold or issue derivative instruments for trading purposes. GPU enters into fixed-price contracts for future purchases of electricity and natural gas with individual counterparties or through traded exchanges. The majority of these commodity contracts entered into by GPU are considered "normal purchases," as defined by FAS 133, and, therefore, are excluded from the statement's scope. Commodity contracts accounted for as derivatives under FAS 133 are designated as cash flow hedges of the underlying commodity purchases, to the extent they qualify for such treatment. FAS 133 requires that the effective portion of the gain or loss on a derivative instrument designated and qualifying as a cash flow hedge be reported as a component of Other Comprehensive Income, net of tax. GPU also enters into third party energy option contracts. These derivative instruments are accounted for as cash flow hedges of the underlying commodity purchases, to the extent they are effective hedges. Upon adoption of this statement at January 1, 2001, the impact of FAS 133 as it relates to forward, futures and option contracts was immaterial to GPU's earnings or financial position.
To hedge against high transmission rates along certain routes during periods of high congestion, GPU enters into fixed transmission rights (FTRs) agreements. Upon adoption of FAS 133 at January 1, 2001, the impact of this statement as it relates to FTRs was immaterial to GPU's earnings or financial position.
GPU uses various types of interest rate swaps to convert floating-rate loans to fixed rates. These instruments are accounted for as cash flow hedges, to the extent they are effective hedges. Upon adoption of this statement on January 1, 2001, derivative liabilities of approximately $7 million (Penelec $1 million; GPU Power $1.5 million; GPU Electric $4.5
GPU, Inc. and Subsidiary Companies
million) were recognized on the Consolidated Balance Sheet, with an offset, net of tax, of $5 million (Penelec $1 million; GPU Power $1.5 million; GPU Electric $2.5 million) to Accumulated other comprehensive income and a $2 million (GPU Electric) charge to income.
GPU uses currency swap agreements to manage currency risk caused by fluctuations in the US dollar exchange rate related to debt issued in the US by Avon Energy Partners Holdings. These instruments will be accounted for as cash flow hedges, to the extent they are effective hedges. Upon adoption of FAS 133 on January 1, 2001, derivative assets of approximately $54 million (GPU Power UK) were recognized on the Consolidated Balance Sheet, with an offset, net of tax, to Accumulated other comprehensive income.
In December 1999, the GPU Energy companies sold TMI-1 to AmerGen for approximately $100 million. In August 2000, JCP&L sold Oyster Creek to AmerGen for approximately $10 million. As part of the sales, AmerGen has assumed full responsibility for decommissioning the plants, and the GPU Energy companies have transferred $320 million and $430 million of TMI-1 and Oyster Creek decommissioning trust funds, respectively, to AmerGen. JCP&L, Met-Ed and Penelec jointly own TMI-2, which was damaged during a 1979 accident, in the percentages of 25%, 50% and 25%, respectively. JCP&L's net investment in TMI-2 as of December 31, 2000 and December 31, 1999 was $55 million and $61 million, respectively. JCP&L is collecting revenues for TMI-2 on a basis which provides for the recovery of its remaining investment in the plant by 2008. Met-Ed's and Penelec's remaining investments in TMI-2 were written off in 1998 after receiving the PaPUC's Restructuring Orders.
At the time of the TMI-2 accident, as provided for in the Price-Anderson Act, the GPU Energy companies had (a) primary financial protection in the form of insurance policies with groups of insurance companies providing an aggregate of $140 million of primary coverage, (b) secondary financial protection in the form of private liability insurance under an industry retrospective rating plan providing for up to an aggregate of $335 million in premium charges under such plan and (c) an indemnity agreement with the Nuclear Regulatory Commission (NRC) for up to $85 million, bringing their total financial protection up to an aggregate of $560 million. Under the secondary level, the GPU Energy companies are subject to a retrospective premium charge of up to $5 million per reactor, or a total of $15 million (JCP&L $7.5 million; Met-Ed $5 million; Penelec $2.5 million).
In 1995, the US Court of Appeals for the Third Circuit ruled that the Price-Anderson Act provides coverage under its primary and secondary levels for punitive as well as compensatory damages, but that punitive damages could not be recovered against the Federal Government under the third level of
GPU, Inc. and Subsidiary Companies
financial protection. In so doing, the Court of Appeals referred to the "finite fund" (the $560 million of financial protection under the Price- Anderson Act) to which plaintiffs must resort to get compensatory as well as punitive damages.
The Court of Appeals also ruled that the standard of care owed by the defendants to a plaintiff was determined by the specific level of radiation which was released into the environment, as measured at the site boundary, rather than as measured at the specific site where the plaintiff was located at the time of the accident (as the defendants proposed). The Court of Appeals also held that each plaintiff still must demonstrate exposure to radiation released during the TMI-2 accident and that such exposure had resulted in injuries. In 1996, the US Supreme Court denied petitions filed by GPU, Inc. and the GPU Energy companies to review the Court of Appeals' rulings.
In 1996, the District Court granted a motion for summary judgment filed by GPU, Inc. and the GPU Energy companies, and dismissed the ten initial "test cases" which had been selected for a test case trial, as well as all of the remaining 2,100 pending claims. The Court ruled that there was no evidence which created a genuine issue of material fact warranting submission of plaintiffs' claims to a jury. The plaintiffs appealed the District Court's ruling to the Court of Appeals for the Third Circuit. In November 1999, the Third Circuit affirmed the District Court's dismissal of the ten "test cases," but set aside the dismissal of the additional pending claims, remanding them to the District Court for further proceedings. In remanding these claims, the Third Circuit held that the District Court had erred in extending its summary judgment decision to the other plaintiffs and imposing on these plaintiffs the District Court's finding that radiation exposures below 10 rems were too speculative to establish a causal link to cancer. The Court of Appeals stated that the non-test case plaintiffs should be permitted to present their own individual evidence that exposure to radiation from the accident caused their cancers. In June 2000, the US Supreme Court denied petitions for review filed by GPU, Inc., the GPU Energy companies and the plaintiffs.
In September 2000, the defendants filed a Motion for Summary Judgment in the District Court. Meanwhile, the plaintiffs have taken an interlocutory appeal to the Third Circuit seeking review of the District Court's determination that the remaining plaintiffs should be allowed to advance causation theories based only on the admissible evidence of record at the close of discovery in the case.
Oral arguments on the plaintiffs' appeal were held in January, 2001. There can be no assurance as to the outcome of this litigation.
GPU, Inc. and the GPU Energy companies believe that any liability to which they might be subject by reason of the TMI-2 accident will not exceed their financial protection under the Price-Anderson Act.
Retirement costs for nuclear plants include decommissioning the radiological portions of the plants and the cost of removal of nonradiological structures and materials. The disposal of spent nuclear fuel is covered separately by contracts with the DOE.
GPU, Inc. and Subsidiary Companies
In 1995, a consultant performed a site-specific study of TMI-2 that considered various decommissioning methods and estimated the cost of decommissioning the radiological portion and the cost of removal of the nonradiological portion of the plant, using the prompt removal/dismantlement method. Management has reviewed the methodology and assumptions used in this study, is in agreement with them, and believes the results are reasonable. The TMI-2 funding completion date is 2014, consistent with TMI-2 remaining in long-term storage. The retirement cost estimate under the 1995 site-specific study, assuming decommissioning of TMI-2 in 2014, is $450 million for radiological decommissioning and $36 million for non-radiological removal costs (net of $12.6 million spent as of December 31, 2000)(in 2000 dollars).
Each of the GPU Energy companies is responsible for retirement costs in proportion to its respective ownership percentage. The ultimate cost of retiring TMI-2 may be different from the cost estimate contained in this site-specific study. Also, the cost estimate contained in this site-specific study is significantly greater than the decommissioning funding targets established by the NRC.
The estimated liability for future TMI-2 retirement costs (reflected as Three Mile Island Unit 2 future costs on the Consolidated Balance Sheets) as of December 31, 2000 and December 31, 1999 is $515 million (JCP&L $129 million; Met-Ed $257 million; Penelec $129 million) and $497 million (JCP&L $124 million; Met-Ed $249 million; Penelec $124 million), respectively. This liability is based upon the 1995 site-specific study estimate (in 2000 and 1999 dollars, respectively) discussed above and an estimate for remaining incremental monitored storage costs of $29 million (JCP&L $7 million; Met-Ed $15 million; Penelec $7 million) and $27 million (JCP&L $7 million; Met-Ed $13 million; Penelec $7 million) as of December 31, 2000 and December 31, 1999, respectively, as a result of TMI-2 entering long-term monitored storage in 1993.
Offsetting the $515 million liability as of December 31, 2000 is $127 million (JCP&L $15 million; Met-Ed $93 million; Penelec $19 million), which management believes is probable of recovery from customers and included in Regulatory assets, net on the Consolidated Balance Sheet, and $374 million (JCP&L $115 million; Met-Ed $161 million; Penelec $98 million) in trust funds for TMI-2 and included in Nuclear decommissioning trusts, at market on the Consolidated Balance Sheet.
The NJBPU has granted JCP&L revenues for TMI-2 retirement costs based on the 1995 site-specific study estimate. In addition, JCP&L is recovering a portion of its share of TMI-2 incremental monitored storage costs. The PaPUC Restructuring Orders granted Met-Ed and Penelec recovery of TMI-2 decommissioning costs as part of the CTC; however, Penelec has recovered these costs through the divestiture of its generating assets. The 1996 Customer Choice Act also allows Met-Ed and Penelec to defer as a regulatory asset those amounts that are above the level provided for in the CTC for future recovery.
As of December 31, 2000, the accident-related portion of TMI-2 radiological decommissioning costs is estimated to be $80 million (JCP&L $20 million; Met-Ed $40 million; Penelec $20 million), which is based on the 1995 site-specific study (in 2000 dollars). In connection with rate case resolutions, JCP&L, Met-Ed and Penelec made contributions to irrevocable external trusts for their respective shares of the accident-related portion of the decommissioning liability in amounts of $15 million, $40 million and
GPU, Inc. and Subsidiary Companies
$20 million, respectively. These contributions were not recoverable from customers and were expensed in 1990, in the case of JCP&L, and in 1991 for Met-Ed and Penelec.
The GPU Energy companies intend to seek recovery for any increases in TMI-2 retirement costs, but recognize that recovery cannot be assured.
Prior to September 2000, increases in the accident-related portion of Met-Ed's and Penelec's TMI-2 decommissioning liability were charged to expense, in amounts totaling $23.2 million (Met-Ed $15.4 million; Penelec $7.8 million) through August 2000. Likewise, through August 2000, earnings on Met-Ed's and Penelec's contributions to external trusts, in amounts totaling $34.9 million (Met-Ed $23.3 million; Penelec $11.6 million), were taken to income, and the related unrealized gains and losses were accrued to Accumulated other comprehensive income on the Consolidated Balance Sheet.
During the course of ongoing regulatory proceedings in Pennsylvania, Met-Ed and Penelec determined, in the third quarter 2000, that a portion of their regulatory assets for TMI-2 decommissioning previously regarded as probable of recovery in rates, are now no longer deemed probable of recovery. As a result, in the third quarter 2000, Met-Ed and Penelec charged to income $11.7 million (Met-Ed $7.9 million; Penelec $3.8 million) pre-tax for the write-down of their respective regulatory assets for TMI-2 decommissioning, representing the net realized gain they previously recorded on the accident-related portion of the TMI-2 decommissioning trust. Furthermore, the unrealized gains or losses associated with the accident-related portion of the TMI-2 decommissioning trust (previously recorded in Accumulated other comprehensive income) were transferred to Regulatory assets, net on the Consolidated Balance Sheet, and will no longer be recorded in Accumulated other comprehensive income.
The GPU Energy companies own all of the common stock of the Saxton Nuclear Experimental Corporation, which owns a small demonstration nuclear reactor. Decommissioning of the plant is expected to be completed in 2002. In December 2000, based on new estimates to complete the decommissioning of the plant, the decommissioning liability was increased by $13 million, to $52 million (JCP&L $23 million; Met-Ed $17 million; Penelec $12 million) as of December 31, 2000. The GPU Energy companies do not believe this increase is probable of recovery, and have charged the entire amount to expense.
GPU has insurance (subject to retentions and deductibles) for its operations and facilities including coverage for property damage, liability to employees and third parties, and loss of use and occupancy. There is no assurance that GPU will maintain all existing insurance coverages. Losses or liabilities that are not completely insured, unless allowed to be recovered through ratemaking, could have a material adverse effect on the financial position of GPU.
GPU has purchased property and decontamination insurance coverage for TMI-2 totaling $150 million.
The Price-Anderson Act limits an owner's liability to third parties resulting from a nuclear incident to approximately $9.5 billion. Coverage for the first $200 million of such liability is provided by private insurance. The remaining coverage, or secondary financial protection, is provided by retrospective premiums payable by all nuclear reactor owners.
GPU, Inc. and Subsidiary Companies
Although TMI-2 is exempt from retrospective premium assessments, the plant is still covered by the provisions of the Price-Anderson Act. In addition, the GPU Energy companies are subject to other retrospective premium assessments related to policies applicable to TMI-1 prior to its sale to AmerGen.
As a result of existing and proposed legislation and regulations, and ongoing legal proceedings dealing with environmental matters, including but not limited to acid rain, water quality, ambient air quality, global warming, electromagnetic fields, and storage and disposal of hazardous and/or toxic wastes, GPU may be required to incur substantial additional costs to construct new equipment, modify or replace existing and proposed equipment, remediate, decommission or cleanup waste disposal and other sites currently or formerly used by it, including formerly owned manufactured gas plants (MGP), coal mine refuse piles and generation facilities.
GPU has been formally notified by the EPA and state environmental authorities that it is among the potentially responsible parties (PRPs) who may be jointly and severally liable to pay for the costs associated with the investigation and remediation at 11 hazardous and/or toxic waste sites (in some cases, more than one company is named for a given site).
JCP&L MET-ED PENELEC GPUN GPU,INC. TOTAL ----- ------ ------- ---- ------- ----- 7 4 2 1 1 11 |
In addition, certain of the GPU companies have been requested to participate in the remediation or supply information to the EPA and state environmental authorities on several other sites for which they have not been formally named as PRPs, although the EPA and/or state authorities may nevertheless consider them as PRPs. Certain of the GPU companies have also been named in lawsuits requesting damages (which are material in amount) for hazardous and/or toxic substances allegedly released into the environment. As of December 31, 2000, a liability of approximately $6 million (JCP&L $2.2 million; Met-Ed $0.6 million; Penelec $0.2 million; other $3 million) was recorded for PRP sites where it is probable that a loss has been incurred and the amount could be reasonably estimated.
The ultimate cost of remediation of all these and other hazardous waste sites will depend upon changing circumstances as site investigations continue, including (a) the existing technology required for site cleanup, (b) the remedial action plan chosen and (c) the extent of site contamination and the portion attributed to the GPU companies involved.
In 1997, the EPA filed a complaint against GPU, Inc. in the US District Court for the District of Delaware for enforcement of its Unilateral Order (Order) issued against GPU, Inc. to clean up the former Dover Gas Light Company (Dover) manufactured gas production site (Site) in Dover, Delaware. Dover was part of the AGECO/AGECORP group of companies from 1929 until 1942; GPU, Inc. emerged from the AGECO/AGECORP reorganization proceedings in 1946. All of Dover's common stock, which was sold in 1942 to an unaffiliated entity, was subsequently acquired by Chesapeake Utilities Corporation (Chesapeake), which merged with Dover in 1960. Chesapeake is currently performing the cleanup at the Site. According to the complaint, the EPA is seeking (1) enforcement of the Order against GPU; (2) recovery of its past response costs; (3) a declaratory judgment that GPU is liable for any remaining cleanup costs of the Site; and (4) statutory penalties for noncompliance with the Order. The EPA has stated that it has incurred
GPU, Inc. and Subsidiary Companies
approximately $1.1 million of past response costs as of December 31, 2000. Chesapeake claims to have spent approximately $10 million in connection with remediation of the site. The EPA has more recently estimated the cost of ground water remediation to be on the order of $6 million. Consultants to Chesapeake have estimated the remaining remediation ground water costs to be approximately $12 million to $19 million. In accordance with its penalty policy, and in discussions with GPU, the EPA has demanded penalties calculated at a daily rate of $8,800, rather than the statutory maximum of $27,500 per day. As of December 31, 2000, if the statutory maximum were applied, the total amount of penalties would be approximately $44 million. GPU believes that it has meritorious defenses to the imposition of penalties, or that if a penalty is assessed, it should be at a lower daily rate. Chesapeake has also sued GPU, Inc. for contribution to the cleanup of the Dover Site. The US District Court for the District of Delaware has consolidated the case filed by Chesapeake with the case filed by the EPA and discovery is proceeding. There can be no assurance as to the outcome of these proceedings.
In August 2000, Rochester Gas & Electric Corporation (RG&E) filed suit against GPU, Inc. in the US District Court for the Western District of New York for the reimbursement of $5.2 million of costs and damages it has allegedly incurred, and a declaratory judgement with respect to future costs and damages, in connection with two former MGP sites and a third property where wastes from one of those sites were allegedly deposited. All of the properties are located in Rochester, New York. According to the complaint, RG&E was an indirect subsidiary of AGECO from May 1929 until January 1946, and a subsidiary of GPU, Inc. from January 1946 until October 1949, when it was divested by order of the SEC under the Public Utility Holding Company Act. There can be no assurance as to the outcome of this matter.
In connection with the 1999 sale of its Seward Generation Station to Sithe, Penelec has assumed up to $6 million of remediation costs associated with certain coal mine refuse piles which are the subject of an earlier consent decree with the Pennsylvania Department of Environmental Protection. Penelec received recovery of these remediation costs through a reduction of its liability to ratepayers, per the December 20, 2000 PaPUC Phase II Order.
JCP&L has entered into agreements with the New Jersey Department of Environmental Protection for the investigation and remediation of 17 formerly owned MGP sites. JCP&L has also entered into various cost-sharing agreements with other utilities for most of the sites. As of December 31, 2000, JCP&L has spent approximately $44.5 million in connection with the cleanup of these sites. In addition, JCP&L has recorded an estimated environmental liability of $50.2 million relating to expected future costs of these sites (as well as two other properties). This estimated liability is based upon ongoing site investigations and remediation efforts, which generally involve capping the sites and pumping and treatment of ground water. The cost to clean up these sites could be materially in excess of the $50.2 million due to significant uncertainties, including changes in acceptable remediation methods and technologies.
In 1997, the NJBPU approved JCP&L's request to establish a Remediation Adjustment Clause for the recovery of MGP remediation costs. As a result of the NJBPU's Summary Order, effective August 1, 1999, the recovery of these costs was transferred to the Societal Benefits Charge. As of December 31, 2000, JCP&L had recorded on its Consolidated Balance Sheet a regulatory asset of $51.6 million. JCP&L is continuing to pursue reimbursement from its insurance carriers for remediation costs already spent and for future
GPU, Inc. and Subsidiary Companies
estimated costs. In 1994, JCP&L filed a complaint with the Superior Court of New Jersey against several of its insurance carriers, relating to these MGP sites, and has settled with all but one of those carriers.
GPU Energy
In July 1999, the Mid-Atlantic states experienced a severe heat storm which resulted in power outages throughout the service territories of many electric utilities, including the territory of JCP&L. Following these outages, the NJBPU initiated an investigation into the causes of the outages and the reliability of the transmission and distribution systems of all four New Jersey electric utilities. This investigation was essentially completed in May 2000, with the issuance of Phase I and Phase II reports and orders from the NJBPU. Both the Phase I and Phase II reports and orders contain, among other things, directions for JCP&L to undertake certain actions and report back to the NJBPU on the results. Additionally, the NJBPU Phase II order concluded that there is not a prima facie case demonstrating that, overall, JCP&L provided unsafe, inadequate or improper service to its customers.
Two class action lawsuits were commenced in New Jersey Superior Court in July 1999. These suits were subsequently consolidated into a single proceeding, and they seek compensatory and punitive damages arising from the service interruptions of July 1999 in the JCP&L territory. The GPU defendants named in these suits (i.e., GPU, Inc., JCP&L, GPUS and GPU Generation, Inc.) moved to dismiss or stay the litigation pending the NJBPU's exercise of its primary jurisdiction to investigate the causes of the outages. The trial court denied that motion, and also certified a plaintiff class consisting of JCP&L customers and their "dependents, tenants, employees and other intended beneficiaries of customers who suffered damages as a result" of the service interruptions.
In January 2000, the New Jersey Appellate Division granted the GPU defendants' motion for leave to take an interlocutory appeal of the trial court's decision on the issue of primary jurisdiction. On June 14, 2000, the Appellate Division affirmed the trial court but determined that the NJBPU's findings in the exercise of its "exclusive jurisdiction" could be "probative...but not determinative" of at least some of the issues in the litigation, and leaving it to the trial court to "decide in the first instance just what weight and validity to give the [NJBPU's] findings and conclusions."
In response to the GPU defendants' demand for a statement of damages, the plaintiffs have stated that they are seeking $700 million, subject to the results of pretrial discovery. JCP&L has notified its insurance carriers of the plaintiffs' allegations. The primary insurance carrier has stated that, while the substance of the plaintiffs' allegations is covered under the policy, it is reserving its rights concerning coverage as circumstances develop. In September 2000, JCP&L received from its primary insurance carrier the initial indemnification payment for certain expenses incurred by JCP&L relative to this action.
Discovery continues in the class action, and no trial date has been set. The GPU defendants filed a motion with the trial court seeking
GPU, Inc. and Subsidiary Companies
decertification of the class, and oral argument on the decertification was held in February 2001. There can be no assurance as to the outcome of these matters.
GPU Electric
As a result of the September 1998 fire and explosion at the Longford natural gas plant in Victoria, Australia, Victorian gas users (plaintiffs) have brought a class action in the Australian Federal Court against Esso Australia Limited and its affiliate (Esso), the owner and operator of the plant, for losses suffered due to the lack of natural gas supply and related damages. The plaintiffs claim that Esso was, among other things, negligent in designing, maintaining and operating the Longford plant, and also assert claims under Australian fair trade practices law.
Esso has joined as third party defendants the State of Victoria (State) and various State-owned entities which operated the Victorian gas industry prior to its privatization, including Transmission Pipelines Australia (TPA) and its affiliate Transmission Pipelines (Assets) Australia (TPAA). GPU, Inc., through GPU GasNet, acquired the assets of TPA and the shares of TPAA from the State in June 1999. Esso asserts that the State and the gas industry were negligent in that, among other things, they failed to ensure that the gas system would provide a secure supply of gas to users, and also asserts claims under the Australian fair trade practices law. In addition, GPU GasNet and other private entities (Buyers) that purchased the Victorian gas assets from the State have joined Esso as third party defendants. Esso asserts that if the gas industry is liable as alleged, that liability has been transferred to the Buyers as part of the State's privatization process.
Under the acquisition agreement with the State, GPU GasNet has indemnified TPA and the State against third party claims arising out of, among other things, the operation of TPA's business. TPA and the State have commenced proceedings against GPU GasNet to enforce the indemnity in respect of any liability that may flow to TPA as a result of Esso's claim.
GPU GasNet and TPAA have filed answers denying liability to Esso, the State and TPA, which could be material. GPU GasNet and TPAA have notified their insurance carriers of this action. The insurers have notified GPU GasNet that they have formed the preliminary view that GPU GasNet is not entitled to coverage under the liability policy. GPU GasNet believes that it is entitled to coverage, and discussions with the insurers are continuing. There can be no assurance as to the outcome of this matter.
GPU, Inc.
GPU, Inc. has made significant investments in foreign businesses and facilities through its subsidiaries, GPU Electric and GPU Power. As of December 31, 2000, GPU, Inc.'s investments in GPU Electric and GPU Power were $881 million and $139 million, respectively. As of that date, GPU, Inc. has also guaranteed an additional $899 million and $21 million of GPU Electric and GPU Power outstanding obligations, respectively. Although management attempts to mitigate the risks of investing in certain foreign countries by, among other things, securing political risk insurance, GPU faces additional risks inherent to operating in such locations, including foreign currency fluctuations.
GPU, Inc. and Subsidiary Companies
GPU Electric
In June 2000, GPU sold GPU PowerNet, its Australian electric transmission company, for A$2.1 billion (US $1.26 billion). For further information, see Note 6, Accounting for Extraordinary and Non-Recurring Items.
GPU Power UK has a 40% equity interest in a 586 MW power project in Pakistan (the Uch Power Project), which was originally scheduled to begin commercial operation in late 1998. In June 1999, certain Project lenders for the Uch Power Project issued notices of default to the Project sponsors (including GPU Power UK) for, among other things, failure to pay principal and interest under various loan agreements. In November 1999, the Project sponsors and lenders reached an agreement under which repayment of the construction loan was extended, principal and interest payments deferred, and the sponsors agreed to fund the completion of the plant through the remaining equity contribution commitments. The plant commenced commercial operations in October 2000.
Uch has renegotiated several of the project agreements with the Government of Pakistan and its agencies, under which it agreed, among other things, to accept a reduction in the power purchase tariff averaging approximately 8% over the project term. The agreement includes options to extend the term of the project from 23 to 30 years.
GPU's investment in the Uch Power Project as of December 31, 2000 was approximately $37.9 million, plus a guaranty letter of credit of $3.6 million, and its share of the projected completion costs represents an additional $3.1 million commitment. Cinergy (the former owner of 50% of Midlands Electricity plc) agreed to fund up to an aggregate of $20 million of the required capital contributions, for a period of one year from July 15, 1999, and "cash losses," which could be incurred on the Uch Power Project, for a period of up to ten years from July 15, 1999. Cinergy has reimbursed GPU Electric for $4.9 million of capital contributions through December 31, 2000, leaving a remaining commitment of up to $15.1 million. There can be no assurance as to the outcome of this matter.
GPU Power UK also owns an 18.75% interest in Humber Power Limited (Humber). At December 31, 2000, GPU Power UK's equity in the project, which is located in England, was approximately $28 million. A number of investors in the project (not including GPU Power UK) also have purchase power agreements with Humber, which provide for the servicing of the project's debt and a return on equity. The purchasers are claiming that such contracts, which provide for prices of power in excess of current market prices, will become unenforceable under a proposed new UK regulatory scheme. Humber and the purchasers have agreed to submit the matter to arbitration as provided by the contracts. If the contracts cannot be satisfactorily reformed, the prices at which Humber can sell its energy may not be sufficient to provide an equity return to the investors or ultimately to service Humber's debt. There can be no assurance as to the outcome of this matter.
As part of the 1999 sale of the GPU Power UK supply business and the purchase of the 50% of GPU Power UK that GPU did not already own, certain long-term purchase obligations under natural gas supply contracts were retained. Most of these contracts, which extend to September 2005, were at fixed prices in excess of the market price of gas, and a liability had been established for the estimated loss under such contracts. However, as a result of increasing gas prices during the second quarter of 2000, GPU Power UK was able to enter into matching forward sale contracts for the majority of
GPU, Inc. and Subsidiary Companies
the gas purchases, resulting in a reduction in the estimated liability and a pre-tax credit to income of $15.9 million. Other open gas contracts, which extend to 2002, require GPU Power UK to purchase or to sell gas at fixed prices. The estimated out-of-market position of all contracts at December 31, 2000 was $22 million; however, the remaining open positions included both sales and purchases, thereby reducing the remaining exposure to future price changes.
In an English court decision involving two unaffiliated utilities (National Grid and National Power), the court held that utilities improperly used a pension plan surplus in the UK Electricity Supply Pension Scheme to eliminate scheduled payments in respect of early retirement costs and employer contributions. The court found that, in the case of National Grid and National Power, procedures had not been strictly followed, and as such, a liability may now exist. At a subsequent hearing, the court refused to consider the validity or effectiveness of retrospective amendments to the plan. National Grid and National Power have appealed the court's decision to the House of Lords. Pending the outcome of the Appeal, the requirement for any payments has been stayed. The appeal in the House of Lords is expected to be heard in the first quarter of 2001. If a similar complaint were to be made against GPU Power UK, GPU Power UK's potential liability is estimated to be a maximum of BP 63 million (US $94 million), exclusive of any applicable interest charges or penalties. The GPU Power UK section of the Electricity Supply Pension Scheme remains in substantial surplus and any payment to the plan that might ultimately prove to be necessary would be accounted for as an increase in pension assets, and would not have an immediate impact on income. However, any related penalties or interest (which could be assessed, though none are currently proposed) may adversely affect income. There can be no assurance as to the outcome of this matter.
Emdersa's operating companies are subject to a number of government claims related to Value-added tax liabilities and to Social Security taxes collected in their electric rates, which aggregate approximately $21 million. The claims are generally related to transitional issues surrounding the privatization of Argentina's electricity industry. There can be no assurance as to the outcome of these matters.
GPU Power
On July 9, 1999, DIAN (the Colombian national tax authority) issued a "Special Requirement" on the Termobarranquilla S.A., Empresa de Servicios Publicos (TEBSA) 1996 income tax return, which challenges the exclusion from taxable income of an inflation adjustment related to the value of assets used for power generation (EI Barranquilla, a wholly owned subsidiary of GPU Power, ABB Barranquilla, Corporacion Electrica de la Costa Atlantica (CORELCA) and Distral Group have a 28.7%, 28.7%, 42.5% and 0.1% interest in TEBSA, respectively). The failure to give notice of this Special Requirement to the US Export Import Bank (EXIM Bank) is an event of default under the loan agreement. GPU Power also believes that other events of default exist under the loan agreements with project lenders including the Overseas Private Investments Corporation (OPIC), a commercial bank syndicate. As a result, certain required certifications have not been delivered to EXIM Bank, OPIC and the other project lenders, which failure is, itself, an event of default under the loan agreements. These issues are currently being discussed with EXIM Bank, the other project lenders, and the Government of Colombia, as well as the other partners in the TEBSA project. In addition, in January 2001 CORELCA advised GPU Power that it was conducting its own investigation of the matter. As of December 31, 2000, GPU Power has an investment of approximately $92 million in TEBSA and is committed to make additional standby equity
GPU, Inc. and Subsidiary Companies
contributions of $21.3 million, which GPU, Inc. has guaranteed. The total outstanding senior debt of the TEBSA project is $372 million at December 31, 2000, and, in addition, GPU, Inc. has guaranteed the obligations of the operators of the TEBSA project, up to a maximum of $5 million, under the project's operations and maintenance agreement. There can be no assurance as to the outcome of these matters.
With regard to the "Special Requirement" issued by DIAN, DIAN asserts that TEBSA should be liable for approximately $4.4 million consisting of $1.3 million in additional tax and $3.1 million in penalties and interest. TEBSA has filed both procedural and substantive objections to these assertions, the DIAN responded to these objections reiterating its previous position, and TEBSA, in turn, filed an appeal with the DIAN on June 2, 2000. A response is expected within one year.
In July 2000, the DIAN issued a "Special Requirement" on the 1997 income tax return of TEBSA challenging a tax exemption benefit under a Colombian income tax statute. The DIAN requested payment of approximately $1.2 million in additional tax, penalties and interest. On October 12, 2000, TEBSA filed a response with the DIAN stating arguments supporting its tax exemption benefit. There can be no assurance as to the outcome of these matters.
GPU Telcom
In March 2000, GPU, Inc. announced its participation in America's Fiber Network LLC (AFN), of which GPU, Inc. anticipates owning 25%. AFN is a high-speed fiber optics company with a network of more than 7,000 route miles, or 140,000 fiber miles, connecting major markets in the eastern US to secondary markets with a growing need for broadband access. GPU, Inc. anticipates investing cash, as well as existing and new fiber routes and electronic equipment, in AFN through GPU Telcom. As of December 31, 2000, GPU Telcom had invested $5.3 million in AFN.
In April 2000, GPU, Inc. announced the formation of Telergy Mid-Atlantic (TMA), a joint venture between GPU Telcom and Telergy, Inc. TMA combines established telecommunications services and marketing expertise with utilities' existing fiber networks and natural positioning in serving retail markets. As of December 31, 2000 GPU Telcom had acquired $20 million of Telergy, Inc. convertible preferred securities.
JCP&L and Public Service Electric & Gas Company (PSE&G) each hold a 50% undivided ownership interest in Yards Creek Pumped Storage Facility (Yards Creek). In December 1998, JCP&L filed a petition with the NJBPU seeking a declaratory order that PSE&G's right of first refusal to purchase JCP&L's ownership interest at its current book value under a 1964 agreement between the companies is void and unenforceable. Management believes that the fair market value of JCP&L's ownership interest in Yards Creek is substantially in excess of its December 31, 2000 book value of $21 million. Negotiations to resolve this dispute are continuing; however, there can be no assurance as to the outcome of this matter.
In March 1999, Penelec and New York State Electric & Gas Corporation (NYSEG) each sold their 50% undivided ownership interests in the Homer City Station to a subsidiary of Edison Mission Energy (EME) for a total of $1.9 billion. In connection with the sale, Penelec and NYSEG indemnified the buyer with respect to certain contingent liabilities, including costs or
GPU, Inc. and Subsidiary Companies
expenses which the EPA might impose for failure to comply with New Source Performance Standards, Prevention of Significant Deterioration and New Source Review regulations under the Clean Air Act prior to the date of the sale. In 1998, the EPA had conducted inspections at Homer City with regard to the plant's compliance with these regulations. On October 30, 2000, EME notified Penelec and NYSEG that the EPA had concluded that these regulations applied to Homer City prior to the sale to EME and that Homer City was operating in violation of these Clean Air Act regulations. If it is ultimately determined that these regulations were applicable to Homer City, the EPA could assess substantial monetary penalties and require capital modifications to the plant, the costs of which would be material. To the extent Penelec and NYSEG are obligated to indemnify EME for any of these costs, they would each be severally liable for a 50% share. There can be no assurance as to the outcome of this matter.
Concurrent with GPU's July 1999 acquisition of the 50% of GPU Power UK which it did not already own, GPU began to evaluate existing restructuring plans and formulate additional plans to reduce operating expenses and achieve ongoing cost reductions. As of December 31, 1999, GPU had identified and approved a cost reduction plan. At the acquisition date, GPU Power UK had recorded a liability of $28.6 million related to previous cost reduction plans. GPU retained $25.7 million of this liability, related to contractual termination and other severance benefits for 276 employees identified in a 1999 business process reengineering project. GPU identified an additional 355 employees (234 in Engineering Services, 38 in Metering, 21 in Network Services and 62 from other specific functions) to be terminated as part of the plan and recorded an additional liability of $39.3 million. A net charge of $18.2 million for GPU's 50% share of these adjustments was included in expense in 1999 and the other 50% was recorded in Goodwill as a purchase accounting adjustment.
In 2000, a change in the investment return assumptions, due to better than expected investment performance, resulted in a reduction of approximately $6.9 million, to $22.6 million, in the estimated liability for the remaining 459 employees. Consequently, goodwill was credited for $3.4 million (50% of the change in estimate) and $3.5 million was credited to income. During 2000, $16.9 million was paid to 399 employees. The remaining severance liability of $4.5 million at December 31, 2000 reflects the above transactions as well as currency translation adjustments and the impact of seven employees who were retained, and is included in Other current liabilities on the Consolidated Balance Sheet. Management expects the remaining employees to leave by June 30, 2001.
GPU AR has entered into contracts to supply electricity to retail customers through June 2001. In connection with meeting its supply obligations, GPU AR has entered into purchase commitments for energy and capacity with payment obligations totaling approximately $10.6 million as of December 31, 2000. GPU, Inc. has guaranteed these payments, as well as certain other obligations, up to a maximum of $19 million.
In accordance with the Nuclear Waste Policy Act of 1982 (NWPA), the GPU Energy companies have entered into contracts with, and have been paying fees to, the DOE for the future disposal of spent nuclear fuel in a repository or interim storage facility. In 1996, the DOE notified the GPU Energy companies and other standard contract holders that it would be unable to begin acceptance of spent nuclear fuel for disposal by 1998, as mandated by the NWPA. The DOE requested recommendations from contract holders for handling
GPU, Inc. and Subsidiary Companies
the delay. In June 1997, a consortium of electric utilities, including GPUN, filed a license application with the NRC seeking permission to build an interim above-ground disposal facility for spent nuclear fuel in Utah.
At December 31, 2000, GPU has recorded a liability of $210 million owed to the Nuclear Waste Fund, related to spent nuclear fuel generated prior to the sales of TMI-1 and Oyster Creek to AmerGen. AmerGen has assumed all liability for disposal costs related to spent nuclear fuel generated following its purchase of the plants.
On July 26, 2000, GPUN filed suit in the United States Court of Claims seeking to recover damages as a result of the DOE's failure to commence disposal of GPUN's spent nuclear fuel on January 31, 1998, as required by the terms of the Standard Contract between GPUN and DOE. The complaint seeks damages from the Government in an amount to be determined at trial. GPUN has alleged that it is entitled to damages attributable to operations at both TMI-1 and Oyster Creek. The Government has not yet answered the complaint. There can be no assurance as to the outcome of this matter.
GPU, Inc. and consolidated affiliates have approximately 14,100 employees worldwide, of whom 10,000 are employed in the US, 3,600 are in the United Kingdom (UK) and the remaining 500 are in South America and Australia. The majority of the US workforce is employed by the GPU Energy companies (4,880) and MYR (4,831), of which approximately 2,900 and 4,000, respectively, are represented by unions for collective bargaining purposes. In the UK, approximately 2,300 GPU Power UK employees are represented by unions, and the terms and conditions of various bargaining agreements are generally reviewed annually, on April 1. The JCP&L, Met-Ed and Penelec collective bargaining agreements with the International Brotherhood of Electrical Workers expire on October 31, 2002, May 1, 2003 and May 14, 2002, respectively. Penelec's collective bargaining agreement with the Utility Workers Union of America expires on June 30, 2001.
In January 2001, the GPU Energy companies announced that they were offering Voluntary Enhanced Retirement Programs (VERP) to certain bargaining unit employees in Pennsylvania. Approximately 240 employees (Met-Ed 130 employees; Penelec 110 employees) are eligible for the VERP. If all of the eligible employees accept the offer, a pre-tax charge of approximately $23 million (Met-Ed $12 million; Penelec $11 million) would be recorded in 2001 earnings for the cost of pension and other postretirement benefits, exclusive of any severance benefits that would be paid to those employees.
During the normal course of the operation of its businesses, in addition to the matters described above, GPU is from time to time involved in disputes, claims and, in some cases, as a defendant in litigation in which compensatory and punitive damages are sought by the public, customers, contractors, vendors and other suppliers of equipment and services and by employees alleging unlawful employment practices. While management does not expect that the outcome of these matters will have a material effect on GPU's financial position or results of operations, there can be no assurance that this will continue to be the case.
GPU, Inc. and Subsidiary Companies
13. SEGMENT INFORMATION
The following is presented in accordance with Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information."
GPU's reportable segments are strategic business units that are managed separately due to their different operating and regulatory environments. GPU's management evaluates the performance of its business units based upon income before extraordinary and non-recurring items (the adjustments to income for each of the years presented are described below). For the purpose of providing segment information, domestic electric utility operations (GPU Energy) is comprised of the three electric utility operating companies serving customers in New Jersey and Pennsylvania, as well as GPU Generation, Inc. (sold in late 1999), GPUN and GPUS. For additional information on GPU's organizational structure and businesses, see preface to the Combined Notes to Consolidated Financial Statements.
GPU's 2000 non-recurring items totaled a net charge of $103.9 million after-tax, and consisted of the following: the loss of $276.6 million after-tax on the sale of GPU PowerNet; the gain of $89.2 million after-tax on the sale of GPUI; the net increase in income of $40.8 million for the impact of the PaPUC's Phase II Order; the net gain of $26.2 million after-tax primarily related to a restructured power supply agreement between a GPU independent power project and NIMO; and the gain of $16.5 million for the reversal of certain deferred taxes and realization of an investment tax credit related to the sale of Oyster Creek.
GPU's 1999 non-recurring items totaled a net charge of $25.1 million after-tax, and consisted of the following: the charge of $68 million after-tax resulting from a NJBPU Summary Order issued to JCP&L ; the net gain of $36.1 million after-tax on the sales of the GPU Energy companies' generating facilities, related to wholesale operations; and the gain on the sale of the GPU Power UK supply business of $6.8 million after-tax.
GPU's 1998 non-recurring items totaled a charge of $65.8 million after-tax, and consisted of the following: an extraordinary loss of $25.8 million after-tax as a result of the PaPUC's Restructuring Orders and the discontinued application of FAS 71 with respect to Met-Ed's and Penelec's electric generation operations; and a charge of $40 million after-tax for customer refunds and the establishment of a sustainable energy fund, also as a result of the PaPUC's Restructuring Orders.
GPU, Inc. and Subsidiary Companies
Business Segment Data (in thousands)
Interest Income
Charges Before Extra- Capital
Depreciation and Income Tax ordinary and Expenditures
Operating and Preferred Expense/ Non-recurring Total and
Revenues Amortization Dividends (Benefit)(a) Items Assets Investments
--------- ----------- --------- --------- ---------- ----------- ----------
2000
Domestic Segments:
Electric Utility Operations (GPU Energy) $3,647,482 $360,201 $213,921 $184,876 $ 267,764 $12,647,529 $276,117
Independ Power Prod (GPU International) (d) 74,440 8,864 2,115 5,135 7,685 - 6,763
Electric Retail Energy Sales (GPU AR) 60,306 - - (853) (1,715) 19,943 -
Telecommunications Infrastructure (GPU Telcom) 10,488 429 - (1,856) (2,635) 104,061 65,664
Construction Services (MYR) (b) 437,679 4,893 7,294 5,879 5,334 354,197 3,883
--------- ------- ------- ------- ------- ---------- -------
Subtotal 4,230,395 374,387 223,330 193,181 276,433 13,125,730 352,427
--------- ------- ------- ------- ------- ---------- -------
Foreign Segments:
Electric/Gas Utility Operations:
(GPU Electric)
Electric Distribution - United Kingdom 594,294 115,643 184,234 35,224 62,277(e) 4,367,405 168,536
Electric Distribution - Argentina 182,502 18,259 32,602 5,829 (846) 635,050 37,541
Electric Transmission - Australia (c) 90,007 19,947 46,822 (10,921) 9,242 - 4,993
Gas Transmission - Australia 56,669 13,748 47,173 (9,929) 4,131 862,939 2,101
Independ Power Prod - S. America (GPU Power) 42,389 6,232 3,371 5,002 8,634 255,166 182
--------- ------- ------- ------- ------- ---------- -------
Subtotal 965,861 173,829 314,202 25,205 83,438 6,120,560 213,353
--------- ------- ------- ------- ------- ---------- --------
Corporate and Eliminations - 43 12,737 (12,432) (22,381) 16,171 4,794
--------- ------- ------- ------- ------- ---------- -------
Consolidated Total $5,196,256 $548,259 $550,269 $205,954 $337,490 $19,262,461 $570,574
========= ======= ======= ======= ======= ========== =======
1999
----
Domestic Segments:
Electric Utility Operations (GPU Energy) $3,679,474 $409,215 $209,769 $238,533 $440,881 $13,211,808 $289,025
Independ Power Prod (GPU International) 83,434 9,401 1,044 9,478 11,337 359,374 1,225
Electric Retail Energy Sales (GPU AR) 84,681 - - (2,393) (4,558) 24,630 -
Telecommunications Infrastructure (GPU Telcom) 6,347 130 - 58 102 12,243 2,366
--------- ------- ------- ------- ------- ---------- -------
Subtotal 3,853,936 418,746 210,813 245,676 447,762 13,608,055 292,616
--------- ------- ------- ------- ------- ---------- -------
Foreign Segments:
Electric/Gas Utility Operations: (GPU Electric)
Electric Distribution - United Kingdom 504,826 52,847 91,433 21,208 54,836(f) 4,687,476 75,054
Electric Distribution - Argentina 135,938 15,273 23,414 (960) (1,778) 579,907 38,225
Electric Transmission - Australia (c) 193,366 42,850 110,059 (1,171) (6,715) 1,824,309 19,889
Gas Transmission - Australia 31,326 6,933 28,821 (12,156) (39) 795,527 4,747
Independ Power Prod - S. America (GPU Power) 37,732 6,290 3,560 5,152 8,116 238,644 30,421
--------- ------- ------- ------- ------- ---------- -------
Subtotal 903,188 124,193 257,287 12,073 54,420 8,125,863 168,336
--------- ------- ------- ------- ------- ---------- -------
Corporate and Eliminations - - 14,397 - (18,068) (36,086) -
--------- ------- ------- ------- ------- ---------- -------
Consolidated Total $4,757,124 $542,939 $482,497 $257,749 $484,114 $21,697,832 $460,952
========= ======= ======= ======= ======= ========== =======
|
GPU, Inc. and Subsidiary Companies
Business Segment Data (in thousands)
Interest Income
Charges Before Extra- Capital
Depreciation and Income Tax ordinary and Expenditures
Operating and Preferred Expense/ Non-recurring Total and
Revenues Amortization Dividends (Benefit)(a) Items Assets Investments
--------- ----------- --------- --------- ---------- ----------- ----------
1998
Domestic Segments:
Electric Utility Operations (GPU Energy) $3,937,139 $469,623 $241,886 $269,838 $367,586 $13,290,138 $326,858
Independ Power Prod (GPU International) 72,256 4,560 748 9,103 11,622 397,523 21,375
Electric Retail Energy Sales (GPU AR) 10,938 - - (1,201) (2,231) 2,651 34
Telecommunications Infrastructure (GPU Telcom) 16,115 - - 1,498 2,166 8,119 1,560
--------- ------- ------- ------- ------- ---------- -------
Subtotal 4,036,448 474,183 242,634 279,238 379,143 13,698,431 349,827
--------- ------- ------- ------- ------- ---------- -------
Foreign Segments:
Electric/Gas Utility Operations: (GPU Electric)
Electric Distribution - United Kingdom 944 1,226 30,859 (6,489) 37,249(g) 617,737 -
Electric Transmission - Australia (c) 181,059 40,841 108,227 11,421 18,885 1,788,877 58,549
Independ Power Prod - S. America (GPU Power) 33,136 5,844 4,219 719 2,499 237,162 59,847
--------- ------- ------- ------- ------- ---------- -------
Subtotal 215,139 47,911 143,305 5,651 58,633 2,643,776 118,396
--------- ------- ------- ------- ------- ---------- -------
Corporate and Eliminations (2,795) - 3,293 - (11,818) (54,098) -
--------- ------- ------- ------- ------- ---------- -------
Consolidated Total $4,248,792 $522,094 $389,232 $284,889 $425,958 $16,288,109 $468,223
========= ======= ======= ======= ======= ========== =======
|
(a) Represents income taxes on income before extraordinary and non-recurring
items.
(b) MYR was acquired in April 2000.
(c) Represents GPU PowerNet, which was sold in June 2000.
(d) GPU International was sold in December 2000.
(e) Includes income from GPU Power UK's investments in independent power
projects accounted for under the equity and cost methods of $29 million.
(f) Includes equity in net income of investee accounted for under the equity
method of $74 million, for the period prior to the consolidation of GPU
Power UK.
(g) Includes equity in net income of investee accounted for under the equity
method of $62 million.
GPU, Inc. and Subsidiary Companies
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
---------------------------- --------- -------- -------- --------
Additions
----------------------
Balance (1) (2)
at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
----------- --------- -------- -------- ---------- ---------
Year ended December 31, 2000
Allowance for doubtful
accounts $59,927(e) $61,671 $4,619(a) $33,503(b) $92,714
Allowance for inventory
obsolescence 639 102 - 83(c) 658
Year ended December 31, 1999
Allowance for doubtful
accounts $51,045(e) $31,458 $120,161(a) $143,261(b) $59,403
Allowance for inventory
obsolescence 218(e) 581 - 160(c) 639
Year ended December 31, 1998
Allowance for doubtful
accounts $ 8,087 $16,169 $ 5,564(a) $ 21,486(b) $ 8,334
Allowance for inventory
obsolescence 1,484 - (13)(d) 1,311(c) 160
|
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Inventory written off.
(d) Sale of inventory previously written off.
(e) Beginning balance is adjusted for 2000 acquisition ($524 relating to allowance for doubtful accounts) and 1999 acquisitions ($42,711 relating to the allowance for doubtful accounts and $58 relating to the allowance for inventory obsolescence). For additional information, see Note 7 of the Combined Notes to Consolidated Financial Statements.
Jersey Central Power & Light Company and Subsidiary Company
SELECTED FINANCIAL DATA
(In Millions)
For the Years Ended December 31,
2000(1) 1999(2) 1998 1997 1996(3)
-------------------------------------------------------------------------------------------
Operating revenues $1,979.3 $2,018.2 $2,069.6 $2,094.0 $2,057.9
Other operation and
maintenance expense 381.8 482.9 485.0 455.0 556.1
Net income 210.8 172.4 222.4 212.0 156.3
Earnings available for
common stock 203.9 162.9 212.4 200.6 143.2
Net utility plant in service 2,056.9 1,729.3 2,538.2 2,664.1 2,717.1
Total assets 6,217.4 5,811.0 4,582.1 4,641.6 4,676.7
Long-term debt 1,094.0 1,133.8 1,173.5 1,173.3 1,173.1
Long-term obligations
under capital leases - - - - 0.1
Company-obligated
mandatorily redeemable
preferred securities 125.0 125.0 125.0 125.0 125.0
Cumulative preferred stock
with mandatory redemption 51.5 73.2 86.5 91.5 114.0
Capital expenditures and
investments 144.4 140.9 154.9 172.2 199.8
Return on average common equity 14.5% 10.7% 13.5% 13.1% 9.5%
(1) Results for 2000 reflect non-recurring income of $16.5 million (after-tax)
resulting from the elimination of deferred taxes and realization of an
investment tax credit related to the sale of the Oyster Creek nuclear
generating plant.
(2) Results for 1999 reflect a non-recurring charge of $68 million (after-tax)
related to the NJBPU Restructuring Order.
(3) Results for 1996 reflect a non-recurring charge of $39.4 million
(after-tax) for costs related to voluntary enhanced retirement programs.
|
Jersey Central Power & Light Company and Subsidiary Company
QUARTERLY FINANCIAL DATA (UNAUDITED)
First Quarter Second Quarter
----------------------- ----------------------
In Thousands 2000 1999 2000 1999 (1)
--------------------------------------------------------------------------------------------
Operating revenues $452,745 $516,889 $490,150 $391,025
Operating income 95,995 113,127 99,553 11,285
Net income/(loss) 45,570 53,697 44,434 (5,855)
Earnings/(loss) available for common stock 43,109 51,265 42,773 (8,225)
Third Quarter Fourth Quarter
----------------------- ----------------------
In Thousands 2000 (2) 1999 2000 (3) 1999 (4)
--------------------------------------------------------------------------------------------
Operating revenues $605,045 $670,245 $431,357 $440,050
Operating income 135,835 194,846 75,863 46,531
Net income 92,793 102,903 28,015 21,635
Earnings available for common stock 91,402 100,565 26,624 19,257
|
(1) Results for the second quarter of 1999 include a reduction of $68 million after-tax as a result of the NJBPU's Restructuring Order on JCP&L.
(2) Results for the third quarter of 2000 include an increase of $16.5 million after-tax resulting from the elimination of deferred taxes and realization of an investment tax credit related to the sale of the Oyster Creek nuclear generating plant.
(3) The aggregate effect on earnings of fourth quarter 2000 adjustments was a loss of approximately $9.9 million after-tax.
(4) The aggregate effect on earnings of fourth quarter 1999 adjustments was a gain of approximately $3 million after-tax.
Jersey Central Power & Light Company and Subsidiary Company
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Jersey Central Power & Light Company:
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Jersey Central Power & Light Company and Subsidiary Company at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 31, 2001
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31,
2000 1999
------------------------------------------------------------------------------------
ASSETS
Utility Plant:
Utility plant in service $3,269,676 $3,601,695
Accumulated depreciation (1,212,784) (1,872,422)
--------- ---------
Net utility plant in service (Note 1) 2,056,892 1,729,273
Construction work in progress 75,201 80,671
Other, net 13,311 14,781
--------- ---------
Net utility plant 2,145,404 1,824,725
--------- ---------
Other Property and Investments:
Nuclear decommissioning trusts, at market (Note 12) 115,311 394,941
Nuclear fuel disposal trust, at market 126,336 119,293
Other, net 6,342 1,252
--------- ---------
Total other property and investments 247,989 515,486
--------- ---------
Current Assets:
Cash and temporary cash investments 801 68,684
Special deposits 1,220 1,035
Accounts receivable:
Customers, less provision for doubtful accounts
of $21,479 for 2000 and $6,056 for 1999 156,358 164,099
Affiliates 28,853 34,992
Other 38,107 34,696
Unbilled revenues (Note 1) 80,864 78,251
Fuel inventory, at average cost or less 508 240
Deferred income taxes (Note 8) 20,669 1,652
Prepayments 96,916 23,000
--------- ---------
Total current assets 424,296 406,649
--------- ---------
Deferred Debits and Other Assets:
Regulatory assets, net (Notes 1 & 12) 3,185,072 2,810,854
Deferred income taxes (Note 8) 187,632 221,668
Other 26,962 31,615
--------- ---------
Total deferred debits and other assets 3,399,666 3,064,137
--------- ---------
Total Assets $6,217,355 $5,810,997
========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31,
2000 1999
------------------------------------------------------------------------------------
LIABILITIES AND CAPITALIZATION
Capitalization:
Common stock $ 153,713 $ 153,713
Capital surplus 510,769 510,769
Retained earnings 794,786 720,878
Accumulated other comprehensive income/(loss) (8) 7
--------- ---------
Total common stockholder's equity (Note 5) 1,459,260 1,385,367
Cumulative preferred stock: (Note 4)
With mandatory redemption 51,500 73,167
Without mandatory redemption 12,649 12,649
Company-obligated mandatorily redeemable
preferred securities (Note 4) 125,000 125,000
Long-term debt (Note 3) 1,093,987 1,133,760
--------- ---------
Total capitalization 2,742,396 2,729,943
--------- ---------
Current Liabilities:
Securities due within one year (Notes 3 & 4) 50,847 50,846
Notes payable (Note 2) 29,200 -
Obligations under capital leases (Note 11) - 48,165
Accounts payable:
Affiliates 98,526 60,527
Other 95,988 82,355
Taxes accrued 8,836 13,079
Interest accrued 23,625 24,523
Other 37,786 36,169
--------- ---------
Total current liabilities 344,808 315,664
--------- ---------
Deferred Credits and Other Liabilities:
Deferred income taxes (Note 8) 866,058 570,568
Unamortized investment tax credits 17,087 32,114
Power purchase contract loss liability (Note 12) 1,699,473 1,624,769
Nuclear fuel disposal fee 156,959 148,009
Three Mile Island Unit 2 future costs (Note 12) 128,735 124,241
Other 261,839 265,689
--------- ---------
Total deferred credits and other liabilities 3,130,151 2,765,390
--------- ---------
Commitments and Contingencies (Note 12)
Total Liabilities and Capitalization $6,217,355 $5,810,997
========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
----------------------------------------------------------------------------------------------
Operating Revenues (Note 1) $1,979,297 $2,018,209 $2,069,648
---------- ---------- ----------
Operating Expenses:
Fuel 19,886 91,044 86,431
Power purchased and interchanged:
Affiliates 48,131 127,406 57,643
Others 1,052,108 670,538 658,742
Deferred costs, net (Note 1) (229,321) (38,108) (25,542)
Other operation and maintenance (Note 9) 381,848 482,874 485,054
Depreciation and amortization (Note 1) 235,001 241,842 250,675
Taxes, other than income taxes (Note 9) 64,398 76,824 94,586
---------- ---------- ----------
Total operating expenses 1,572,051 1,652,420 1,607,589
---------- ---------- ----------
Operating Income 407,246 365,789 462,059
---------- ---------- ----------
Other Income and Deductions:
Allowance for other funds used during construction 719 - 786
Other income, net 27,234 12,461 13,227
---------- ---------- ----------
Total other income and deductions 27,953 12,461 14,013
---------- ---------- ----------
Income Before Interest Charges 435,199 378,250 476,072
---------- ---------- ----------
Interest Charges:
Long-term debt and notes payable 93,888 95,325 95,361
Company-obligated mandatorily
redeemable preferred securities 10,700 10,700 10,700
Other interest 1,211 650 4,129
Allowance for borrowed funds used during
construction (1,287) (1,775) (1,638)
---------- ---------- ----------
Total interest charges 104,512 104,900 108,552
---------- ---------- ----------
Income Before Income Taxes 330,687 273,350 367,520
Income taxes (Note 8) 119,875 100,970 145,078
---------- ---------- ----------
Net Income 210,812 172,380 222,442
Preferred stock dividends 6,904 8,670 10,065
Loss on preferred stock reacquisition - 848 -
Earnings Available for Common Stock $ 203,908 $ 162,862 $ 212,377
========== ========== ==========
|
The accompanying notes are an integral part of the consolidated financial statements.
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
----------------------------------------------------------------------------------------------
Net income $210,812 $172,380 $222,442
---------- ---------- ----------
Other comprehensive income/(loss), net of tax: (Note 5)
Net unrealized gain on investments - 7 -
Minimum pension liability (15) 425 (425)
---------- ---------- ----------
Total other comprehensive income/(loss) (15) 432 (425)
---------- ---------- ----------
Comprehensive income $210,797 $172,812 $222,017
========== ========== ==========
|
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
---------------------------------------------------------------------------------------------
Balance at beginning of year $ 720,878 $ 893,016 $ 875,639
Net income 210,812 172,380 222,442
---------- ---------- ----------
Total 931,690 1,065,396 1,098,081
---------- ---------- ----------
Cash dividends on capital stock:
Cumulative preferred stock (at the annual rates indicated below):
4% Series ($4.00 a share) (500) (500) (500)
7.88% Series E ($7.88 a share) - (1,162) (1,970)
8.48% Series I ($8.48 a share) - - (212)
8.65% Series J ($8.65 a share) (3,843) (4,325) (4,325)
7.52% Series K ($7.52 a share) (2,561) (2,683) (3,058)
Common stock (not declared on a
per share basis) (130,000) (335,000) (195,000)
---------- ---------- ----------
Total (136,904) (343,670) (205,065)
---------- ---------- ----------
Loss on preferred stock reacquisition - (848) -
---------- ---------- ----------
Balance at end of year $ 794,786 $ 720,878 $ 893,016
========== ========== ==========
|
The accompanying notes are an integral part of the consolidated financial statements.
Jersey Central Power & Light Company and Subsidiary Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
---------------------------------------------------------------------------------------------
Operating Activities:
Net income $ 210,812 172,380 $ 222,442
Adjustments to reconcile income to cash provided:
Depreciation and amortization 269,564 272,284 277,950
Provision for doubtful accounts 25,732 9,549 4,670
Regulatory assets, net (167,331) (7,271) 26,947
Amortization of property under capital leases 11,472 29,507 26,739
NJBPU restructuring rate order - 115,000 -
Loss on sale of investments 1,163 - -
Nuclear outage maintenance costs, net - - (6,640)
Deferred income taxes and investment tax
credits, net 255,453 (96,183) (41,865)
Deferred costs, net (229,321) (37,841) (24,482)
Allowance for other funds used during
construction (719) - (786)
Changes in working capital:
Receivables (20,105) (57,943) (11,106)
Materials and supplies (268) 46,023 3,863
Special deposits and prepayments (74,099) 9,660 (12,450)
Payables and accrued liabilities 20,076 (19,861) (12,275)
Due to/from affiliates 44,136 (6,755) 10,722
Nonutility generation contract buyout costs - (35,500) (15,000)
Other, net 4,259 (14,605) (13,856)
--------- --------- ----------
Net cash provided by operating activities 350,824 378,444 434,873
--------- --------- ----------
Investing Activities:
Capital expenditures (144,389) (140,915) (154,918)
Proceeds from sale of investments 74,797 413,753 -
Contributions to decommissioning trusts (130,444) (59,175) (28,003)
Other, net (624) (2,162) (10,720)
--------- --------- ----------
Net cash provided/(required) by
investing activities (200,660) 211,501 (193,641)
--------- --------- ----------
Financing Activities:
Increase/(decrease) in notes payable, net 29,200 (122,344) 7,090
Retirement of long-term debt (40,000) (12) (11)
Capital lease principal payments (48,515) (27,347) (29,084)
Redemption of preferred stock (21,667) (30,940) (15,000)
Dividends paid on preferred stock (7,065) (7,468) (10,371)
Dividends paid on common stock (130,000) (335,000) (195,000)
--------- --------- ----------
Net cash required by financing activities (218,047) (523,111) (242,376)
--------- --------- ----------
Net increase/(decrease) in cash and temporary cash
investments from above activities (67,883) 66,834 (1,144)
Cash and temporary cash investments, beginning of year 68,684 1,850 2,994
--------- --------- ----------
Cash and temporary cash investments, end of year $ 801 $ 68,684 $ 1,850
========= ========= =========
Supplemental Disclosure:
Interest and preferred dividends paid $ 110,661 $ 115,624 $ 116,942
========= ========= =========
Income taxes paid/(refunded) $ (50,105) $ 189,304 $ 192,335
========= ========= =========
New capital lease obligations incurred $ 41,580 $ 9,407 $ 32,680
========= ========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
Jersey Central Power & Light Company and Subsidiary Company
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
---------------------------- --------- -------- -------- --------
Additions
---------------------
Balance (1) (2)
at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
----------- --------- -------- -------- ---------- ---------
Year ended December 31, 2000
Allowance for doubtful
accounts $6,056 $25,732 $ 2,427(a) $12,736(b) $21,479
Allowance for inventory
obsolescence - - - - -
Year ended December 31, 1999
Allowance for doubtful
accounts $1,764 $ 9,549 $37,098(a) $42,355(b) $ 6,056
Allowance for inventory
obsolescence - - - - -
Year ended December 31, 1998
Allowance for doubtful
accounts $1,414 $ 4,670 $ 1,729(a) $ 6,049(b) $ 1,764
Allowance for inventory
obsolescence (16) - - 16(c) -
|
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Inventory written off.
Metropolitan Edison Company and Subsidiary Companies
SELECTED FINANCIAL DATA
(In Millions)
For the Years Ended December 31,
2000(1) 1999(2) 1998(3) 1997 1996(4)
--------------------------------------------------------------------------------------------
Operating revenues $ 842.3 $ 902.8 $ 919.6 $ 943.1 $ 910.4
Other operation
and maintenance expense 91.5 250.2 247.2 228.3 250.0
Income before
extraordinary item 81.9 95.1 57.7 93.5 69.1
Net income 81.9 95.1 50.9 93.5 69.1
Earnings available for
common stock 81.9 94.5 50.4 93.0 71.8
Net utility plant in service 1,094.7 1,059.4 1,239.2 1,492.0 1,455.7
Total assets 3,161.4 3,488.2 4,065.0 2,509.8 2,447.0
Long-term debt 496.9 496.9 546.9 576.9 563.3
Long-term obligations
under capital leases - - - - 0.4
Company-obligated
mandatorily redeemable
preferred securities - - 100.0 100.0 100.0
Company-obligated trust
preferred securities 100.0 100.0 - - -
Capital expenditures and
investments 58.5 66.4 75.1 87.6 76.7
Return on average common equity 16.1% 13.9% 7.5% 12.9% 10.3%
|
(1) Results for 2000 include a gain of $32 million (after-tax) as a result of the net impact of the PaPUC's Phase II order.
(2) Results for 1999 include a net gain of $1.2 million (after-tax) as a result of the sale of substantially all of Met-Ed's electric generating stations.
(3) Results for 1998 include an extraordinary charge of $6.8 million (after-tax) as a result of the PaPUC's Restructuring Order. Also in 1998, as a result of the PaPUC Order, Met-Ed recorded a non-recurring charge of $19 million (after-tax) related to the obligation to refund 1998 revenues; and for the establishment of a sustainable energy fund.
(4) Results for 1996 reflect a non-recurring charge of $15.4 million (after-tax) for costs related to voluntary enhanced retirement programs.
Metropolitan Edison Company and Subsidiary Companies
QUARTERLY FINANCIAL DATA (UNAUDITED)
First Quarter Second Quarter
----------------------- ----------------------
In Thousands 2000 1999 2000 1999
-------------------------------------------------------------------------------------------
Operating revenues $203,056 $229,157 $197,814 $198,010
Operating income 55,319 76,252 19,213 44,623
Net income/(loss) 26,493 32,832 8,667 19,142
Earnings available for common stock 26,493 32,224 8,667 19,142
Third Quarter Fourth Quarter
----------------------- ----------------------
In Thousands 2000 1999 2000 (1) 1999 (2)
--------------------------------------------------------------------------------------------
Operating revenues $227,442 $280,235 $214,021 $195,425
Operating income 9,844 81,257 84,113 11,116
Net income (3,791) 41,622 50,526 1,527
Earnings available for common stock (3,791) 41,622 50,526 1,527
|
(1) Results for 2000 include a gain of $32 million (after-tax) as a result of the net impact of the PaPUC's Phase II order. The aggregate effect on earnings of other fourth quarter 2000 adjustments was a loss of approximately $6 million after-tax.
(2) Results for the fourth quarter of 1999 include an increase of $1.2 million after-tax for the net gain on the sale of substantially all of Met-Ed's generating assets, related to wholesale operations. In addition, the aggregate effect on earnings of other fourth quarter 1999 adjustments was a loss of approximately $5 million after-tax.
Metropolitan Edison Company and Subsidiary Companies
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Metropolitan Edison Company:
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Metropolitan Edison Company and Subsidiary Companies at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 31, 2001
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31,
2000 1999
------------------------------------------------------------------------------------
ASSETS
Utility Plant:
Utility plant in service $1,561,252 $1,522,100
Accumulated depreciation (489,607) (462,709)
--------- ---------
Net utility plant in service (Note 1) 1,071,645 1,059,391
Construction work in progress 22,437 25,329
Other, net 596 643
--------- ---------
Net utility plant 1,094,678 1,085,363
--------- ---------
Other Property and Investments:
Nuclear decommissioning trusts, at market (Note 12) 154,068 144,261
Other, net 4,472 3,010
--------- ---------
Total other property and investments 158,540 147,271
--------- ---------
Current Assets:
Cash and temporary cash investments 3,234 10,899
Special deposits 205 160
Accounts receivable:
Customers, less provision for doubtful accounts
of 13,004 for 2000, and 4,757 for 1999 70,118 60,188
Affiliates 49,731 77,067
Other 28,525 46,377
Unbilled revenues (Note 1) 38,688 28,956
Deferred income taxes (Note 8) 1,838 2,945
Prepayments 7,556 16,715
--------- ---------
Total current assets 199,895 243,307
--------- ---------
Deferred Debits and Other Assets:
Regulatory assets, net (Notes 1 & 12) 1,227,981 1,232,865
Deferred income taxes (Note 8) 447,868 738,189
Other 32,417 41,198
--------- ---------
Total deferred debits and other assets 1,708,266 2,012,252
--------- ---------
Total Assets $3,161,379 $3,488,193
========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31,
2000 1999
------------------------------------------------------------------------------------
LIABILITIES AND CAPITALIZATION
Capitalization:
Common stock $ 66,273 $ 66,273
Capital surplus 400,200 400,200
Retained earnings 70,476 13,581
Accumulated other comprehensive income 64 21,363
--------- ---------
Total common stockholder's equity (Note 5) 537,013 501,417
Company-obligated trust preferred securities 100,000 100,000
Long-term debt (Note 3) 496,860 496,883
--------- ---------
Total capitalization 1,133,873 1,098,300
--------- ---------
Current Liabilities:
Securities due within one year (Note 3) 27 50,025
Notes payable (Note 2) 46,600 -
Accounts payable:
Affiliates 69,462 125,179
Other 37,399 30,106
Taxes accrued 20,768 35,976
Interest accrued 14,375 16,738
Other 13,858 18,208
--------- ---------
Total current liabilities 202,489 276,232
--------- ---------
Deferred Credits and Other Liabilities:
Deferred income taxes (Note 8) 728,344 993,427
Unamortized investment tax credits 14,159 15,010
Power purchase contract loss liability (Note 12) 727,503 735,833
Three Mile Island Unit 2 future costs (Note 12) 257,367 248,381
Nuclear fuel disposal fee 35,456 33,430
Other 62,188 87,580
--------- ---------
Total deferred credits and other liabilities 1,825,017 2,113,661
--------- ---------
Commitments and Contingencies (Note 12)
Total Liabilities and Capitalization $3,161,379 $3,488,193
========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
--------------------------------------------------------------------------------------------
Operating Revenues (Note 1) $842,333 $902,827 $919,594
------- ------- -------
Operating Expenses:
Fuel - 86,156 99,511
Power purchased and interchanged:
Affiliates 2,328 3,415 17,766
Others 468,742 221,516 220,095
Other operation and maintenance (Note 9) 91,456 250,220 247,189
Depreciation and amortization (Note 1) 68,695 88,989 109,148
Taxes, other than income taxes (Note 9) 42,623 39,283 58,459
------- ------- -------
Total operating expenses 673,844 689,579 752,168
------- ------- -------
Operating Income 168,489 213,248 167,426
------- ------- -------
Other Income and Deductions:
Allowance for other funds used during construction 28 164 130
Other income/(expense), net 12,169 3,901 (13,539)
------- ------- -------
Total other income and deductions 12,197 4,065 (13,409)
------- ------- -------
Income Before Interest Charges 180,686 217,313 154,017
------- ------- -------
Interest Charges:
Long-term debt and notes payable 45,866 45,996 47,557
Company-obligated trust preferred securities 6,656 4,369 -
Company-obligated mandatorily
redeemable preferred securities - 8,950 9,000
Other interest 2,658 2,527 3,130
Allowance for borrowed funds used during
construction (477) (1,048) (813)
------- ------- -------
Total interest charges 54,703 60,794 58,874
------- ------- -------
Income Before Income Taxes 125,983 156,519 95,143
Income taxes (Note 8) 44,088 61,396 37,423
------- ------- -------
Income Before Extraordinary Item 81,895 95,123 57,720
Extraordinary item (net of income taxes
of $4,708) (Note 6) - - (6,805)
------- ------- -------
Net Income 81,895 95,123 50,915
Preferred stock dividends - 66 483
Loss on preferred stock reacquisition - 542 -
------- ------- -------
Earnings Available for Common Stock $ 81,895 $ 94,515 $ 50,432
======= ======= =======
|
The accompanying notes are an integral part of the consolidated financial statements.
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
---------------------------------------------------------------------------------------------
Net income $ 81,895 $ 95,123 $ 50,915
------- ------- -------
Other comprehensive income/(loss), net of tax: (Note 5)
Net unrealized gain/(loss) on investments (21,295) 4,315 4,148
Minimum pension liability (4) 528 (115)
------- ------- --------
Total other comprehensive income/(loss) (21,299) 4,843 4,033
------- ------- -------
Comprehensive income $ 60,596 $ 99,966 $ 54,948
======= ======= =======
|
The net unrealized loss on investments, reflected above for 2000, is due to the reclassification of previous unrealized gains totaling $21.2 million, from Accumulated other comprehensive income to Regulatory assets, net on the Consolidated Balance Sheets. See Nuclear Plant Retirement Costs section of Note 12, Commitments and Contingencies.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
--------------------------------------------------------------------------------------------
Balance at beginning of year $ 13,581 $234,066 $268,634
Net income 81,895 95,123 50,915
------- ------- -------
Total 95,476 329,189 319,549
------- ------- -------
Cash dividends on capital stock:
Cumulative preferred stock (at the annual rates indicated below):
3.90% Series ($3.90 a share) - (34) (251)
4.35% Series ($4.35 a share) - (14) (98)
3.85% Series ($3.85 a share) - (5) (36)
3.80% Series ($3.80 a share) - (4) (30)
4.45% Series ($4.45 a share) - (9) (68)
Common stock (not declared on a
per share basis) (25,000) (315,000) (85,000)
------- ------- -------
Total (25,000) (315,066) (85,483)
------- ------- -------
Loss on preferred stock reacquisition - (542) -
------- ------- -------
Balance at end of year $ 70,476 $ 13,581 $234,066
======= ======= =======
|
The accompanying notes are an integral part of the consolidated financial statements.
Metropolitan Edison Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
-------------------------------------------------------------------------------------------
Operating Activities:
Net income $ 81,895 $ 95,123 $ 50,915
Extraordinary item (net of income tax
benefit of $4,708) - - 6,805
-------- -------- -------
Income before extraordinary item 81,895 95,123 57,720
Adjustments to reconcile income to cash provided:
Depreciation and amortization 74,379 91,575 114,961
Provision for doubtful accounts 18,511 7,095 5,673
Regulatory assets, net 15,941 33,987 (44,890)
Amortization of property under capital leases - 12,041 14,666
PaPUC restructuring rate orders (44,580) - 32,900
Gain/(loss) on sale of investments 575 (2,011) -
Nuclear outage maintenance costs, net - (7,595) 6,494
Deferred income taxes and investment tax
credits, net 21,631 (79,142) (23,152)
Allowance for other funds used during
construction - (164) (130)
Changes in working capital:
Receivables (12,499) (53,810) (5,238)
Materials and supplies - 36,944 (1,911)
Special deposits and prepayments 9,115 4,803 (13,861)
Payables and accrued liabilities (14,656) (80,141) 10,445
Due to/from affiliates (28,352) (5,013) 1,332
Nonutility generation contract buyout costs (1,250) (55,034) (32,917)
Other, net (36,313) (103,006) 51,456
-------- -------- -------
Net cash provided/(required) by
operating activities 84,397 (104,348) 173,548
-------- -------- -------
Investing Activities:
Capital expenditures (58,481) (66,388) (75,068)
Proceeds from sale of investments 3,519 641,273 -
Contributions to decommissioning trusts (8,700) (33,556) (17,766)
Other, net - (45) 465
-------- -------- -------
Net cash provided/(required) by
investing activities (63,662) 541,284 (92,369)
-------- -------- -------
Financing Activities:
Issuance of company-obligated trust preferred
securities - 96,535 -
Increase/(decrease) in notes payable, net 46,600 (79,540) 12,261
Retirement of long-term debt (50,000) (30,024) (22)
Capital lease principal payments - (15,786) (13,609)
Contributions from parent company - 30,000 -
Redemption of preferred stock - (12,598) -
Redemption of company-obligated mandatorily
redeemable preferred securities - (100,000) -
Dividends paid on preferred stock - (66) (483)
Dividends paid on common stock (25,000) (315,000) (85,000)
-------- -------- -------
Net cash required by financing activities (28,400) (426,479) (86,853)
-------- -------- -------
Net increase/(decrease) in cash and temporary cash
investments from above activities (7,665) 10,457 (5,674)
Cash and temporary cash investments, beginning of year 10,899 442 6,116
-------- -------- -------
Cash and temporary cash investments, end of year $ 3,234 $ 10,899 $ 442
======== ======== =======
Supplemental Disclosure:
Interest and preferred dividends paid $ 54,107 $ 59,380 $ 57,891
======== ======== =======
Income taxes paid $ 45,534 $ 120,277 $ 77,296
======== ======== =======
New capital lease obligations incurred $ - $ 18,840 $ 3,399
======== ======== =======
|
The accompanying notes are an integral part of the consolidated financial statements.
Metropolitan Edison Company and Subsidiary Companies
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
---------------------------- --------- -------- -------- --------
Additions
---------------------
Balance (1) (2)
at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
----------- --------- ---------- -------- ---------- ---------
Year ended December 31, 2000
Allowance for doubtful
accounts $4,757 $18,511 $ 1,602(a) $11,866(b) $13,004
Allowance for inventory
obsolescence - - - - -
Year ended December 31, 1999
Allowance for doubtful
accounts $3,335 $ 7,095 $42,811(a) $48,484(b) $ 4,757
Allowance for inventory
obsolescence 160 - - 160(d) -
Year ended December 31, 1998
Allowance for doubtful
accounts $3,147 $ 5,673 $ 1,712(a) $ 7,197(b) $ 3,335
Allowance for inventory
obsolescence 1,433 - (13)(c) 1,260(d) 160
|
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Sale of inventory previously written off.
(d) Inventory written off.
Pennsylvania Electric Company and Subsidiary Companies
SELECTED FINANCIAL DATA
(In Millions)
For the Years Ended December 31,
2000(1) 1999(2) 1998(3) 1997 1996(4)
-------------------------------------------------------------------------------------------
Operating revenues $ 901.9 $ 922.0 $1,032.2 $1,052.9 $1,019.6
Other operation and
maintenance expense 148.7 248.0 275.1 258.4 293.9
Income before
extraordinary item 39.3 152.5 58.6 95.0 69.8
Net income 39.3 152.5 39.6 95.0 69.8
Earnings available
for common stock 39.3 151.6 38.9 94.4 73.9
Net utility plant in service 1,203.2 1,179.9 1,626.5 1,720.8 1,715.7
Total assets 3,048.1 3,695.8 4,524.8 2,563.0 2,503.4
Long-term debt 517.8 424.6 626.4 676.4 656.5
Long-term obligations
under capital leases 1.7 2.2 2.6 3.3 4.1
Company-obligated
mandatorily redeemable
preferred securities - - 105.0 105.0 105.0
Company-obligated trust
preferred securities 100.0 100.0 - - -
Capital expenditures and
investments 73.2 78.3 89.6 99.1 114.7
Return on average common equity 8.8% 26.6% 5.0% 12.1% 10.0%
|
(1) Results for 2000 include a gain of $8.8 million (after-tax) as a result of the net impact of the PaPUC's Phase II order.
(2) Results for 1999 include a gain of $34.9 million (after-tax) as a result of the sale of Penelec's remaining electric generating stations.
(3) Results for 1998 include an extraordinary charge of $19 million (after-tax) as a result of the PaPUC's Restructuring Order. Also in 1998, as a result of the PaPUC Order, Penelec recorded a non-recurring charge of $21 million (after-tax) related to the obligation to refund 1998 revenues; and for the establishment of a sustainable energy fund.
(4) Results for 1996 reflect a non-recurring charge of $19.7 million (after-tax) for costs related to voluntary enhanced retirement programs.
Pennsylvania Electric Company and Subsidiary Companies
QUARTERLY FINANCIAL DATA (UNAUDITED)
First Quarter Second Quarter
----------------------- ---------------------
In Thousands 2000 1999 (1) 2000 1999
------------------------------------------------------------------------------------------
Operating revenues $220,105 $246,249 $206,789 $205,097
Operating income 53,632 72,642 14,678 45,009
Net income/(loss) 26,942 65,490 4,539 19,945
Earnings available for common stock 26,942 64,610 4,539 19,945
Third Quarter Fourth Quarter
----------------------- ---------------------
In Thousands 2000 1999 2000 (3) 1999 (2)
--------------------------------------------------------------------------------------------
Operating revenues $236,729 $254,609 $238,258 $216,010
Operating income (11,067) 41,613 48,428 32,336
Net income (14,009) 22,515 21,778 44,541
Earnings/(loss) available for common stock (14,009) 22,515 21,778 44,541
|
(1) Results for the first quarter of 1999 include an increase of $27.8 million after-tax for the gain on the sale of Penelec's Homer City Station, related to wholesale operations.
(2) Results for the fourth quarter of 1999 includes an increase of $7.1 million after-tax for the net gain on the sale of Penelec's remaining generating assets, related to wholesale operations. In addition, the aggregate effect on earnings of other fourth quarter 1999 adjustments was a gain of approximately $14 million after-tax.
(3) Results for the fourth quarter of 2000 include an after-tax gain of $8.8 million for the net impact of the PaPUC's Phase II order. The aggregate effect on earnings of other fourth quarter 2000 adjustments was a loss of approximately $1.7 million after-tax.
Pennsylvania Electric Company and Subsidiary Companies
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Pennsylvania Electric Company:
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Pennsylvania Electric Company and Subsidiary Companies at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 31, 2001
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31,
2000 1999
------------------------------------------------------------------------------------
ASSETS
Utility Plant:
Utility plant in service $1,791,594 $1,732,386
Accumulated depreciation (588,377) (552,449)
--------- ---------
Net utility plant in service (Note 1) 1,203,217 1,179,937
Construction work in progress 25,895 30,329
Other, net 2,665 2,704
--------- ---------
Net utility plant 1,231,777 1,212,970
--------- ---------
Other Property and Investments:
Nonutility generation trusts, at market 190,710 266,700
Nuclear decommissioning trusts, at market (Note 12) 98,426 97,082
Other, net 833 1,233
--------- ---------
Total other property and investments 289,969 365,015
--------- ---------
Current Assets:
Cash and temporary cash investments 250 32,250
Special deposits 330 233
Accounts receivable:
Customers, less provision for doubtful accounts
of $14,851 for 2000 and $5,288 for 1999 78,001 69,752
Affiliates 25,073 15,546
Other 21,205 24,658
Unbilled revenues (Note 1) 39,514 30,836
Deferred income taxes (Note 8) 1,912 7,589
Prepayments 11,869 15,484
--------- ---------
Total current assets 178,154 196,348
--------- ---------
Deferred Debits and Other Assets:
Regulatory assets, net: (Notes 1 & 12) 619,951 672,527
Deferred income taxes (Note 8) 708,954 1,225,150
Other 19,314 23,781
--------- ---------
Total deferred debits and other assets 1,348,219 1,921,458
--------- ---------
Total Assets $3,048,119 $3,695,791
========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31,
2000 1999
------------------------------------------------------------------------------------
LIABILITIES AND CAPITALIZATION
Capitalization:
Common stock $ 105,812 $ 105,812
Capital surplus 320,487 285,486
Retained earnings 43,515 59,265
Accumulated other comprehensive income 23 10,619
--------- ---------
Total common stockholder's equity (Note 5) 469,837 461,182
Company-obligated trust preferred securities 100,000 100,000
Long-term debt (Note 3) 517,813 424,641
--------- ---------
Total capitalization 1,087,650 985,823
--------- ---------
Current Liabilities:
Securities due within one year (Note 3) 14 13
Notes payable (Note 2) 55,800 53,600
Obligations under capital leases (Note 11) 485 -
Accounts payable:
Affiliates 29,788 66,223
Other 50,673 34,845
Taxes accrued 23,895 108,005
Interest accrued 11,582 6,588
Other 6,880 17,567
--------- ---------
Total current liabilities 179,117 286,841
--------- ---------
Deferred Credits and Other Liabilities:
Deferred income taxes (Note 8) 735,750 1,250,490
Unamortized investment tax credits 13,098 14,240
Power purchase contract loss liability (Note 12) 846,992 940,276
Three Mile Island Unit 2 future costs (Note 12) 128,820 124,322
Nuclear fuel disposal fee 17,728 16,717
Other 38,964 77,082
--------- ---------
Total deferred credits and other liabilities 1,781,352 2,423,127
--------- ---------
Commitments and Contingencies (Note 12)
Total Liabilities and Capitalization $3,048,119 $3,695,791
========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
------------------------------------------------------------------------------------------
Operating Revenues (Note 1) $ 901,881 $ 921,965 $1,032,226
--------- --------- ---------
Operating Expenses:
Fuel - 82,397 176,548
Power purchased and interchanged:
Affiliates 2,634 6,422 2,729
Others 542,483 273,082 233,395
Other operation and maintenance (Note 9) 148,698 248,034 275,107
Depreciation and amortization (Note 1) 56,505 78,384 109,800
Taxes, other than income taxes (Note 9) 45,890 42,046 63,874
--------- --------- ---------
Total operating expenses 796,210 730,365 861,453
--------- --------- ---------
Operating Income 105,671 191,600 170,773
--------- --------- ---------
Other Income and Deductions:
Allowance for other funds used during construction - 268 -
Other income/(expense), net 11,135 59,081 (6,429)
--------- --------- ---------
Total other income and deductions 11,135 59,349 (6,429)
--------- --------- ---------
Income Before Interest Charges 116,806 250,949 164,344
--------- --------- ---------
Interest Charges:
Long-term debt and notes payable 36,839 34,588 54,907
Company-obligated trust preferred securities 7,034 3,976 -
Company-obligated mandatorily
redeemable preferred securities - 4,977 9,188
Other interest 4,671 1,608 1,019
Allowance for borrowed funds used during
construction (742) (1,074) (1,897)
--------- --------- ---------
Total interest charges 47,802 44,075 63,217
--------- --------- ---------
Income Before Income Taxes 69,004 206,874 101,127
Income taxes (Note 8) 29,754 54,383 42,537
--------- --------- ---------
Income Before Extraordinary Item 39,250 152,491 58,590
Extraordinary item (net of income taxes
of $11,592) (Note 6) - - (18,950)
--------- --------- ---------
Net Income 39,250 152,491 39,640
Preferred stock dividends - 154 695
Loss on preferred stock reacquisition - 726 -
--------- --------- ---------
Earnings Available for Common Stock $ 39,250 $ 151,611 $ 38,945
========= ========= =========
|
The accompanying notes are an integral part of the consolidated financial statements.
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
--------------------------------------------------------------------------------------------
Net income $ 39,250 $152,491 $ 39,640
------- ------- -------
Other comprehensive income/(loss), net of tax: (Note 5)
Net unrealized gains/(loss) on investments (10,596) 2,101 2,064
Minimum pension liability - 165 (42)
------- ------- -------
Total other comprehensive income/(loss) (10,596) 2,266 2,022
------- ------- -------
Comprehensive income $ 28,654 $154,757 $ 41,662
======= ======= =======
|
The net unrealized loss on investments for year 2000 is due to the reclassification of previous unrealized gains totaling $10.6 million from Accumulated other comprehensive income to Regulatory assets, net in the Consolidated Balance Sheets. See Nuclear Plant Retirement Costs section of Note 12, Commitments and Contingencies.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
--------------------------------------------------------------------------------------------
Balance at beginning of year $ 59,265 $367,653 $393,708
Net income 39,250 152,491 39,640
------- ------- -------
Total 98,515 520,144 433,348
------- ------- -------
Cash dividends on capital stock:
Cumulative preferred stock (at the annual rates indicated below):
4.40% Series B ($4.40 a share) - (29) (131)
3.70% Series C ($3.70 a share) - (41) (183)
4.05% Series D ($4.05 a share) - (25) (114)
4.70% Series E ($4.70 a share) - (15) (66)
4.50% Series F ($4.50 a share) - (17) (77)
4.60% Series G ($4.60 a share) - (27) (124)
Common stock (not declared on a
per share basis) (55,000) (460,000) (65,000)
------- ------- ------
Total (55,000) (460,154) (65,695)
------- ------- -------
Loss on preferred stock reacquisition - (725) -
------- ------- -------
Balance at end of year $ 43,515 $ 59,265 $367,653
======= ======= =======
|
The accompanying notes are an integral part of the consolidated financial statements.
Pennsylvania Electric Company and Subsidiary Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For The Years Ended December 31,
2000 1999 1998
----------------------------------------------------------------------------------------------
Operating Activities:
Net income $ 39,250 $ 152,491 $ 39,640
Extraordinary item (net of income tax
benefit of $11,592) - - 18,950
-------- --------- ---------
Income before extraordinary item 39,250 152,491 58,590
Adjustments to reconcile income to cash provided:
Depreciation and amortization 56,852 78,072 107,239
Provision for doubtful accounts 20,667 8,447 5,826
Regulatory assets, net (38,578) (46,839) (48,016)
Amortization of property under capital leases - 6,036 7,319
PaPUC restructuring rate orders (21,550) - 35,600
Gain on sale of investments (4,882) (59,313) -
Nuclear outage maintenance costs, net - (3,803) 3,251
Deferred income taxes and investment tax
credits, net 14,804 (417,559) (15,496)
Allowance for other funds used during construction (742) (268) -
Changes in working capital:
Receivables (30,228) (28,343) (7,601)
Materials and supplies - 56,559 (1,310)
Special deposits and prepayments 3,518 18,466 (1,878)
Payables and accrued liabilities (73,976) 29,484 16,709
Due to/from affiliates (45,963) 14,577 21,466
Nonutility generation contract buyout costs (4,410) (3,500) (6,101)
Other, net (31,283) (69,964) 16,537
-------- --------- ---------
Net cash provided/(required) by
operating activities (116,521) (265,457) 192,135
-------- --------- ---------
Investing Activities:
Capital expenditures (73,247) (78,331) (89,550)
Proceeds from sale of investments - 1,493,444 -
Contributions to nonutility generation trusts 75,991 (266,701) -
Contributions to decommissioning trusts (40) (75,926) (5,270)
Other, net 6,617 1,002 (520)
-------- --------- ---------
Net cash provided/(required) by
investing activities 9,321 1,073,488 (95,340)
-------- --------- ---------
Financing Activities:
Issuance of company-obligated trust
preferred securities - 96,535 -
Issuance of long-term debt 118,000 348,218 -
Increase/(Decrease) in notes payable, net 2,200 (32,423) 8,442
Contributions from parent 35,000 - -
Retirement of long-term debt (25,000) (600,011) (30,011)
Capital lease principal payments - (7,907) (6,781)
Redemption of preferred stock - (17,406) -
Redemption of company-obligated mandatorily
redeemable preferred securities - (105,383) -
Dividends paid on preferred stock - (154) (695)
Dividends paid on common stock (55,000) (460,000) (65,000)
-------- --------- ---------
Net cash provided/(required) by
financing activities 75,200 (778,531) (94,045)
-------- --------- ---------
Net increase/(decrease) in cash and temporary cash
investments from above activities (32,000) 29,500 2,750
Cash and temporary cash investments, beginning of year 32,250 2,750 -
-------- --------- ---------
Cash and temporary cash investments, end of year $ 250 $ 32,250 $ 2,750
======== ========= =========
Supplemental Disclosure:
Interest and preferred dividends paid $ 40,443 $ 55,779 $ 64,057
======== ========= =========
Income taxes paid $ 110,395 $ 413,810 $ 46,732
======== ========= =========
New capital lease obligations incurred $ - $ 9,415 $ 1,714
======== ========= =========
The accompanying notes are an integral part of the consolidated financial statements.
|
Pennsylvania Electric Company and Subsidiary Companies
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
---------------------------- --------- -------- -------- --------
Additions
---------------------
Balance (1) (2)
at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
----------- --------- -------- -------- ---------- ---------
Year ended December 31, 2000
Allowance for doubtful
accounts $5,288 $20,667 $ 1,539(a) $12,643(b) $14,851
Allowance for inventory
obsolescence - - - - -
Year ended December 31, 1999
Allowance for doubtful
accounts $3,235 $ 8,447 $38,374(a) $44,768(b) $ 5,288
Allowance for inventory
obsolescence - - - - -
Year ended December 31, 1998
Allowance for doubtful
accounts $3,526 $ 5,826 $ 2,123(a) $ 8,240(b) $ 3,235
Allowance for inventory
obsolescence 67 - - 67(c) -
|
(a) Recovery of accounts previously written off.
(b) Accounts receivable written off.
(c) Inventory written off.
Exhibits to be filed by EDGAR with 2000 10-K
3-F By-Laws of Met-Ed as amended May 16, 2000.
3-H By-Laws of Penelec as amended May 16, 2000.
4-L Indenture of GPU, Inc., dated as of December 1, 2000, between GPU,
Inc. and United States Trust Company of New York.
10-A GPU Companies Deferred Compensation Plan as amended through
August 8, 2000.
10-H Deferred Remuneration Plan for Outside Directors of JCP&L as
amended and restated effective August 8, 2000.
10-L Letter agreement dated August 8, 2000 relating to terms of
employment and pension benefits for I.H. Jolles.
10-M GPU, Inc. Restricted Stock Plan for Outside Directors as amended
and restated as of August 8, 2000.
10-N Retirement Plan for Outside Directors of GPU, Inc. as amended and
restated as of August 8, 2000.
10-O Deferred Remuneration Plan for Outside Directors of GPU, Inc. as
amended and restated effective August 8, 2000.
10-W Form of 2000 Stock Option Agreement under the 1990 Stock Plan for
Employees of GPU, Inc. and Subsidiaries.
10-X Form of 2000 Performance Units Agreement under the 1990 Stock Plan
for Employees of GPU, Inc. and Subsidiaries.
10-Y Deferred Stock Unit Plan for Outside Directors of GPU, Inc. as
amended effective August 8, 2000.
10-Z Form of 2000 MYR Group Inc. Performance Units Agreement under the
1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries.
10-EE GPU Companies Supplemental Executive Retirement Plan, as amended
through August 9, 2000.
12 Statements Showing Computation of Ratio of Earnings to Fixed
Charges and Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
A - GPU, Inc. and Subsidiary Companies
B - JCP&L
C - Met-Ed
D - Penelec
|
21 Subsidiaries of the Registrants
A - JCP&L
B - Met-Ed
C - Penelec
23 Consent of Independent Accountants
A - GPU, Inc.
B - JCP&L
C - Met-Ed
D - Penelec
Exhibit 3F
METROPOLITAN EDISON COMPANY
BY-LAWS
METROPOLITAN EDISON COMPANY
BY-LAWS
1. The principal office of the corporation shall be located at 2800 Pottsvile Pike, Muhlenberg Township, Berks County, Pennsylvania. The corporation may also have offices at such other places, either within or without the Commonwealth of Pennsylvania, as the Board of Directors may from time to time designate or the business of the corporation may require.
2. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization, and the words "Corporate Seal" and "Pennsylvania". The corporate seal may be affixed to any certificates of stock, bonds, debentures, notes or other engraved, lithographed or printed instruments, by engraving, lithographing or printing thereon such seal or a facsimile thereof, and such seal or facsimile thereof so engraved, lithographed or printed thereon shall have the same force and effect, for all purposes, as if such corporate seal had been affixed thereto by indentation.
3. All meetings of the shareholders shall be held at the principal office of the corporation or at such other place as shall be stated in the notice of the meeting. All meetings of the shareholders shall be presided over by the President or, in the event of his absence or disability, by any Vice President, except when by statute, the Articles of Incorporation or any amendment thereof, the election of a presiding officer by the shareholders present at the meeting is required.
4. The annual meeting of shareholders shall be held during the month of May in each year on such day and at such time as shall be determined by the Board of Directors and specified in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors of the corporation and transact such other business as may properly be
brought before the meeting. Notice of the time and place thereof shall be given by mail at least ten (10) days prior to the meeting, to each shareholder of record entitled to vote thereat, at his address as the same shall appear on the books of the corporation.
5. Except as otherwise provided by law or by the Articles of Incorporation, as amended, the holders of a majority of shares of the stock of the Corporation issued and outstanding and entitled to vote, present in person or represented by proxy, shall be requisite for, and shall constitute a quorum, at all meetings of the stockholders. If, however, the holders of a majority of such shares of stock shall not be present or represented by proxy at any such meeting, the stockholders entitled to vote thereat, present in person or by proxy, shall have power, by a majority vote of those present, to adjourn the meeting from time to time without notice other than announcement at the meeting, until the holders of the amount of stock requisite to constitute a quorum, as aforesaid, shall be present in person or by proxy. At any adjourned meeting at which a quorum shall be present, in person or by proxy, any business may be transacted which might have been transacted at the meeting as originally noticed.
6. At all meetings of the shareholders each shareholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument executed in writing by such shareholder, or by his duly appointed attorney, but no proxy dated more than eleven (11) months prior to any meeting or election shall confer the right to vote thereat. Each holder of record of stock having voting power shall be entitled to one vote for each share of stock standing in the name of such holder on the stock transfer books of the corporation, except as otherwise provided by law or the Articles of Incorporation or any amendment thereto. The vote for directors, and upon the demand of any shareholder or duly authorized proxy, the vote upon any question before the meeting, shall be by ballot. All elections shall be determined and all questions decided by a plurality vote, except when by statute or the Articles of Incorporation or any amendment thereto a larger vote of the shareholders shall be required. Any action which may be taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be signed by all of the shareholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the corporation.
7. Nothing herein contained shall be construed to enlarge, limit or impair the voting rights of the holders of the Preferred Stock of the corporation, as set forth in the Articles of Incorporation of the corporation as the same now exist or may hereafter be amended.
8. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by statute or by the Articles of Incorporation or any amendment thereto, may be called by the President, or by a majority of the Board of Directors or by a majority of the Executive Committee, and shall be called by the President or the Secretary at the request in writing of one or more shareholders who, by statute or the Articles of Incorporation or any amendment thereto are entitled to call such meeting, upon at least ten (10) days' written or printed notice to each shareholder of record entitled to vote thereat, stating the place, day and hour of such meeting and the business proposed to be transacted thereat. No business shall be transacted at such meetings except with respect to matters specified in the notice, provided however, that if all the shareholders of the corporation entitled to vote shall be present in person or by proxy any business pertaining to the affairs of the corporation may be transacted.
9. The business and affairs of the corporation shall be managed by its Board of Directors, or under the direction of the Board of Directors, which shall consist of not less than three (3) nor more than ten (10) directors as shall be fixed from time to time by a resolution adopted by the majority of the entire Board of Directors, or by the consent of the shareholders, provided, however, that no decrease in the number of directors constituting the entire Board of Directors shall shorten the term of any incumbent director. Each director shall be at least twenty-one years of age. Directors need not be shareholders of the corporation. Directors shall be elected at the annual meeting of shareholders, or, if any such election shall not be held, at a shareholders' meeting called and held in accordance with the provisions of the Business Corporation Law of the Commonwealth of Pennsylvania. Each director shall serve until the next annual meeting of shareholders and thereafter until his successor shall have been elected and shall qualify. If all the directors shall, severally or collectively, consent in writing to any action to be taken by the corporation, such action shall
be as valid a corporate action as though it had been authorized at a meeting of the Board of Directors.
10. Unless otherwise required by law, in the absence of fraud, no contract or transaction between the corporation and one or more of its directors or officers or between the corporation and any corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial or other interest, shall be void or voidable solely for that reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors that authorizes the contract or transaction, or solely because his or their votes are counted for that purpose, if:
(a) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors and the Board authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum or;
(b) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of those shareholders; or
(c) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the Board of Directors or the shareholders.
No director or officer shall be liable to account to the corporation for any profit realized by him from or through any such contract or transaction of the corporation by reason of his interest as aforesaid in such contract or transaction if such contract or transaction shall be authorized, approved or ratified as aforesaid.
11. At all meetings of the Board of Directors a majority of the directors in office shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the Articles of Incorporation or any amendment thereto or by these By-Laws.
12. The first meeting of the Board of Directors held next after the annual meeting of shareholders at which directors shall have been directed, shall be held for the purpose of organization, the election of officers and the transaction of any other business which may come before the meeting.
13. Regular meetings of the Board of Directors shall be held without notice at such time and place as the Board of Directors may from time to time determine.
14. Special meetings of the Board of Directors may be called by the Chairman of the Board or by the President or, in the absence or disability of the Chairman of the Board and the President, by a Vice President, or by any two directors and may be held at the time and place designated in the call and notice of the meeting. The Secretary, or other officer performing his duties, shall give notice either personally or by telephone or by telegram at least twenty-four hours before the meeting, or by mail at least three (3) days before the meeting. Meetings may be held at any time and place without such notice if all the directors are present or if those not present waive notice in writing, either before or after the meeting.
15. Any regular or special meeting may be adjourned to any other time at the same or any other place by a majority of the directors present at the meeting whether or not a quorum shall be present at such meeting, and no notice of the adjourned meeting shall be required other than announcement at the meeting.
16. Directors, as such shall not receive any stated salary for their services, but by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular and special meeting of the Board; but nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of board committees may be allowed like compensation for attending committee meetings.
17. The Board of Directors may by vote of the majority of the whole Board create an Executive Committee consisting of two (2) or more of their own number to hold office for such period as the Board shall determine. The Chairman of the Board and the President shall each be a member of the Executive Committee, and the Chairman of the Board shall be Chairman thereof and the remaining members shall be elected by a majority vote of the whole Board of Directors. The Board of Directors by a majority vote of the whole Board may fill any vacancies in the Executive Committee and may designate one or more alternate members who shall serve on the Executive Committee in the absence of any regular member or members of such Committee
Such Executive Committee shall advise with and aid the officers of the corporation in all matters concerning its interest and the management of its business, and shall, between meetings of the Board of Directors, have all the power of the Board of Directors in the management of the business and affairs of the corporation, and shall have the power to authorize the seal of the corporation to be affixed to all papers that may require it. The taking of any action by the Executive Committee shall be conclusive evidence that the Board of Directors was not in session at the time of such action. Any action which may be taken at a meeting of the Executive Committee may be taken without a meeting if a consent or consents in writing setting forth the action so taken shall be signed by all of the members of the Committee and shall be filed with the Secretary of the corporation.
The Executive Committee shall cause to be kept regular minutes of its proceedings, which may be transcribed in the regular minute book of the corporation, and all such proceedings shall be reported to the Board of Directors at its next succeeding meeting, and shall be subject to revision or alteration by the Board of Directors, provided that no rights of third persons shall be affected by such revision or alteration. A majority of the Executive Committee shall constitute a quorum at any meeting. The Executive Committee may, from time to time, subject to the approval of the Board of Directors, prescribe rules and regulations for the calling and conduct of meetings of the Committee, and other matters relating to its procedure and the exercise of its powers.
From time to time the Board of Directors may appoint any other committee or committees consisting of one or more of their own number for any purpose or purposes, which committees shall have such powers and such tenure of office as shall be specified in the resolution of appointment. The Board of Directors by a majority vote of the whole Board may fill any vacancies on any such committee or committees so appointed and may with respect to any such committee designate one or more alternate members who shall serve in the absence of any regular member or members on such committee. The chief executive officer of the corporation shall be a member ex officio of all such committees of the Board, unless the resolution appointing a particular committee specifically excludes such ex officio membership by the chief executive officer.
18. The officers of the corporation shall be chosen by the Board of Directors and shall be a President, one or more Vice Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, a Comptroller, and one or more Assistant Comptrollers. The Board of Directors may at any regular or special meeting appoint from among their own number, a Chairman of the Board of Directors.
19. The Board of Directors, at its first meeting after the election of Directors by the shareholders, shall choose a President from among their own number, and a Secretary, a Treasurer, a Comptroller, and such Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Comptrollers as it shall deem necessary, none of whom need be members of the Board of Directors.
Such officers of the corporation shall hold office until the first meeting of the Board of Directors after the next succeeding annual meeting of shareholders and until their successors are chosen and qualified in their stead. The President may not occupy any other such office. Except as above set forth any two such offices may be occupied by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity.
20. The Board of Directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.
21. The salary or other compensation of the officers, other than the assistant officers, shall be fixed by the Board of Directors. The salaries or other compensation of the assistant officers and all other employees shall, in the absence of any action by the Board, be fixed by the President or such other officers or executives as may be designated by the President.
22. Any officers or agents elected or appointed by the Board of Directors may be removed at any time, with or without cause, by vote of a majority of the whole Board of Directors.
23. In the event that the Board of Directors shall appoint a Chairman of the Board of Directors as herein provided, he shall, unless otherwise directed by the Board of Directors, be the chief executive officer of the corporation with authority, among other things, to sign in the name and on behalf of the corporation any and all contracts, agreements, and other instruments and documents pertaining to matters which arise in the normal conduct or ordinary course of business of the corporation, shall hold office until the next annual meeting of shareholders, shall preside at all meetings of the Board of Directors and shall have and exercise such powers and perform such duties as may be assigned and conferred upon him by the Board of Directors.
24. The President, at the request or in the absence, or during the disability, of a Chairman of the Board of Directors functioning as the chief executive officer of the corporation, shall be the chief executive officer of the corporation. He shall, except as otherwise provided herein or by law, preside at all meetings of the Board of Directors, the Executive Committee and the shareholders. Subject to the control of the Board of Directors and any Chairman of the Board of Directors functioning as chief executive officer of the corporation, he shall have general supervision, direction and control of the business and affairs of the corporation. He shall have such powers and duties as are usually vested in the office of President of a corporation, and shall perform such other and further duties as may from time to time be assigned to him by the Board of Directors. He may sign in the name and on behalf of the corporation any and all contracts, agreements and other instruments and documents pertaining to matters which arise in
the normal conduct or ordinary course of business of the corporation.
25. If there be one Vice President he shall, at the request or in the absence or disability of the President, have supervision, direction and control of the business of the corporation and exercise the duties and functions of the President. He shall also have such powers and perform such other duties as may be prescribed from time to time by law, the Articles of Incorporation or any amendment thereof, the By-Laws, the Board of Directors or the President. If there be more than one Vice President, the Board of Directors shall assign to each of them the general scope of their respective duties, subject to detailed specification thereof made from time to time, by the President, and the Board shall designate which Vice President shall exercise the duties and functions of the President during his absence or disability, and the Board may designate such Vice President as the Executive Vice President. Any Vice President may sign in the name and on behalf of the corporation contracts, agreements or other instruments, and documents pertaining to matters which arise in the normal conduct or ordinary course of business of the corporation, except in cases where the signing thereof shall be expressly and exclusively delegated by the Board of Directors or the Executive Committee to some other officer or agent of the corporation.
26. The Secretary shall attend all meetings of the Board of Directors, the Executive Committee, and the shareholders, and shall record all votes and the minutes of all proceedings in a book or books to be kept by him for that purpose, and shall perform like duties for other board committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders, the Board of Directors and the Executive Committee, and shall perform such other duties as may be prescribed by the Board of Directors or President. Any records kept by him shall be the property of the corporation and shall be restored to the corporation in case of his death, resignation, retirement or removal from office. He shall be the custodian of the seal of the corporation and, when authorized by the Board of Directors or by the President or a Vice President, shall affix the seal to all instruments requiring it and shall attest the same and/or the execution of such instruments as required. He shall have control of the stock ledger, stock
certificate book and other formal records and documents relating to the corporate affairs of the corporation.
The Assistant Secretary or Assistant Secretaries shall assist the Secretary in the performance of his duties, and shall exercise and perform his powers and duties in his absence or disability, and shall also exercise such powers and duties as may be conferred or required by the Board of Directors, or by the President.
27. The Treasurer shall have the custody of the corporate funds and securities, shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall deposit all monies and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors.
He shall disburse the funds of the corporation in such manner as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and directors at the regular meetings of the Board of Directors, or whenever they may require it, a report of cash receipts and disbursements and an account of all his transactions as Treasurer.
He shall give the corporation a bond, if required by the Board of Directors, in such sum and with such sureties as may be satisfactory to the Board of Directors, for the faithful performance of the duties of his office, and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
He shall perform all duties generally incident to the office of Treasurer, and shall have other powers and duties as from time to time may be prescribed by law, by the By-Laws, or by the Board of Directors.
The Assistant Treasurer or Assistant Treasurers shall assist the Treasurer in the performance of his duties, and shall exercise and perform his powers and duties in his absence or disability and shall also exercise and perform such duties as may be conferred or required by the Board of Directors, or by the President.
28. The Comptroller of the corporation shall have full control of all the books of account of the corporation and keep a true and accurate record of all property owned by it, of its debts and its revenues and expenses and shall keep all accounting records of the corporation, other than the records of receipts and disbursements and those relating to the deposit or custody of money and securities of the corporation which shall be kept by the Treasurer, and shall also make reports to the President and directors at the regular meetings of the Board of Directors or whenever they may require them and others of or relating to the financial condition of the corporation.
The Assistant Comptroller or Assistant Comptrollers shall assist the Comptroller in the performance of his duties and shall exercise and perform his powers and duties in his absence or disability and shall also exercise such powers and perform such duties as may be conferred or required by the Board of Directors, or by the President.
29. If the office of any director becomes vacant, for any reason, including vacancies resulting from an increase in the number of directors, the directors then in office, although less than a quorum, by a majority vote, may choose a successor or successors who shall hold office for the unexpired term in respect of which such vacancy occurred.
If the office of any officer of the corporation shall become vacant for any reason, the Board of Directors may choose a successor or successors who shall hold office for the unexpired term in respect of which such vacancy occurred.
30. Any officer or any director of the corporation may resign at any time, such resignation to be made in writing and to take effect from the time of its receipt by the corporation, unless some time be fixed in the resignation, and then from that time.
31. In case of the absence of any officer of the corporation, or for any other reason the Board of Directors may deem sufficient, the Board of Directors may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer.
32. (a) A director shall not be personally liable for monetary damages as such for any action taken, or any failure to take any action, on or after January 27, 1987 unless the director has breached or failed to perform the duties of his office under Section 1721 of the Business Corporation Law, as the same may be amended from time to time, and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. The provisions of this subsection (a) shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or the liability of a director for the payment of taxes pursuant to local, State or Federal law.
(b) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the corporation or otherwise, by reason of the fact that he was a director, officer or employee of the corporation (and may indemnify any person who was an agent of the corporation), or a person serving at the request of the corporation as a director, officer, partner, fiduciary or trustee of another Company, partnership, joint venture, trust, employee benefit plan or other enterprise, to the fullest extent permitted by law, including without limitation indemnification against expenses (including attorneys' fees and disbursements), damages, punitive damages, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such proceeding unless the act or failure to act giving rise to the claim for indemnification is finally determined by a court to have constituted willful misconduct or recklessness.
(c) The corporation shall pay the expenses (including attorneys' fees and disbursements) actually and reasonably incurred in defending a civil or criminal action, suit or proceeding on behalf of any person entitled to indemnification
under subsection (b) in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation, and may pay such expenses in advance on behalf of any agent on receipt of a similar undertaking. The financial ability of such person to make such repayment shall not be a prerequisite to the making of an advance.
(d) For purposes of this Section: (i) the corporation shall be deemed to have requested an officer, director, employee or agent to serve as fiduciary with respect to an employee benefit plan where the performance by such person of duties to the corporation also imposes duties on, or otherwise involves services by, such person as a fiduciary with respect to the plan; (ii) excise taxes assessed with respect to any transaction with an employee benefit plan shall be deemed "fines"; and (iii) action taken or omitted by such person with respect to an employee benefit plan in the performance of duties for a purpose reasonably believed to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the corporation.
(e) To further effect, satisfy or secure the indemnification obligations provided herein or otherwise, the corporation may maintain insurance, obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the Board of Directors shall deem appropriate.
(f) All rights of indemnification under this Section shall be deemed a contract between the corporation and the person entitled to indemnification under this Section pursuant to which the corporation and each such person intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not limit, but may expand, any rights or obligations in respect of any proceeding whether commenced prior to or after such change to the extent such proceeding pertains to actions or failures to act occurring prior to such change.
(g) The indemnification, as authorized by this Section, shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in any official capacity and as to action in any other capacity while holding such office. The indemnification and advancement of expenses provided by, or granted pursuant to, this Section shall continue as to a person who has ceased to be an officer, director, employee or agent in respect of matters arising prior to such time and shall inure to the benefit of the heirs, executors and administrators of such person.
STOCK OF OTHER CORPORATIONS
33. The Board of Directors shall have the right to authorize any officer or other person on behalf of the corporation to attend, act and vote at meetings of the shareholders of any corporation in which the corporation shall hold or own stock, and to exercise thereat any and all the rights and powers incident to the ownership of such stock and to execute waivers of notice of such meetings and calls therefor; and authority may be given to exercise the same either on one or more designated occasions, or generally on all occasions until revoked by the Board of Directors. In the event that the Board of Directors shall fail to give such authority, such authority may be exercised by the President in person or by proxy appointed by him on behalf of the corporation.
34. (a) Shares of the corporation shall be represented by certificates or, except as limited by law, uncertificated shares.
(b) The certificates of stock of the corporation shall be numbered and shall be entered in the books of the corporation as they are issued. They shall be in a form approved by the Board of Directors. They shall exhibit the holder's name and number of shares and shall be signed by the President or a Vice President and the Treasurer or an Assistant Treasurer and the seal of the corporation shall be affixed thereto. Such certificates may, in addition to the foregoing, be signed by a transfer agent or an assistant transfer agent and by a registrar, who shall have been duly appointed for the purpose by the Board of Directors. When such certificates are signed by a transfer agent or an assistant transfer agent and by a
registrar, the signature of the President, Vice President, Treasurer and Assistant Treasurer upon any such certificates may be affixed by engraving, lithographing or printing thereon a facsimile of such signature, in lieu of actual signature, and such facsimile signature so engraved, lithographed or printed thereon shall have the same force and effect, as if such officer had actually signed the same. In case any officer who has signed, or whose facsimile signature has been affixed to, any such certificate shall cease to be such officer before such certificate shall have been issued by the corporation, such certificate may nevertheless be issued and delivered as though the person who signed such certificate, or whose facsimile signature has been affixed thereto, had not ceased to be such officer of the corporation at the date of the issue.
(c) Uncertificated shares may be issued upon initial issuance of shares or upon transfer of certificated shares after surrender thereof to the corporation. Within a reasonable time after issuance or transfer of uncertificated shares, the corporation shall send to the registered owner the information required to be set forth on the face of the certificate by Section 34(b) above.
35. Transfers of stock shall be made on the books of the corporation, only by the person named in the certificate or by attorney, lawfully constituted in writing, and upon surrender of the certificate therefor.
36. Unless otherwise restricted by law or the Articles of Incorporation or any amendment thereto, the Board of Directors may fix a time, not more than ninety days prior to the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of, or to vote at, any such meeting, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect to any such change, conversion, or exchange of shares. In such case, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of, or to vote at, such meeting or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after any record date fixed, as aforesaid. Unless a record date is fixed by the Board of Directors for the determination of shareholders entitled to receive notice of, or vote at, a shareholders' meeting, transferees of shares which are transferred on the books of the corporation within ten days next preceding the date of such meeting shall not be entitled to notice of or to vote at such meeting.
37. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly otherwise provided by the statutes of the Commonwealth of Pennsylvania.
38. Any person claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation of that fact, whereupon a new certificate may be issued, of the same tenor and for the same number of shares as the one alleged to be lost or destroyed; provided, however, that the Board of Directors may require, as a condition to the issuance of a new certificate, a bond of indemnity in such form and amount and with such surety or sureties, or without surety, as the Board of Directors shall determine to be sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate or the issuance of any such new certificate, and may also require the advertisement of such loss in such manner as the Board of Directors may prescribe.
39. The Board of Directors shall have power to determine whether and to what extent, and at what time and places and under what conditions and regulations, the accounts and books of the corporation (other than the books required by statute to be open to the inspection of shareholders), or any of them, shall be open to the inspection of shareholders, and no shareholders shall have any right to inspect any account or book or document
of the corporation, except as such right may be conferred by the statutes of the Commonwealth of Pennsylvania or by resolution of the Board of Directors or of the shareholders.
40. All checks of the corporation shall be signed by such person or persons (who may but need not be an officer or officers of the corporation) as the Board of Directors may from time to time designate, either directly or through such officers of the corporation as shall, by resolution of the Board of Directors, be authorized to designate such person or persons.
All bonds, debentures, notes and other instruments requiring a seal shall be signed on behalf of the corporation by the President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. In case any officer who has signed any such bonds, debentures, notes or other instruments shall cease to be such officer before such bonds, debentures, notes or other instruments shall have been delivered by the corporation, such bonds, debentures, notes or other instruments may nevertheless be adopted by the corporation and be issued and delivered as though the person who signed the same had not ceased to be such officer of the corporation.
To the extent authorized by the Board of Directors, the signatures of the persons and officers referred to in the two preceding paragraphs may be made by engraving, lithographing or printing on the instruments there referred to facsimiles of such signatures in lieu of actual signatures and such facsimile signatures so engraved, lithographed or printed thereon shall have the same force and effect as if such persons had actually signed the same.
41. All receipts for stocks, bonds or other securities received by the corporation shall be signed by the Treasurer or an Assistant Treasurer, or by such other person or persons as the Board of Directors or Executive Committee shall designate.
42. The fiscal year shall begin the first day of January in each year.
43. Dividends upon the capital stock of the corporation may be declared by the Board of Directors at any regular or special meeting, out of surplus or net profits of the corporation legally available for such purpose.
The Board of Directors shall have power to fix and determine, and from time to time to vary, the amount to be reserved as working capital; to determine whether any, and if any, what part of any, surplus shall be declared and paid as dividends, to determine the date or dates for the declaration or payment of dividends; and to direct and determine the use and disposition of any surplus. Before payment of any dividend or making any distribution of surplus there may be set aside out of the surplus of the corporation such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation.
44. Reserved
45. Whenever under the provisions of law or the Articles of Incorporation or amendment thereto or these By-Laws notice is required to be given to any director, officer or shareholder, it shall be sufficient if given to such person either personally or by sending a copy thereof through the mail or by telegram, charges prepaid, to the person's address appearing on the books of the corporation or supplied by such person to the corporation for the purpose of notice. If the notice is sent by mail or telegram, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with the telegraph office for transmission to such person.
Whenever any written notice is required to be given under the provisions of law or the Articles of Incorporation or any amendment thereto or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
46. In advance of any meeting of the shareholders for the election of directors, the Board of Directors may appoint judges of election, who need not, except as otherwise provided by statute, be shareholders, to act at such meeting or any adjournment thereof. If judges of election be not so appointed, the chairman of any such meeting may, and on the request of any shareholder or his proxy shall, make such appointment at the meeting. The number of judges shall be one or three. No person who is a candidate for office shall act as a judge. In case any person appointed as judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made at the meeting by the Board of Directors in advance of the convening of the meeting, or at the meeting by the chairman. The judge or judges so appointed shall determine the number of shares outstanding and the voting power of each, the share represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes, determine the result, and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. Judges of election shall perform their duties impartially, in good faith, to the best of their ability, and as expeditiously as is practical. If there be three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. On the request of the chairman of the meeting, or of any shareholder or proxy for a shareholder, the judge or judges shall make a report in writing of any challenge or question or matter determined by such judge or judges, and execute a certificate of any fact found. Any such report or certificate shall be prima facie evidence of the facts stated therein.
47. At any meeting of the Board of Directors or the Executive Committee or any other committee designated by the Board of Directors, one or more directors may participate in such meeting, in lieu of attendance in person, by means of conference telephone or similar communications equipment, by means of which all persons participating in the meeting can hear each other.
48. Effective December 23, 1983, Section 910 of the Pennsylvania Business Corporation Law added by Pennsylvania Act No. 92 of 1983 (effective December 23, 1983) shall not be applicable to the corporation. This By-Law 48 shall remain effective until rescinded by amendment to the Articles of Incorporation.
49. All presently existing By-Laws of the corporation are hereby repealed and superseded by these By-Laws; provided, however, that any actions taken or rights which have accrued under prior By-Laws shall be valid and enforceable.
AMENDMENTS
50. These By-Laws may be added to, altered, amended or repealed by the shareholders at any annual or special meeting, or by the Board of Directors at any regular or special meeting; provided, however, that any By-Laws made by the Board of Directors may be altered or repealed by the shareholders.
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Exhibit 3-H
PENNSYLVANIA ELECTRIC COMPANY
BY-LAWS
(As Amended May 16, 2000)
BY-LAWS
1. The principal office of the corporation shall be located at 2800 Pottsville Pike, Muhlenberg Township, Pennsylvania, The corporation may also have offices at such other places, either within or without the Commonwealth of Pennsylvania, as the Board of Directors may from time to time designate or the business of the corporation may require.
2. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization, and the words "Corporate Seal" and "Pennsylvania." The corporate seal may be affixed to any certificates of stock, bonds, debentures, notes or other engraved, lithographed or printed instruments, by engraving, lithographing or printing thereon such seal or a facsimile thereof, and such seal or facsimile thereof so engraved, lithographed or printed thereon shall have the same force and effect, for all purposes, as if such corporate seal had been affixed thereto by indentation.
3. All meetings of the shareholders shall be held at the principal office of the corporation or at such other place as shall be stated in the notice of the meeting. All meetings of the shareholders shall be presided over by the President or, in the event of his absence or disability, by any Vice President, except when by statute, the Articles of Incorporation or any amendment thereof, the election of a presiding officer by the shareholders present at the meeting is required.
4. The annual meeting of shareholders shall be held during the month of May in each year on such day and at such time as shall be determined by the Board of Directors and specified in the notice of the meeting. At the annual meeting the shareholders shall elect a Board of Directors of the corporation and transact such other business as may properly be brought before the meeting. Notice of the time and place thereof
shall be given by mail at least ten (10) days prior to the meeting, to each shareholder of record entitled to vote thereat, at his address as the same shall appear on the books of the corporation.
5. Except as otherwise provided by law or the Articles of Incorporation, as amended, the holders of a majority of the shares of stock of the Corporation issued and outstanding and entitled to vote, present in person or by proxy, shall be requisite for, and shall constitute a quorum at, any meeting of the shareholders. If, however, the holders of a majority of such shares of stock shall not be present or represented by proxy at any such meeting, the stockholders entitled to vote thereat, present in person or by proxy, shall have power, by majority vote of those present, to adjourn the meeting from time to time without notice other than announcement at the meeting, until the holders of the amount of stock requisite to constitute a quorum, as aforesaid, shall be present, in person or by proxy. At any adjourned meeting at which such quorum shall be present, in person or by proxy, any business may be transacted which might have been transacted at the meeting as originally noticed.
6. At all meetings of the shareholders each shareholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument executed in writing by such shareholder, or by his duly appointed attorney, but no proxy dated more than eleven (11) months prior to any meeting or election shall confer the right to vote thereat. Each holder of record of stock having voting power shall be entitled to one vote for each share of stock standing in the name of such holder on the stock transfer books of the corporation, except as otherwise provided by law or the Articles of Incorporation or any amendment thereto. The vote for directors, and upon the demand of any shareholder or duly authorized proxy, the vote upon any question before the meeting, shall be by ballot. All elections shall be determined and all questions decided by a plurality vote, except when by statute or the Articles of Incorporation or any amendment thereto a larger vote of the shareholders shall be required. Any action which may be taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be signed by all of the shareholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the corporation.
7. Nothing herein contained shall be construed to enlarge, limit or impair the voting rights of the holders of the Preferred Stock of the corporation, as set forth in the Articles of Incorporation of the corporation as the same now exist or may hereafter be amended.
8. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by statute or by the Articles of Incorporation or any amendment thereto, may be called by the President, or by a majority of the Board of Directors or by a majority of the Executive Committee, and shall be called by the President or the Secretary at the request in writing of one or more shareholders who, by statute or the Articles of Incorporation or any amendment thereto are entitled to call such meeting, upon at least ten (10) days written or printed notice to each shareholder of record entitled to vote thereat, stating the place, day and hour of such meeting and the business proposed to be transacted thereat. No business shall be transacted at any such meeting except with respect to matters specified in the notice, provided however, that if all the shareholders of the corporation entitled to vote shall be present in person or by proxy any business pertaining to the affairs of the corporation mat be transacted.
9. The business and affairs of the corporation shall be managed by its Board of Directors, or under the direction of the Board of Directors, which shall consist of not less than three (3) nor more than ten (10) directors as shall be fixed from time to time by a resolution adopted by the majority of the entire Board of Directors, or by the consent of the shareholders, provided, however, that no decrease in the number of directors constituting the entire Board of Directors shall shorten the term of any incumbent director. Each director shall be at least twenty-one years of age. Directors need not be shareholders of the corporation. Directors shall be elected at the annual meeting of shareholders, or, if any such election shall not be held, at a shareholders' meeting called and held in accordance with the provisions of the Business Corporation Law of the Commonwealth of Pennsylvania. Each director shall serve until the next annual meeting of shareholders and thereafter until his successor shall have been elected and shall qualify. If all the directors shall, severally or collectively, consent in writing to any action to be taken by the corporation, such action shall be as valid a corporate action as though it had been authorized at a meeting of the Board of Directors.
10. Unless otherwise required by law, in the absence of fraud, no contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any corporation, partnership, association, or other organization in which one or more of its directors or officers arc directors or officers, or have a financial or other interest, shall be void or voidable solely for that reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors that authorizes the contract or transaction, or solely because his or their votes are counted for that purpose, if:
(a) The material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors and the Board authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum; or
(b) The material facts as to his interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or
(c) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors or the shareholders.
No director or officer shall be liable to account to the corporation for any profit realized by him from or through any such contract or transaction of the corporation by reason of his interest as aforesaid in such contract or transaction if such contract or transaction shall be authorized, approved or ratified as aforesaid.
11. At all meetings of the Board of Directors a majority of the directors in office shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Articles of Incorporation or any amendment thereto or by these By-Laws.
12. The first meeting of the Board of Directors held next after the annual meeting of shareholders at which directors shall have been elected, shall be held for the purpose of organization, the election of officers and the transaction of any other business which may come before the meeting.
13. Regular meetings of the Board of Directors shall be held without notice at such time and place as the Board of Directors may from time to time determine.
14. Special meetings of the Board of Directors may be called by the Chairman of the Board or by the President or, in the absence or disability of the Chairman of the Board and the President, by a Vice President, or by any two directors and may be held at the time and place designated in the call and notice of the meeting. The Secretary, or other officer performing his duties, shall give notice either personally or by telephone or by telegram at least twenty-four hours before the meeting or by mail, at least three (3) days before the meeting. Meetings may be held at any time and place without such notice if all the directors are present or if those not present waive notice in writing, either before or after the meeting.
15. Any regular or special meeting may be adjourned to any other time at the same or any other place by a majority of the directors present at the meeting, whether or not a quorum shall be present at such meeting, and no notice of the adjourned meeting shall be required other than announcement at the meeting.
16. Directors, as such, shall not receive any stated salary for their services, but by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular and special meeting of the Board but nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of board committees may be allowed like compensation for attending committee meetings.
17. The Board of Directors may by vote of a majority of the whole Board create an Executive Committee consisting of two (2) or more of their own number to hold office for such period as the Board shall determine. The Chairman of the Board and the President shall each be a member of the Executive Committee, and the Chairman of the Board shall be Chairman thereof and the
remaining members shall be elected by a majority vote of the whole Board of Directors. The Board of Directors by a majority vote of the whole Board may fill any vacancies in the Executive Committee and may designate one or more alternate members who shall serve on the Executive Committee in the absence of any regular member or members of such committee.
Such Executive Committee shall advise with and aid the officers of the corporation in all matters concerning its interest and the management of its business, and shall, between meetings of the Board of Directors, have all the power of the Board of Directors in the management of the business and affairs of the corporation, and shall have power to authorize the seal of the corporation to be affixed to all papers which may require it. The taking of any action by the Executive Committee shall be conclusive evidence that the Board of Directors was not in session at the time of such action. Any action which may be taken at a meeting of the Executive Committee may be taken without a meeting if a consent or consents in writing setting forth the action so taken shall be signed by all of the members of the Committee and shall be filed with the Secretary of the corporation.
The Executive Committee shall cause to be kept regular minutes of its proceedings, which may be transcribed in the regular minute book of the corporation, and all such proceedings shall be reported to the Board of Directors at its next succeeding meeting, and shall be subject to revision or alteration by the Board of Directors, provided that no rights of third persons shall be affected by such revision or alteration. A majority of the Executive Committee shall constitute a quorum at any meeting. The Executive Committee may, from time to time, subject to the approval of the Board of Directors, prescribe rules and regulations for the calling and conduct of meetings of the Committee, and other matters relating to its procedure and the exercise of its powers.
From time to time the Board of Directors may appoint any other committee or committees consisting of one or more of their own number for any purpose or purposes, which committee or committees shall have such powers and such tenure of office as shall be specified in the resolution of appointment. The Board of Directors by a majority vote of the whole Board may fill any vacancies on any such committee or committees so appointed and may with respect to any such committee designate one or more alternate members who shall serve in the absence of any regular member or members on such committee. The chief executive officer
of the corporation shall be a member ex officio of all such committees of the Board, unless the resolution appointing a particular committee specifically excludes such ex officio membership by the chief executive officer.
18. The officers of the corporation shall be chosen b~ the Board of Directors and shall be a President, one or more Vice Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, a Comptroller, and one or more Assistant Comptrollers. The Board of Directors may at any regular or special meeting appoint from among their own number, a Chairman of the Board of Directors.
19. The Board of Directors, at its first meeting after the election of Directors by the shareholders, shall choose a President from among their own number, and a Secretary, a Treasurer, a Comptroller, and such Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Comptrollers as it shall deem necessary, none of whom need be members of the Board of Directors.
Such officers of the corporation shall hold office until the first meeting of the Board of Directors after the next succeeding annual meeting of shareholders and until their successors are chosen and qualified in their stead The President may not occupy any other such office. Except as above set forth any two such offices may be occupied by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity.
20. The Board of Directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.
21. The salary or other compensation of the officers, other than the assistant officers, shall be fixed by the Board of Directors. The salaries or other compensation of the assistant officers and all other employees shall, in the absence of any action by the Board, be fixed by the President or such other officers or executives as may be designated by the President.
22. Any officers or agents elected or appointed by the Board of Directors may be removed at any time, with or without cause, by vote of a majority of the whole Board of Directors.
23. In the event that the Board of Directors shall appoint a Chairman of the Board of Directors as herein provided, he shall, unless otherwise directed by the Board of Directors, be the chief executive officer of the corporation, with authority, among other things, to sign in the name and on behalf of the corporation any and all contracts, agreements, and other instruments and documents pertaining to matters which arise in the normal conduct or ordinary course of business of the corporation, shall hold office until the next annual meeting of shareholders, shall preside at all meetings of the Board of Directors, and shall have and exercise such powers and perform such duties as may be assigned and conferred upon him by the Board of Directors.
24. The President, at the request or in the absence or disability of a Chairman of the Board of Directors functioning as the chief executive officer of the corporation, shall be the chief executive officer of the corporation. He shall, except as otherwise provided herein or by law, preside at all meetings of the Board of Directors, the Executive Committee and the shareholders. Subject to the control of the Board of Directors and any Chairman of the Board of Directors functioning as chief executive officer of the corporation, he shall have general supervision, direction and control of the business and affairs of the corporation. He shall have such powers and duties as are usually vested in the office of President of a corporation, and shall perform such other and further duties as may from time to time be assigned to him by the Board of Directors. He may sign in the name and on behalf of the corporation any and all contracts, agreements and other instruments and documents pertaining to matters which arise in the normal conduct or ordinary course of business of the corporation.
25. If there be one Vice President he shall, at the request or in the absence or disability of the President, have supervision, direction and control of the business of the corporation and exercise the duties and functions of the
President. He shall also have such powers and perform such other duties as may be prescribed from time to time by law, the Articles of Incorporation or any amendment thereof, the By-Laws, the Board of Directors or the President. If there be more than one Vice President, the Board of Directors shall assign to each of them the general scope of their respective duties, subject to detailed specification thereof made from time to time by the President, and the Board shall designate which Vice President shall exercise the duties and functions of the President during his absence or disability, and the Board may designate such Vice President as the Executive Vice President. Any Vice President may sign in the name and on behalf of the corporation contracts, agreements or other instruments, and documents pertaining to matters which arise in the normal conduct or ordinary course of business of the corporation, except in cases where the signing thereof shall be expressly and exclusively delegated by the Board of Directors or the Executive Committee to some other officer or agent of the corporation.
26. The Secretary shall attend all meetings of the Board of Directors, the Executive Committee, and the shareholders, and shall record all votes and the minutes of all proceedings in a book or books to be kept by him for that purpose, and shall perform like duties for other board committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders, the Board of Directors and the Executive Committee, and shall perform such other duties as may be prescribed by the Board of Directors or President. Any records kept by him shall be the property of the corporation and shall be restored to the corporation in case of his death, resignation, retirement or removal from office. He shall be the custodian of the seal of the corporation and, when authorized by the Board of Directors or by the President or a Vice President, shall affix the seal to all instruments requiring it and shall attest the same and/or the execution of such instruments as required. He shall have control of the stock ledger, stock certificate book and other formal records and documents relating to the corporate affairs of the corporation.
The Assistant Secretary or Assistant Secretaries shall assist the Secretary in the performance of his duties, and shall exercise and perform his powers and duties in his absence or disability, and shall also exercise such powers and duties as may be conferred or required by the Board of Directors, or by the President.
27. The Treasurer shall have the custody of the corporate funds and securities, shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors.
He shall disburse the funds of the corporation in such manner as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and directors at the regular meetings of the Board of Directors, or whenever they may require it, a report of cash receipts and disbursements and an account of all his transactions as Treasurer. .He shall give the corporation a bond, if required by the Board of Directors, in such sum and with such sureties as may be satisfactory to the Board of Directors, for the faithful performance of the duties of his office, and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
He shall perform all duties generally incident to the office of the Treasurer, and shall have other powers and duties as from time to time may be prescribed by law, by the By-Laws, or by the Board of Directors.
The Assistant Treasurer or Assistant Treasurers shall assist the Treasurer in the performance of his duties, and shall exercise and perform his powers and duties in his absence or disability and shall also exercise and perform such duties as may be conferred or required by the Board of Directors, or by the President.
28. The Comptroller of the corporation shall have full control of all the books of account of the corporation and keep a true and accurate record of all property owned by it, of its debts and its revenues and expenses and shall keep all accounting records of the corporation, other than the records of receipts and disbursements and those relating to the deposit or custody of money and securities of the corporation which shall be kept by the Treasurer, and shall also make reports to the
President and directors (at the regular meetings of the Board of Directors or whenever they may require them) and others of or relating to the financial condition of the corporation.
The Assistant Comptroller or Assistant Comptrollers shall assist the Comptroller in the performance of his duties and shall exercise and perform his powers and duties in his absence or disability and shall also exercise such powers and perform such duties as may be conferred or required by the Board of Directors, or by the President.
29. If the office of any director becomes vacant, for any reason, including vacancies resulting from an increase in the number of directors, the directors then in office, although less than a quorum, by a majority vote, may fill such vacancy and each person so selected shall hold office for the unexpired term in respect of which such vacancy occurred; provided, however, that in case of any vacancy in the office of a director occurring among the directors elected by the holders of the shares of Preferred Stock, as a class pursuant to the Articles of Incorporation of the corporation as the same now exist or may hereafter be amended, the remaining directors elected by the holders of the shares of Preferred Stock, by affirmative vote of a majority thereof, or the remaining director so elected if there be but one, may elect a successor or successors to hold office for the unexpired term of the director or directors whose place or places shall be vacant. Likewise in case of any vacancy in the office of a director occurring among the directors elected by the holders of the shares of Common Stock pursuant to the terms of Paragraph 10 of Article 6th of the Articles of Incorporation or any amendment thereto of the corporation, the remaining directors elected by the holders of the shares of Common Stock, by affirmative vote of a majority thereof, or the remaining director so elected if there be but one, may elect a successor or successors to hold office for the unexpired term of the director or directors whose place or places shall be vacant.
If the office of any officer of the corporation shall become vacant for any reason, the Board of Directors may choose a successor or successors who shall hold office for the unexpired term in respect of which such vacancy occurred.
30. Any officer or any director of the corporation may resign at any time, such resignation to be made in writing and to take effect from the time of its receipt by the corporation, unless some time be fixed in the resignation, and then from that time.
31. In case of the absence of any officer of the corporation, or for any other reason the Board of Directors may deem sufficient, the Board of Directors may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer.
32. (a) A director shall not be personally liable for monetary damages as such for any action taken, or any failure to take any action, on or after January 27, 1987 unless the director has breached or failed to perform the duties of his office under Section 1721 of the Pennsylvania Business Corporation Law, as the same may be amended from time to time, and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. The provisions of this subsection (a) shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or the liability of a director for the payment of taxes pursuant to local, State or Federal law.
(b) The corporation shall indemnify any person who was or is a party or is threatened to be made a parts to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the corporation or otherwise, by reason of the fact that he was a director, officer or employee of the corporation (and may indemnify an person who was an agent of the corporation), or a person serving at the request of the corporation as a director, officer, partner, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise to the fullest extent permitted by law, including without limitation indemnification against expenses (including attorneys' fees and disbursements), damages, punitive damages, judgements, penalties, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such proceeding unless the act or failure to act giving rise to the claim for indemnification is finally determined by a court to have constituted willful misconduct or recklessness.
(c) The corporation shall pay the expenses (including attorneys' fees and disbursements) actually and reasonably incurred in defending a civil or criminal action, suit or proceeding on behalf of any person entitled to indemnification under subsection (b) in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation, and may pay such expenses in advance on behalf of any agent on receipt of a similar undertaking. The financial ability of such person to make such repayment shall not be a prerequisite to the making of an advance.
(d) For purposes of this Section: (i) the corporation shall be deemed to have requested an officer, director, employee or agent to serve as fiduciary with respect to an employee benefit plan where the performance by such person of duties to the corporation also imposes duties on, or otherwise involves services by, such person as a fiduciary with respect to the plan; (ii) excise taxes assessed with respect to any transaction with an employee benefit plan shall be deemed "fines"; and (iii) action taken or omitted by such person with respect to an employee benefit plan in the performance of duties for a purpose reasonably believed to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the corporation.
(e) To further effect, satisfy or secure the indemnification obligations provided herein or otherwise, the corporation may maintain insurance, obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the Board of Directors shall deem appropriate.
(f) All rights of indemnification under this Section shall be deemed a contract between the corporation and the person entitled to indemnification under this Section pursuant
to which the corporation and each such person intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not limit, but may expand, any rights or obligations in respect of any proceeding whether commenced prior to or after such change to the extent such proceeding pertains to actions or failures to act occurring prior to such change.
(g) The indemnification, as authorized by this Section, shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in any official capacity and as to action in any other capacity while holding such office. The indemnification and advancement of expenses provided by, or granted pursuant to, this Section shall continue as to a person who has ceased to be an officer, director, employee or agent in respect of matters arising prior to such time and shall inure to the benefit of the heirs, executors and administrators of such person.
33. The Board of Directors shall have the right to authorize any officer or other person on behalf of the corporation to attend, act and vote at meetings of the shareholders of any corporation in which the corporation shall hold or own stock, and to exercise thereat an and all the rights and powers incident to the ownership of such stock and to execute waivers of notice of such meetings and calls therefor; and authority may be given to exercise the same either on one or more designated occasions, or generally on all occasions until revoked by the Board of Directors. In the event that the Board of Directors shall fail to give such authority, such authority may be exercised by the President in person or by proxy appointed by him on behalf of the corporation.
34. (a) Shares of the corporation shall be represented by certificates or, except as limited by law, uncertificated shares.
(b) The certificates of stock of the corporation shall be numbered and shall be entered in the books of the corporation as they are issued. They shall be in a form approved by the Board of Directors. They shall exhibit the holder's name
and number of shares and shall be signed by the President or a Vice President and the Treasurer or an Assistant Treasurer and the seal of the corporation shall be affixed thereto. Such certificates may, in addition to the foregoing, be signed by a transfer agent or an assistant transfer agent and by a registrar, who shall have been duly appointed for the purpose by the Board of Directors. When such certificates are signed by a transfer agent or an assistant transfer agent and by a registrar, the signature of the President, Vice President, Treasurer and Assistant Treasurer upon any such certificates may be affixed by engraving, lithographing or printing thereon a facsimile of such signature, in lieu of actual signature, and such facsimile signature so engraved, lithographed or printed thereon shall have the same force and effect, as if such officer had actually signed the same. In case any officer who has signed, or whose facsimile signature has been affixed to, any such certificate shall cease to be such officer before such certificate shall have been issued by the corporation, such certificate may nevertheless be issued, and delivered as though the person who signed such certificate, or whose facsimile signature has been affixed thereto, had not ceased to be such officer of the corporation at the date of the issue.
(c) Uncertificated shares may be issued upon initial issuance of
shares or upon transfer of certificated shares after surrender thereof to the
corporation. Within a reasonable time after issuance or transfer of
uncertificated shares, the corporation shall send to the registered owner the
information required to be set forth on the face of the certificate by Section
34 (b) above.
35. Transfers of stock shall be made on the books of the corporation, only by the person named in the certificate or by attorney, lawfully constituted in writing, and upon surrender of the certificate therefor.
36. Unless otherwise restricted by law or the Articles of Incorporation or any amendment thereto, the Board of Directors may fix a time, not more than ninety days prior to the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for
the determination of the shareholders entitled to notice of, or to vote at, any such meeting, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect to any such change, conversion, or exchange of shares. In such case, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of, or to vote at, such meeting or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after any record date fixed, as aforesaid. Unless a record date is fixed by the Board of Directors for the determination of shareholders entitled to receive notice of, or vote at, a shareholders' meeting, transferees of shares which are transferred on the books of the corporation within ten days next preceding the date of such meeting shall not be entitled to notice of or to vote at such meeting.
37. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly otherwise provided by the statutes of the Commonwealth of Pennsylvania.
38. Any person claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation of that fact, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed; provided, however, that the Board of Directors may require, as a condition to the issuance of a new certificate, a bond of indemnity in such form and amount and with such surety or sureties, or without surety, as the Board of Directors shall determine to be sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate or the issuance of any such new certificate, and may also require the advertisement of such loss in such manner as the Board of Directors may prescribe.
39. The Board of Directors shall have power to determine whether and to what extent, and at what time and places and under what conditions and regulations, the accounts and books of the corporation (other than the books required by statute to be open to the inspection of shareholders), or any of them, shall be open to the inspection of shareholders, and no shareholders shall have any right to inspect any account or book or document of the corporation, except as such right may be conferred by the statutes of the Commonwealth of Pennsylvania or by resolution of the Board of Directors or of the shareholders.
40. All checks of the corporation shall be signed by such person or persons (who may but need not be an officer or officers of the corporation) as the Board of Directors may from time to time designate, either directly or through such officers of the corporation as shall, by resolution of the Board of Directors, be authorized to designate such person or persons.
All bonds, debentures, notes and other instruments requiring a seal shall be signed on behalf of the corporation by the President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. In case any officer who has signed any such bonds, debentures, notes or other instruments shall cease to be such officer before such bonds, debentures, notes or other instruments shall have been delivered by the corporation, such bonds, debentures, notes or other instruments may nevertheless be adopted by the corporation and be issued and delivered as though the person who signed the same had not ceased to be such officer of the corporation.
To the extent authorized by the Board of Directors, the signatures of the persons and officers referred to in the two preceding paragraphs may be made by engraving, lithographing or printing on the instruments there referred to facsimiles of such signatures in lieu of actual signatures and such facsimile signatures so engraved, lithographed or printed thereon shall have the same force and effect as if such persons had actually signed the same.
41. All receipts for stocks, bonds or other securities received by the corporation shall be signed by the Treasurer or an Assistant Treasurer, or by such other person or persons as the Board of Directors or Executive Committee shall designate.
42. The fiscal year shall begin the first day of January in each year.
43. Dividends upon the capital stock of the corporation may be declared by the Board of Directors at any regular or special meeting, out of surplus or net profits of the corporation legally available for such purpose.
The Board of Directors shall have power to fix and determine, and from time to time to vary, the amount to be reserved as working capital; to determine whether any, and if any, what part of any, surplus shall be declared and paid as dividends, to determine the date or dates for the declaration or payment of dividends; and to direct and determine the use and disposition of any surplus. Before payment of any dividend or making any distribution of surplus there may be set aside out of the surplus of the corporation such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation.
44. Reserved
45. Whenever under the provisions of law or the Articles of Incorporation or any amendment thereto or these By-Laws notice is required to be given to any director, officer or shareholder, it shall be sufficient if given to such person either personally or by sending a copy thereof through the mail or by telegram, charges prepaid, to the person's address appearing on the books of the corporation or supplied by such person to the corporation for the purpose of notice. If the notice is sent by mail or telegram, it shall be deemed to have
been given to the person entitled thereto when deposited in the United States mail or with the telegraph office for transmission to such person.
Whenever any written notice is required to be given under the provisions of law or the Articles of Incorporation or any amendment thereto or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.
46. In advance of any meeting of the shareholders, for the election of directors, the Board of Directors may appoint judges of election, who need not, except as otherwise provided by statute, be shareholders, to act at such meeting or any adjournment thereof. If judges of election be not so appointed, the chairman of any such meeting may, and on the request of any shareholder or his proxy shall, make such appointment at the meeting. The number of judges shall be one or three. No person who is a candidate for office shall act as a judge. In case any person appointed as judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made at the meeting by the Board of Directors in advance of the convening of the meeting, or at the meeting by the chairman, The judge or judges so appointed shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes, determine the result, and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. Judges of election shall perform their duties impartially, in good faith, to the best of their ability, and as expeditiously as is practical. If there be three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. On the request of the chairman of the meeting, or of any shareholder or proxy for a shareholder, the judge or judges shall make a report in writing of any challenge or question or matter determined by such judge or judges, and execute a certificate of any fact found. Any such report or certificate shall be prima facie evidence of the facts stated therein.
47. At any meeting of the Board of Directors or the Executive Committee or any other committee designated by the Board of Directors, one or more directors may participate in such meeting, in lieu of attendance in person, by means of conference telephone or similar communications equipment, by means of which all persons participating in the meeting can hear each other.
48. Effective December 23, 1983, Section 910 of the Pennsylvania Business Corporation Law added by Pennsylvania Act No. 92 of 1983 (effective December 23, 1983) shall not be applicable to the corporation. This By-Law 48 shall remain effective until rescinded by amendment to the Articles of Incorporation.
49. All presently existing By-Laws of the corporation are hereby repealed and superseded by these By-Laws; provided, however, that any actions taken or rights which have accrued under prior By-Laws shall be valid and enforceable.
50. These By-Laws may be added to, altered, amended or repealed by the shareholders at any annual or special meeting, or by the Board of Directors at any regular or special meeting; provided, however, that any By-Laws made by the Board of Directors may be altered or repealed by the shareholders.
****************
Exhibit 4L
TABLE OF CONTENTS
PARTIES 1
RECITAL OF THE COMPANY 1
ARTICLE One
Definitions and Other Provisions of General Application
section 101. Definitions. 1
Act 2
Affiliate 3
Authenticating Agent 3
Authorized Officer 3
Board of Directors 3
Board Resolution 3
Business Day 3
Commission 3
Company 3
Company Request or Company Order 4
Corporate Trust Office 4
Corporation 4
Defaulted Interest 4
Discount Security 4
Dollar or $ 4
Eligible Obligations 4
Event of Default 4
Governmental Authority 4
Government Obligations 5
Holder 5
Indenture 5
Interest Payment Date 5
Maturity 5
Officer's Certificate 6
Opinion of Counsel 6
Outstanding 6
Paying Agent 7
Periodic Offering 7
Person 7
Place of Payment 8
Predecessor Security 8
Redemption Date 8
Redemption Price 8
Regular Record Date 8
Required Currency 8
Responsible Officer 8
Securities 8
Security Register and Security Registrar 9
Special Record Date 9
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ii
Stated Interest Rate 9
Stated Maturity 9
Subsidiary 9
Tranche 9
Trust Indenture Act 9
Trustee 9
United States 10
section 102. Compliance Certificates and Opinions. 11
section 103. Form of Documents Delivered to Trustee. 12
section 104. Acts of Holders. 14
section 105. Notices, etc. to Trustee and Company. 15
section 106. Notice to Holders of Securities; Waiver. 15
section 107. Conflict with Trust Indenture Act. 16
section 108. Effect of Headings and Table of Contents. 16
section 109. Successors and Assigns. 16
section 110. Separability Clause. 16
section 111. Benefits of Indenture. 16
section 112. Governing Law. 16
section 113. Legal Holidays. 16
ARTICLE Two
Security Forms
section 201. Forms Generally. 18
section 202. Form of Trustee's Certificate
of Authentication. 18
ARTICLE Three
The Securities
section 301. Amount Unlimited; Issuable in Series. 19
section 302. Denominations. 24
section 303. Execution, Authentication, Delivery
and Dating. 24
section 304. Temporary Securities. 27
section 305. Registration, Registration of Transfer
and Exchange. 28
section 306. Mutilated, Destroyed, Lost and
Stolen Securities. 30
section 307. Payment of Interest; Interest Rights
Preserved. 31
section 308. Persons Deemed Owners. 32
section 309. Cancellation by Security Registrar. 33
section 310. Computation of Interest. 33
section 311. Payment to Be in Proper Currency. 33
section 312. Extension of Interest Payment. 34
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iii
ARTICLE Four
Redemption of Securities
section 401. Applicability of Article. 34
section 402. Election to Redeem; Notice to Trustee. 34
section 403. Selection of Securities to Be Redeemed. 35
section 404. Notice of Redemption. 35
section 405. Securities Payable on Redemption Date. 37
section 406. Securities Redeemed in Part. 37
ARTICLE Five
Sinking Funds
section 501. Applicability of Article. 38
section 502. Satisfaction of Sinking Fund
Payments with Securities. 38
section 503. Redemption of Securities for Sinking Fund. 39
ARTICLE Six
Covenants
section 601. Payment of Principal, Premium and Interest. 40
section 602. Maintenance of Office or Agency. 40
section 603. Money for Securities Payments
to Be Held in Trust. 41
section 604. Corporate Existence. 43
section 605. Maintenance of Properties. 43
section 606. Annual Officer's Certificate
as to Compliance. 43
section 607. Waiver of Certain Covenants. 43
section 608. Limitation on Liens. 44
ARTICLE Seven
Satisfaction and Discharge
section 701. Satisfaction and Discharge of Securities. 48
section 702. Satisfaction and Discharge of Indenture. 51
section 703. Application of Trust Money. 52
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iv
ARTICLE Eight
Events of Default; Remedies
section 801. Events of Default. 53
section 802. Acceleration of Maturity;
Rescission and Annulment. 55
section 803. Collection of Indebtedness and
Suits for Enforcement by Trustee. 56
section 804. Trustee May File Proofs of Claim. 57
section 805. Trustee May Enforce Claims
Without Possession of Securities. 58
section 806. Application of Money Collected. 58
section 807. Limitation on Suits. 59
section 808. Unconditional Right of Holders
to Receive Principal, Premium and Interest. 60
section 809. Restoration of Rights and Remedies. 60
section 810. Rights and Remedies Cumulative. 60
section 811. Delay or Omission Not Waiver. 60
section 812. Control by Holders of Securities. 61
section 813. Waiver of Past Defaults. 61
section 814. Undertaking for Costs. 62
section 815. Waiver of Stay or Extension Laws. 62
ARTICLE Nine
The Trustee
section 901. Certain Duties and Responsibilities. 63
section 902. Notice of Defaults. 64
section 903. Certain Rights of Trustee. 64
section 904. Not Responsible for Recitals
or Issuance of Securities. 66
section 905. May Hold Securities. 66
section 906. Money Held in Trust. 66
section 907. Compensation and Reimbursement. 66
section 908. Disqualification; Conflicting Interests. 67
section 909. Corporate Trustee Required; Eligibility. 68
section 910. Resignation and Removal;
Appointment of Successor. 68
section 911. Acceptance of Appointment by Successor. 71
section 912. Merger, Conversion, Consolidation
or Succession to Business. 72
section 913. Preferential Collection of
Claims Against Company. 73
section 914. Co-trustees and Separate Trustees. 73
section 915. Appointment of Authenticating Agent. 75
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ARTICLE Ten
Holders' Lists and Reports by Trustee and Company
section 1001. Lists of Holders. 77
section 1002. Reports by Trustee and Company. 78
ARTICLE Eleven
Consolidation, Merger, Conveyance or Other Transfer
section 1101. Company May Consolidate, etc.,
Only on Certain Terms. 78
section 1102. Successor Person Substituted. 79
ARTICLE Twelve
Supplemental Indentures
section 1201. Supplemental Indentures Without
Consent of Holders. 79
section 1202. Supplemental Indentures With
Consent of Holders. 82
section 1203. Execution of Supplemental Indentures. 84
section 1204. Effect of Supplemental Indentures. 84
section 1205. Conformity With Trust Indenture Act. 84
section 1206. Reference in Securities to
Supplemental Indentures. 84
section 1207. Modification Without Supplemental
Indenture . 85
ARTICLE Thirteen
Meetings of Holders; Action Without Meeting
section 1301. Purposes for Which Meetings May Be Called. 85
section 1302. Call, Notice and Place of Meetings. 85
section 1303. Persons Entitled to Vote at Meetings. 86
section 1304. Quorum; Action. 87
section 1305. Attendance at Meetings;
Determination of Voting Rights; 88
section 1306. Counting Votes and Recording
Action of Meetings. 89
section 1307. Action Without Meeting. 90
ARTICLE Fourteen
Immunity of Incorporators, Shareholders, Officers and Directors
section 1401. Liability Solely Corporate. 90
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GPU, INC.
Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of December 1, 2000
Trust Indenture Act Section Indenture Section
Section 310 (a)(1) 909
(a)(2) 909
(a)(3) 914
(a)(4) Not Applicable
(b) 908
910
Section 311 (a) 913
(b) 913
(c) 913
Section 312 (a) 1001
(b) 1001
(c) 1001
Section 313 (a) 1002
(b) 1002
(c) 1002
Section 314 (a) 1002
(a)(4) 606
(b) Not Applicable
(c)(1) 102
(c)(2) 102
(c)(3) Not Applicable
(d) Not Applicable
(e) 102
Section 315 (a) 901
903
(b) 902
(c) 901
(d) 901
(e) 814
Section 316 (a) 812
813
(a)(1)(A) 802
812
(a)(1)(B) 813
(a)(2) Not Applicable
(b) 808
Section 317 (a)(1) 803
(a)(2) 804
(b) 603
Section 318 (a) 107
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INDENTURE, dated as of December 1, 2000 between GPU, INC., a corporation duly organized and existing under the laws of the Commonwealth of Pennsylvania (herein called the "Company"), having its principal office at 300 Madison Avenue, Morristown, New Jersey, 07962, and UNITED STATES TRUST COMPANY OF NEW YORK, a New York a corporation duly organized and existing under the laws of the State of New York, having its principal corporate trust office at 114 West 47th Street, New York, New York 10036, as Trustee (herein called the "Trustee").
RECITAL OF THE COMPANY
The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities"), in an unlimited aggregate principal amount to be issued in one or more series as contemplated herein; and all acts necessary to make this Indenture a valid agreement of the Company have been performed.
For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires, capitalized terms used herein shall have the meanings assigned to them in Article One of this Indenture.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of any series thereof, as follows:
ARTICLE ONE
Definitions and Other Provisions of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(b) all terms used herein without definition which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States at the date of such computation or, at the election of the Company from time to time, at the date of the execution and delivery of this Indenture; provided, however, that in determining generally accepted accounting principles applicable to the Company, the Company shall, to the extent required, conform to any order, rule or regulation of any administrative agency, regulatory authority or other governmental body having jurisdiction over the Company; and
(d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.
Certain terms, used principally in Article Nine, are defined in that Article.
"Act", when used with respect to any Holder of a Security, has the meaning specified in Section 104.
"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or through one or more intermediaries, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Authenticating Agent" means any Person (other than the Company or an Affiliate of the Company) authorized by the Trustee pursuant to Section 915 to act on behalf of the Trustee to authenticate one or more series of Securities or Tranche thereof.
"Authorized Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, or any other officer or agent of the Company duly authorized by the Board of Directors to act in respect of matters relating to this Indenture.
"Board of Directors" means either the board of directors of the Company or any committee thereof duly authorized to act in respect of matters relating to this Indenture.
"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.
"Business Day", when used with respect to a Place of Payment or any other particular location specified in the Securities or this Indenture, means any day, other than a Saturday or Sunday, which is not a day on which banking institutions or trust companies in such Place of Payment or other location are generally authorized or required by law, regulation or executive order to remain closed, except as may be otherwise specified as contemplated by Section 301.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the date of execution and delivery of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body, if any, performing such duties at such time.
"Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order signed in the name of the Company by an Authorized Officer and delivered to the Trustee.
"Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution and delivery of this instrument is located at 114 West 47th Street, New York, New York 10036.
"Corporation" means a corporation, association, company, limited liability company, partnership, joint stock company or business trust.
"Defaulted Interest" has the meaning specified in Section 307.
"Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 802. "Interest" with respect to a Discount Security means interest, if any, borne by such Security at a Stated Interest Rate.
"Dollar" or "$" means a dollar or other equivalent unit in such coin or currency of the United States as at the time shall be legal tender for the payment of public and private debts.
"Eligible Obligations" means:
(a) with respect to Securities denominated in Dollars, Government Obligations; or
(b) with respect to Securities denominated in a currency other than
Dollars or in a composite currency, such other obligations or instruments
as shall be specified with respect to such Securities, as contemplated by
Section 301.
"Event of Default" has the meaning specified in Section 801.
"Governmental Authority" means the government of the United States or of any State or Territory thereof or of the District of Columbia or of any county, municipality or other political subdivision of any of the foregoing, or any
department, agency, authority or other instrumentality of any of the foregoing.
"Government Obligations" means:
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States and entitled to the benefit of the full faith and credit thereof; and
(b) certificates, depositary receipts or other instruments which
evidence a direct ownership interest in obligations described in clause
(a) above or in any specific interest or principal payments due in respect
thereof; provided, however, that the custodian of such obligations or
specific interest or principal payments shall be a bank or trust company
(which may include the Trustee or any Paying Agent) subject to Federal or
state supervision or examination with a combined capital and surplus of at
least $50,000,000; and provided, further, that except as may be otherwise
required by law, such custodian shall be obligated to pay to the holders
of such certificates, depositary receipts or other instruments the full
amount received by such custodian in respect of such obligations or
specific payments and shall not be permitted to make any deduction
therefrom.
"Holder" means a Person in whose name a Security is registered in the Security Register.
"Indenture" means this instrument as originally executed and delivered and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of a particular series of Securities established as contemplated by Section 301.
"Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security.
"Maturity", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as provided in such Security or in this Indenture, whether at the Stated Maturity, by declaration of acceleration, upon call for redemption or otherwise.
"Officer's Certificate" means a certificate signed by an Authorized Officer and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, or other counsel acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:
(a) Securities theretofore canceled or delivered to the Security Registrar for cancellation;
(b) Securities deemed to have been paid in accordance with
Section 701; and
(c) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it and the Company that such Securities are held by a bona fide purchaser or purchasers in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether or not the Holders of the requisite principal amount of the Securities Outstanding under this Indenture, or the Outstanding Securities of any series or Tranche, have given any request, demand, authorization, direction, notice, consent or waiver hereunder or whether or not a quorum is present at a meeting of Holders of Securities,
(x) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor (unless the Company, such Affiliate or such obligor owns all Securities Outstanding under this Indenture, or (except for the purposes of actions to be taken by Holders of (i) more than one series voting as a class under Section 812 or (ii) more than one series or more than one Tranche, as the case may be, voting as a class under Section 1202) all Outstanding Securities of each such series and each such Tranche, as the case may be, determined without
regard to this clause (x)) shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver or upon any such determination as to the presence of a quorum, only Securities which the Trustee knows to be so owned shall be so disregarded; provided, however, that Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor; and
(y) the principal amount of a Discount Security that shall be deemed to be Outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the Maturity thereof pursuant to Section 802;
provided, further, that, in the case of any Security the principal of which is payable from time to time without presentment or surrender, the principal amount of such Security that shall be deemed to be Outstanding at any time for all purposes of this Indenture shall be the original principal amount thereof less the aggregate amount of principal thereof theretofore paid.
"Paying Agent" means any Person, including the Company, authorized by the Company to pay the principal of, and premium, if any, or interest, if any, on any Securities on behalf of the Company.
"Periodic Offering" means an offering of Securities of a series from time to time any or all of the specific terms of which Securities, including without limitation the rate or rates of interest, if any, thereon, the Stated Maturity or Maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Company or its agents upon the issuance of such Securities.
"Person" means any individual, corporation, joint venture, trust or unincorporated organization or any Governmental Authority.
"Place of Payment", when used with respect to the Securities of any series, or any Tranche thereof, means the place or places, specified as contemplated by Section 301, at which, subject to Section 602, principal of and premium, if any, and interest, if any, on the Securities of such series or Tranche are payable.
"Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed (to the extent lawful) to evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301.
"Required Currency" has the meaning specified in Section 311.
"Responsible Officer", when used with respect to the Trustee, means any Vice President, Assistant Vice President, Trust Officer or other officer of the Trustee assigned by the Trustee to the Corporate Trust Administration Division of the Trustee (or any successor division or department of the Trustee).
"Securities" has the meaning stated in the first recital of this Indenture and more particularly means any securities authenticated and delivered under this Indenture.
"Security Register" and "Security Registrar" have the respective meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest on
the Securities of any series means a date fixed by the Trustee pursuant to
Section 307.
"Stated Interest Rate" means a rate (whether fixed or variable) at which an obligation by its terms is stated to bear simple interest. Any calculation or other determination to be made under this Indenture by reference to the Stated Interest Rate on a Security shall be made without regard to the effective interest cost to the Company of such Security and without regard to the Stated Interest Rate on, or the effective cost to the Company of, any other indebtedness in respect of which the Company's obligations are evidenced or secured in whole or in part by such Security.
"Stated Maturity", when used with respect to any obligation or any installment of principal thereof or interest thereon, means the date on which the principal of such obligation or such installment of principal or interest is stated to be due and payable (without regard to any provisions for redemption, prepayment, acceleration, purchase or extension).
"Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock that ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.
"Tranche" means a group of Securities which (a) are of the same series and (b) have identical terms except as to principal amount and/or date of issuance.
"Trust Indenture Act" means, as of any time, the Trust Indenture Act of 1939, or any successor statute, as in effect at such time.
"Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such with respect to one or more series of Securities pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series.
"United States" means the United States of America, its Territories, its possessions and other areas subject to its political jurisdiction.
SECTION 102. Compliance Certificates and Opinions.
Except as otherwise expressly provided in this Indenture, upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall, if requested by the Trustee, furnish to the Trustee an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action (including any covenants compliance with which constitutes a condition precedent) have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:
(a) a statement that each Person signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such Person, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such officer's certificate or opinion are based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
Whenever, subsequent to the receipt by the Trustee of any Board Resolution, Officer's Certificate, Opinion of Counsel or other document or instrument, a clerical, typographical or other inadvertent or unintentional error or omission shall be discovered therein, a new document or instrument may be substituted therefor in corrected form with the same force and effect as if originally filed in the corrected form and, irrespective of the date or dates of the actual execution and/or delivery thereof, such substitute document or
instrument shall be deemed to have been executed and/or delivered as of the date or dates required with respect to the document or instrument for which it is substituted. Anything in this Indenture to the contrary notwithstanding, if any such corrective document or instrument indicates that action has been taken by or at the request of the Company which could not have been taken had the original document or instrument not contained such error or omission, the action so taken shall not be invalidated or otherwise rendered ineffective but shall be and remain in full force and effect, except to the extent that such action was a result of willful misconduct or bad faith. Without limiting the generality of the foregoing, any Securities issued under the authority of such defective document or instrument shall nevertheless be the valid obligations of the Company entitled to the benefits of this Indenture equally and ratably with all other Outstanding Securities, except as aforesaid.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, election, waiver or other action provided by this Indenture to be made, given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing or, alternatively, may be embodied in and evidenced by the record of Holders voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders duly called and held in accordance with the provisions of Article Thirteen, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments and so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and (subject to Section 901) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. The record of any meeting of Holders shall be proved in the manner provided in Section 1306.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof or may be proved in any other manner which the Trustee and the Company deem sufficient. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority.
(c) The principal amount (except as otherwise contemplated in clause
(y) of the first proviso to the definition of Outstanding) and serial
numbers of Securities held by any Person, and the date of holding the
same, shall be proved by the Security Register.
(d) Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of a Holder shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.
(e) Until such time as written instruments shall have been delivered to the Trustee with respect to the requisite percentage of principal amount of Securities for the action contemplated by such instruments, any such instrument executed and delivered by or on behalf of a Holder may be revoked with respect to any or all of such Securities by written notice by such Holder or any subsequent Holder, proven in the manner in which such instrument was proven.
(f) Securities of any series, or any Tranche thereof, authenticated and delivered after any Act of Holders may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any action taken by such Act of Holders. If the Company shall so determine, new Securities of any series, or any Tranche thereof, so modified as to conform, in the opinion of the Trustee and the Company, to such action may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series or Tranche.
(g) If the Company shall solicit from Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on the record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of the Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of the record date.
SECTION 105. Notices, etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, election, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, the Trustee by any Holder or by the Company, or the Company by the Trustee or by any Holder, shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered personally to an officer or other responsible employee of the addressee at the applicable location set forth below or at such other location as such party may from time to time designate by written notice, or transmitted by facsimile transmission or other direct written electronic means to such telephone number or other electronic communications address as the parties hereto shall from time to time designate by written notice, or transmitted by certified or registered mail, charges prepaid, to the applicable address set forth below or to such other address as either party hereto may from time to time designate by written notice:
If to the Trustee, to:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Vice President, Corporate Trust Department
Telephone: (212) 852-1671
Telecopy: (212) 852-1626
If to the Company, to:
GPU, Inc.
300 Madison Avenue
Morristown, New Jersey 07962
Attention: Vice President and Treasurer
Telephone: (973) 401-8519
Telecopy: (973) 644-4224
Any communication contemplated herein shall be deemed to have been made, given, furnished and filed if personally delivered, on the date of delivery, if transmitted by facsimile transmission or other direct written electronic means, on the date of receipt, and if transmitted by certified or registered mail, on the date of receipt.
SECTION 106. Notice to Holders of Securities; Waiver.
Except as otherwise expressly provided herein, where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given, and shall be deemed given, to Holders if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at the address of such Holder as it appears in the Security Register, not later than the latest date, if any, and not earlier than the earliest date, if any, prescribed for the giving of such notice.
In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice to Holders by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders.
Any notice required by this Indenture may be waived in writing by the Person entitled to receive such notice, either before or after the event otherwise to be specified therein, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
SECTION 107. Conflict with Trust Indenture Act.
If any provision of this Indenture limits, qualifies or conflicts with another provision hereof which is required or
deemed to be included in this Indenture by, or is otherwise governed by, any of the provisions of the Trust Indenture Act, such other provision shall control; and if any provision hereof otherwise conflicts with the Trust Indenture Act, the Trust Indenture Act shall control unless otherwise provided as contemplated by Section 301 with respect to any series of Securities.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings in this Indenture and the Table of Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and Trustee shall bind their respective successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or the Securities, express or implied, shall give to any Person, other than the parties hereto, their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, except to the extent that the law of any other jurisdiction shall be mandatorily applicable.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the
Securities other than a provision in Securities of any series, or any Tranche thereof, or in the Board Resolution or Officer's Certificate which establishes the terms of the Securities of such series or Tranche, which specifically states that such provision shall apply in lieu of this Section) payment of interest or principal and premium, if any, need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment, with the same force and effect, and in the same amount, as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, as the case may be, and, if such payment is made or duly provided for on such Business Day, no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to such Business Day.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
The definitive Securities of each series shall be in substantially the form or forms thereof established in the indenture supplemental hereto establishing such series or in a Board Resolution establishing such series, or in an Officer's Certificate pursuant to such supplemental indenture or Board Resolution, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form or forms of Securities of any series are established in a Board Resolution or in an Officer's Certificate pursuant to a Board Resolution, such Board Resolution and Officer's Certificate, if any, shall be delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities.
Unless otherwise specified as contemplated by Section 301 or clause
(g) of Section 1201, the Securities of each series shall be issuable in
registered form without coupons. The definitive Securities shall be produced in
such manner as shall be determined by the officers executing such Securities, as
evidenced by their execution thereof.
SECTION 202. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially the form set forth below:
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
Dated:
ARTICLE THREE
The Securities
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. Subject to the last paragraph of this Section, prior to the authentication and delivery of Securities of any series there shall be established by specification in a supplemental indenture or in a Board Resolution, or in an Officer's Certificate pursuant to a supplemental indenture or a Board Resolution:
(a) the title of the Securities of such series (which shall distinguish the Securities of such series from Securities of all other series);
(b)any limit upon the aggregate principal amount of the Securities of such series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of such series pursuant to Section 304, 305, 306, 406 or 1206 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder);
(c) the Person or Persons (without specific identification) to whom interest on Securities of such series, or any Tranche thereof, shall be payable on any Interest Payment Date, if other than the Persons in whose names such Securities (or one or more Predecessor Securities) are registered at the close of business on the Regular Record Date for such interest;
(d) the date or dates on which the principal of the Securities of such series, or any Tranche thereof, is payable or any formulary or other method or other means by which such date or dates shall be determined, by reference to an index or other fact or event ascertainable outside of this Indenture or otherwise (without regard to any provisions for redemption, prepayment, acceleration, purchase or extension);
(e) the rate or rates at which the Securities of such series, or any Tranche thereof, shall bear interest, if any (including the rate or rates at which overdue principal shall bear interest, if different from the rate or rates at which such Securities shall bear interest prior to Maturity, and, if applicable, the rate or rates at which overdue premium or interest shall bear interest, if any), or any formulary or other method or other means by which such rate or rates shall be determined, by reference to an index or other fact or event ascertainable outside of this Indenture or otherwise; the date or dates from which such interest shall accrue; the Interest Payment Dates on which such interest shall be payable and the Regular Record Date, if any, for the interest payable on such Securities on any Interest Payment Date; the right of the Company, if any, to extend the interest payment periods and the duration of any such extension as contemplated by Section 312; and the basis of computation of interest, if other than as provided in Section 310;
(f) the place or places at which or methods by which (1) the principal of and premium, if any, and interest, if any, on Securities of such series, or any Tranche thereof, shall be payable, (2) registration of transfer of Securities of such series, or any Tranche thereof, may be effected, (3) exchanges of Securities of such series, or any Tranche thereof, may be effected and (4) notices and demands to or upon the Company in respect of the Securities of such series, or any Tranche thereof, and this Indenture may be served; the Security Registrar for such series or Tranche; and if such is the case, that the principal of such Securities shall be payable without presentment or surrender thereof;
(g) the period or periods within which, or the date or dates on which, the price or prices at which and the terms and conditions upon which the Securities of such series, or any Tranche thereof, may be redeemed, in whole or in part, at the option of the Company and any restrictions on such redemptions, including but not limited to a restriction on a partial redemption by the Company of the Securities of any series, or any Tranche thereof, resulting in delisting of such Securities from any national exchange;
(h) the obligation or obligations, if any, of the Company to redeem or purchase the Securities of such series, or any Tranche thereof,
pursuant to any sinking fund or other mandatory redemption provisions or at the option of a Holder thereof and the period or periods within which or the date or dates on which, the price or prices at which and the terms and conditions upon which such Securities shall be redeemed or purchased, in whole or in part, pursuant to such obligation, and applicable exceptions to the requirements of Section 404 in the case of mandatory redemption or redemption at the option of the Holder;
(i) the denominations in which Securities of such series, or any Tranche thereof, shall be issuable if other than denominations of $1,000 and any integral multiple thereof;
(j) the currency or currencies, including composite currencies, in which payment of the principal of and premium, if any, and interest, if any, on the Securities of such series, or any Tranche thereof, shall be payable (if other than in Dollars);
(k) if the principal of or premium, if any, or interest, if any, on the Securities of such series, or any Tranche thereof, are to be payable, at the election of the Company or a Holder thereof, in a coin or currency other than that in which the Securities are stated to be payable, the period or periods within which and the terms and conditions upon which, such election may be made;
(l) if the principal of or premium, if any, or interest, if any, on the Securities of such series, or any Tranche thereof, are to be payable, or are to be payable at the election of the Company or a Holder thereof, in securities or other property, the type and amount of such securities or other property, or the formulary or other method or other means by which such amount shall be determined, and the period or periods within which, and the terms and conditions upon which, any such election may be made;
(m) if the amount payable in respect of principal of or premium, if any, or interest, if any, on the Securities of such series, or any Tranche thereof, may be determined with reference to an index or other fact or event ascertainable outside of this Indenture, the manner in which such amounts shall be determined to the extent not established pursuant to clause (e) of this paragraph;
(n) if other than the principal amount thereof, the portion of the principal amount of Securities of such series, or any Tranche thereof, which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 802;
(o) any Events of Default, in addition to those specified in Section 801, with respect to the Securities of such series, and any covenants of the Company for the benefit of the Holders of the Securities of such series, or any Tranche thereof, in addition to those set forth in Article Six;
(p) the terms, if any, pursuant to which the Securities of such series, or any Tranche thereof, may be converted into or exchanged for shares of capital stock or other securities of the Company or any other Person;
(q) the obligations or instruments, if any, which shall be considered to be Eligible Obligations in respect of the Securities of such series, or any Tranche thereof, denominated in a currency other than Dollars or in a composite currency, and any additional or alternative provisions for the reinstatement of the Company's indebtedness in respect of such Securities after the satisfaction and discharge thereof as provided in Section 701;
(r) if the Securities of such series, or any Tranche thereof, are to be issued in global form, (i) any limitations on the rights of the Holder or Holders of such Securities to transfer or exchange the same or to obtain the registration of transfer thereof, (ii) any limitations on the rights of the Holder or Holders thereof to obtain certificates therefor in definitive form in lieu of temporary form and (iii) any and all other matters incidental to such Securities;
(s) if the Securities of such series, or any Tranche thereof, are to be issuable as bearer securities, any and all matters incidental thereto which are not specifically addressed in a supplemental indenture as contemplated by clause (g) of Section 1201;
(t) to the extent not established pursuant to clause (r) of this paragraph, any limitations on the rights of the Holders of the Securities of such Series, or any Tranche thereof, to transfer or exchange such
Securities or to obtain the registration of transfer thereof; and if a service charge will be made for the registration of transfer or exchange of Securities of such series, or any Tranche thereof, the amount or terms thereof;
(u) any exceptions to Section 113, or variation in the definition of Business Day, with respect to the Securities of such series, or any Tranche thereof;
(v) any collateral security, assurance or guarantee for the Securities of such series;
(w)any non-applicability of Section 608 to the Securities of such series or any exceptions or modifications of Section 608 with respect to the Securities of such series;
(x) any rights or duties of another Person to assume the obligations of the Company with respect to the Securities of such series (whether as joint obligor, primary obligor, secondary obligor or substitute obligor) and any rights or duties to discharge and release any obligor with respect to the Securities of such series or the Indenture to the extent related to such series; and
(y)any other terms of the Securities of such series, or any Tranche thereof, not inconsistent with the provisions of this Indenture.
With respect to Securities of a series subject to a Periodic Offering, the indenture supplemental hereto or the Board Resolution which establishes such series, or the Officer's Certificate pursuant to such supplemental indenture or Board Resolution, as the case may be, may provide general terms or parameters for Securities of such series and provide either that the specific terms of Securities of such series, or any Tranche thereof, shall be specified in a Company Order or that such terms shall be determined by the Company or its agents in accordance with procedures specified in a Company Order as contemplated by the clause (b) of Section 303.
SECTION 302. Denominations.
Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities, or any Tranche thereof, the Securities of each series shall be issuable in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities, or any Tranche thereof, the Securities shall be executed on behalf of the Company by an Authorized Officer and may have the corporate seal of the Company affixed thereto or reproduced thereon attested by any other Authorized Officer or by the Secretary or an Assistant Secretary of the Company. The signature of any or all of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who were at the time of execution Authorized Officers or the Secretary or an Assistant Secretary of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.
The Trustee shall authenticate and deliver Securities of a series, for original issue, at one time or from time to time in accordance with the Company Order referred to below, upon receipt by the Trustee of:
(a) the instrument or instruments establishing the form or forms and terms of such series, as provided in Sections 201 and 301;
(b) a Company Order requesting the authentication and delivery of such Securities and, to the extent that the terms of such Securities shall not have been established in an indenture supplemental hereto or in a Board Resolution, or in an Officer's Certificate pursuant to a supplemental indenture or Board Resolution, all as contemplated by Sections 201 and 301, either (i) establishing such terms or (ii) in the case of Securities of a series subject to a Periodic Offering, specifying procedures, acceptable to the Trustee, by which such terms are to be established (which procedures may provide, to the extent acceptable to the Trustee, for authentication and delivery pursuant to oral
or electronic instructions from the Company or any agent or agents thereof, which oral instructions are to be promptly confirmed electronically or in writing), in either case in accordance with the instrument or instruments delivered pursuant to clause (a) above;
(c) the Securities of such series, executed on behalf of the Company by an Authorized Officer;
(d) an Opinion of Counsel to the effect that:
(i) the form or forms of such Securities have been duly authorized by the Company and have been established in conformity with the provisions of this Indenture;
(ii) the terms of such Securities have been duly authorized by the Company and have been established in conformity with the provisions of this Indenture; and
(iii) such Securities, when authenticated and delivered by the Trustee and issued and delivered by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will have been duly issued under this Indenture and will constitute valid and legally binding obligations of the Company, entitled to the benefits provided by this Indenture, and enforceable in accordance with their terms, subject, as to enforcement, to laws relating to or affecting generally the enforcement of creditors' rights, including, without limitation, bankruptcy and insolvency laws and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);
provided, however, that, with respect to Securities of a series subject to a Periodic Offering, the Trustee shall be entitled to receive such Opinion of Counsel only once at or prior to the time of the first authentication of such Securities (provided that such Opinion of Counsel addresses the authentication and delivery of all Securities of such series) and that in lieu of the opinions described in clauses (ii) and (iii) above Counsel may opine that:
(x) when the terms of such Securities shall have been established pursuant to a Company Order or Orders or pursuant to such procedures (acceptable to the Trustee) as may be specified from time to time by a Company Order or Orders, all as contemplated by and in accordance with the instrument or instruments delivered pursuant to clause (a) above, such terms will have been duly authorized by the Company and will have been established in conformity with the provisions of this Indenture; and
(y) such Securities, when authenticated and delivered by the Trustee in accordance with this Indenture and the Company Order or Orders or specified procedures referred to in paragraph (x) above and issued and delivered by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will have been duly issued under this Indenture and will constitute valid and legally binding obligations of the Company, entitled to the benefits provided by the Indenture, and enforceable in accordance with their terms, subject, as to enforcement, to laws relating to or affecting generally the enforcement of creditors' rights, including, without limitation, bankruptcy and insolvency laws, and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
With respect to Securities of a series subject to a Periodic Offering, the Trustee may conclusively rely, as to the authorization by the Company of any of such Securities, the form, terms thereof and the legality, validity, binding effect and enforceability thereof, and compliance of the authentication and delivery thereof with the terms and conditions of this Indenture, upon the Opinion of Counsel and other documents delivered pursuant to Sections 201 and 301 and this Section, as applicable, at or prior to the time of the first authentication of Securities of such series unless and until such opinion or other documents have been superseded or revoked or expire by their terms. In connection with the authentication and delivery of Securities of a series subject to a Periodic Offering, the Trustee shall be entitled to assume that the Company's instructions to authenticate and deliver such Securities do not violate any applicable law or any applicable rule, regulation or order of any Governmental Authority having jurisdiction over the Company.
If the form or terms of the Securities of any series have been established by or pursuant to a Board Resolution or an Officer's Certificate as permitted by Sections 201 or 301, the Trustee shall not be required to
authenticate such Securities if the issuance of such Securities pursuant to this Indenture will materially or adversely affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee.
Unless otherwise specified as contemplated by Section 301 with respect to any series of Securities, or any Tranche thereof, each Security shall be dated the date of its authentication.
Unless otherwise specified as contemplated by Section 301 with respect to any series of Securities, no Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee or an Authenticating Agent by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder to the Company, or any Person acting on its behalf, but shall never have been issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits hereof.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, or any Tranche thereof, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities;
provided, however, that temporary Securities need not recite specific redemption, sinking fund, conversion or exchange provisions.
Unless otherwise specified as contemplated by Section 301 with respect to the Securities of any series, or any Tranche thereof, after the preparation of definitive Securities of such series or Tranche, the temporary Securities of such series or Tranche shall be exchangeable, without charge to the Holder thereof, for definitive Securities of such series or Tranche upon surrender of such temporary Securities at the office or agency of the Company maintained pursuant to Section 602 in a Place of Payment for such Securities. Upon such surrender of temporary Securities for such exchange, the Company shall, except as aforesaid, execute and the Trustee shall authenticate and deliver in exchange therefor definitive Securities of the same series and Tranche of authorized denominations and of like tenor and aggregate principal amount.
Until exchanged in full as hereinabove provided, temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and Tranche and of like tenor authenticated and delivered hereunder.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept in each office designated pursuant to Section 602, with respect to the Securities of each series, a register (all registers kept in accordance with this Section being collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities of such series, or any Tranche thereof, and the registration of transfer thereof. The Company shall designate one Person to maintain the Security Register for the Securities of each series on a consolidated basis, and such Person is referred to herein, with respect to such series, as the "Security Registrar." Anything herein to the contrary notwithstanding, the Company may designate one or more of its offices as an office in which a register with respect to the Securities of one or more series shall be maintained, and the Company may designate itself the Security Registrar with respect to one or more of such series. The Security Register shall be open for inspection by the Trustee and the Company at all reasonable times.
Except as otherwise specified as contemplated by Section 301 with respect to the Securities of any series, or any Tranche thereof, upon surrender for registration of transfer of any Security of such series or Tranche at the office or agency of the Company maintained pursuant to Section 602 in a Place of Payment for such series or Tranche, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series and Tranche, of authorized denominations and of like tenor and aggregate principal amount. Except as otherwise specified as contemplated by Section 301 with respect to the Securities of any series, or any Tranche thereof, any Security of such series or Tranche may be exchanged at the option of the Holder, for one or more new Securities of the same series and Tranche, of authorized denominations and of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at any such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive.
All Securities delivered upon any registration of transfer or exchange of Securities shall be valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company, the Trustee or the Security Registrar) be duly endorsed or shall be accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee or the Security Registrar, as the case may be, duly executed by the Holder thereof or his attorney duly authorized in writing.
Unless otherwise specified as contemplated by Section 301 with respect to Securities of any series, or any Tranche thereof, no service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 406 or 1206 not involving any transfer.
The Company shall not be required to execute or to provide for the registration of transfer of or the exchange of (a) Securities of any series, or any Tranche thereof, during a period of 15 days immediately preceding the date notice is to be given identifying the serial numbers of the Securities of such series or Tranche called for redemption or (b) any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and Tranche, and of like tenor and principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (a) evidence to their satisfaction of the ownership of and the destruction, loss or theft of any Security and (b) such security or indemnity as may be reasonably required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security is held by a Person purporting to be the owner of such Security, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and Tranche, and of like tenor and principal amount and bearing a number not contemporaneously outstanding.
Notwithstanding the foregoing, in case any such mutilated,
destroyed, lost or stolen Security has become or is about to become due and
payable, the Company in its discretion may, instead of issuing a new Security,
pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone other than the Holder of such new Security, and any such new Security shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all other Securities of such series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Unless otherwise specified as contemplated by Section 301 with respect to the Securities of any series, or any Tranche thereof, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.
Subject to Section 312, any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the related Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (a) or (b) below:
(a)The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a date (herein called a "Special Record Date") for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall promptly cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at the address of such Holder as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date.
(b) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and premium, if any, and (subject to Sections 305 and 307) interest, if any, on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.
SECTION 309. Cancellation by Security Registrar.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Security
Registrar, be delivered to the Security Registrar and, if not theretofore
canceled, shall be promptly canceled by the Security Registrar. The Company may
at any time deliver to the Security Registrar for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever or which the Company shall not have issued and
sold, and all Securities so delivered shall be promptly canceled by the Security
Registrar. No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities held by the Security
Registrar shall be disposed of in accordance with the customary practices of the
Security Registrar at the time in effect, and the Security Registrar shall not
be required to destroy any such certificates. The Security Registrar shall
promptly deliver a certificate of disposition to the Trustee and the Company
unless, by a Company Order, similarly delivered, the Company shall direct that
canceled Securities be returned to it. The Security Registrar shall promptly
deliver evidence of any cancellation of a Security in accordance with this
Section 309 to the Trustee and the Company.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for Securities of any series, or any Tranche thereof, interest on the Securities of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months and for any period shorter than a full month, on the basis of the actual number of days elapsed in such period.
SECTION 311. Payment to Be in Proper Currency.
In the case of the Securities of any series, or any Tranche thereof, denominated in any currency other than Dollars or in a composite currency (the "Required Currency"), except as otherwise specified with respect to such Securities as contemplated by Section 301, the obligation of the Company to make any payment of the principal thereof, or the premium or interest thereon, shall not be discharged or satisfied by any tender by the Company, or recovery by the Trustee, in any currency other than the Required Currency, except to the extent
that such tender or recovery shall result in the Trustee timely holding the full amount of the Required Currency then due and payable. If any such tender or recovery is in a currency other than the Required Currency, the Trustee may take such actions as it considers appropriate to exchange such currency for the Required Currency. The costs and risks of any such exchange, including without limitation the risks of delay and exchange rate fluctuation, shall be borne by the Company, the Company shall remain fully liable for any shortfall or delinquency in the full amount of Required Currency then due and payable, and in no circumstances shall the Trustee be liable therefor except in the case of its negligence or willful misconduct.
SECTION 312. Extension of Interest Payment.
The Company shall have the right at any time, so long as the Company is not in default in the payment of interest on the Securities of any series hereunder, to extend interest payment periods on all Securities of one or more series, if so specified as contemplated by Section 301 with respect to such Securities and upon such terms as may be specified as contemplated by Section 301 with respect to such Securities.
ARTICLE FOUR
Redemption of Securities
SECTION 401. Applicability of Article.
Securities of any series, or any Tranche thereof, which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of such series or Tranche) in accordance with this Article.
SECTION 402. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by a Board Resolution or an Officer's Certificate. The Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date and of the principal amount of such Securities to be redeemed. In the case of any redemption of Securities (a) prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture or (b) pursuant to an election of
the Company which is subject to a condition specified in the terms of such Securities, the Company shall furnish the Trustee with an Officer's Certificate evidencing compliance with such restriction or condition.
SECTION 403. Selection of Securities to Be Redeemed.
If less than all the Securities of any series, or any Tranche thereof, are to be redeemed, the particular Securities to be redeemed shall be selected by the Trustee from the Outstanding Securities of such series or Tranche not previously called for redemption, by such method as shall be provided for any particular series, or, in the absence of any such provision, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of such series or Tranche or any integral multiple thereof) of the principal amount of Securities of such series or Tranche of a denomination larger than the minimum authorized denomination for Securities of such series or Tranche; provided, however, that if, as indicated in an Officer's Certificate, the Company shall have offered to purchase all or any principal amount of the Securities then Outstanding of any series, or any Tranche thereof, and less than all of such Securities as to which such offer was made shall have been tendered to the Company for such purchase, the Trustee, if so directed by Company Order, shall select for redemption all or any principal amount of such Securities which have not been so tendered.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected to be redeemed in part, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Securities redeemed or to be redeemed only in part, to the portion of the
principal amount of such Securities which has been or is to be redeemed.
SECTION 404. Notice of Redemption.
Except as otherwise specified as contemplated by Section 301 for Securities of any series, notice of redemption shall be given in the manner provided in Section 106 to the Holders of the Securities to be redeemed not less than 30 nor more than 60 days prior to the Redemption Date.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price (if known),
(c) if less than all the Securities of any series or Tranche are to be redeemed, the identification of the particular Securities to be redeemed and the portion of the principal amount of any Security to be redeemed in part,
(d) that on the Redemption Date the Redemption Price, together with accrued interest, if any, to the Redemption Date, will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date,
(e) the place or places where such Securities are to be surrendered for payment of the Redemption Price and accrued interest, if any, unless it shall have been specified as contemplated by Section 301 with respect to such Securities that such surrender shall not be required,
(f) that the redemption is for a sinking or other fund, if such is the case, and
(g) such other matters as the Company shall deem desirable or appropriate.
Unless otherwise specified with respect to any Securities in
accordance with Section 301, with respect to any notice of redemption of
Securities at the election of the Company, unless, upon the giving of such
notice, such Securities shall be deemed to have been paid in accordance with
Section 701, such notice may state that such redemption shall be conditional
upon the receipt by the Paying Agent or Agents for such Securities, on or prior
to the date fixed for such redemption, of money sufficient to pay the principal
of and premium, if any, and interest, if any, on such Securities and that if
such money shall not have been so received such notice shall be of no force or
effect and the Company shall not be required to redeem such Securities. In the
event that such notice of redemption contains such a condition and such money is
not so received, the redemption shall not be made and within a reasonable time
thereafter notice shall be given, in the manner in which the notice of
redemption was given, that such money was not so received and such redemption
was not required to be made, and the Paying Agent or Agents for the Securities
otherwise to have been redeemed shall promptly return to the Holders thereof any of such Securities which had been surrendered for payment upon such redemption.
Notice of redemption of Securities to be redeemed at the election of the Company, and any notice of non-satisfaction of a condition for redemption as aforesaid, shall be given by the Company or, at the Company's request, by the Security Registrar in the name and at the expense of the Company. Notice of mandatory redemption of Securities shall be given by the Security Registrar in the name and at the expense of the Company.
SECTION 405. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, and the conditions, if any, set forth in such notice having been satisfied, the Securities or portions thereof so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless, in the case of an unconditional notice of redemption, the Company shall default in the payment of the Redemption Price and accrued interest, if any) such Securities or portions thereof, if interest-bearing, shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with such notice, such Security or portion thereof shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that no such surrender shall be a condition to such payment if so specified as contemplated by Section 301 with respect to such Security; and provided, further, that except as otherwise specified as contemplated by Section 301 with respect to such Security, any installment of interest on any Security the Stated Maturity of which installment is on or prior to the Redemption Date shall be payable to the Holder of such Security, or one or more Predecessor Securities, registered as such at the close of business on the related Regular Record Date according to the terms of such Security and subject to the provisions of Section 307.
SECTION 406. Securities Redeemed in Part.
Upon the surrender of any Security which is to be redeemed only in part at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities of the same series and Tranche, of any authorized denomination requested by such Holder and of like tenor and in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered.
ARTICLE FIVE
Sinking Funds
SECTION 501. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for the retirement of the Securities of any series, or any Tranche thereof, except as otherwise specified as contemplated by Section 301 for Securities of such series or Tranche.
The minimum amount of any sinking fund payment provided for by the terms of Securities of any series, or any Tranche thereof, is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities of any series, or any Tranche thereof, is herein referred to as an "optional sinking fund payment". If provided for by the terms of Securities of any series, or any Tranche thereof, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 502. Each sinking fund payment shall be applied to the redemption of Securities of the series or Tranche in respect of which it was made as provided for by the terms of such Securities.
SECTION 502. Satisfaction of Sinking Fund Payments with Securities.
The Company (a) may deliver to the Trustee Outstanding Securities (other than any previously called for redemption) of a series or Tranche in respect of which a mandatory sinking fund payment is to be made and (b) may apply as a credit Securities of such series or Tranche which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of such mandatory sinking fund payment with respect to the Securities of such series; provided, however, that no Securities shall be applied in
satisfaction of a mandatory sinking fund payment if such Securities shall have been previously so applied. Securities so applied shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly.
SECTION 503..Redemption of Securities for Sinking Fund.
Not less than 45 days prior to each sinking fund payment date for the Securities of any series, or any Tranche thereof, the Company shall deliver to the Trustee an Officer's Certificate specifying:
(a) the amount of the next succeeding mandatory sinking fund payment for such series or Tranche;
(b) the amount, if any, of the optional sinking fund payment to be made together with such mandatory sinking fund payment;
(c) the aggregate sinking fund payment;
(d) the portion, if any, of such aggregate sinking fund payment which is to be satisfied by the payment of cash; and
(e) the portion, if any, of such aggregate sinking fund payment which is to be satisfied by delivering and crediting Securities of such series or Tranche pursuant to Section 502 and stating the basis for such credit and that such Securities have not previously been so credited, and the Company shall also deliver to the Trustee any Securities to be so delivered.
If the Company shall have not delivered such Officer's Certificate and, to the extent applicable, all such Securities, the next succeeding sinking fund payment for such series or Tranche shall be made entirely in cash in the amount of the mandatory sinking fund payment. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 403 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 404. Such
notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 405 and 406.
ARTICLE SIC
Covenants
SECTION 601 Payment of Principal, Premium and Interest.
The Company shall pay the principal of and premium, if any, and interest, if any, on the Securities of each series in accordance with the terms of such Securities and this Indenture.
SECTION 602. Maintenance of Office or Agency.
The Company shall maintain in each Place of Payment for the Securities of each series, or any Tranche thereof, an office or agency where payment of such Securities shall be made, where the registration of transfer or exchange of such Securities may be effected and where notices and demands to or upon the Company in respect of such Securities and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of each such office or agency and prompt notice to the Holders of any such change in the manner specified in Section 106. If at any time the Company shall fail to maintain any such required office or agency in respect of Securities of any series, or any Tranche thereof, or shall fail to furnish the Trustee with the address thereof, payment of such Securities shall be made, registration of transfer or exchange thereof may be effected and notices and demands in respect thereof may be served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent for all such purposes in any such event.
The Company may also from time to time designate one or more other offices or agencies with respect to the Securities of one or more series, or any Tranche thereof, for any or all of the foregoing purposes and may from time to time rescind such designations; provided, however, that, unless otherwise specified as contemplated by Section 301 with respect to the Securities of such series or Tranche, no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency for such purposes in each Place of Payment for such Securities in accordance with the requirements set forth above. The Company shall give prompt written notice to the Trustee,
and prompt notice to the Holders in the manner specified in Section 106, of any such designation or rescission and of any change in the location of any such other office or agency.
Anything herein to the contrary notwithstanding, any office or agency required by this Section may be maintained at an office of the Company, in which event the Company shall perform all functions to be performed at such office or agency.
SECTION 603. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect to the Securities of any series, or any Tranche thereof, it shall, on or before each due date of the principal of and premium, if any, and interest, if any, on any of such Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and premium or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided. The Company shall promptly notify the Trustee of any failure by the Company (or any other obligor on such Securities) to make any payment of principal of or premium, if any, or interest, if any, on such Securities.
Whenever the Company shall have one or more Paying Agents for the Securities of any series, or any Tranche thereof, it shall, on or before each due date of the principal of and premium, if any, and interest, if any, on such Securities, deposit with such Paying Agents sums sufficient (without duplication) to pay the principal and premium or interest so becoming due, such sums to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of any failure by it so to act.
The Company shall cause each Paying Agent for the Securities of any series, or any Tranche thereof, other than the Company or the Trustee, to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent shall:
(a) hold all sums held by it for the payment of the principal of and premium, if any, or interest, if any, on such Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any failure by the Company (or any other obligor upon such Securities) to make any payment of principal of or premium, if any, or interest, if any, on such Securities; and
(c) at any time during the continuance of any such failure, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent and furnish to the Trustee such information as it possesses regarding the names and addresses of the Persons entitled to such sums.
The Company may at any time pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent and, if so stated in a Company Order delivered to the Trustee, in accordance with the provisions of Article Seven; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of and premium, if any, or interest, if any, on any Security and remaining unclaimed for two years after such principal and premium, if any, or interest has become due and payable shall be paid to the Company on Company Request, or, if then held by the Company, shall be discharged from such trust; and, upon such payment or discharge, the Holder of such Security shall, as an unsecured general creditor and not as a Holder of an Outstanding Security, look only to the Company for payment of the amount so due and payable and remaining unpaid, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such payment to the Company, may at the expense of the Company cause to be mailed, on one occasion only, notice to such Holder that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such mailing, any unclaimed balance of such money then remaining will be paid to the Company.
SECTION 604. Corporate Existence.
Subject to the rights of the Company under Article Eleven, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.
SECTION 605. Maintenance of Properties.
The Company shall cause (or, with respect to property owned in common with others, make reasonable effort to cause) all its properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and shall cause (or, with respect to property owned in common with others, make reasonable effort to cause) to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as, in the judgment of the Company, may be necessary so that the business carried on in connection therewith may be properly conducted; provided, however, that nothing in this Section shall prevent the Company from discontinuing, or causing the discontinuance of, the operation and maintenance of any of its properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business.
SECTION 606. Annual Officer's Certificate as to Compliance.
Not later than April 1 in each year, commencing April 1, 2001, the Company shall deliver to the Trustee an Officer's Certificate which need not comply with Section 102, executed by the principal executive officer, the principal financial officer or the principal accounting officer of the Company, as to such officer's knowledge of the Company's compliance with all conditions and covenants under this Indenture, such compliance to be determined without regard to any period of grace or requirement of notice under this Indenture, and making any other statements as may be required by the provisions of Section 314(a)(4) of the Trust Indenture Act.
SECTION 607. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any term, provision or condition set forth in (a) Section 602 or any additional covenant or restriction specified with respect to the Securities of any series, or any Tranche thereof, as contemplated by Section 301, if before the time for such compliance the Holders of a majority in aggregate principal
amount of the Outstanding Securities of all series and Tranches with respect to
which compliance with Section 602 or such additional covenant or restriction is
to be omitted, considered as one class, shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
term, provision or condition and (b) Section 604, 605 or Article Eleven if
before the time for such compliance the Holders of a majority in principal
amount of Securities Outstanding under this Indenture shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such term, provision or condition; but, in the case of (a) or
(b), no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.
SECTION 608. Limitation on Liens.
(a) Except as otherwise specified as contemplated by Section 301 for Securities of any series, so long as any Securities of any series are Outstanding, the Company will not pledge, mortgage, hypothecate or grant a security interest in, or permit any mortgage, pledge, security interest or other lien upon, any capital stock of any Subsidiary now or hereafter directly owned by the Company, to secure any Indebtedness (hereinafter defined) without concurrently making effective provision whereby the Outstanding Securities shall (so long as such other Indebtedness shall be so secured) be equally and ratably secured with any and all such other Indebtedness and any other indebtedness similarly entitled to be equally and ratably secured; provided, however, that this restriction shall not apply to nor prevent the creation or existence of:
(1) any mortgage, pledge, security interest, lien or encumbrance upon any such capital stock created at the time of the acquisition of such capital stock by the Company or within one year after such time to secure all or a portion of the purchase price for such capital stock;
(2) any mortgage, pledge, security interest, lien or encumbrance upon any such capital stock existing thereon at the time of the acquisition thereof by the Company (whether or not the obligations secured thereby are assumed by the Company);
(3) any extension, renewal or refunding of any mortgage, pledge, security interest, lien or encumbrance permitted by Subsection (1) or (2) above on capital stock of any Subsidiary theretofore subject thereto (or substantially the same capital stock) or any portion thereof; or
(4) any judgment, levy, execution, attachment or other similar lien arising in connection with court proceedings, provided that either
(i) the execution or enforcement of each such lien is effectively stayed within 30 days after entry of the corresponding judgment (or the corresponding judgment has been discharged within such 30 day period) and the claims secured thereby are being contested in good faith by appropriate proceedings timely commenced and diligently prosecuted;
(ii) the payment of each such lien is covered in full by insurance and the insurance company has not denied or contested coverage thereof; or
(iii) so long as each such lien is adequately bonded, any appropriate legal proceedings that may have been duly initiated for the review of the corresponding judgment, decree or order shall not have been fully terminated or the period within which such proceedings may be initiated shall not have expired.
For purposes of this Section 608, "Indebtedness" means all indebtedness, whether or not represented by bonds, debentures, notes or other securities, created or assumed by the Company for the repayment of money borrowed. All indebtedness for money borrowed secured by a lien upon capital stock owned by the Company and upon which indebtedness for money borrowed the
Company customarily pays interest, although the Company has not assumed or
become liable for the payment of such indebtedness for money borrowed, shall for
purposes of this Section 608 be deemed to be Indebtedness of the Company. All
indebtedness of others for money borrowed which is guaranteed as to payment of
principal by the Company or in effect guaranteed by the Company through a
contingent agreement to purchase such indebtedness for money borrowed shall for
purposes of this Section 608 be deemed to be Indebtedness of the Company, but no
other contingent obligation of the Company in respect of indebtedness for money
borrowed or other obligations incurred by others shall for purposes of this
Section 608 be deemed to be Indebtedness of the Company.
In case the Company shall propose to pledge, mortgage, hypothecate
or grant a security interest in any capital stock of any Subsidiary owned by the
Company to secure any Indebtedness, other than as permitted by Subsections
(a)(1) to (a)(3), inclusive, of this Section, the Company will prior thereto
give written notice thereof to the Trustee, and the Company will prior to or
simultaneously with such pledge, mortgage, hypothecation or grant of security
interest, by supplemental indenture executed to the Trustee (or to the extent
legally necessary to another trustee or an additional or separate trustee), in
form satisfactory to the Trustee, effectively secure (for so long as such other
Indebtedness shall be so secured) all the Securities equally and ratably with
such Indebtedness and with any other indebtedness for money borrowed similarly
entitled to be equally and ratably secured.
(b) Except as otherwise specified as contemplated by Section 301 for Securities of any series, the provisions of Subsection (a) of this Section 608 shall not apply in the event that the Company shall pledge, mortgage, hypothecate or grant a security interest in or other lien upon any capital stock of any Subsidiary now or hereafter owned by the Company to secure any Indebtedness which would otherwise be subject to the foregoing restriction up to an aggregate amount which, together with all other Indebtedness (other than mortgages, pledges, security interests, liens or encumbrances permitted by Subsection (a) of this Section 608) which would otherwise be subject to the foregoing restriction, does not at the time exceed 5% of Consolidated Capitalization.
For purposes of this Section 608:
(1) The term "Consolidated Capitalization" means the sum obtained by adding (i) Consolidated Shareholders' Equity, (ii) Consolidated Indebtedness for money borrowed (exclusive of any thereof which is due and payable within one year of the date such sum is determined) and, without duplication, (iii) any preference or preferred stock of the Company or any Consolidated Subsidiary which is subject to mandatory redemption or sinking fund provisions.
(2) The term "Consolidated Shareholders' Equity" means the total Assets of the Company and its Consolidated Subsidiaries less all liabilities of the Company and its Consolidated Subsidiaries. As used in this definition, "liabilities" means all obligations which would, in accordance with generally accepted accounting principles, be classified on a balance sheet as liabilities, including without limitation, (i) indebtedness secured by property of the Company or any of its Consolidated Subsidiaries whether or not the Company or such Consolidated Subsidiary is liable for the payment thereof unless, in the case that the Company or such Consolidated Subsidiary is not so liable, such property has not been included among the Assets of the Company or such Consolidated Subsidiary on such balance sheet, (ii) deferred liabilities, (iii) indebtedness of the Company or any of its Consolidated Subsidiaries that is expressly subordinated in right and priority of payment to other liabilities of the Company or such Consolidated Subsidiary. As used in this definition, "liabilities" includes preference or preferred stock of the Company or any Consolidated Subsidiary only to the extent of any such preference or preferred stock that is subject to mandatory redemption or sinking fund provisions.
(3) The term "Consolidated Subsidiary" means at any date any Subsidiary the financial statements of which under generally accepted accounting principles would be consolidated with those of the Company in its consolidated financial statements as of such date.
(4) The "Assets" of any Person means the whole or any part of its business, property, assets, cash and receivables.
(5) The term "Consolidated Indebtedness" means total indebtedness as shown on the consolidated balance sheet of the Company and its Consolidated Subsidiaries.
ARTICLE SEVEN
Satisfaction and Discharge
SECTION 701. Satisfaction and Discharge of Securities.
Any Security or Securities, or any portion of the principal amount thereof, shall be deemed to have been paid for all purposes of this Indenture, and the entire indebtedness of the Company in respect thereof shall be deemed to have been satisfied and discharged, if there shall have been irrevocably deposited with the Trustee or any Paying Agent (other than the Company), in trust:
(a) money in an amount which shall be sufficient, or
(b) in the case of a deposit made prior to the Maturity of such Securities or portions thereof, Eligible Obligations, which shall not contain provisions permitting the redemption or other prepayment thereof at the option of the issuer thereof, the principal of and the interest on which when due, without any regard to reinvestment thereof, will provide moneys which, together with the money, if any, deposited with or held by the Trustee or such Paying Agent, shall be sufficient, or
(c) a combination of (a) or (b) which shall be sufficient,
to pay when due the principal of and premium, if any, and interest, if any, due and to become due on such Securities or portions thereof on or prior to Maturity; provided, however, that in the case of the provision for payment or redemption of less than all the Securities of any series or Tranche, such Securities or portions thereof shall have been selected by the Trustee as provided herein and, in the case of a redemption, the notice requisite to the validity of such redemption shall have been given or irrevocable authority shall have been given by the
Company to the Trustee to give such notice, under arrangements satisfactory to the Trustee; and provided, further, that the Company shall have delivered to the Trustee and such Paying Agent:
(x) if such deposit shall have been made prior to the Maturity of such Securities, a Company Order stating that the money and Eligible Obligations deposited in accordance with this Section shall be held in trust, as provided in Section 703; and
(y) if Eligible Obligations shall have been deposited, an Opinion of Counsel that the obligations so deposited constitute Eligible Obligations and do not contain provisions permitting the redemption or other prepayment at the option of the issuer thereof, and an opinion of an independent public accountant of nationally recognized standing, selected by the Company, to the effect that the requirements set forth in clause (b) above have been satisfied; and
(z) if such deposit shall have been made prior to the Maturity of such Securities, an Officer's Certificate stating the Company's intention that, upon delivery of such Officer's Certificate, its indebtedness in respect of such Securities or portions thereof will have been satisfied and discharged as contemplated in this Section.
Upon the deposit of money or Eligible Obligations, or both, in
accordance with this Section, together with the documents required by clauses
(x), (y) and (z) above, the Trustee shall, upon receipt of a Company Request,
acknowledge in writing that the Security or Securities or portions thereof with
respect to which such deposit was made are deemed to have been paid for all
purposes of this Indenture and that the entire indebtedness of the Company in
respect thereof has been satisfied and discharged as contemplated in this
Section. In the event that all of the conditions set forth in the preceding
paragraph shall have been satisfied in respect of any Securities or portions
thereof except that, for any reason, the Officer's Certificate specified in
clause (z) shall not have been delivered, such Securities or portions thereof
shall nevertheless be deemed to have been paid for all purposes of this
Indenture, and the Holders of such Securities or portions thereof shall
nevertheless be no longer entitled to the benefits of this Indenture or of any
of the covenants of the Company under Article Six (except the covenants
contained in Sections
602 and 603) or any other covenants made in respect of such Securities or portions thereof as contemplated by Section 301, but the indebtedness of the Company in respect of such Securities or portions thereof shall not be deemed to have been satisfied and discharged prior to Maturity for any other purpose, and the Holders of such Securities or portions thereof shall continue to be entitled to look to the Company for payment of the indebtedness represented thereby; and, upon Company Request, the Trustee shall acknowledge in writing that such Securities or portions thereof are deemed to have been paid for all purposes of this Indenture.
If payment at Stated Maturity of less than all of the Securities of
any series, or any Tranche thereof, is to be provided for in the manner and with
the effect provided in this Section, the Security Registrar shall select such
Securities, or portions of principal amount thereof, in the manner specified by
Section 403 for selection for redemption of less than all the Securities of a
series or Tranche.
In the event that Securities which shall be deemed to have been paid for purposes of this Indenture, and, if such is the case, in respect of which the Company's indebtedness shall have been satisfied and discharged, all as provided in this Section do not mature and are not to be redeemed within the 60 day period commencing with the date of the deposit of moneys or Eligible Obligations, as aforesaid, the Company shall, as promptly as practicable, give a notice, in the same manner as a notice of redemption with respect to such Securities, to the Holders of such Securities to the effect that such deposit has been made and the effect thereof.
Notwithstanding that any Securities shall be deemed to have been paid for purposes of this Indenture, as aforesaid, the obligations of the Company and the Trustee in respect of such Securities under Sections 304, 305, 306, 404, 503 (as to notice of redemption), 602, 603, 907 and 915 and this Article Seven shall survive.
The Company shall pay, and shall indemnify the Trustee or any Paying Agent with which Eligible Obligations shall have been deposited as provided in this Section against, any tax, fee or other charge imposed on or assessed against such Eligible Obligations or the principal or interest received in respect of such Eligible Obligations, including, but not limited to, any such tax payable by any entity deemed, for tax purposes, to have been created as a result of such deposit.
Anything herein to the contrary notwithstanding, (a) if, at any time
after a Security would be deemed to have been paid for purposes of this
Indenture, and, if such is the case, the Company's indebtedness in respect
thereof would be deemed to have been satisfied or discharged, pursuant to this
Section (without regard to the provisions of this paragraph), the Trustee or any
Paying Agent, as the case may be, shall be required to return the money or
Eligible Obligations, or combination thereof, deposited with it as aforesaid to
the Company or its representative under any applicable Federal or State
bankruptcy, insolvency or other similar law, such Security shall thereupon be
deemed retroactively not to have been paid and any satisfaction and discharge of
the Company's indebtedness in respect thereof shall retroactively be deemed not
to have been effected, and such Security shall be deemed to remain Outstanding
and (b) any satisfaction and discharge of the Company's indebtedness in respect
of any Security shall be subject to the provisions of the last paragraph of
Section 603.
SECTION 702. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request, accompanied by an Officer's Certificate and an Opinion of Counsel in compliance with Section 102 of this Indenture, cease to be of further effect (except as hereinafter expressly provided), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when
(a) no Securities remain Outstanding hereunder; and
(b) the Company has paid or caused to be paid all other sums payable hereunder by the Company;
provided, however, that if, in accordance with the last paragraph of Section 701, any Security, previously deemed to have been paid for purposes of this Indenture, shall be deemed retroactively not to have been so paid, this Indenture shall thereupon be deemed retroactively not to have been satisfied and discharged, as aforesaid, and to remain in full force and effect, and the Company shall execute and deliver such instruments as the Trustee shall reasonably request to evidence and acknowledge the same.
Notwithstanding the satisfaction and discharge of this Indenture as aforesaid, the obligations of the Company and the Trustee under Sections 304, 305, 306, 404, 503 (as to notice of redemption), 602, 603, 907 and 915 and this Article Seven shall survive.
Upon satisfaction and discharge of this Indenture as provided in this Section, the Trustee shall assign, transfer and turn over to the Company, subject to the lien provided by Section 907, any and all money, securities and other property then held by the Trustee for the benefit of the Holders of the Securities other than money and Eligible Obligations held by the Trustee pursuant to Section 703.
SECTION 703. Application of Trust Money.
Neither the Eligible Obligations nor the money deposited pursuant to
Section 701, nor the principal or interest payments on any such Eligible
Obligations, shall be withdrawn or used for any purpose other than, and shall be
held in trust for, the payment of the principal of and premium, if any, and
interest, if any, on the Securities or portions of principal amount thereof in
respect of which such deposit was made, all subject, however, to the provisions
of Section 603; provided, however, that, so long as there shall not have
occurred and be continuing an Event of Default, any cash received from such
principal or interest payments on such Eligible Obligations, if not then needed
for such purpose, shall, to the extent practicable and upon Company Request, be
invested in Eligible Obligations of the type described in clause (b) in the
first paragraph of Section 701 maturing at such times and in such amounts as
shall be sufficient, together with any other moneys and the principal of and
interest on any other Eligible Obligations then held by the Trustee, to pay when
due the principal of and premium, if any, and interest, if any, due and to
become due on such Securities or portions thereof on and prior to the Maturity
thereof, and interest earned from such reinvestment shall be paid over to the
Company as received, free and clear of any trust, lien or pledge under this
Indenture except the lien provided by Section 907; and provided, further, that,
so long as there shall not have occurred and be continuing an Event of Default,
any moneys held in accordance with this Section on the Maturity of all such
Securities in excess of the amount required to pay the principal of and premium,
if any, and interest, if any, then due on such Securities shall be paid over to
the Company free and clear of any trust, lien or pledge under this Indenture
except the lien provided by Section 907; and
provided, further, that if an Event of Default shall have occurred and be continuing, moneys to be paid over to the Company pursuant to this Section shall be held until such Event of Default shall have been waived or cured.
ARTICLE EIGHT
Events of Default; Remedies
SECTION 801. Events of Default.
"Event of Default", wherever used herein with respect to Securities of any series, means any one of the following events:
(a) failure to pay interest, if any, on any Security of such series within 30 days after the same becomes due and payable; provided, however, that a valid extension of the interest payment period by the Company as contemplated in Section 312 of this Indenture shall not constitute a failure to pay interest for this purpose; or
(b) failure to pay the principal of or premium, if any, on any Security of such series at its Maturity; or
(c) failure to perform or breach of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in the performance of which or breach of which is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of one or more series of Securities other than such series) for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee, or to the Company and the Trustee by the Holders of at least 33% in principal amount of the Outstanding Securities of such series, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder, unless the Trustee, or the Trustee and the Holders of a principal amount of Securities of such series not less than the principal amount of Securities the Holders of which gave such notice, as the case may be, shall agree in writing to an extension of such period prior to its expiration; provided, however, that the Trustee, or the Trustee and the Holders of such principal amount of Securities of such series, as the case may be, shall be deemed to have agreed to an extension of such period if corrective action is
initiated by the Company within such period and is being diligently pursued; or
(d) the entry by a court having jurisdiction in the premises of (1) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (2) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition by one or more Persons other than the Company seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official for the Company or for any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order for relief or any such other decree or order shall have remained unstayed and in effect for a period of 90 consecutive days; or
(e) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in a case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the authorization of such action by the Board of Directors; or
(f) any other Event of Default specified with respect to Securities of such series.
SECTION 802. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default due to the default in payment of principal of, or interest on, any series of Securities or due to the default in the performance or breach of any other covenant or warranty of the Company applicable to the Securities of such series but not applicable to all Outstanding Securities shall have occurred and be continuing, either the Trustee or the Holders of not less than 33% in principal amount of the Securities of such series may then declare the principal amount (or, if any of the Securities of such series are Discount Securities, such portion of the principal amount as may be specified in the terms thereof as contemplated by Section 301) of all Securities of such series and interest accrued thereon to be due and payable immediately. If an Event of Default due to default in the performance of any other of the covenants or agreements herein applicable to all Outstanding Securities or an Event of Default specified in Section 801(d) or (e) shall have occurred and be continuing, either the Trustee or the Holders of not less than 33% in principal amount of all Securities then Outstanding (considered as one class), and not the Holders of the Securities of any one of such series, may declare the principal of all Securities and interest accrued thereon to be due and payable immediately. As a consequence of each such declaration (herein referred to as a declaration of acceleration) with respect to Securities of any series, the principal amount (or portion thereof in the case of Discount Securities) of such Securities and interest accrued thereon shall become due and payable immediately.
At any time after such a declaration of acceleration with respect to Securities of any series shall have been made and before a judgment or decree for payment of the money due shall have been obtained by the Trustee as hereinafter in this Article provided, the Event or Events of Default giving rise to such declaration of acceleration shall, without further act, be deemed to have been waived, and such declaration and its consequences shall, without further act, be deemed to have been rescinded and annulled, if
(a) the Company shall have paid or deposited with the Trustee a sum sufficient to pay
(1) all overdue interest on all Securities of such series;
(2) the principal of and premium, if any, on any Securities of such series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Securities;
(3) to the extent that payment of such interest is lawful, interest upon overdue interest, if any, at the rate or rates prescribed therefor in such Securities;
(4) all amounts due to the Trustee under Section 907; and
(b) any other Event or Events of Default with respect to Securities of such series, other than the nonpayment of the principal of Securities of such series which shall have become due solely by such declaration of acceleration, shall have been cured or waived as provided in Section 813.
No such rescission shall affect any subsequent Event of Default or impair any right consequent thereon.
SECTION 803. Collection of Indebtedness and Suits for Enforcement by Trustee.
If an Event of Default described in clause (a) or (b) of Section 801 shall have occurred and be continuing, the Company shall, upon demand of the Trustee, pay to it, for the benefit of the Holders of the Securities of the series with respect to which such Event of Default shall have occurred, the whole amount then due and payable on such Securities for principal and premium, if any, and interest, if any, and, to the extent permitted by law, interest on any overdue principal and interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover any amounts due to the Trustee under Section 907.
If the Company shall fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated.
If an Event of Default with respect to Securities of any series shall have occurred and be continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 804. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal, premium, if any, and interest, if any, owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for amounts due to the Trustee under Section 907) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amounts due it under Section 907. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 805. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders in respect of which such judgment has been recovered.
SECTION 806. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or premium, if any, or interest, if any, upon presentation of the Securities in respect of which or for the benefit of which such money shall have been collected and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under
Section 907;
Second: To the payment of the amounts then due and unpaid upon the Securities for principal of and premium, if any, and interest, if any, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal, premium, if any, and interest, if any, respectively; and
Third: To the payment of the remainder, if any, to the Company
or to whomsoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct.
Limitation on Suits.
SECTION 807. Limitation on Suits
No Holder shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(a) such Holder shall have previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of such series;
(b) the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series in respect of which an Event of Default shall have occurred and be continuing, considered as one class, shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders shall have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such proceeding; and
(e) no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series in respect of which an Event of Default shall have occurred and be continuing, considered as one class;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders.
SECTION 808. Unconditional Right of Holders to Receive Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and premium, if any, and (subject to Sections 307 and 312) interest, if any, on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.
SECTION 809. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, and Trustee and such Holder shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and such Holder shall continue as though no such proceeding had been instituted.
SECTION 810. Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
SECTION 811. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 812. Control by Holders of Securities.
If an Event of Default shall have occurred and be continuing in respect of a series of Securities, the Holders of a majority in principal amount of the Outstanding Securities of such series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series; provided, however, that if an Event of Default shall have occurred and be continuing with respect to more than one series of Securities, the Holders of a majority in aggregate principal amount of the Outstanding Securities of all such series, considered as one class, shall have the right to make such direction, and not the Holders of the Securities of any one of such series; and provided, further, that such direction shall not be in conflict with any rule of law or with this Indenture. The Trustee may take any other action, deemed proper by the Trustee, which is not inconsistent with any such direction. Before proceeding to exercise any right or power hereunder at the direction of such Holders, the Trustee shall be entitled to receive from such Holders reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with any such direction.
SECTION 813. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default
(a)in the payment of the principal of or premium, if any, or interest, if any, on any Security of such series, or
(b) in respect of a covenant or provision hereof which under Section 1202 cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any and all Events of Default arising therefrom shall be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
SECTION 814. Undertaking for Costs.
The Company and the Trustee agree, and each Holder by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in aggregate principal amount of the Outstanding Securities of all series in respect of which such suit may be brought, considered as one class, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or premium, if any, or interest, if any, on any Security on or after the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date).
SECTION 815. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE NINE
The Trustee
SECTION 901. Certain Duties and Responsibilities.
(a) The Trustee shall have and be subject to all the duties and responsibilities specified with respect to an indenture trustee in the Trust Indenture Act and no implied covenants or obligations shall be read into this Indenture against the Trustee. For purposes of Sections 315(a) and 315(c) of the Trust Indenture Act, the term "default" is hereby defined as an Event of Default which has occurred and is continuing.
(b) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(c) Notwithstanding anything contained in this Indenture to the contrary, the duties and responsibilities of the Trustee under this Indenture shall be subject to the protections, exculpations and limitations on liability afforded to an indenture trustee under the provisions of the Trust Indenture Act. For the purposes of Sections 315(b)(2) and 315(d)(2) of the Trust Indenture Act, the term "responsible officer" is hereby defined as a Responsible Officer and the chairman or vice chairman of the board of directors, the chairman or vice chairman of the executive committee of the board of directors, the president, any vice president, the secretary, any assistant secretary, the treasurer any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller and any assistant controller of the Trustee, or any other officer of the Trustee customarily performing functions similar to those performed by a Responsible Officer or any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject.
(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.
SECTION 902. Notice of Defaults.
The Trustee shall give notice of any default hereunder known to the
Trustee with respect to the Securities of any series to the Holders of
Securities of such series in the manner and to the extent required to do so by
the Trust Indenture Act, unless such default shall have been cured or waived;
provided, however, that in the case of any default of the character specified in
Section 801(c), no such notice to Holders shall be given until at least 45 days
after the occurrence thereof. For the purpose of this Section and clause (h) of
Section 903, the term "default" means any event which is, or after notice or
lapse of time, or both, would become, an Event of Default.
SECTION 903. Certain Rights of Trustee.
Subject to the provisions of Section 901 and to the applicable provisions of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or refraining from acting in good faith upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order, or as otherwise expressly provided herein, and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any Holder pursuant to this Indenture, unless such Holder shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall (subject to applicable legal requirements) be entitled to examine, during normal business hours, the books, records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and
(h) the Trustee shall not be charged with knowledge of any default or Event of Default, as the case may be, with respect to the Securities of any series for which it is acting as Trustee unless either (1) a Responsible Officer of the Trustee shall have actual knowledge that such default or Event of Default, as the case may be, exists and constitutes a default or Event of Default under this Indenture or (2) written notice of such default or Event of Default, as the case may be, shall have been given in the manner provided in Section 105 hereof to the Trustee by the Company, any other obligor on such Securities or by any Holder of such Securities.
SECTION 904. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities (except the Trustee's certificates of authentication) shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof.
SECTION 905. May Hold Securities.
Each of the Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 908 and 913, may otherwise deal with the Company with the same rights it would have if it were not the Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent.
SECTION 906. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from other funds, except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as expressly provided herein or otherwise agreed with, and for the sole benefit of, the Company.
SECTION 907. Compensation and Reimbursement.
The Company shall
(a) pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances reasonably incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except to the extent that any such expense, disbursement or
advance may be attributable to the Trustee's negligence, wilful misconduct or bad faith; and
(c) indemnify the Trustee for, and hold it harmless from and against, any loss, liability or expense reasonably incurred by it arising out of or in connection with the acceptance or administration of the trust or trusts hereunder or the performance of its duties hereunder, including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence, wilful misconduct or bad faith.
As security for the performance of the obligations of the Company under this Section, the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by the Trustee as such other than property and funds held in trust under Section 703 (except as otherwise provided in Section 703). "Trustee" for purposes of this Section shall include any predecessor Trustee; provided, however, that the negligence, wilful misconduct or bad faith of any Trustee hereunder shall not affect the rights of any other Trustee hereunder.
When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 801(d) or Section 801(e), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or State bankruptcy, insolvency or other similar law.
The provisions of this Section 907 shall survive the termination of this Indenture.
SECTION 908. Disqualification; Conflicting Interests.
If the Trustee shall have or acquire any conflicting interest within the meaning of the Trust Indenture Act, it shall either eliminate such conflicting interest or resign to the extent, in the manner and with the effect, and subject to the conditions, provided in the Trust Indenture Act and this Indenture. For purposes of Section 310(b)(1) of the Trust Indenture Act and to the extent permitted thereby, the Trustee, in its capacity as trustee in respect of the Securities of any series, shall not be deemed to have a conflicting
interest arising from its capacity as trustee in respect of the Securities of any other series.
SECTION 909. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the United States, any State or Territory thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal or State authority, or
(b) if and to the extent permitted by the Commission by rule, regulation or order upon application, a corporation or other Person organized and doing business under the laws of a foreign government, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 or the Dollar equivalent of the applicable foreign currency and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees,
and, in either case, qualified and eligible under this Article and the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.
SECTION 910. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 911.
(b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 911 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 908 after written request therefor by the Company or by any Holder who has been a bona fide Holder for at least six months, or
(2)the Trustee shall cease to be eligible under Section 909 and shall fail to resign after written request therefor by the Company or by any such Holder, or
(3)the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (x) the Company by a Board Resolution may remove the Trustee with respect to all Securities or (y) subject to Section 814, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause (other than as contemplated in clause (y) in Subsection (d) of this Section), with respect to the Securities of one or more series, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 911. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 911, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 911, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.
(f) So long as no event which is, or after notice or lapse of time, or both, would become, an Event of Default shall have occurred and be continuing, and except with respect to a Trustee appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities pursuant to Subsection (e) of this Section, if the Company shall have delivered to the Trustee (i) a Board Resolution appointing a successor Trustee, effective as of a date specified therein, and (ii) an instrument of acceptance of such appointment, effective as of such date, by such successor Trustee in accordance with Section 911, the Trustee shall be deemed to have resigned as contemplated in Subsection (b) of this Section, the successor Trustee shall be deemed to have been appointed by the Company pursuant to Subsection (e) of this Section and such appointment shall be deemed to have been accepted as contemplated in Section 911, all as of such date, and all other provisions of this Section and Section 911 shall be applicable to such
resignation, appointment and acceptance except to the extent inconsistent with this Subsection (f).
(g) The Company (or, should the Company fail so to act promptly, the successor trustee at the expense of the Company) shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to all Holders of Securities of such series as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its corporate trust office.
SECTION 911. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with respect to the Securities of all series, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of all sums owed to it, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor
Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee, upon payment of all sums owed to it, shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute any instruments which fully vest in and confirm to such successor Trustee all such rights, powers and trusts referred to in Subsection (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.
SECTION 912. Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities.
SECTION 913. Preferential Collection of Claims Against Company.
If the Trustee shall be or become a creditor of the Company or any
other obligor upon the Securities (other than by reason of a relationship
described in Section 311(b) of the Trust Indenture Act), the Trustee shall be
subject to any and all applicable provisions of the Trust Indenture Act
regarding the collection of claims against the Company or such other obligor.
For purposes of Section 311(b) of the Trust Indenture Act:
(a) the term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;
(b) the term "self-liquidating paper" means any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation.
SECTION 914. Co-trustees and Separate Trustees.
At any time or times, for the purpose of meeting the legal requirements of any applicable jurisdiction, the Company and the Trustee shall
have power to appoint, and, upon the written request of the Trustee or of the Holders of at least 33% in principal amount of the Securities then Outstanding, the Company shall for such purpose join with the Trustee in the execution and delivery of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Trustee either to act as co-trustee, jointly with the Trustee, or to act as separate trustee, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons, in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. If the Company does not join in such appointment within 15 days after the receipt by it of a request so to do, or if an Event of Default shall have occurred and be continuing, the Trustee alone shall have power to make such appointment.
Should any written instrument or instruments from the Company be required by any co-trustee or separate trustee so appointed to more fully confirm to such co-trustee or separate trustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Company.
Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following conditions:
(a) the Securities shall be authenticated and delivered, and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely, by the Trustee;
(b) the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed either by the Trustee or by the Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee;
(c) the Trustee at any time, by an instrument in writing executed by it, with the concurrence of the Company, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, if an Event of Default shall have occurred and be continuing, the Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Company. Upon the written request of the Trustee, the Company shall join with the Trustee in the execution and delivery of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section;
(d) no co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Trustee, or any other such trustee hereunder; and
(e) any Act of Holders delivered to the Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee.
SECTION 915. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect to the Securities of one or more series, or Tranche thereof, which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series or Tranche issued upon original issuance and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States, any State or territory thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes
reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section.
The provisions of Sections 308, 904 and 905 shall be applicable to each Authenticating Agent.
If an appointment with respect to the Securities of one or more series shall be made pursuant to this Section, the
Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication substantially in the following form:
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
If all of the Securities of a series may not be originally issued at one time, and if the Trustee does not have an office capable of authenticating Securities upon original issuance located in a Place of Payment where the Company wishes to have Securities of such series authenticated upon original issuance, the Trustee, if so requested by the Company in writing (which writing need not comply with Section 102 and need not be accompanied by an Opinion of Counsel), shall appoint, in accordance with this Section and in accordance with such procedures as shall be acceptable to the Trustee, an Authenticating Agent having an office in a Place of Payment designated by the Company with respect to such series of Securities.
ARTICLE TEN
Holders' Lists and Reports by Trustee and Company
SECTION 1001. Lists of Holders.
Semiannually, not later than October 1 and April 1 in each year, commencing April 1, 2001, and at such other times as the Trustee may request in writing, the Company shall furnish or cause to be furnished to the Trustee information as to the names and addresses of the Holders, and the Trustee shall preserve such information and similar information received by it in any other capacity and afford to the Holders access to information so preserved by it, all to such extent, if any, and in such manner as shall be required by the Trust Indenture Act;
provided, however, that no such list need be furnished so long as the Trustee shall be the Security Registrar.
SECTION 1002. Reports by Trustee and Company.
Not later than August 15 in each year, commencing with the year 2001
, the Trustee shall transmit to the Holders, the Commission and each securities
exchange upon which any Securities are listed, a report, dated as of the next
preceding June, 15, with respect to any events and other matters described in
Section 313(a) of the Trust Indenture Act, in such manner and to the extent
required by the Trust Indenture Act. The Trustee shall transmit to the Holders,
the Commission and each securities exchange upon which any Securities are
listed, and the Company shall file with the Trustee (within 30 days after filing
with the Commission in the case of reports which pursuant to the Trust Indenture
Act must be filed with the Commission and furnished to the Trustee) and transmit
to the Holders, such other information, reports and other documents, if any, at
such times and in such manner, as shall be required by the Trust Indenture Act.
The Company shall notify the Trustee of the listing of any Securities on any
securities exchange.
ARTICLE ELEVEN
Consolidation, Merger, Conveyance or Other Transfer
SECTION 1101. Company May Consolidate, etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person, or convey or otherwise transfer or lease its properties and assets substantially as an entirety to any Person, unless
(a) the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a Person organized and validly existing under the laws of the United States, any State thereof or the District of Columbia, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and premium, if any, and interest, if any, on all Outstanding Securities and the
performance of every covenant of this Indenture on the part of the Company to be performed or observed;
(b) immediately 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 occurred and be continuing; and
(c) the Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, or other transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transactions have been complied with.
SECTION 1102. Successor Person Substituted.
Upon any consolidation by the Company with or merger by the Company into any other Person or any conveyance, or other transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 1101, the successor Person formed by such consolidation or into which the Company is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities Outstanding hereunder.
ARTICLE TWELVE
Supplemental Indentures
SECTION 1201. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company and the assumption by any such successor of the
covenants of the Company herein and in the Securities, all as provided in Article Eleven; or
(b) to add one or more covenants of the Company or other provisions for the benefit of all Holders or for the benefit of the Holders of, or to remain in effect only so long as there shall be Outstanding, Securities of one or more specified series, or one or more specified Tranches thereof, or to surrender any right or power herein conferred upon the Company; or
(c) to add any additional Events of Default with respect to all or any series of Securities Outstanding hereunder; or
(d) to change or eliminate any provision of this Indenture or to add any new provision to this Indenture; provided, however, that if such change, elimination or addition shall adversely affect the interests of the Holders of Securities of any series or Tranche Outstanding on the date of such indenture supplemental hereto in any material respect, such change, elimination or addition shall become effective with respect to such series or Tranche only pursuant to the provisions of Section 1202 hereof or when no Security of such series or Tranche remains Outstanding; or
(e) to provide collateral security for all but not part of the Securities; or
(f) to establish the form or terms of Securities of any series or Tranche as contemplated by Sections 201 and 301; or
(g) to provide for the authentication and delivery of bearer securities and coupons appertaining thereto representing interest, if any, thereon and for the procedures for the registration, exchange and replacement thereof and for the giving of notice to, and the solicitation of the vote or consent of, the holders thereof, and for any and all other matters incidental thereto; or
(h) to evidence and provide for the acceptance of appointment hereunder by a separate or successor Trustee or co-trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 911(b); or
(i) to provide for the procedures required to permit the Company to utilize, at its option, a noncertificated system of registration for all, or any series or Tranche of, the Securities; or
(j) to change any place or places where (1) the principal of and premium, if any, and interest, if any, on all or any series of Securities, or any Tranche thereof, shall be payable, (2) all or any series of Securities, or any Tranche thereof, may be surrendered for registration of transfer, (3) all or any series of Securities, or any Tranche thereof, may be surrendered for exchange and (4) notices and demands to or upon the Company in respect of all or any series of Securities, or any Tranche thereof, and this Indenture may be served; or
(k) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other changes to the provisions hereof or to add other provisions with respect to matters or questions arising under this Indenture, provided that such other changes or additions shall not adversely affect the interests of the Holders of Securities of any series or Tranche in any material respect.
Without limiting the generality of the foregoing, if the Trust Indenture Act as in effect at the date of the execution and delivery of this Indenture or at any time thereafter shall be amended and
(x) if any such amendment shall require one or more changes to any provisions hereof or the inclusion herein of any additional provisions, or shall by operation of law be deemed to effect such changes or incorporate such provisions by reference or otherwise, this Indenture shall be deemed to have been amended so as to conform to such amendment to the Trust Indenture Act, and the Company and the Trustee may, without the consent of any Holders, enter into an indenture supplemental hereto to effect or evidence such changes or additional provisions; or
(y) if any such amendment shall permit one or more changes to, or the elimination of, any provisions hereof
which, at the date of the execution and delivery hereof or at any time thereafter, are required by the Trust Indenture Act to be contained herein, this Indenture shall be deemed to have been amended to effect such changes or elimination, and the Company and the Trustee may, without the consent of any Holders, enter into an indenture supplemental hereto to evidence such amendment hereof.
SECTION 1202. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of a majority in aggregate principal amount of the Securities of all series then Outstanding under this Indenture, considered as one class, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or modifying in any manner the rights of the Holders of Securities of such series under the Indenture; provided, however, that if there shall be Securities of more than one series Outstanding hereunder and if a proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such series, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series so directly affected, considered as one class, shall be required; and provided, further, that if the Securities of any series shall have been issued in more than one Tranche and if the proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such Tranches, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all Tranches so directly affected, considered as one class, shall be required; and provided, further, that no such supplemental indenture shall:
(a) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon (or the amount of any installment of interest thereon) or change the method of calculating such rate or reduce any premium payable upon the redemption thereof, or reduce the amount of the principal of a Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 802, or change the coin or currency (or other property), in which any Security or any premium or
the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity of any Security (or, in the case of redemption, on or after the Redemption Date), without, in any such case, the consent of the Holder of such Security, or
(b) reduce the percentage in principal amount of the Outstanding Securities of any series, or any Tranche thereof, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with any provision of this Indenture or of any default hereunder and its consequences, or reduce the requirements of Section 1304 for quorum or voting, without, in any such case, the consent of the Holders of each Outstanding Security of such series or Tranche, or
(c) modify any of the provisions of this Section, Section 607 or
Section 813 with respect to the Securities of any series, or any Tranche
thereof, except to increase the percentages in principal amount referred
to in this Section or such other Sections or to provide that other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby;
provided, however, that this clause shall not be deemed to require the
consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section, or the deletion of this
proviso, in accordance with the requirements of Sections 911(b), 914 and
1201(h).
A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or one or more Tranches thereof, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series or Tranche.
It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. A waiver by a Holder of such Holder's right to consent under this Section shall be deemed to be a consent of such Holder.
SECTION 1203. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 901) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties, immunities or liabilities under this Indenture or otherwise.
SECTION 1204. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Any supplemental indenture permitted by this Article may restate this Indenture in its entirety, and, upon the execution and delivery thereof, any such restatement shall supersede this Indenture as theretofore in effect for all purposes.
SECTION 1205. Conformity With Trust Indenture Act.
Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities, every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 1206. Reference in Securities to Supplemental Indentures.
Securities of any series, or any Tranche thereof, authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series, or any Tranche thereof, so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series or Tranche.
SECTION 1207. Modification Without Supplemental Indenture .
If the terms of any particular series of Securities shall have been
established in a Board Resolution or an Officer's Certificate as contemplated by
Section 301, and not in an indenture supplemental hereto, additions to, changes
in or the elimination of any of such terms may be effected by means of a
supplemental Board Resolution or Officer's Certificate, as the case may be,
delivered to, and accepted by, the Trustee; provided, however, that such
supplemental Board Resolution or Officer's Certificate shall not be accepted by
the Trustee or otherwise be effective unless all conditions set forth in this
Indenture which would be required to be satisfied if such additions, changes or
elimination were contained in a supplemental indenture shall have been
appropriately satisfied. Upon the acceptance thereof by the Trustee, any such
supplemental Board Resolution or Officer's Certificate shall be deemed to be a
"supplemental indenture" for purposes of Section 1204 and 1206.
ARTICLE THIRTEEN
Meetings of Holders; Action Without Meeting
SECTION 1301. Purposes for Which Meetings May Be Called.
A meeting of Holders of Securities of one or more, or all, series, or any Tranche or Tranches thereof, may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities of such series or Tranches.
SECTION 1302. Call, Notice and Place of Meetings.
(a) The Trustee may at any time call a meeting of Holders of Securities of one or more, or all, series, or any Tranche or Tranches thereof, for any purpose specified in Section 1301, to be held at such time and at such place in the Borough of Manhattan, The City of New York, as the Trustee shall determine, or, with the approval of the Company, at any other place. Notice of every such meeting, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section
106, not less than 21 nor more than 180 days prior to the date fixed for the meeting.
(b) If the Trustee shall have been requested to call a meeting of the Holders of Securities of one or more, or all, series, or any Tranche or Tranches thereof, by the Company or by the Holders of 33% in aggregate principal amount of all of such series and Tranches, considered as one class, for any purpose specified in Section 1301, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have given the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities of such series and Tranches in the amount above specified, as the case may be, may determine the time and the place in the Borough of Manhattan, The City of New York, or in such other place as shall be determined or approved by the Company, for such meeting and may call such meeting for such purposes by giving notice thereof as provided in Subsection (a) of this Section.
(c) Any meeting of Holders of Securities of one or more, or all, series, or any Tranche or Tranches thereof, shall be valid without notice if the Holders of all Outstanding Securities of such series or Tranches are present in person or by proxy and if representatives of the Company and the Trustee are present, or if notice is waived in writing before or after the meeting by the Holders of all Outstanding Securities of such series, or any Tranche or Tranches thereof, or by such of them as are not present at the meeting in person or by proxy, and by the Company and the Trustee.
SECTION 1303. Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities of one or more, or all, series, or any Tranche or Tranches thereof, a Person shall be (a) a Holder of one or more Outstanding Securities of such series or Tranches, or (b) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series or Tranches by such Holder or Holders. The only Persons who shall be entitled to attend any meeting of Holders of Securities of any series or Tranche shall be the Persons entitled to vote at such meeting and their counsel, any
representatives of the Trustee and its counsel and any representatives of the Company and its counsel.
SECTION 1304. Quorum; Action.
The Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of the series and Tranches with respect to which a meeting shall have been called as hereinbefore provided, considered as one class, shall constitute a quorum for a meeting of Holders of Securities of such series and Tranches; provided, however, that if any action is to be taken at such meeting which this Indenture expressly provides may be taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of such series and Tranches, considered as one class, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Securities of such series and Tranches, considered as one class, shall constitute a quorum. In the absence of a quorum within one hour of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities of such series and Tranches, be dissolved. In any other case the meeting may be adjourned for such period as may be determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for such period as may be determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Except as provided by Section 1305(e), notice of the reconvening of any meeting adjourned for more than 30 days shall be given as provided in Section 1302(a) not less than 10 days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series and Tranches which shall constitute a quorum.
Except as limited by Section 1202, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted only by the affirmative vote of the Holders of a majority in aggregate principal amount of the Outstanding Securities of the series and Tranches with respect to which such meeting shall have been called, considered as one class; provided, however, that, except as so limited, any resolution with respect to any action which this Indenture expressly provides may be taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of such series
and Tranches, considered as one class, may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of such series and Tranches, considered as one class.
Any resolution passed or decision taken at any meeting of Holders of Securities duly held in accordance with this Section shall be binding on all the Holders of Securities of the series and Tranches with respect to which such meeting shall have been held, whether or not present or represented at the meeting.
SECTION 1305. Attendance at Meetings; Determination of Voting Rights;
Conduct and Adjournment of Meetings.
(a) Attendance at meetings of Holders of Securities may be in person or by proxy; and, to the extent permitted by law, any such proxy shall remain in effect and be binding upon any future Holder of the Securities with respect to which it was given unless and until specifically revoked by the Holder or future Holder of such Securities before being voted.
(b) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities in regard to proof of the holding of such Securities and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 104 and the appointment of any proxy shall be proved in the manner specified in Section 104. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 104 or other proof.
(c) The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders
as provided in Section 1302(b), in which case the Company or the Holders of Securities of the series and Tranches calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of all series and Tranches represented at the meeting, considered as one class.
(d) At any meeting each Holder or proxy shall be entitled to one vote for each $1 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security or proxy.
(e) Any meeting duly called pursuant to Section 1302 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of all series and Tranches represented at the meeting, considered as one class; and the meeting may be held as so adjourned without further notice.
SECTION 1306. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders shall be by written ballots on which shall be subscribed the signatures of the Holders or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities, of the series and Tranches with respect to which the meeting shall have been called, held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports of all votes cast at the meeting. A record of the proceedings of each meeting of Holders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 1302 and, if applicable, Section 1304. Each copy shall be signed and
verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company, and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.
SECTION 1307. Action Without Meeting.
In lieu of a vote of Holders at a meeting as hereinbefore contemplated in this Article, any request, demand, authorization, direction, notice, consent, waiver or other action may be made, given or taken by Holders by written instruments as provided in Section 104.
ARTICLE FOURTEEN
Immunity of Incorporators, Shareholders, Officers and Directors
SECTION 1401. Liability Solely Corporate.
This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written.
GPU, INC.
UNITED STATES TRUST COMPANY OF NEW YORK, Trustee
Exhibit 10-A
GPU COMPANIES
DEFERRED COMPENSATION PLAN
(as amended through August 8, 2000)
TABLE OF CONTENTS
1. Purpose 1 2. Definition of Terms 1 3. Administration 8 4. Deferral Election 10 5. Supplemental Savings Plan Benefits 12 6. Interest 13 7. Distribution of Deferred Funds 14 8. Non-Assignment of Deferred Compensation 18 9. Termination of Participation or Employment 18 10. Transfer of Employment 18 11. Successor Corporation 19 |
GPU COMPANIES
DEFERRED COMPENSATION PLAN
1. Purpose
This document sets forth the GPU Companies Deferred Compensation Plan, as amended and restated, effective August 8, 2000.
The Plan provides Elected Officers of each Company, as defined herein, with an opportunity to defer part or all of their Compensation, pursuant to their elections made in accordance with the provisions hereof. The Plan also provides Elected Officers and Other Eligible Employees with an opportunity to be credited with additional deferred amounts that are intended to approximate the Company Matching Contributions that otherwise might have been made on their behalf to the GPU Companies Employee Savings Plan for Non-bargaining Employees (the "Savings Plan") but for the limitation on the amount of compensation that can be taken into account under the Savings Plan pursuant to section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the "Compensation Limit").
The Plan is intended to constitute an unfunded plan of deferred compensation for "a select group of management or highly compensated employees" within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Each Company has adopted this Plan as its own Plan. Accordingly, each Company shall be obligated hereunder only with respect to amounts distributable from the Accounts it maintains for Participants who are its own employees; and the right to receive any amount distributable hereunder with respect to any Participant shall be enforceable only against the Company with which such Participant is or was last employed.
2. Definition of Terms
2.1 Account - refers, as the context may require, to the Retirement Account, or the Pre-Retirement Account or Accounts, or to the Retirement Account and all Pre-Retirement Accounts, established for a Participant hereunder.
2.2 Board - refers to the Board of Directors of a Company.
2.3 Chairman - refers to the Chairman of the Board or the Chairman, as appropriate for each Company that has adopted the Plan.
2.4 Change in Control - A "Change in Control" shall mean the occurrence during the term of the Plan of:
(1) An acquisition (other than directly from GPU, Inc. (the "Corporation")
of any common stock of the Corporation ("Common Stock") or other voting
securities of the Corporation entitled to vote generally for the election of
directors (the "Voting Securities") by any "Person" (as the term person is used
for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of the then outstanding shares of
Common Stock or the combined voting power of the Corporation's then outstanding
Voting Securities; provided, however, in determining whether a Change in Control
has occurred, Voting Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an acquisition which
would cause a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (A) an employee benefit plan (or a trust forming a part thereof)
maintained by (i) the Corporation or (ii) any corporation or other Person of
which a majority of its voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by the Corporation (for purposes of
this definition, a "Subsidiary"), (B) the Corporation or its Subsidiaries, or
(C) any Person in connection with a "Non-Control Transaction" (as hereinafter
defined);
(2) The individuals who, as of August 1, 1996, are members of the board of directors of the Corporation (the "Incumbent Board"), cease for any reason to constitute at least seventy percent (70%) of the members of the board of directors of the Corporation; provided, however, that if the election, or nomination for election by the Corporation's shareholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the
board of directors of the Corporation (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization with or into the Corporation or in which securities of the Corporation are issued, unless such merger, consolidation or reorganization is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a merger, consolidation or reorganization with or into the Corporation or in which securities of the Corporation are issued where:
(i) the shareholders of the Corporation, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least sixty percent (60%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization,
(ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least seventy percent (70%) of the members of the board of directors of the Surviving Corporation, or a corporation, directly or indirectly, beneficially owning a majority of the Voting Securities of the Surviving Corporation, and
(iii) no Person other than (w) the Corporation, (x) any Subsidiary,
(y) any employee benefit plan (or any trust forming a part thereof) that,
immediately prior to such merger, consolidation or reorganization, was
maintained by the Corporation or any Subsidiary, or (z) any Person who,
immediately prior to such merger, consolidation or reorganization had
Beneficial Ownership of twenty percent (20%) or more of the then
outstanding Voting Securities or common stock of the Corporation, has
Beneficial Ownership of twenty percent (20%) or more of the combined
voting power of the Surviving Corporation's then outstanding voting
securities or its common stock.
(B) A complete liquidation or dissolution of the Corporation; or
(C) The sale or other disposition of all or substantially all of the assets of the Corporation to any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the then outstanding Common Stock or Voting Securities as a result of the acquisition of Common Stock or Voting Securities by the Corporation which, by reducing the number of shares of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares of Common Stock or Voting Securities by the Corporation, and after such share acquisition by the Corporation, the Subject Person becomes the Beneficial Owner of any additional shares of Common Stock or Voting Securities which increases the percentage of the then outstanding shares of Common Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
2.5 Committee - refers to the Personnel, Compensation and Nominating Committee of the Board of Directors of GPU, Inc.
2.6 Company - refers, as the context may require, singularly and not jointly, to any Company, a majority of the outstanding common stock of which is owned, directly or indirectly, by GPU, Inc., that has adopted the Plan. When used in reference to a Participant, the term "Company" shall mean the Company with which such Participant is or was last employed unless the context otherwise requires.
2.7 Compensation - refers to all amounts which, but for an election hereunder, would be paid in cash during a Plan Year to a Participant for services performed on behalf of the Company, but does not include reimbursement for travel or other expenses, Company contributions to retirement programs or other employee benefit plans, payments under the Company's Short-Term or Long-Term Disability Income Plans, any amounts distributed to the Elected Officer from any Pre-Retirement Account. A Participant's Compensation for any Plan Year includes any Performance Award that becomes payable to the Participant during such year, but does not include any other amounts that are paid or that become payable to the Participant under the 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries (the "Stock Plan"). A Participant's Compensation for any Plan Year beginning on or after April 1, 1991, shall not include any severance payments
made to the Participant in connection with his or her termination of employment.
2.8 Disability - refers to entitlement to benefits under the Company's Long-Term Disability Income Plan or Employee Pension Plan as a result of a disability which, in the opinion of the Board, is considered to be a permanent disability.
2.9 Elected Officer - refers to an individual who, pursuant to election by the Board, is serving as an officer of the Company other than as an Assistant Controller, an Assistant Secretary, or an Assistant Treasurer; provided, however, that the Board of any Company may limit participation in the Plan to such of that Company's elected officers as the Board may designate, and in such case, the term "Elected Officer" shall refer only to any elected officer of such Company so designated by the Board.
2.10 Excess Compensation - refers, in the case of any Participant for any
month beginning on or after January 1, 1995, to the amount by which (i) the
aggregate amount of the Participant's Regular Compensation and Incentive
Compensation for such month and for all prior months within the Plan Year of the
Savings Plan ("ESP Plan Year") that includes such month exceeds the sum of (ii)
the Compensation Limit in effect for such ESP Plan Year and (iii) the aggregate
amount of the Participant's "Excess Compensation" (as determined under clause
(i) and (ii) hereof) for all prior months within such Plan Year.
2.11 Incentive Compensation - refers to the portion of a Participant's Compensation for a Plan Year that consists of amounts awarded to the Participant during such year under the Company's Incentive Compensation Plan for Elected Officers, Employee Incentive Compensation Plan, or Annual Performance Award Plan.
2.12 Involuntary Termination: The term Involuntary Termination shall mean the termination of a Participant's employment with the Company (A) as a result of the Participant's death, (B) by the Company, for any reason, or (C) by the Participant for "Good Reason" as defined below.
For purposes of the clause (C) of the preceding paragraph, "Good Reason" shall mean the occurrence after a Change in Control of any of the following events or conditions:
(1) a change in the Participant's status, title, position or responsibilities (including reporting responsibilities) which, in the Participant's reasonable judgement, represents an adverse change from his or her status, title, position or responsibilities as in effect immediately prior thereto; the
assignment to the Participant of any duties or responsibilities which, in the Participant's reasonable judgement, are inconsistent with his or her status, title, position or responsibilities; or any removal of the Participant from or failure to reappoint or reelect him or her to any of such offices or positions, other than in connection with the termination of his or her employment for disability, for cause, or by the Participant other than for Good Reason;
(2) any reduction in the rate of the Participant's annual base salary;
(3) the relocation of the offices of the Company at which the Participant is principally employed to a location more than twenty-five (25) miles from the location of such offices immediately prior to such relocation, or the Company's requiring the Participant to be based anywhere other than at such offices, except to the extent the Participant was not previously assigned to a principal place of duty and except for required travel on the Company's business to an extent substantially consistent with the Participant's previous business travel obligations;
(4) the failure by the Company to pay to the Participant any amount of the Participant's current compensation, or any amount payable under any deferred compensation program of the Company in which the Participant participated, within seven (7) days of the date on which payment of such amount is due;
(5) the failure by the Company (A) to continue in effect (without reduction in benefit level, and/or reward opportunities) any material compensation or employee benefit plan in which the Participant was participating immediately prior to such failure by the Company unless a substitute or replacement plan has been implemented which provides substantially identical compensation or benefits to the Participant or (B) to continue to provide the Participant with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under all other compensation or employee benefit plans, programs and practices in which the Participant was participating immediately prior to such failure by the Company; or
(6) in the case of any Participant with whom the Company has entered into a Severance Protection Agreement that is in effect on the date of the Participant's termination of employment, any other event or condition that constitutes "Good Reason" as defined in such agreement.
Any event or condition described in clauses (1) through (6) above which occurs (A) within twelve (12) months prior to a Change in Control or (B) prior to a Change in Control but which (x) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control, or (y) otherwise arose in connection with, or in anticipation of, a Change in Control which has been threatened or proposed and which actually occurs, shall constitute Good Reason notwithstanding that it occurred prior to a Change in Control.
2.13 Other Eligible Employee - refers, with respect to any Plan Year, to any employee of a Company who is not an Elected Officer of such Company but who is expected to have Excess Compensation for any one or more months during such Plan Year and who has been designated by the Chairman of such Company as eligible to make a deferral election for such Plan Year under Section 4.3.
2.14 Participant - refers to any Elected Officer or Other Eligible
Employee who has made a deferral election for any Plan Year under Section 4.1 or
4.3. For all purposes of the Plan other than for purposes of continuing
entitlement to make deferral elections under Section 4.1 or 4.3, an Elected
Officer who at any time ceases to be such, or a Participant whose employment is
terminated or whose participation in the Plan is terminated pursuant to Section
9, shall, notwithstanding such cessation or termination, continue to be treated
as a "Participant" until all amounts credited to his or her Accounts under the
Plan have been distributed pursuant to Section 7, or transferred pursuant to
Section 10.1.
2.15 Performance Award - refers to the portion of a Participant's Compensation for a Plan Year that consists of any Performance Cash Incentive Award that becomes payable to the Elected Officer during such year under the Stock Plan. For this purpose, a Performance Award shall be treated as becoming payable to a Participant on the "Vesting Date" for the restricted shares or restricted units with respect to which the Performance Award becomes payable; and the "Vesting Date" shall mean the date on which such restricted shares or restricted units become vested under the terms of the written agreement between the Elected Officer and GPU, Inc. evidencing the award of such shares or units to the Elected Officer.
2.16 Plan - refers to the GPU Companies Deferred Compensation Plan as set forth in this document and as it may be amended in the future.
2.17 Plan Year - refers to each 12-month period from April 1 through March
31. In the case of any Company that adopts the Plan as of a date after the start
of a Plan Year, as so defined, the initial "Plan Year," with respect to such
Company's Elected Officers and Other Eligible Employees, shall be the period
commencing on the date as of which the Plan is so adopted and ending on the next
following March 31.
2.18 Pre-Retirement Account - refers to the memorandum account which shall be established and maintained for a Participant who elects, pursuant to Section 4.5, to have payment of any portion of his or her Compensation for any Plan Year deferred to a date which is expected to occur prior to his or her Retirement or Disability. A separate Pre-Retirement Account shall be established and maintained for the Compensation for each Plan Year which the Participant so elects to defer.
2.19 Regular Compensation - refers to a Participant's Compensation for a Plan Year, exclusive of any Incentive Compensation awarded to the Participant during such Plan Year, and exclusive of any Performance Award that becomes payable to the Participant during such Plan Year.
2.20 Retirement - refers to the termination of a Participant's employment with the Company on account of retirement under the Company's Employee Pension Plan, resignation, death or any other reason other than as a result of the transfer of the Participant's employment to any other Company. A Participant's Retirement will not be deemed to have occurred until he or she ceases to be employed with any Company.
2.21 Retirement Account - refers to the memorandum account which shall be established and maintained for a Participant who elects, pursuant to Section 4.5, to have payment of any portion of his or her Compensation for any Plan Year deferred to a date after his or her Retirement or Disability. The term Retirement Account shall also refer to the memorandum account that shall be established and maintained for a Participant pursuant to Section 5.3.
3. Administration
3.1 Subject to the concurrence of the Committee, the Company may modify the provisions of the Plan from time-to-time, or, may terminate the entire Plan at any time; provided, however, that Section 2.4, this Section 3.1, Section 3.4, Paragraph (d) of Section 6 and Section 7.5 may not be amended or modified, and the Plan may not be terminated, (i) at the request of a third party who has indicated an intention or taken steps to effect a Change in Control and who effectuates a Change in Control, (ii) within
six (6) months prior to, or otherwise in connection with, or in anticipation of, a Change in Control which has been threatened or proposed and which actually occurs, or (iii) following a Change in Control, if the amendment, modification or termination adversely affects the rights of any Participant under the Plan. Action to amend the Plan may be taken by the Company either by resolution duly adopted by the Company's Board, or by an instrument in writing executed by an officer of the Company to whom authority to adopt or approve amendments to the Plan has been delegated pursuant to a resolution duly adopted by the Company's Board. No modification or termination of the Plan shall adversely affect the rights of any Participant with respect to any amounts standing to the Participant's credit in any Account immediately prior to the date of the adoption of such modification or termination, including without limitation any rights with respect to the time and method of payment of, or the crediting of interest equivalents with respect to, any such amounts.
3.2 Responsibility for the ongoing administration of this Plan rests with the Board.
3.3 The Board may delegate the day-to-day administration of this Plan, including the maintenance of appropriate records, receiving notifications, making filings, and maintaining related documentation, to the officer or other employee of the Company in charge of the Company's Human Resources division or function, and to his or her staff, or to any one or more other officers or employees of any Company as the Board may determine in its discretion.
3.4 The Board shall have exclusive authority to resolve all questions concerning the Plan, including any dispute over accounting or administrative procedures or interpretation of the Plan.
Notwithstanding the foregoing, any determination made by the Board after the occurrence of a Change in Control that denies in whole or in part any claim made by any individual for benefits under the Plan shall be subject to judicial review, under a "de novo", rather than a deferential, standard.
3.5 A Participant's election to defer Compensation, selection of a distribution commencement date and distribution option, or designation of a beneficiary and contingent beneficiary, made pursuant to this Plan, shall be made in writing, on a form that is furnished to the Participant for such purpose by the Committee and that is signed by the Participant and delivered to the Committee. Any such election, selection,
designation, or any change therein, shall not become effective unless and until received by the Committee.
Except as provided in Section 7.4 , 7.5 or 7.6, a change in the selection of a distribution commencement date or distribution option shall not be effective unless made (i) at least twenty-four (24) months prior to the Participant's Retirement or Disability, or (ii), in the case of any Participant whose Retirement constitutes an Involuntary Termination, at least twelve (12) months prior to the Participant's Retirement.
4. Deferral Election
4.1 For each Plan Year beginning on and after April 1, 1991, an Elected Officer may elect, separately, to defer (a) any part or all of his or her Regular Compensation for such year, (b) any part or all of his or her Incentive Compensation for such year, and/or (c) any part or all of any Performance Award that becomes payable to the Elected Officer during such year; subject, however, in each case to the limitations set forth in Section 4.4.
4.2 An election to defer Regular Compensation for any Plan Year beginning on and after April 1, 1991, shall be made on or prior to October 31 of the year preceding such Plan Year. An election to defer Incentive Compensation for any Plan Year beginning on or after April 1, 1991, shall be made on or prior to October 31 of such Plan Year. Notwithstanding the foregoing, (a) Elected Officers who are initially elected prior to November 1st of any Plan Year may, within 30 days of such initial election, or, if later, the date the Elected Officer's Regular Compensation is fixed by the Board, make a deferral election for his or her Regular Compensation for the then current Plan Year, and (b) Elected Officers who are initially elected after November 1st of any Plan Year may, within 30 days of such initial election, or, if later, the date the Elected Officer's Regular Compensation is fixed by the Board, make a deferral election for both his or her Regular Compensation and Incentive Compensation (if any) for the then current Plan Year, as well as for his or her Regular Compensation for the immediately succeeding Plan Year; provided, however, that any deferral election made pursuant to clause (a) or (b) hereof shall be effective only with respect to Compensation earned after such deferral election has become effective. An election to defer any part of a Performance Award shall be made at least one year prior to the Vesting Date for the restricted shares or restricted units with respect to which such Performance Award is payable. All deferral elections made under Section 4.1 or 4.3 shall be irrevocable.
4.3 For each Plan Year beginning on or after April 1, 1996, any Other Eligible Employee may elect to defer any part or all of any Excess Compensation that may become payable to such Other Eligible Employee for any month during such Plan Year, subject to the limitations set forth in Section 4.4. Such election shall be made on or prior to October 31 of the year preceding such Plan Year.
4.4 Deferral elections otherwise permitted to be made under the Plan for Plan Years beginning on or after April 1, 1995 shall be subject to the following limitations:
(a) No amount may be deferred pursuant to a Participant's election under this Plan for a period of 12 months following the Participant's receipt of a hardship withdrawal under Section 7.2(e) of the Savings Plan.
(b) No Incentive Compensation for a Plan Year may be deferred pursuant to a Participant's election hereunder if the Participant's Retirement or Disability occurs after the date on which he or she made such election but prior to the first day of the calendar year next following the date on which the Participant made the election for such Plan Year.
(c) No portion of a Participant's Compensation for a Plan Year may be deferred pursuant to the Participant's election hereunder to the extent such portion is required to be applied to payment of any tax or other obligation of the Participant.
4.5 In any election to defer Regular Compensation or Incentive Compensation for any Plan Year, in any election to defer any Performance Award that becomes payable during a Plan Year, and in any election by any Other Eligible Employee to defer any Excess Compensation for any Plan Year, the Participant shall specify the amount or portion of such Compensation to be deferred, and shall indicate whether the Compensation so deferred is to be credited to a Pre-Retirement Account, or to a Retirement Account. If an Elected Officer elects to defer Incentive Compensation for any Plan Year to a Pre-Retirement Account, the Compensation so deferred shall be credited to the Elected Officer's Pre-Retirement Account for the Plan Year next following the Plan Year in which such Incentive Compensation is awarded to the Elected Officer.
4.6 With respect to Compensation deferred hereunder for a Plan Year which a Participant elects to have credited to his or her Pre-Retirement Account, he or she shall specify in his or her election form the date on which distribution of such account shall be made or commence. The date so selected shall be no earlier than January 15 of the third calendar year beginning
after the close of such Plan Year, and may be the January 15 of any subsequent calendar year. Notwithstanding the foregoing, a Participant may elect to have distribution of any Pre-Retirement Account made or commence on the earlier of any date selected by the Participant in accordance with the preceding sentence, or January 15 of the calendar year following the Participant's Retirement or Disability. In his or her election form for the Plan Year, the Participant shall also select an option under Section 7.2 for the distribution of the Pre-Retirement Account. Except as provided in Section 7.4 , 7.5 or 7.6, the date so specified, and the option so selected, may not thereafter be changed by the Participant.
4.7 With respect to any Compensation deferred hereunder which a Participant elects to have credited to his or her Retirement Account, he or she shall, at the time he or she first elects to have an amount credited to such account, also elect a distribution commencement date and a distribution option under Section 7.2 for the distribution of such account. A Participant may, subject to the provisions of Section 3.5, change any election as to the distribution commencement date and distribution option for the Retirement Account previously made by him or her. The distribution commencement date so elected shall be either January 15 of the calendar year following the Participant's Retirement or Disability, or January 15 of any subsequent calendar year.
5. Supplemental Savings Plan Benefits
5.1 Beginning on or after April 1, 1992, for each month for which an Elected Officer has Excess Compensation, and beginning on or after April 1, 1996, for each month for which any Other Eligible Employee has Excess Compensation, there shall be credited to such Participant's Retirement Account an amount determined by multiplying the Participant's Excess Compensation for such month by his or her Matching Percentage for such month.
5.2 For purposes of Section 5.1, the following definitions and rules shall apply beginning on or after January 1, 1995:
(a) In determining the amount of a Participant's Excess Compensation for any month, only the Participant's Regular Compensation for those months during which he or she is eligible to participate in the Savings Plan shall be taken into account.
(b) A Participant's Regular Compensation for any month shall include the total amount of Regular Compensation that would have been paid to the Participant in such month but for any deferral election made by the Participant hereunder. A Participant's Incentive Compensation for any month shall include
the total amount of Incentive Compensation awarded to the Participant during such month whether or not paid to the Participant in such month.
(c) A Participant's "Matching Percentage" for any month shall mean the percentage, not in excess of 4%, determined by dividing the aggregate amount of the Participant's Regular Compensation and Incentive Compensation for such month, and for all prior months within the ESP Plan Year that includes such month, that is deferred pursuant to elections made by the Participant hereunder, by (ii) the aggregate amount of the Participant's Excess Compensation for such month and for all prior months within the ESP Plan Year that includes such month.
5.3 If, on the first date as of which an amount is to be credited to a Participant's Retirement Account under Section 5.1, a Retirement Account had not previously been established for such Participant pursuant to Section 4.5, a Retirement Account shall be established for such Participant as of such date. By no later than 30 days after such date, such Participant shall elect a distribution commencement date and a distribution option for his Retirement Account, and may thereafter change any such election, in accordance with the provisions set forth in Section 4.7.
6. Interest
Interest equivalents will be calculated and credited to Accounts at the end of each quarter in the calendar year. Such interest equivalents shall be determined in accordance with the following rules:
(a) The amount of Regular Compensation deferred each month pursuant to an Elected Officer's election hereunder, the amount of Excess Compensation for any month that is deferred pursuant to any Other Eligible Employee's election hereunder, and any amount credited to a Participant's Retirement Account for any month under Section 5.1, shall be treated as having been credited to the Participant's Account in two equal installments during such month, one at mid-month, and the other at month's end; and interest equivalents thereon shall be compounded monthly on each quarter's beginning balance with proportionate monthly compounding for any amounts so deferred or credited during any calendar quarter.
(b) The amount of Incentive Compensation deferred pursuant to an Elected Officer's election hereunder shall be treated as having been credited to the Elected Officer's Account as of the 15th day, or the last day of the month (whichever is earlier), following the date on which such amount would have been paid to the Elected Officer in the absence of such election, and interest equivalents thereon shall be compounded monthly.
(c) Any part of a Performance Award deferred pursuant to an Elected Officer's election hereunder shall be treated as having been credited to the Elected Officer's Account as of the 15th day, or the last day of the month (whichever is earlier), following the Vesting Date for the restricted shares or restricted units with respect to which such Performance Award became payable.
(d) The rate used in calculation of interest equivalents will be the rate equal to the simple average of Citibank N.A. of New York Prime Rates for the last business day of each of the three months in the calendar quarter or, if greater, such other rate as established from time to time by the Committee.
Interest equivalents will be credited to the balance of each Account maintained for a Participant hereunder, including the undistributed balance of any such Account from which payments are being made in installments. However, if a Participant elects Option (c) under Section 7.2 below, no interest equivalents will be credited to the Participant's Account for any period after the date on which distribution under such Option is to commence.
7. Distribution of Deferred Funds
7.1 Subject to Sections 7.4, 7.5 and 7.6, a Participant's Pre-Retirement Accounts shall be distributed to him or her, or distributions from such Pre-Retirement Accounts shall commence, on the date or dates specified in the elections made by the Participant pursuant to Section 4.6 with respect to such accounts. Subject to Sections 7.4, 7.5 and 7.6, a Participant's Retirement Account shall be distributed to him or her, or distributions from such Retirement Account shall commence, on the date specified in the most recent effective election made by the Participant under Section 4.7 with respect to such Account.
7.2 The options available for distribution are:
(a) A single lump sum payment.
(b) Annual installments over any fixed number of years selected by the Participant, with a minimum of five annual installments required for the Retirement Account.
(c) With the prior consent of the Committee and subject to such terms and conditions as it may require, a lifetime annuity payable in annual or more frequent installments, the amount of which shall be determined by reference to mortality tables and
interest and dividend rates applicable under individual whole life insurance policies being issued at the time of the Committee's approval by such life insurance companies as the Committee may designate.
(d) Any other form of distribution, in equal or unequal payments, as specifically approved by the Committee.
If distribution of any of a Participant's Accounts is to be made in
annual installments under Option (b) of this Section 7.2, the amount of each
installment will equal the total amount in said Account on the date the
installment is payable, divided by the number of installments remaining to be
paid. In addition, if the distributions are made in installments under Option
(b) of this Section 7.2, the interest equivalent accrued on each Account each
year after the date the first installment is payable will be distributed on each
anniversary of such date.
7.3 Except as the Board may otherwise determine based on the circumstances at the time the distribution to the beneficiary is to commence:
(a) If a Participant should die after distribution of any Account maintained for him or her hereunder has commenced, but before the entire balance of such Account has been fully distributed, distributions will continue to be made from such Account to the Participant's designated beneficiary or contingent beneficiary, in accordance with the distribution option in effect for such Account at the time of the Participant's death.
(b) If a Participant should die before any distribution from an Account maintained for him or her hereunder has been made to him or her, distribution of such Account to the Participant's designated beneficiary or contingent beneficiary shall be made, or shall commence, as soon as practicable after the Participant's death, in accordance with the distribution option in effect for such Account at the time of the Participant's death.
Any amounts remaining to be paid to a Participant's designated beneficiary at the time of the designated beneficiary's death shall be paid to the Participant's contingent beneficiary or, if such contingent beneficiary has predeceased the Participant's designated beneficiary, to the estate of the designated beneficiary. Any amounts remaining to be paid to a Participant's contingent beneficiary at the time of such contingent beneficiary's death shall be paid to the estate of the contingent beneficiary. If the Participant's designated beneficiary and contingent beneficiary have both predeceased the
Participant, any amounts remaining to be paid to the Participant at the time of his or her death shall be paid to the Participant's estate.
7.4 Notwithstanding anything herein to the contrary, any Account maintained for a Participant hereunder may be distributed, in whole or in part, to such Participant on any date earlier than the date on which distribution from such Account is to be made or commence pursuant to the Participant's election with respect to such Account, if (a) the Participant requests such early distribution, and (b) the Board, in its sole discretion, determines that such early distribution is necessary to help the Participant meet some severe financial need arising from circumstances which were beyond the Participant's control and which were not foreseen by him or her at the time he or she made his or her election as to the date or dates for distribution from such Account. A request by a Participant for an early distribution shall be made in writing, shall set forth sufficient information as to the Participant's need for such distribution to enable the Board to take action on his or her request, and shall be mailed or delivered to the Company's Corporate Secretary.
7.5 Notwithstanding any other optional form of distribution or date for payment (or for commencement of payment) otherwise elected under Section 4.6 and/or Section 4.7, each Participant shall be permitted to make a special distribution election under (a), (b) or (c) below, in accordance with the provisions of (d) below.
(a) A Participant may elect under this Section 7.5(a) to have the entire balance of each of his or her Accounts distributed in the form of a single lump sum payment upon the occurrence of a Change in Control prior to the Retirement. Such payment shall be made by no later than thirty (30) days after the date on which such Change in Control occurs.
(b) A Participant may elect under this Section 7.5(b) to have the entire balance of each of his or her Accounts distributed in the form of a single lump sum payment in the event of the Participant's Retirement for any reason within the two (2) year period following a Change in Control. Such payment shall be made by no later than thirty (30) days after the date of the Participant's Retirement.
(c) Under this Section 7.5(c) a Participant may elect, in the event a Change in Control occurs after the Participant's Retirement but before all payments with respect to the Participant's Accounts have been made pursuant to the Participant's elections under Section 4.6 and/or Section 4.7, to have the entire unpaid balance of his or her Accounts at the time
of such Change in Control distributed in the form of a single lump sum payment. Such payment shall be made by no later than thirty (30) days after the date on which the Change in Control occurs.
(d) Subject to Section 7.6, an election under Section 7.5(a) shall be
effective only if it is made at least one year prior to the Change in Control
referred to in Section 7.5(a). Subject to Section 7.6, an election under Section
7.5 (b) shall be effective only if it is made either (i) at least twenty-four
(24) months prior to the Participant's Retirement, or (ii) if such Retirement
constitutes an Involuntary Termination at least one year prior to the Change in
Control referred to in Section 7.5(b). Subject to Section 7.6, an election under
Section 7.5(c) shall be effective only if it is made prior to the Participant's
Retirement and at least one year prior to the occurrence of the Change in
Control referred to in Section 7.5(c). Any special election made under Section
7.5(a), (b) or (c) may be revoked, and a new special election may be made
thereunder at any time; provided, however, that subject to Section 7.6, any such
revocation or new election shall be effective only if it is made within the
applicable election period specified in this Section 7.5(d). Any special
election, or revocation of a special election, that may be made under Section
7.5(a), (b) or (c) shall be made in the manner set forth in Section 3.5.
7.6 Notwithstanding any other provision of the Plan to the contrary, if the Committee so directs in connection with any proposed or threatened Change in Control,
(a) any regular distribution election provided for under Section 4.7 and any special distribution election provided for under Section 7.5 may be made by a Participant, and any such election previously made by a Participant may be revoked and a new election made by the Participant under such Sections, within the period beginning on the date of the first public announcement of such proposed or threatened Change in Control and ending on the 45th day following such date; and
(b) a Participant may also elect, within such 45-day period, to have the entire balance of such of his or her Accounts distributed in the form of a single lump-sum payment in the event of the Participant's Involuntary Termination at any time within the 12-month period following the date of such public announcement, notwithstanding any other distribution election otherwise made by the Participant under Section 4.6, 4.7 or 7.5. Such lump-sum payment shall be made no later than 30 days following the date of the Participant's termination of employment.
Any election, or revocation of an election, that may be made pursuant to this
Section 7.6 shall be made in the manner set forth in Section 3.5. Any election,
or revocation of an election under Section 4.7 that is made pursuant to this
Section 7.6, shall be effective only if either (x) the Change in Control which
was proposed or threatened actually occurs or (y) the Participant's Retirement
occurs at any time within the twelve (12) month period following such public
announcement and such Retirement constitutes an Involuntary Termination.
7.7 The Company may, but shall not be required to, purchase a life insurance policy, or policies, to assist in funding any of its payment obligations under the Plan. If any policy is so purchased, it shall, at all times, remain the exclusive property of the Company and subject to the claims of its creditors. Neither the Participant nor any beneficiary or contingent beneficiary designated by him or her shall have any interest in, or rights with respect to, such policy.
7.8 A Participant shall have the status of a mere unsecured creditor of the Company with respect to his or her right to receive any payment under the Plan. The Plan shall constitute a mere promise by the Company to make payments in the future of the benefits provided for herein. It is intended that the arrangements reflected in this Plan be treated as unfunded for tax purposes and for purposes of Title I of ERISA.
8. Non-Assignment of Deferred Compensation
A Participant's rights to payments under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer (other than transfer by will or by the laws of descent and distribution, in the absence of a beneficiary designation), assignment, pledge, encumbrance, attachment or garnishment by creditors of the Participant or his or her spouse or other beneficiary.
9. Termination of Participation or Employment
A Participant's participation in the Plan may be terminated by the Board at any time. No promise or representation, either express or implied, is made with respect to continued employment, transfer or promotion because of participation in the Plan, and the employment of a Participant may be terminated at any time.
10. Transfer of Employment
10.1 If a Participant transfers employment to any other Company that maintains this Plan for such Company's Elected Officers and Other Eligible Employees and the Participant is or
becomes an Elected Officer or Other Eligible Employee of such other Company, the balance to the Participant's credit in each Account maintained for the Participant under this Plan shall be transferred to the comparable account established for the Participant under the Plan maintained by such other Company, effective as of the date on which the Participant's employment is so transferred or, if later, the date on which the Participant first becomes an Elected Officer or Other Eligible Employee of such other Company. Upon the transfer of the Participant's Account balances, the Company making the transfer shall have no further obligation to the Participant or his or her designated beneficiaries with respect to payment of the Account balances so transferred.
10.2 If an Elected Officer or Other Eligible Employee of any other Company that maintains this Plan for its Elected Officers or Other Eligible Employee transfers employment to the Company and is or becomes an Elected Officer or Other Eligible Employee of the Company, as of the date on which such Elected Officer's or Other Eligible Employee's employment is so transferred or, if later, the date on which such Elected Officer or Other Eligible Employee first becomes an Elected Officer or Other Eligible Employee of the Company, there shall be established for the Elected Officer or Other Eligible Employee under this Plan an Account or Accounts comparable to each account maintained for such Elected Officer or Other Eligible Employee under such other Company's Plan, and there shall be transferred to each Account so established an amount equal to the balance to such Elected Officer's or Other Eligible Employee's credit in the comparable account maintained for the Elected Officer or Other Eligible Employee under such other Company's Plan.
In addition, on and after the date on which an Elected Officer's or Other Eligible Employee's Account balances are so transferred, any election to defer Compensation, any election as to the date of commencement or form of distribution of Account balances, and any designation of a beneficiary, made by the Participant under such other Company's Plan shall be treated as having been made under this Plan.
11. Successor Corporation
11.1 The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.
Exhibit 10-H
DEFERRED REMUNERATION PLAN FOR OUTSIDE DIRECTORS
OF JERSEY CENTRAL POWER & LIGHT COMPANY
(AS AMENDED AND RESTATED EFFECTIVE AUGUST 8, 2000)
1.1 The purpose of this document is to set forth the Deferred Remuneration Plan for Outside Directors, as amended and restated effective August 8, 2000. The Plan will be implemented by individual elections by each Director.
2.1 This Plan provides for deferral by Directors of all or a portion of current Remuneration. Funds being deferred will be credited with the equivalent of interest in accordance with Section 6.
2.2 Each component of the deferred funds will be distributed as follows:
(a) for a Director who elects deferral until a date or dates following his or her Retirement, to the Director, in accordance with his or her latest effective election, and subject to provisions of Section 4.5;
(b) for a Director who elects deferral until a date or dates preceding his or her Retirement, to the Director, in accordance with his or her initial election; or
(c) if a Director dies before the deferred funds have been fully
distributed, to his or her designated beneficiary, in
accordance with the option selected by the Director under
Section 7.2 for each component except as the Board may
otherwise determine, based on the circumstances at the time
the distribution is to commence.
3.1 Board of Directors - refers to the Board of Directors of Jersey Central Power & Light Company.
3.2 Change in Control - A "Change in Control" shall mean the occurrence during the term of the Plan of:
(1) An acquisition (other than directly from GPU, Inc. (the
"Corporation")) of any common stock of the Corporation
("Common Stock") or other voting securities of the Corporation
entitled to vote generally for the election of directors of
the Corporation (the "Voting Securities") by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%) or
more of the then outstanding shares of Common Stock or the
combined voting power of the Corporation's then outstanding
Voting Securities; provided, however, in determining whether a
Change in Control has occurred, Voting Securities which are
acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which would cause
a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (A) an employee benefit plan (or a trust
forming a part thereof) maintained by (i) the Corporation or
(ii) any corporation or other Person of which a majority of
its voting power or its voting equity securities or equity
interest is owned, directly or indirectly, by the Corporation
(for purposes of this definition, a "Subsidiary"), (B) the
Corporation or its Subsidiaries, or (C) any Person in
connection with a "Non-Control Transaction" (as hereinafter
defined);
The individuals who, as of August 1, 1996, are members of the board of directors of the Corporation (the "Incumbent Board"), cease for any reason to constitute at least seventy percent (70%) of the members of the board of directors of the Corporation; provided, however, that if the election, or nomination for election by the Corporation's shareholders, of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the board of directors of the Corporation (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization with or into the Corporation or in which securities of the Corporation are issued, unless such merger, consolidation or reorganization is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a merger, consolidation or reorganization with or into the Corporation or in which securities of the Corporation are issued where:
(i) the shareholders of the Corporation, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least sixty percent (60%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization,
(ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least seventy percent (70%) of the members of the board of directors of the Surviving Corporation, or a corporation, directly or indirectly, beneficially owning a majority of the Voting Securities of the Surviving Corporation, and
(iii) no Person other than (w) the Corporation, (x) any Subsidiary, (y) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to such merger, consolidation or reorganization, was maintained by the Corporation or any Subsidiary, or (z) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities or common stock of the Corporation, has Beneficial Ownership of twenty percent (20%) or more of the combined voting power of the Surviving Corporation's then outstanding voting securities or its common stock;
(B) A complete liquidation or dissolution of the Corporation; or
(C) The sale or other disposition of all or substantially all of the assets of the Corporation to any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the then outstanding Common Stock or Voting Securities as a result of the acquisition of Common Stock or Voting Securities by the Corporation which, by reducing the number of shares of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares of Common Stock or Voting Securities by the Corporation, and after such share acquisition by the Corporation, the Subject Person becomes the Beneficial Owner of any additional shares of Common Stock or Voting Securities which increases the percentage of the then outstanding shares of Common Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
3.3 Company -- refers to Jersey Central Power & Light Company.
3.4 Director - refers to a member of the Board of Directors who is not an employee of Jersey Central Power & Light Company or any of its subsidiaries.
3.5 Plan - refers to this Deferred Remuneration Plan for Outside Directors as described in this document and as it may be amended in the future.
3.6 Remuneration - refers to all cash amounts earned during a calendar year by a Director for services performed as a Director (including services performed as a member of a committee of the Board of Directors), but does not include consulting fees, reimbursement for travel or other expenses or Company contributions to other benefit plans.
3.7 Pre-Retirement Account - refers to the memorandum account which shall be established and maintained for a Director who elects, pursuant to Section 5.2, to have payment of any portion of his or her Remuneration for any Plan Year deferred to a date prior to his or her Retirement. A separate Pre-Retirement Account shall be established and maintained for the Remuneration for each Plan Year which the Director so elects to defer.
3.8 Retirement Account - refers to the memorandum account which shall be
established and maintained for a Director who elects, pursuant to
Section 5.2, to have payment of any portion of his or her
Remuneration for any Plan Year deferred to a date after his or her
Retirement. All amounts deferred pursuant to elections made on or
before December 31, 1985 under the Plan by a Director, together with
all interest equivalents earned by such election and credited to
such amounts prior to December 31, 1986, shall be treated, on or
after such date, as part of the Director's Retirement Account.
3.9 Retirement - refers to the retirement from service on the Board of Directors, on account of resignation, death, or any other reason, without becoming an employee of Jersey Central Power & Light Company, the Corporation or any of its subsidiaries.
3.10 Plan Year - refers to the period October 1, 1986 through December 31, 1986; and each twelve (12) month period from January 1 through December 31 thereafter.
4.1 The Board of Directors has established this Plan. The Board of Directors may in its sole discretion modify the provisions of the Plan from time-to-time, or, may terminate the entire Plan at any time; provided, however, that Section 3.2, this Section 4.1, Section 4.3, the last sentence of the first paragraph of Section 6 and the last paragraph of Section 7.2 may not be amended or modified, and the Plan may not be terminated, (i) at the request of a third party who has indicated an intention or taken steps to effect a Change in Control and who effectuates a Change in Control, (ii) within six (6) months prior to, or otherwise in connection with, or in anticipation of, a Change in Control which has been threatened or proposed and which actually occurs, or (iii) following a Change in Control, if the amendment, modification or termination adversely affects the rights of any Director under the Plan. No modification or termination of the Plan shall adversely affect the rights of any Director with respect to any amounts standing to the Director's credit in any Account immediately prior to the date of the adoption of such modification or termination, including without limitation any rights with respect to the time and method of payment of, or the crediting of interest equivalents with respect to, any such amounts.
4.2 Responsibility for the ongoing administration of this Plan rests with the Corporate Secretary's Department.
4.3 All questions concerning the disclosure of information relating to this Plan, as well as any dispute over accounting or administrative procedures or interpretation of the Plan, will be resolved at the sole discretion of the Corporate Secretary. The Corporate Secretary will not be liable to any person for any action taken or omitted in connection with the interpretation and the administration of the Plan unless attributable to willful misconduct or lack of good faith. Notwithstanding the foregoing, any determination made by the Corporate Secretary after the occurrence of a Change in Control that denies in whole or in part any claim made by any individual for benefits under the Plan shall be subject to judicial review, under a "de novo", rather than a deferential, standard.
4.4 All provisions of this Plan, its administration and interpretation, are intended to be in compliance with appropriate Internal Revenue Service Rulings regarding the construction and operation of a deferred compensation program, so that deferred Remuneration and interest equivalents thereon will not constitute income constructively received prior to being distributed under the terms of this Plan.
4.5 A Director's election to voluntarily defer Remuneration, selection of a distribution commencement date and distribution option, and designation of a beneficiary and contingent beneficiary, made pursuant to this Plan shall be made in writing, on a form furnished to the Director by the Company for such purposes, signed and delivered personally or by first class mail to:
Corporate Secretary
Jersey Central Power & Light Company
300 Madison Avenue
Morristown, New Jersey 07962
Any such election, selection, designation, or change therein, shall not become effective unless and until received by the Corporate Secretary. Subject to Sections 7.2 and 9, a distribution election or a change in a distribution election made by a Director after May 31, 1987 will not be effective unless made at least twenty-four (24) months prior to the Director's Retirement or Disability.
5. Deferral Election
5.1 A Director may elect to defer all or any portion of his or her Remuneration for any Plan Year, providing such portion is three thousand dollars ($3,000) or more. A separate deferral election shall be made with respect to a Director's Remuneration for each Plan Year. An election to defer Remuneration for the 1986 amended Plan Year shall be made on or prior to September 30. In subsequent years, the election shall be made on or before December 31 of the year preceding the Plan Year. Notwithstanding, the foregoing, (a) Directors who are initially elected prior to December 1st of any Plan Year may, within 30 days of such initial election, make a deferral election for the then current Plan Year, and (b) Directors who are initially elected after December 1st of any Plan Year may immediately make a deferral
election for both the then current Plan Year and for the immediately succeeding Plan Year; provided, however, that any deferral election made pursuant to clause (a) or (b) hereof shall be effective only with respect to Remuneration earned after such election has become effective. All elections under this Section 5.1 shall be irrevocable.
5.2 In his or her election to defer Remuneration for any Plan Year, a Director shall specify the amount or portion of the Remuneration to be deferred, and shall indicate whether the Remuneration so deferred is to be credited to a Pre-Retirement Account, or to a Retirement Account.
5.3 With respect to Remuneration deferred hereunder for a Plan Year
which a Director elects to have credited to his or her
Pre-Retirement Account, the Director shall specify in the election
form the date on which distribution of the Pre-Retirement Account
shall be made or commence. The date so selected shall be no earlier
than 24 months from the close of the Plan Year. In the election form
for the Plan Year, the Director shall also select an option under
Section 7.2 for the distribution of the account. Except as provided
in Section 7.2 or 9, the date so specified, and the option so
selected, may not thereafter be changed by the Director.
5.4 With respect to any Remuneration deferred hereunder which a Director elects to have credited to his or her Retirement Account, the Director may elect a distribution commencement date and a distribution option under Section 7.2 for the distribution of the account, and may change, subject to the provisions of Section 4.5, any election as to the distribution commencement date and distribution option for the account previously made by the Director, at any time prior to his or her Retirement. The distribution commencement date so elected shall be either January 15 of the calendar year following the Director's Retirement, or January 15 of any subsequent calendar year.
5.5 In the case of a Director who, prior to January 1, 1986, made a deferral election under the Plan with respect to his or her Remuneration for the calendar year 1986, any deferral election made by the Director hereunder with respect to the period commencing
October 1, 1986 and ending December 31, 1986 shall be effective, for that period, only with respect to the excess, if any, of the amount he or she so elects to defer for said period over the amount of Remuneration for said period deferred pursuant to the Director's prior election.
5.6 The amounts which are deferred, including interest equivalents, will be credited to a Director's Account. Prior to distribution, all amounts deferred including interest equivalents, will constitute general assets of the Company for use as it deems necessary, and will be subject to the claims of the Company's creditors. A Director shall have the status of a mere unsecured creditor of the Company with respect to his or her right to receive any payment under the Plan. The Plan shall constitute a mere promise by the Company to make payments in the future of the benefits provided for herein. It is intended that the arrangements reflected in this Plan be treated as unfunded for tax purposes.
Interest equivalents, compounded monthly on deposits treated as monthly transactions, will be credited at the end of each quarter in the calendar year. Such credit will be made to the balance of each account maintained for a Director hereunder, including the undistributed balance of any such account from which payments are being made in installments. The rate used in calculation of interest equivalents will be no less than the rate equal to the simple average of Citibank N.A. of New York Prime Rates for the last business day of each of the three months in the calendar quarter or, if greater, such other rate as established from time to time by the Committee.
The Company may, but shall not be required to, purchase a life insurance policy, or policies, to assist it in funding its payment obligations under the Plan. If a policy, or policies, is so purchased, it shall, at all times, remain the exclusive property of the Company and subject to the claims of its creditors. Neither the Director nor any beneficiary or contingent beneficiary designated by him or her shall have any interest in, or rights with respect to such policy.
7.1 A Director's Pre-Retirement Account shall be distributed to the Director, or distributions from such Pre-Retirement Accounts shall commence, on the date or dates specified in the elections made by the Director with respect to such accounts. A Director's Retirement Account shall be distributed to the Director, or distributions from such accounts shall commence, on the date specified in the Director's latest effective election. In such case a distribution election made after May 31, 1987 will not be effective unless selected at least twenty-four (24) months prior to his or her Retirement.
7.2 The options for distribution are:
(a) A single lump sum payment.
(b) Annual Installments over any fixed number of years selected by the Director, with a minimum of five annual installments required for the Retirement Account.
If distribution of a Director's Account is to be made in
annual installments under Option (b) of Section 7.2, the
amount of each installment will equal the total amount in such
account on the date the installment is payable, divided by the
number of installments remaining to be paid. In addition, if
the distributions are made in installments under Option (b) of
Section 7.2, the interest equivalent accrued on the Director's
memorandum account each year after the date the first
installment is payable will be distributed on each anniversary
of such date.
Notwithstanding any other optional form of distribution or date for the payment (or commencement of payment) of benefits otherwise elected or provided for hereunder, each Director shall be permitted to make either one or both of the following special distribution elections; (x) to have the entire balance of his or her Accounts distributed in the form of a single lump sum payment in the event of the Director's Retirement following a Change in Control, or (y) if a Change in Control occurs after the Director's Retirement but before all payments
with respect to the balances of his or her Accounts have been
made in accordance with the Director's elections under
Sections 5.3 and 5.4, to have the entire balance of each of
his Accounts that remains unpaid at the time of such Change in
Control distributed in the form of a single lump sum payment
Subject to Section 9. Any such election shall be effective
only if it is made at least twelve (12) months prior to such
Change in Control and prior to the Director's Retirement. Any
special election made under clause (x) or (y) above may be
revoked and a new special election may be made thereunder at
any time; provided, however, that such revocation or new
election shall be effective only if it is made within the
period specified in the preceding sentence, or within such
other period as may be applicable under Section 9. Any special
election, or revocation of a special election, that may be
made hereunder shall be made in the manner set forth in
Section 4.6. The lump sum payment to be made pursuant to a
Director's special election hereunder shall be made no later
than thirty (30) days following the date of the Director's
Retirement or, in the case of a special election under clause
(y) above, the date of the Change in Control.
7.3 Except as the Board may otherwise determine based on the circumstances at the time the distribution to the beneficiary is to commence:
(a) If a Director should die after distribution of any account maintained for the Director has commenced, but before the entire balance of such account has been fully distributed, distributions will continue to be made from such account to the Director's designated beneficiary or contingent beneficiary, in accordance with the distribution option in effect for such Account at the time of the Director's death.
(b) If a Director should die before any distribution from an account maintained for the Director hereunder has been made to him or her, distribution of such account to the Director's designated beneficiary or contingent beneficiary shall be made, or shall commence, as soon as practicable after the Director's death, in accordance with the distribution option in effect for such account at the time of the Director's death.
Amounts remaining to be paid, after the death of the Director, to the designated beneficiary and the contingent beneficiary, will be paid in a lump sum to the estate of the last of such persons to die.
7.4 Notwithstanding anything herein to the contrary, any account maintained for a Director hereunder may be distributed, in whole or in part, to such Director on any date earlier than the date on which distribution is to be made, or commence, pursuant to the Director's election if:
(a) the Director requests early distribution, and
(b) the Board, in its sole discretion, determines that early distribution is necessary to help the Director meet some severe financial need arising from circumstances which were beyond the Director's control and which were not foreseen by the Director at the time he or she made the election as to the date or dates for distribution from such account. A request by a Director for an early distribution shall be made in writing, shall set forth sufficient information as to the Director's needs for such distribution to enable the Board to take action on his or her request, and shall be mailed or delivered to the Company's Corporate Secretary.
8.1 A Director's rights to payments under this Plan shall not be subject to any manner to anticipation, alienation, sale, transfer (other than transfer by will or by the laws of descent and distribution, in the absence of a beneficiary designation), assignment, pledge, encumbrance, attachment or garnishment by creditors of the Director or his or her spouse or other beneficiary.
8.2 All amounts paid under the Plan, including the interest equivalents credited to a Director's memorandum account, are considered to be Remuneration. The crediting of interest equivalents is intended to
preserve the value of the Remuneration so deferred for the Director.
In the event of a Change in Control of GPU, Inc. the provisions set forth below shall apply, not withstanding any other provision of the Plan to the contrary:
The regular distribution elections provided for under Section 5.4 with respect to a Director's Retirement Account and any special distribution election provided for under Section 7.2 with respect to a Director's Pre-Retirement and Retirement Accounts may be made by a Director, and any such election previously made by a Director may be revoked and a new election made the Director under such Sections, at any time during the period beginning on the date of any agreement entered into by the Corporation which provides for the occurrence of one or more transactions which, if consummated, should constitute a Change in Control, and ending on the 45th day after such date. Any election, or revocation of an election that made be made pursuant to this Section 9 shall be made in the manner set forth in Section 4.5. Any election, or revocation of any election, under Section 5.4 that is made pursuant to this Section 9 shall be effective only if the transactions provided for in the agreement referred to in the preceding sentence are consummated.
Exhibit 10-L
August 8, 2000
Mr. Ira H. Jolles
610 West End Avenue
New York, New York 10024
Dear Ira:
The purpose of this letter is to amend and restate the letter agreement dated August 7, 1997 between you, GPU, Inc. (GPU) and GPU Service, Inc. (GPUS). That letter (the "Prior Agreement") amended and restated a letter agreement between you, GPU and GPUS, initially dated December 13, 1989 and thereafter amended and restated on various subsequent dates, that set forth the terms of your employment, effective January 1, 1990, as Senior Vice President and General Counsel of GPU and as Executive Vice President and General Counsel of GPUS, as well as the agreement between you, GPU and GPUS with respect to your pension arrangements.
Upon your agreement to this amendment and restatement as provided on the last page hereof, this letter agreement (the "Agreement") shall supersede and replace, in its entirety, the Prior Agreement.
You will be a director of GPUS.
Your compensation and other benefits from GPU and its subsidiaries (the "GPU Companies") will be paid to you by GPUS. You will not receive separate or additional compensation for serving as a director or officer of GPU or any GPU Company other than GPUS. Payment of your compensation and the other benefits payable to you pursuant to this Agreement shall be obligations of both GPU and GPUS. Your other unfunded employee benefits payable by GPUS will be guaranteed by GPU to the extent covered under the latter's guarantee of unfunded benefits for all GPUS officers.
Mr. Ira H. Jolles
August 8, 2000
Your Base Salary will be determined from time to time by the GPU Board of Directors. As of the date of this amendment and restatement, your Base Salary is $360,000.00
(a) You will be a participant in the GPU Companies Employee Pension Plan and the GPUS Supplemental and Excess Benefits Plan (the "Retirement Plans") and, by reason of the services rendered by you in accordance with this Agreement, you will accrue benefits, commencing as of January 1, 1990, in accordance with the terms of such Retirement Plans, as the Retirement Plans may be in effect from time to time.
(b) Under the terms of the present Retirement Plans, your Normal Retirement Date under those plans is the last day of the month in which you reach your sixty-fifth birthday (December 12, 2003). It is anticipated that you will retire on your Normal Retirement Date. If you do retire on or after that date, you will receive an additional retirement pension from the GPU Companies equal to the additional pension which would have been paid under the Retirement Plans if, in addition to your actual years of creditable service, you had an additional 20 years of past creditable service. Payment of the additional retirement pension will commence on the first day of the month following the month in which you so retire.
(c) GPUS has in effect Short-Term and Long-Term Disability Income Plans that provide coverage, up to your Normal Retirement Date, for employees meeting the requirements of such Plans. If you are receiving Disability Income under either such Plan at the time you reach your Normal Retirement Date, you will thereafter receive an additional retirement pension from the GPU Companies equal to the additional pension which would have been paid under the Retirement Plans if, in addition to your actual years of creditable service, you had an additional 20 years of past creditable service.
(d) If your employment with the GPU Companies shall be terminated (i) as a result of an "Involuntary Termination" (as defined below) at any time within two (2) years following the occurrence of a "Change in Control" (as defined in Appendix A hereto), or (ii) by any GPU Company without "Cause" (as defined in
Mr. Ira H. Jolles
August 8, 2000
Appendix A hereto), then you will receive from the GPU Companies an additional retirement pension, equal to the additional pension which would have been paid under the Retirement Plans if, in addition to your actual years of creditable service, you had an additional twenty (20) years of past creditable service. Payment of the additional retirement pension will commence on the first day of the month following the month in which your employment is so terminated.
For purposes of clause (i) above, "Involuntary Termination" shall mean (A) the termination of your employment with the GPU Companies by any GPU Company, or (B) a termination by you (x) for "Good Reason" (as defined in Appendix A hereto) or (y) as the result of any other material adverse change in the conditions of your employment with the GPU Companies. If the termination of your employment by any GPU Company is (1) within twelve (12) months prior to a Change in Control or (2) prior to the date of a Change in Control but you reasonably demonstrate that the termination (A) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control or (B) otherwise arose in connection with, or in anticipation of, a Change in Control which has been threatened or proposed and which actually occurs, such termination shall be deemed to have occurred after a Change in Control.
(e) If your employment with the GPU Companies shall terminate for any reason, other than by death or retirement or termination in accordance with paragraphs (b), (c) or (d) above, you will receive from the GPU Companies an additional retirement pension equal to the additional pension which would have been paid under the Retirement Plans if, in addition to your actual years of creditable service, you had an additional number of years of past creditable service determined in accordance with the following table (employing straight-line interpolation for fractional years of actual employment with the GPU Companies):
Mr. Ira H. Jolles
August 8, 2000
Years of Actual Additional Number of Years
GPU Employment of Past Creditable Service
-------------- --------------------------
1 2.0
2 3.5
3 5.0
4 6.0
5 7.0
.6 8.0
.7 8.5
.8 9.0
.9 9.5
10 10.0
11 12.5
12 15.0
13 17.5
14 20.0
|
Payment of the additional retirement pension payable to you under this paragraph
(e) shall commence on the first day of the month following the month in which
your employment so terminates.
(f) For purposes of determining the amount of the additional retirement pension payable to you under paragraphs (b), (c), (d) or (e) above, it shall be assumed that the pension payable to you under the Retirement Plans is payable in the form of a single life annuity, and that payment of such pension will commence on the same date as payment of your additional retirement pension hereunder will commence.
The additional retirement pension payable to you hereunder shall be paid to you in the form of a single life annuity unless you are married on the date as of which payment of such pension is to commence, in which event it shall be paid in the form described as Option 2 in Section 10.1 of the GPUS Employee Pension Plan, with your spouse as your beneficiary.
(g) If you should die before you start to receive the additional pension payable to you under paragraph (b), (c), (d) or (e), your surviving spouse, if any, will receive, for the rest of her life from the GPU System Companies, 100% of the pension which would have been payable to you under the Retirement Plans
Mr. Ira H. Jolles
August 8, 2000
and 100% of the additional retirement pension which would have been payable to you in accordance with paragraph (e), had you terminated employment on the date of your death. Such payments to your surviving spouse shall commence on the first day of the month following the month of your death.
To the extent your surviving spouse does not receive such pension from the Retirement Plans, she will receive it from the GPU Companies.
(h) Retirement or pension benefits from prior employers to which you are now, or may in the future be, entitled will not be applied against the pension benefits payable to you pursuant to this Section and you are free to elect to receive such other pension benefits when, and in such manner as, you choose.
Upon your retirement on any date subsequent to the date of this letter (the date as of which you so retire is referred to herein as your "Retirement Date") you shall be entitled to receive from the GPU Companies, in addition to the additional retirement pension payable to you pursuant to Section 3 hereof, a supplemental pension, which shall be payable upon the following terms and conditions:
(a) The supplemental pension payable to you hereunder, when expressed as a single life annuity, shall be a monthly amount of income equal to the amount, if any, by which either (i) $10,825.75 for each month beginning after your Retirement Date and before the month beginning after your 62nd birthday, or (ii) $10,325.75 for each month beginning after the later of your Retirement Date or your 62nd birthday, exceeds (iii) the aggregate pension amount payable to you for such month under the Retirement Plans and Section 3 hereof, determined for this purpose without taking into account (x) any Additional Pension amount payable to you under the GPUS Employee Pension Plan, and (y) the 20% increase in the pension amounts payable to you under the Retirement Plans and Section 3 hereof during the first 12 months following your retirement. For purposes of the foregoing, if any part of the aggregate pension amount payable to you under the Retirement Plans or Section 3 hereof is not payable in the form of a single life
Mr. Ira H. Jolles
August 8, 2000
annuity commencing on the first day of the month following your Retirement Date, the pension amount referred to in (iii) above shall be determined as if such part were so payable.
(b) The supplemental pension shall be paid to you in the same form, and payments shall commence at the same time, as payment of the additional retirement pension provided for under Section 3 hereof.
(c) If you should die before you start to receive your supplemental pension, your surviving spouse, if any, shall be entitled to receive from GPU System sources an annuity payable to her for her lifetime in a monthly amount equal to 100% of the supplemental pension that would have been payable to you hereunder if you had not died, if you had retired on the last day of the month in which your death occurs, and if you had not been married on such last day.
(d) With each monthly payment of the supplemental pension payable to you during the first 12 months following your Retirement Date, you shall be entitled to receive an additional amount equal to 20% of the amount of such monthly payment; provided, however, that if clause (i) of paragraph (a) above applies in calculating the supplemental pension amount payable for such month, the additional amount payable to you for such month under this paragraph (d) shall be equal to 20% of the supplemental pension amount that would be payable to you for such month if clause (ii) instead of clause (i) of paragraph (a) were applicable in calculating the amount of your supplemental pension payment for such month.
Notwithstanding any other provision of Section 3 or 4 to the contrary,
you may elect to have the additional retirement pension and the supplemental
pension that become payable to you or your surviving spouse thereunder paid in
the form of a single lump sum payment. The amount of such lump sum payment shall
be determined in the same manner as the amount of the lump sum payment payable
pursuant to an election by you under clause (a) of the first paragraph of
Section 6 would be determined, as provided in the third paragraph of Section 6.
Mr. Ira H. Jolles
August 8, 2000
Subject to Section 10, any election under this Section 5 shall be
effective only if it is made (i) at least twenty-four (24) months prior to the
termination of your employment with the GPU Companies, or (ii), if your
termination of employment constitutes an Involuntary Termination or occurs by
reason of your death, at least twelve (12) months prior to such termination of
your employment. Any election so made may be revoked, and a new election may be
made under this Section 5, at any time; provided, however, that, subject to
Section 10, any such revocation or new election shall be effective only if it is
made within the period specified in the preceding sentence. Any election, or
revocation of an election, that may be made by you under this Section 5 shall be
made in writing, on a form that is furnished to you for such purpose by the
Administrative Committee of the GPUS Employee Pension Plan (the "Administrative
Committee") and that is signed by you and delivered to the Administrative
Committee.
Notwithstanding any other form of distribution or payment or date for
the payment, (or commencement of payment) of benefits otherwise elected or
provided for under this Agreement or the Retirement Plans, you shall be
permitted to make either one, or both, of the following special payment
elections: (a) to have the additional retirement pension payable pursuant to
Section 3 hereof and the supplemental pension payable pursuant to Section 4
hereof paid in the form of a single lump sum payment in the event of your
termination of employment with the GPU Companies for any reason within the two
(2) year period following the occurrence of a Change in Control, or (b) if a
Change in Control occurs after the termination of your employment with the GPU
Companies but before all payments required to be made hereunder with respect to
your additional retirement pension and supplemental pension have been made, to
have the additional retirement pension and supplemental pension payments that
otherwise would be made hereunder after the date of such Change in Control paid
in the form of a single lump sum payment.
Mr. Ira H. Jolles
August 8, 2000
Subject to Section 10, an election under clause (a) of the preceding paragraph shall be effective only if it is made either at least twenty-four (24) months prior to such termination of your employment, or if such termination of your employment is due to your death or is the result of an Involuntary Termination as defined in Section 3(d) hereof, at least one year prior to such Change in Control. Subject to Section 10, an election under clause (b) of the preceding paragraph shall be effective only if it is made at least one year prior to the Change in Control, and prior to the termination of your employment. Any special election made under clause (a) or (b) of the preceding paragraph may be revoked, and a new special election may be made thereunder, at any time; provided, however, that, subject to Section 10, any such revocation or new election shall be effective only if it is made within the election period specified in this paragraph. Any special election, or revocation of a special election, that may be made hereunder shall be made in the same manner as provided in the last sentence of the second paragraph of Section 5.
The lump sum payment to be made to you pursuant to your election under
clause (a) of the second preceding paragraph shall be in an amount that is
"Actuarially Equivalent" (as defined below and determined as of the first day of
the month following the date of your termination of employment) to the
additional retirement pension and supplemental pension that otherwise would be
payable to you hereunder if payment of your additional retirement pension and
supplemental pension and the pension payable to you under the Retirement Plans
(i) were to commence on your Normal Retirement Date or, if earlier, on the
earliest date as of which you could elect to have payment of your pension under
the Retirement Plans commence and (ii) were to be made in the form of a single
life annuity. The lump sum payment to be made to your surviving spouse pursuant
to your election under clause (a) of the second preceding paragraph shall be in
an amount that is "Actuarially Equivalent" (as defined below and determined as
of the first day of the month following the date of your death) to the pension
and the annuity that otherwise would be payable to your surviving spouse
pursuant to Section 3(g) and Section 4(c) hereof. The lump sum payment to be
made to you or your surviving spouse pursuant to your election under clause (a)
of the second preceding paragraph shall be made by no later than thirty (30)
days following the date of your termination of employment.
Mr. Ira H. Jolles
August 8, 2000
The lump sum payment to be made pursuant to your election under clause
(b) of the third preceding paragraph shall be in an amount that is Actuarially
Equivalent (as defined below and determined as of the first day of the month
coincident with or next following the date on which the Change in Control
occurs) to the payments that otherwise would be made hereunder with respect to
your additional retirement pension and supplemental pension after the date of
such Change in Control. Such lump sum payment shall be made by no later than
thirty (30) days following the date on which such Change in Control occurs.
For purposes of this Section 6, "Actuarially Equivalent" shall mean,
with respect to any distribution or payment, an actuarially equivalent amount,
calculated by using the annual interest rate on 30-year Treasury securities for
the second month preceding the calendar year in which such distribution is made
or commences, and the mortality table prescribed for purposes of section
417(e)(3)(A)(ii)(I) of the Internal Revenue Code of 1986, as amended (the
"Code"). Such annual interest rate and mortality table shall be as specified or
prescribed by the Commissioner of the Internal Revenue Service for purposes of
Section 417(e)(3)(A)(ii) of the Code in revenue rulings, notices or other
guidance.
To the extent permitted by such plans without requiring prior evidence of insurability or eligibility, you will participate in all of the benefit plans maintained by any of the GPU Companies in which senior GPU executives are eligible to participate, as such plans shall be in effect from time to time. In the case of each such plan that provides a benefit the amount of which depends, directly or indirectly, on the number of years of a participant's service with the GPU Companies, you shall receive the same benefit amount that would be payable to you under such plan if you were treated as having, in addition to your actual years of services, the number of years of service determined under the table in Section 3(e). The number of additional years of service so determined shall also be taken into account in determining your eligibility to participate in any benefit plan maintained by any of the GPU Companies in which
Mr. Ira H. Jolles
August 8, 2000
senior GPU executives are eligible to participate that requires, as a condition for eligibility, the completion of a specified number of years of service with the GPU Companies.
In addition to the supplemental pension described above, you will also receive (i) an extension of coverage in your and your family's health care benefits under the Supplemental and Excess Medical Plan to the third anniversary of the date of your retirement, or your attainment of age 62, whichever is later; and (ii) an amended Split-Dollar Agreement with respect to your Senior Executive Life Insurance policy to provide for eligibility to receive full benefits under your policy at age 55 with 10 years of service.
With respect to your right to receive an additional retirement pension
pursuant to Section 3 hereof and the supplemental pension provided for under
Section 4 hereof, or to receive a lump sum payment with respect to such pensions
under Section 5 or 6 hereof, you shall have the status of a mere unsecured
creditor of GPUS and GPU; and this letter agreement shall constitute a mere
promise by GPUS and GPU to make payments in the future of such pensions in
accordance with the provisions of Sections 3, 4, 5 and 6. It is the intention of
the parties hereto that the arrangements set forth in Sections 3, 4, 5 and 6 of
this letter agreement regarding your additional retirement pension and
supplemental pension shall be treated as unfunded for tax purposes and, if it
should be determined that Title I of ERISA is applicable to such arrangements,
for purposes of Title I of ERISA.
Your rights to receive payments with respect to the additional retirement pension and supplemental pension provided for under Sections 3 and 4 of this letter agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by your creditors or creditors of your spouse or any other beneficiary.
Mr. Ira H. Jolles
August 8, 2000
Notwithstanding any other provision of the Plan to the contrary, if the Personnel, Compensation and Nominating Committee of the Board of Directors of GPU so directs in connection with any proposed or threatened Change in Control
(A) the regular election provided for under Section 5 and any special benefit payment election provided for under Section 6 may be made by you, and any such election previously made by you may be revoked and a new election made by you under such Sections, within the period beginning on the date of the first public announcement of such proposed or threatened Change in Control and ending on the 45th day following such date; and
(B) you may also elect, within such 45-day period, to have the additional retirement pension and the supplemental pension that become payable to you or your surviving spouse under Section 3 or 4 paid in the form of a single lump-sum payment in the event of your Involuntary Termination or death at any time within the 12-month period following the date of such public announcement, notwithstanding any other benefit payment election otherwise made by you under Section 5 and/or Section 6.
The lump-sum payment to be made pursuant to your election under
clause (B) above shall be made no later than 30 days following
the date of your Involuntary Termination or death. The amount of
such lump sum payment shall be determined in the same manner as
the amount of the lump sum payment payable pursuant to an
election by you under clause (a) of the first paragraph of
Section 6 would be determined, as provided in the third paragraph
of Section 6.
Any election, or revocation of an election, that may be made pursuant to this Section 10 shall be made in the manner set forth in the last sentence of the second paragraph of Section 5. Any election, or revocation of an election under Section 5 that is made pursuant to
Mr. Ira H. Jolles
August 8, 2000
this Section 10, shall be effective only if either (1) the Change
in Control which was proposed or threatened actually occurs or
(2) your employment with the GPU Companies terminates at any time
within the twelve (12) month period following such public
announcement as a result of Involuntary Termination or your
death.
If the foregoing correctly reflects your understanding of the agreement between you and GPU and GPUS, will you please so indicate on the enclosed duplicate copy of this letter which will then constitute a binding agreement between GPU and GPUS, on the one hand, and you, on the other.
GPU, INC.
GPU SERVICE, INC.
The foregoing is agreed to by me as of the date of this letter.
Cause. For purposes of this Agreement, a termination of employment is for "Cause" if you have been convicted of a felony or the termination is evidenced by a resolution adopted in good faith by two-thirds of the GPU Board of Directors (the "Board") that you:
(a) intentionally and continually failed substantially to perform your reasonably assigned duties with GPU or GPUS (other than a failure resulting from your incapacity due to physical or mental illness or from your assignment of duties that would constitute "Good Reason" as hereinafter defined) which failure continued for a period of at least thirty (30) days after a written notice of demand for substantial performance, signed by a duly authorized officer of GPU, has been delivered to you specifying the manner in which you have failed substantially to perform, or
(b) intentionally engaged in conduct which is demonstrably and
materially injurious to GPU; provided, however, that no termination of your
employment shall be for Cause as set forth in this clause (b) until (1) there
shall have been delivered to you a copy of a written notice, signed by a duly
authorized officer of GPU, setting forth that you were guilty of the conduct set
forth in this clause (b) and specifying the particulars thereof in detail, and
(2) you shall have been provided an opportunity to be heard in person by the
Board (with the assistance of your counsel if you so desire).
No act, nor failure to act, on your part, shall be considered "intentional" unless you have acted, or failed to act, with a lack of good faith and with a lack of reasonable belief that your action or failure to act was in the best interest of GPU. Notwithstanding anything contained in this Agreement to the contrary, no failure to perform by you after a written notice of termination is given by you shall constitute Cause for purposes of this Agreement.
(1) An acquisition (other than directly from GPU) of any common stock of GPU ("Common Stock") or other voting securities of GPU entitled to vote generally for the election of directors (the "Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent
(20%) or more of the then outstanding shares of Common Stock or the combined
voting power of GPU's then outstanding Voting Securities; provided, however, in
determining whether a Change in Control has occurred, Voting Securities which
are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (A) an employee benefit plan (or a
trust forming a part thereof) maintained by (i) GPU or (ii) any corporation or
other Person of which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or indirectly, by GPU (for
purposes of this definition, a "Subsidiary"), (B) GPU or its Subsidiaries, or
(C) any Person in connection with a "Non-Control Transaction" (as hereinafter
defined);
(2) The individuals who, as of August 1, 1996, are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least seventy percent (70%) of the members of the Board; provided, however, that if the election, or nomination for election by GPU's shareholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization with or into GPU or in which securities of GPU are issued, unless such merger, consolidation or reorganization is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a merger, consolidation or reorganization with or into GPU or in which securities of GPU are issued where:
(i) the shareholders of GPU, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least sixty percent (60%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization,
(ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least seventy percent (70%) of the members of the board of directors of the Surviving Corporation, or a corporation, directly or indirectly, beneficially owning a majority of the Voting Securities of the Surviving Corporation, and
(iii) no Person other than (w) GPU, (x) any Subsidiary, (y) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to such merger, consolidation or reorganization, was maintained by GPU or any Subsidiary, or (z) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities or common Ownership of twenty percent (20%) or more of the combined voting
power of the Surviving Corporation's then outstanding voting securities or its common stock.
(B) A complete liquidation or dissolution of GPU; or
(C) The sale or other disposition of all or substantially all of the assets of GPU to any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the then outstanding Common Stock or Voting Securities as a result of the acquisition of Common Stock or Voting Securities by GPU which, by reducing the number of shares of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares of Common Stock or Voting Securities by GPU, and after such share acquisition by GPU, the Subject Person becomes the Beneficial Owner of any additional shares of Common Stock or Voting Securities which increases the percentage of the then outstanding shares of Common Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
(1) a change in your status, title, position or responsibilities (including reporting responsibilities) which, in your reasonable judgment, represents an adverse change from your status, title, position or responsibilities as in effect immediately prior thereto; the assignment to you of any duties or responsibilities which, in your reasonable judgment, are inconsistent with your status, title, position or responsibilities; or any removal of you from or failure to reappoint or reelect you to any of such offices or positions, except in connection with the termination of your employment for disability, Cause, as a result of your death or by you other than for Good Reason;
(2) a reduction in the rate of your annual base salary;
(3) any change in location of your place of employment to a location other than Morristown, New Jersey without your consent,
(4) the failure by the GPU Companies to pay to you any portion of your current compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of any GPU Company in which you participated, within seven (7) days of the date such compensation is due;
(5) the failure by the GPU Companies (A) to continue in effect (without reduction in benefit level, and/or reward opportunities) any material compensation or employee benefit plan in which you were participating immediately prior to such failure by the GPU Companies, unless a substitute or replacement plan has been implemented which provides substantially identical compensation or benefits to you or (B) to continue to provide you with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each other compensation or employee benefit plan, program and practice in which you were participating immediately prior to such failure by the GPU Companies;
(6) the failure of GPU or GPUS to obtain a satisfactory agreement from any successors or assigns to assume and agree to honor and perform their respective obligations under this Agreement; or
(7) any purported termination of your employment which is not effected pursuant to a Notice of Termination as that term is defined in your Severance Agreement dated November 5, 1998.
(b) Any event or condition described in clauses (1) through (7) of paragraph (a) above of paragraph (a) above which occurs (A) within twelve (12) months prior to a Change in Control or (B) prior to a Change in Control but which you reasonably demonstrate (x) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control or (y) otherwise arose in connection with, or in anticipation of a Change in Control which has been threatened or proposed, shall constitute Good Reason for purposes of this Agreement notwithstanding that it occurred prior to a Change in Control.
Exhibit 10-M
GPU, INC.
RESTRICTED STOCK PLAN FOR OUTSIDE DIRECTORS
AS AMENDED AND RESTATED AS OF AUGUST 8, 2000
GPU, INC.
1. Purpose. The purpose of this restricted Stock Plan for Outside Directors (the "Plan") is to enable GPU, Inc. ("GPU") to attract and retain persons of outstanding competence to serve on its Board of Directors by paying such persons a portion of their compensation in GPU Common Stock ("Common Stock") pursuant to the terms hereof.
(a) The term "Board of Directors" shall mean the board of directors of GPU.
(b) The term "Change in Control" shall mean the occurrence during the term of the Plan of:
(1) An acquisition (other than directly from GPU) of any Common Stock or other voting securities of GPU entitled to vote generally for the election of directors (the "Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the then outstanding shares of Common Stock or the combined voting power of GPU's then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (A) an employee benefit plan (or a trust forming a part thereof) maintained by (i) GPU or (ii) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by GPU (for purposes of this definition, a "Subsidiary"), (B) GPU or its Subsidiaries, or (C) any Person in connection with a "Non-Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996, are members of the
Board of Directors (the "Incumbent Board"), cease for any reason to constitute at least seventy percent (70%) of the members of the Board of Directors; provided, however, that if the election, or nomination for election by GPU's
shareholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization involving GPU, unless such merger, consolidation or reorganization is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a merger, consolidation or reorganization of GPU where:
(i) the shareholders of GPU, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least sixty percent (60%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization,
(ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least seventy percent (70%) of the members of the board of directors of the Surviving Corporation, or a corporation, directly or indirectly, beneficially owning a majority of the Voting Securities of the Surviving Corporation, and
(iii) no Person other than (w) GPU, (x) any Subsidiary, (y) any
employee benefit plan (or any trust forming a part thereof) that, immediately prior to such merger, consolidation or reorganization, was maintained by GPU or any Subsidiary, or (z) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities or Common Stock, has
Beneficial Ownership of twenty percent (20%) or more of the combined voting power of the Surviving Corporation's then outstanding voting securities or its common stock;
(B) A complete liquidation or dissolution of GPU; or
(C) The sale or other disposition of all or substantially all of the assets of GPU to any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the then outstanding Common Stock or Voting Securities as a result of the acquisition of Common Stock or Voting Securities by GPU which, by reducing the number of shares of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares of Common Stock or Voting Securities by GPU, and after such share acquisition by GPU, the Subject Person becomes the Beneficial Owner of any additional shares of Common Stock or Voting Securities which increases the percentage of the then outstanding shares of Common Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
(c) The term "Outside Director" or "Participant" means a member of the Board of Directors who is not an employee (within the meaning of the Employee Retirement Income Security Act of 1974) of GPU or any of its Subsidiaries. A director of GPU who is also an employee of GPU or any of its Subsidiaries shall become eligible to participate in this Plan and shall be entitled to receive an award of restricted stock upon the termination of such employment.
(d) The term "Subsidiary" means, for purposes other than Section 2(b), any corporation 50% or more of the outstanding Common Stock of which is owned, directly or indirectly, by GPU.
(e) The term "Service" shall mean service as an Outside Director.
(a) A total of 33,000(1) shares of GPU Common Stock shall be available for awards under the Plan. Such shares shall be either previously unissued shares or reacquired shares. Any restricted shares awarded under this Plan with respect to which the restrictions do not lapse and which are forfeited as provided herein shall again be available for other awards under the plan.
(b) Each Outside Director shall receive an annual award of 300 shares of GPU Common Stock with respect to each calendar year or portion thereof, during which he or she serves as an Outside Director, beginning with the calendar year 1993. Awards shall be made in January of each year. However, for the calendar year in which an Outside Director commences Service, the award of shares to such Outside Director for such year shall be made in the month in which his or her Service commences, if his or her Service commences after January 31 of such year. All awards of shares made hereunder shall be subject to the restrictions set forth in Section 5.
(c) Subject to the provisions of Section 5, certificates representing shares of GPU Common Stock awarded hereunder shall be issued in the name of the respective Participants. During the period of time such shares are subject to the restrictions set forth in Section 5, such certificates shall be endorsed with a legend to that effect, and shall be held by GPU or an agent therefor. The Participant shall, nevertheless, have all the other rights of a shareholder, including the right to vote and the right to receive all cash dividends paid with respect to such shares.
Subject to the requirements of applicable law, certificates representing such shares shall be delivered to the Participant within 30 days after the lapse of the restrictions to which they are subject.
(d) If as a result of a stock dividend, stock split, recapitalization (or other adjustment in the stated capital of GPU), or as the result of a merger, consolidation, or other reorganization, the common shares of GPU are increased, reduced, or otherwise changed, the number of shares available and to be awarded hereunder shall be appropriately adjusted, and if by virtue thereof a
(1) Initially, 20,000 shares were authorized to be issued under the Plan. On May 29, 1991, GPU effected a two-for-one stock split by way of a stock dividend, leaving 33,000 shares available for issuance under the Plan on and after July 1, 1991 after giving effect to shares previously awarded.
Participant shall be entitled to new or additional or different shares, such shares to which the Participant shall be entitled shall be subject to the terms, conditions, and restrictions herein contained relating to the original shares. In the event that warrants or rights are awarded with respect to shares awarded hereunder, and the recipient exercises such rights or warrants, the shares or securities issuable upon such exercise shall be likewise subject to the terms, conditions, and restrictions herein contained relating to the original shares.
(a) Shares are awarded to a Participant on the condition that he or she serves or has served as an Outside Director until:
(i) the Participant's death or disability, or
(ii) the Participant's retirement not earlier than the first day of the month following the attainment of the Participant's 72nd birthday; or
(iii) the Participant's resignation or retirement prior to the first day of the month following the attainment of the Participant's 72nd birthday with the consent of the Board, i.e., approval thereof by a least 80% of the directors voting thereon, with the affected director abstaining; or
(iv) the Participant's failure to be re-elected after being duly nominated.
Termination of Service of a Participant for any other reason, including, without limitation, any involuntary termination effected by Board action, shall result in forfeiture of all shares awarded. Notwithstanding the foregoing, upon the occurrence of a Change in Control, the restrictions set forth in Section 5(b) hereof to which any shares awarded to a Participant are then still subject shall lapse, and the termination of the Participant's Service for any reason upon or at any time after the occurrence of such Change in Control shall not result in the forfeiture of any such shares.
(b) Shares awarded hereunder may not be sold, exchanged, transferred,
pledged, hypothecated, or otherwise disposed of other than to GPU pursuant to
Section 5(a) during the period commencing on the date of the award of such
shares and ending on the date of termination of the Outside Director's Service.
(c) Each Participant shall represent and warrant to and agree with GPU that he or she (i) takes any shares awarded under the Plan for investment only
and not for purposes of sale or other disposition and will also take for investment only and not for purposes of sale or other disposition any rights, warrants, shares, or securities which may be issued on account of ownership of such shares, and (ii) will not sell or transfer any shares awarded or any shares received upon exercise of any such rights or warrants except in accordance with (A) an opinion of counsel for GPU (or other counsel acceptable to GPU) that such shares, rights, warrants, or other securities may be disposed of without registration under the Securities Act of 1933, or (B) an applicable "no action" letter issued by the Staff of the Commission.
effectuates a Change in Control, (ii) within six (6) months prior to, or otherwise in connection with, or in anticipation of, a Change in Control which has been threatened or proposed and which actually occurs, or (iii) following a Change in Control, shall be effective if the amendment, modification, suspension or termination adversely affects the rights of any Participant under the Plan. If the Plan is terminated, the terms of the Plan shall, notwithstanding such termination, continue to apply to awards granted prior to such termination. In addition, no amendment, modification, suspension or termination of the Plan shall adversely affect the rights of any Participant with respect to any award (including without limitation any right with respect to the timing and method of payment of any award) granted to the Participant prior to the date of the adoption of such amendment, modification, suspension or termination without such Participant's written consent.
(a) All restrictions under Section 5 on all shares standing to a Participant's credit under the Plan on the date on which a Change in Control occurs shall lapse as of the time such Change in Control becomes effective, notwithstanding the fact that the Participant may continue to serve as a member of the Successor Board (as defined in (c) below) immediately following the Change in Control.
(b) During the Window Period (as defined in (c) below) or on any date thereafter that is at least one year prior to the date on which a Change in Control occurs, a Participant may make an election under this Section 9(b) pursuant to which, if he or she is designated to serve as a member of the Successor Board immediately following the occurrence of a Change in Control, the following actions will be taken:
(i) all shares standing to the Participant's credit under the Plan which are still subject to restrictions under Section 5 on the business day immediately preceding the date on which the Change in Control occurs, shall be treated as surrendered by the Participant to GPU on such preceding business day, and the Participant shall have no further interest in or rights with respect to such shares;
(ii) on such preceding business day there shall be credited to the account maintained for the Participant under the Deferred Stock Unit Plan for Outside Directors of GPU, Inc. (the "Directors' DSU Plan") one Deferred Stock Unit (as defined in Section 2 of the Directors' DSU Plan) for each share treated under clause (i) above as having been surrendered by the Participant to GPU on such day.
An election under this Section 9(b) shall be made in writing, on a form that is furnished to the Participant for such purpose by the Committee and that is filed by the Participant with the Committee. Notwithstanding the foregoing, an election made by a Participant under this Section 9(b) shall be given effect only if there is in effect an election made by the Participant under Section 15(c) of the Directors' DSU Plan to have his or her Retirement under that Plan treated as not occurring until the date on which his or her service as a member of the Successor Board terminates for any reason.
(c) As used herein, the term "Successor Board" shall mean the board of directors of the corporation whose acquisition of the Common Stock of the Corporation or substantially all of its assets, or whose merger with the Corporation, results in the occurrence of the Change in Control; and the term "Window Period" shall mean the period beginning on the date of any agreement entered into by the Corporation which provides for the occurrence of one or more transactions which, if consummated, would constitute a Change in Control, and ending on the 45th day after such date.
Exhibit 10-N
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
OF
GPU, INC.
As Amended and Restated as of
August 8, 2000
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
OF
GPU, INC.
As Amended and Restated as of
1. Purpose
The Retirement Plan for Outside Directors of GPU, Inc. (the "Plan") is designed to enhance the ability of GPU, Inc. (the "Corporation") to attract and retain competent and experienced Outside Directors by providing retirement benefits and death benefits for Eligible Outside Directors who retire or die after the Plan's Effective Date.
2. Definitions
Except as otherwise specified or as the context may otherwise require, the following terms have the meanings indicated below for all purposes of this Plan:
"Board of Directors" means the board of directors of the Corporation.
"Outside Director" means a member of the Board of Directors who, during the period involved, is not or was not an Officer or an employee of the Corporation or a subsidiary thereof.
"Board Service" means service as an Outside Director of the Corporation both before and after the Effective Date.
"Change in Control" means the occurrence during the term of the Plan of:
1. An acquisition (other than directly from the Corporation) of any Common
Stock or other voting securities of the Corporation entitled to vote generally for the election of directors (the "Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the then outstanding shares of Common Stock or the combined voting power of the
Corporation's then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (A) an employee benefit plan (or a trust forming a part thereof) maintained by (i) the Corporation or (ii) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Corporation (for purposes of this definition, a "Subsidiary"), (B) the Corporation or its Subsidiaries, or (C) any Person in connection with a "Non-Control Transaction" (as hereinafter defined);
2. The individuals who, as of August 1, 1996, are members of the Board of Directors (the "Incumbent Board"), cease for any reason to constitute at least seventy percent (70%) of the members of the Board of Directors; provided, however, that if the election, or nomination for election by the Corporation's shareholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
3. The consummation of:
(A)A merger, consolidation or reorganization with or into the Corporation or in which securities of the Corporation are issued, unless such merger, consolidation or reorganization is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a merger, consolidation or reorganization with or into the Corporation or in which the securities of the Corporation are issued where:
(i) the shareholders of the Corporation, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least sixty percent (60%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization,
(ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least seventy percent (70%) of the members of the board of directors of the Surviving Corporation, or a corporation, directly or indirectly, beneficially owning a majority of the Voting Securities of the Surviving Corporation, and
(iii) no Person other than (w) the Corporation, (x) any Subsidiary,
(y) any employee benefit plan (or any trust forming a part thereof) that,
immediately prior to such merger, consolidation or reorganization, was
maintained by the Corporation or any Subsidiary, or (z) any Person who,
immediately prior to such merger, consolidation or reorganization had
Beneficial Ownership of twenty percent (20%) or more of the then
outstanding Voting Securities or Common Stock, has Beneficial Ownership of
twenty percent (20%) or more of the combined voting power of the Surviving
Corporation's then outstanding voting securities or its common stock.
(B) A complete liquidation or dissolution of the Corporation; or
(C) The sale or other disposition of all or substantially all of the assets of the Corporation to any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the then outstanding Common Stock or Voting Securities as a result of the acquisition of Common Stock or Voting Securities by the Corporation which, by reducing the number of shares of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares of Common Stock or Voting Securities by the Corporation, and after such share acquisition by the Corporation, the Subject Person becomes the Beneficial Owner of any additional shares of Common Stock or Voting Securities which increases the percentage of the then outstanding shares of Common Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
"Compensation" means the sum of: (a) the monthly retainer paid in cash to an Outside Director as compensation for services as a Director of the Corporation, excluding any fees paid for attendance at meetings of the Board of Directors or any committee of the Board of Directors, and also excluding any additional retainer paid for service as a Committee Chairman, and (b) one-twelfth of the cash value of all shares awarded to, the Outside Director pursuant to the Restricted Stock Plan for Outside Directors as the annual award thereunder for the year preceding his or her Retirement, and not subsequently forfeited.
The cash value of a share shall be its closing price as reported for New York Stock Exchange-Composite Transactions on the date of award.
"Effective Date" means the date of initial adoption of this Plan by the Board of Directors.
"Retirement or Retires" means the cessation of service as an Outside Director for any reason other than (i) acceptance of employment as an officer or employee of the Corporation or a subsidiary thereof or (ii) death.
3. Eligibility
An Outside Director who has completed at least fifty-four (54) months of Board Service, whether or not continuous, and who Retires or dies before Retirement on or after the Effective Date shall be eligible for benefits as provided herein. Upon the occurrence of a Change in Control, any person who was an Outside Director immediately prior to such Change in Control shall be eligible for benefits as provided herein upon Retirement or death before Retirement, whether or not such Outside Director has completed at least fifty-four (54) months of Board Service.
4. Pension Benefits of Eligible Retired Outside Directors Before Death
The accumulated amount of pension benefits payable to an Outside Director
eligible to receive benefits hereunder shall be equal to the product of (a) the
number of months of such Outside Director's Board Service under this Plan times
(b) the monthly compensation of such Outside Director at the date of such
Outside Director's Retirement under the Plan. Such pension benefits shall be
paid in monthly installments equal to the monthly compensation of each Outside
Director at the date of such Outside Director's Retirement. Such pension
benefits shall commence on the first day of the month following the Director's
60th birthday or the Director's Retirement under the Plan, whichever is later,
and shall continue during the Retired Outside Director's life until the date
when the total payments to the Retired Outside Director shall be equal to the
Outside Director's accumulated pension benefits at the date of such Director's
Retirement. Notwithstanding the foregoing, in the case of any retired Outside
Director who again becomes an Outside Director after payment of his pension
benefits hereunder has commenced, no further payments shall be made with respect
to his pension benefits after the date on which he resumes Board Service, until
his subsequent Retirement or death. The pension benefits payable under this
Section 4 or under Section 5 upon such Outside Director's subsequent Retirement
or death (i) shall be determined by taking into account only the excess of (A)
his total number of months of Board Service prior to July 1, 1997 over (B) the
number of months for which he received pension benefit payments hereunder prior
to his resumption of Board Service, and (ii) shall be based on his monthly
compensation at the date of his subsequent Retirement or death.
Notwithstanding the provisions of the preceding paragraph, an Outside Director may elect to have the accumulated amount of the pension benefits that become payable hereunder upon his or her Retirement or death before Retirement paid to the Outside Director, or to his or her surviving spouse (or, if applicable, designated beneficiary) in the event of his or her death before Retirement, in the form of a single lump sum payment. Such payment shall be in an amount that is Actuarially Equivalent (as defined in the GPU Companies Employee Pension Plan or any successor thereto and determined as of the first day of the month next following the date of the Outside Director's Retirement or earlier death) to the payments that otherwise would be made hereunder with respect to the Outside Director's accumulated pension benefits if such payments were made in the form, and if such payments commenced to be made at the time, provided in the preceding paragraph or in Section 5(b), as applicable. Such lump sum payment shall be made by no later than thirty (30) days following the date of the Outside Director's Retirement or earlier death.
Subject to Section 13(a), any election made by an Outside Director under
the preceding paragraph shall be effective only if it is made at least
twenty-four (24) months (twelve (12) months, if the election is made on or
before August 31, 1997) prior to the Outside Director's Retirement or earlier
death. Any election so made may be revoked, and a new election may be made under
the preceding paragraph, at any time; provided, however, that subject to Section
13(a), any such revocation or new election shall be effective only if it is made
within the election period specified in the preceding sentence. Any such
election, or any such revocation of an election, shall be made in writing, on a
form that is furnished to the Outside Director for such purpose by the Personnel, Compensation and Nominating Committee and that is filed by the Outside Director with such Committee.
5. Benefits Payable by Reason of Death of Eligible Outside Director
In the event that an Outside Director who is eligible to receive benefits hereunder should die prior to receiving payment of the full amount of his or her accumulated pension benefits, the remaining portion of such Outside Director's accumulated pension benefits shall be paid as follows:
(a) If the Outside Director dies after Retirement and if, at the time of his or her death, monthly installment payments were being made to the Outside Director, such payments shall continue to be made to the Outside Director's surviving spouse (or, if applicable, designated beneficiary) until the aggregate of the payments to the Outside Director and such surviving spouse or beneficiary shall be equal to the Outside Director's accumulated pension benefits at the date of such Director's Retirement.
(b) If the Outside Director dies prior to Retirement, there shall be paid to the Outside Director's surviving spouse (or, if applicable, designated beneficiary) monthly installments equal to the monthly compensation of such Outside Director at the date of such Outside Director's death until the aggregate of the payments to such surviving spouse (or, if applicable, designated beneficiary) shall be equal to the Outside Director's accumulated amount of pension benefits at the date of the Outside Director's death. Payment of such monthly installments shall begin on the first day of the month next following the Outside Director's death or, if later, the first day of the month in which the Outside Director's 60th birthday would have occurred if the outside Director had survived. The provision of this Section 5(b) shall not apply if, at the time of the Outside Director's death, there is in effect an election made by the Outside Director under the second paragraph of Section 4.
6. Change in Control
Notwithstanding any other provision of the Plan to the contrary or any other form of payment otherwise elected hereunder, each Outside Director shall be permitted to make either one or both of the following special distribution elections: (a) to have his or her pension benefits distributed in the form of a single lump sum payment in the event of the Outside Director's Retirement upon the occurrence of a Change in Control, or (b) if a Change in Control occurs
after the Outside Director's Retirement or earlier death but before all payments required to be made with respect to his or her accumulated pension benefits pursuant to Section 4 and Section 5(a) have been made, to have the payments that otherwise would be made hereunder with respect to the Outside Director's accumulated pension benefits after the date of such Change in Control paid in the form of a single lump sum payment.
Subject to Section 13(a), any such election shall be effective only if it is made at least twelve (12) months prior to such Change in Control, and prior to the Outside Director's Retirement or earlier death. Any special election made under clause (a) or (b) of the preceding paragraph may be revoked, and a new special election may be made thereunder at any time; provided, however, that subject to Section 13(a), any such revocation or new election shall be effective only if it is made within the period specified in the preceding sentence. Any special election, or revocation of a special election, that may be made hereunder shall be made in the manner provided in the last sentence of the last paragraph of Section 4.
The lump sum payment to be made to an Outside Director pursuant to his or her election under clause (a) of the second preceding paragraph shall be in an amount that is Actuarially Equivalent (as defined in the GPU Companies Employee Pension Plan or any successor thereto and determined as of the first day of the month next following the date of the Outside Director's Retirement) to the pension benefits that otherwise would be payable hereunder with respect to the Outside Director if such pension benefits were to commence upon the Outside Director's Retirement or 60th birthday, whichever is later. Such lump sum payment shall be made by no later than thirty (30) days following the date of the Outside Director's Retirement.
The lump sum payment to be made pursuant to an Outside Director's election under clause (b) of the third preceding paragraph shall be in an amount that is Actuarially Equivalent (as defined in the GPU Companies Employee Pension Plan or any successor thereto and determined as of the first day of the month coincident with or next following the date on which the Change in Control occurs) to the payments that otherwise would be made hereunder with respect to the Outside Director's accumulated pension benefits after the date of such Change in Control. Such lump sum payment shall be made by no later than thirty (30) days following the date on which such Change in Control occurs.
7. Designated Beneficiary of Eligible Outside Director
If an Eligible Outside Director shall die without leaving a surviving spouse or if the Outside Director's surviving spouse shall die prior to payment in full of the outside Director's accumulated pension benefits, the payments which would otherwise have been made to the Outside Director's surviving spouse shall be made to the Outside Director's designated beneficiary (or beneficiaries). Such designations shall be made in writing on forms provided by the Corporation to the Outside Director. Any such designation by an Outside Director may be revoked by the Outside Director at any time before or after Retirement. Any such revocation shall be made in writing on a form provided by the Corporation to the Outside Director.
8. Provision for Benefits
All benefits payable hereunder shall be provided from the general assets of the Corporation. No Outside Director shall acquire any interest in any specific assets of the Corporation by reason of this Plan. An Outside Director shall have the status of a mere unsecured creditor of the Corporation with respect to his or her right to receive any payment under the Plan. The Plan shall constitute a mere promise by the Corporation to make payments in the future of the benefits provided for herein. It is intended that the arrangements reflected in this Plan be treated as unfunded for tax purposes.
9. Amendment and Termination
The Board of Directors reserves the right to terminate this Plan or amend
this Plan prospectively in any respect at any time, but no such amendment may
reduce (a) the benefits of any Outside Director who has previously Retired
hereunder, or (b) the benefits accrued hereunder by any Outside Director prior
to the effective date of such termination or amendment. In addition, the
definition of Change in Control in Section 2, the last sentence in Section 3,
the last paragraph in Section 4, this Section 9, and the last sentence of
Section 10 may not be amended or modified, and the Plan may not be terminated,
(i) at the request of a third party who has indicated an intention or taken
steps to effect a Change in Control and who effectuates a Change in Control,
(ii) within six (6) months prior to, or otherwise in connection with, or in
anticipation of, a Change in Control which has been threatened or proposed and
which actually occurs, or (iii) following a Change in Control, if the amendment,
modification or termination adversely affects the rights of any Outside Director under the Plan.
10. Administration
This Plan shall be administered by the Personnel, Compensation, and Nominating Committee of the Board of Directors. Such Committee's final decision, in making any determination or construction under this Plan and in exercising any discretionary power, shall in all instances be final and binding on all persons having or claiming any rights under this Plan. Notwithstanding the foregoing, any determination made by the Committee after the occurrence of a Change in Control that denies in whole or in part any claim made by any individual for benefits under the Plan shall be subject to judicial review, under a "de novo", rather than a deferential, standard.
11. Miscellaneous
Nothing herein contained shall be deemed to give any Outside Director the right to be retained as a director of the Corporation, nor shall it interfere with the Outside Director's right to terminate such directorship at any time. An Outside Director's rights to payments under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer (other than transfer by will or by the laws of descent and distribution, in the absence of a beneficiary designation), assignment, pledge, encumbrance, attachment or garnishment by creditors of the Outside Director or his or her spouse or other beneficiary.
12. Phase Out of Plan
Notwithstanding any other provision in this Plan to the contrary, the provisions of this Section 12 shall apply on or after July 1, 1997.
(a) No individual who first becomes an Outside Director on or after July 1, 1997 shall be entitled to receive any pension benefits under this Plan.
(b) For purposes of determining the amount of pension benefits payable under Section 4, 5 or 6 with respect to any individual who is an Outside Director on July 1, 1997, the number of months of such Outside Director's Board Service shall be determined by taking into account only months of Board Service completed prior to July 1, 1997.
(c)In the case of any individual who is an Outside Director on July 1, 1997, his or her Board Service on and after such date shall be taken into account for purposes of determining his or her eligibility under Section 3 for benefits payable under the Plan.
13. Additional Change in Control Provisions
In the event of a Change in Control, the provisions set forth below shall apply, notwithstanding any other provisions of the Plan to the contrary.
(a) The regular distribution election provided for under Section 4 and any special distribution election provided for under Section 6 may be made by an Outside Director, and any such election previously made by an Outside Director may be revoked and a new election made by the Outside Director under such Sections, at any time during the period beginning on the date of any agreement entered into by the Corporation which provides for the occurrence of one or more transactions which, if consummated, would constitute a Change in Control, and ending on the 45th day after such date (the "Window Period"). Any election, or revocation of an election, that may be made pursuant to this Section 13(a) shall be made in the manner set forth in Section 4. Any election, or revocation of an election under Section 4 that is made pursuant to this Section 13(a) shall be effective only if the transactions provided for in the agreement referred to in the preceding sentence are consummated.
(b) In the case of any Outside Director whose Retirement has not otherwise occurred prior to a Change in Control, such Outside Director's Retirement shall be treated, for purposes of this Plan, as occurring on the date on which such Change in Control occurs, unless an election under (c) below is in effect for the Outside Director at the time of such Change in Control.
(c) During the Window Period or on any date thereafter that is at least one year prior to the date on which a Change in Control occurs, an Outside Director may make an election under this Section 13(c) pursuant to which, if he or she is designated to serve as a member of the Successor Board (as hereinafter defined) immediately following the occurrence of a Change in Control, the Outside Director's Retirement under this Plan will not be treated as occurring on the date of the Change in Control but instead, will be treated as occurring on the date on which his or her service as a member of the Successor Board
terminates for any reason other than death. For purposes of this Section 13, the term "Successor Board" shall mean the board of directors of the corporation described in Section 13(e)(i). An election under this Section 13(c) shall be made in the manner set forth in Section 4.
(d) In the case of any Outside Director for whom an election under Section
13(c) is in effect at the time of a Change in Control, the Outside Director's
accumulated pension benefits shall become payable upon his or her Retirement or
earlier death subsequent to the Change in Control. Payment of such benefits
shall be made at the time or times, and in the form, specified in Section 4 or
5. The amount of accumulated pension benefits so payable shall be the amount
that would have been payable with respect to the Outside Director under Section
4 if his or her Retirement had occurred on the date on which the Change in
Control occurred.
(e) With respect to all periods subsequent to the occurrence of a Change in Control, the following terms shall have the following meanings:
(i) the term "Corporation" shall refer to the corporation whose acquisition of the Common Stock of the Corporation or substantially all of its assets, or whose merger with the Corporation, results in the occurrence of the Change in Control;
(ii) the term "Board of Directors" shall refer to the Successor Board; and
(iii) the term "Personnel, Compensation and Nominating Committee" shall refer to the committee of the Successor Board that has responsibility for the administration of the Plan after the occurrence of the Change in Control.
Exhibit 10-O
DEFERRED REMUNERATION PLAN FOR OUTSIDE DIRECTORS
OF GPU, INC.
(AS AMENDED AND RESTATED EFFECTIVE AUGUST 8, 2000)
1.1 The purpose of this document is to set forth the Deferred Remuneration Plan for Outside Directors, as amended and restated effective August 8, 2000. The Plan will be implemented by individual elections by each Director
2.1 This Plan provides for deferral by Directors of all or a portion of current Remuneration 1.2 Funds being deferred will be credited with the equivalent of interest in accordance with Section 6.
2.3 Each component of the deferred funds will be distributed as follows: (a) for a Director who elects deferral until a date or dates following his or her Retirement, to the Director, in accordance with his or her latest effective election. (b) for a Director who elects deferral until a date or dates preceding his or her Retirement, to the Director, in accordance with his or her initial election; or (c) if a Director dies before the deferred funds have been fully distributed, to his or her designated beneficiary, in accordance with the option in effect for the Director under Section 7.2 for each component except as the Board may otherwise determine, based on the circumstances at the time the distribution is to commence.
3.1 Account - refers to both Pre-Retirement and Retirement Accounts established for Directors unless specifically designated one or the other in the text of this Plan.
3.2 Board of Directors - refers to the Board of Directors of GPU, Inc.
3.3 Change in Control - A "Change in Control" shall mean the occurrence during the term of the Plan of:
(1) An acquisition (other than directly from GPU, Inc. (the "Corporation")) of any common stock of the Corporation ("Common Stock") or other voting securities of the Corporation entitled to vote generally for the election of directors of the Corporation (the "Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the then outstanding shares of Common Stock or the combined voting power of the Corporation's then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (A) an employee benefit plan (or a trust forming a part thereof) maintained by (i) the Corporation or (ii) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Corporation (for purposes of this definition, a "Subsidiary"), (B) the Corporation or its Subsidiaries, or (C) any Person in connection with a "Non-Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996, are members of the Board of Directors (the "Incumbent Board"), cease for any reason to constitute at least seventy percent (70%) of the members of the Board of Directors; provided, however, that if the election, or
nomination for election by the Corporation's shareholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the board of directors of the Corporation (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization with or into the Corporation or in which securities of the Corporation are issued, unless such merger, consolidation or reorganization is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a merger, consolidation or reorganization with or into the Corporation or in which securities of the Corporation are issued where:
(i) the shareholders of the Corporation, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least sixty percent (60%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization,
(ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least seventy percent (70%) of the members of the board of directors of the Surviving Corporation, or a corporation, directly or indirectly, beneficially owning a majority of the Voting Securities of the Surviving Corporation, and
(iii) no Person other than (w) the Corporation, (x) any Subsidiary, (y) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to such merger consolidation or reorganization, was maintained by the Corporation was maintained by the Corporation or any Subsidiary, or (z) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities or common stock of the Corporation, has Beneficial Ownership of twenty percent (20%) or more of the combined voting power of the Surviving Corporation's then outstanding voting securities or its common stock;
(B) A complete liquidation or dissolution of the Corporation; or
(C) The sale or other disposition of all or substantially all of the assets of the Corporation to any Person (other than a transfer to a Subsidiary). Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the then outstanding Common Stock or Voting Securities as a result of the acquisition of Common Stock or Voting Securities by the Corporation which, by reducing the number of shares of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares of Common Stock or Voting Securities by the Corporation, and after such share acquisition by the Corporation, the Subject Person becomes the Beneficial Owner of any additional shares of Common Stock or Voting Securities which increases the percentage of the then outstanding shares of Common Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
3.4 Committee - refers to the Personnel, Compensation and Nominating Committee of the Corporation.
3.5 Director - refers to a member of the Board of Directors who is not an employee of the Corporation or any of its subsidiaries.
3.6 Plan - refers to this Deferred Remuneration Plan for Outside Directors as described in this document and as it may be amended in the future.
3.7 Remuneration - refers to all cash amounts earned during a calendar year by a Director for services performed as a Director (including services performed as a member of a committee of the Board of Directors), but does not include consulting fees, reimbursement for travel or other expenses or Corporation contributions to other benefit plans.
3.8 Pre-Retirement Account - refers to the memorandum account which shall be established and maintained for a Director who elects, pursuant to Section 5.2, to have payment of any portion of his or her Remuneration for any Plan Year deferred to a date prior to his or her Retirement. A separate Pre-Retirement Account shall be established and maintained for the Remuneration for each Plan Year which the Director so elects to defer.
3.9 Retirement Account - refers to the memorandum account which shall be
established and maintained for a Director who elects, pursuant to
Section 5.2, to have payment of any portion of his or her
Remuneration for any Plan Year deferred to a date after his or her
Retirement. All amounts deferred pursuant to elections made on or
before December 31, 1985 under the Plan by a Director, together with
all interest equivalents earned by such election and credited to
such amounts prior to December 31, 1986, shall be treated, on or
after such date, as part of the Director's Retirement Account.
3.10 Retirement - refers to the retirement from service on the Board of Directors, on account of resignation, death, or any other reason, without becoming an employee of the Corporation or any of its subsidiaries.
3.11 Plan Year - refers to the period October 1, 1986 through December 31, 1986; and each twelve (12) month period from January 1 through December 31 thereafter.
4.1 The Board of Directors has established this Plan. The Board of Directors may in its sole discretion modify the provisions of the Plan from time-to-time, or, may terminate the entire Plan at any
time; provided, however, that Section 3.3, this Section 4.1, Section 4.4, the last sentence in the first paragraph of Section 6 and the last paragraph in Section 7.2 may not be amended or modified, and the Plan may not be terminated, (i) at the request of a third party who has indicated an intention or taken steps to effect a Change in Control and who effectuates a Change in Control, (ii) within six (6) months prior to, or otherwise in connection with, or in anticipation of, a Change in Control which has been threatened or proposed and which actually occurs, or (iii) following a Change in Control, if the amendment, modification or termination adversely affects the rights of any Director under the Plan. No modification or termination of the Plan shall adversely affect the rights of any Director with respect to any amounts standing to the Director's credit in any Account immediately prior to the date of the adoption of such modification or termination, including without limitation any rights with respect to the time and method of payment of, or the crediting of interest equivalents with respect to, any such amounts
4.2 Responsibility for the ongoing administration of this Plan rests with the Committee.
4.3 The Committee may delegate the daily administration of this Plan, including the maintenance of appropriate records, receiving notifications, making filings, and maintaining related documentation, to the Vice President - Human Resources of GPU Service, Inc. and to the Vice President's staff or to any one or more other officers or employees of GPU Service, Inc. or any other subsidiary of GPU, Inc.
4.4 All questions concerning the Plan, as well as any dispute over accounting or administrative procedures or interpretation of the Plan, will be resolved at the sole discretion of the Committee, except that no member of the Committee shall vote on any matter which affects that member but not all other members of the Committee. Notwithstanding the foregoing, any determination made by the Committee after the occurrence of a Change in Control that denies in whole or in part any claim made by any individual for benefits under the Plan shall be subject to judicial review, under a "de novo", rather than a deferential, standard.
4.5 All provisions of this Plan, its administration and interpretation, are intended to be in compliance with appropriate Internal Revenue Service Rulings and judicial decisions regarding the construction and operation of a deferred compensation program, so that deferred Remuneration and interest equivalents thereon will not constitute income constructively received prior to being distributed under the terms of this Plan.
4.6 A Director's election to voluntarily defer Remuneration, selection of a distribution commencement date and distribution option, and designation of a beneficiary and contingent beneficiary, made pursuant to this Plan shall be made in writing, on a form furnished to the Director by the Corporation for such purposes, signed and delivered personally or by first class mail to:
Corporate Secretary
GPU, Inc.
300 Madison Avenue
Morristown, New Jersey 07962
Any such election, selection, designation, or change therein, shall not become effective unless and until received by the Corporate Secretary. Subject to Section 7.2 and 9(a), a change in a distribution election made by a Director after April 30, 1987 will not be effective unless made at least twenty-four (24) months prior to the Director's Retirement or Disability.
5.1 A Director may elect to defer all or any portion of his or her Remuneration for any Plan Year, providing such portion is three thousand dollars ($3,000) or more. A separate deferral election shall be made with respect to a Director's Remuneration for each Plan Year. An election to defer Remuneration for the 1986 amended Plan Year shall be made on or prior to September 30. In subsequent years, the election shall be made on or before December 31 of the year preceding the Plan Year. Notwithstanding, the foregoing, (a) Directors who are initially elected prior to December 1st of any Plan Year may, within 30 days of such initial election, make a deferral election for the then current Plan Year, and (b) Directors who are initially elected after December 1st of any Plan Year may immediately make a deferral election for both the then current Plan
Year and for the immediately succeeding Plan Year; provided,
however, that any deferral election made pursuant to clause (a) or
(b) hereof shall be effective only with respect to Remuneration
earned after such election has become effective. All elections under
this Section 5.1 shall be irrevocable.
5.2 In his or her election to defer Remuneration for any Plan Year, a Director shall specify the amount or portion of the Remuneration to be deferred, and shall indicate whether the Remuneration so deferred is to be credited to a Pre-Retirement Account, or to a Retirement Account.
5.3 With respect to Remuneration deferred hereunder for a Plan Year
which a Director elects to have credited to his or her
Pre-Retirement Account, the Director shall specify in the election
form the date on which distribution of the Pre-Retirement Account
shall be made or commence. The date so selected shall be no earlier
than 24 months from the close of the Plan Year. In the election form
for the Plan Year, the Director shall also select an option under
Section 7.2 for the distribution of the Pre-Retirement Account.
Except as provided in Section 7.2 or 9(a), the date so specified,
and the option so selected, may not thereafter be changed by the
Director.
5.4 With respect to any Remuneration deferred hereunder which a Director elects to have credited to his or her Retirement Account, the Director shall, at the time he or she first elects to have an amount credited to that account, also elect a distribution commencement date and a distribution option under Section 7.2 for the distribution of the Retirement Account. A Director may, subject to the provisions of Section 4.6, change any election as to the distribution commencement date and distribution option for the Retirement Account previously made by the Director. The distribution commencement date so elected shall be either January 15 of the calendar year following the Director's Retirement, or January 15 of any subsequent calendar year.
5.5 In the case of a Director who, prior to January 1, 1986, made a deferral election under the Plan with respect to his or her Remuneration for the calendar year 1986, any deferral election made by the Director hereunder with respect to the period commencing
October 1, 1986 and ending December 31, 1986 shall be effective, for that period, only with respect to the excess, if any, of the amount he or she so elects to defer for said period over the amount of Remuneration for said period deferred pursuant to the Director's prior election.
5.6 The amounts which are deferred, including interest equivalents, will be credited to a Director's Account. Prior to distribution, all amounts deferred including interest equivalents, will constitute general assets of the Corporation for use as it deems necessary, and will be subject to the claims of the Corporation's creditors. A Director shall have the status of a mere unsecured creditor of the Corporation with respect to his or her right to receive any payment under the Plan. The Plan shall constitute a mere promise by the Corporation to make payments in the future of the benefits provided for herein. It is intended that the arrangements reflected in this Plan be treated as unfunded for tax purposes.
Interest equivalents, compounded monthly on deposits treated as monthly transactions, will be credited at the end of each quarter in the calendar year. Such credit will be made to the balance of each account maintained for a Director hereunder, including the undistributed balance of any such account from which payments are being made in installments. The rate used in calculation of interest equivalents will be no less than the rate equal to the simple average of Citibank N.A. of New York Prime Rates for the last business day of each of the three months in the calendar quarter or, if greater, such other rate as established from time to time by the Committee.
The Corporation may, but shall not be required to, purchase a life insurance policy, or policies, to assist it in funding its payment obligations under the Plan. Any policy, or policies, so purchased, shall at all times remain the exclusive property of the Corporation and subject to the claims of its creditors. Neither the Director nor any beneficiary or contingent beneficiary designated by the Director shall have any interest in, or rights with respect to such policy.
7.1 A Director's Pre-Retirement Account shall be distributed to the Director, or distributions from such Pre-Retirement Accounts shall commence, on the date or dates specified in the elections made by the Director with respect to such accounts. A Director's Retirement Account shall be distributed to the Director, or distributions from such Retirement Account shall commence, on the date specified in the Director's latest effective election.
7.2 The options for distribution are:
(a) A single lump sum payment.
(b) Annual Installments over any fixed number of years selected by the Director, with a minimum of five annual installments required for the Retirement Account.
(c) Other option, in equal or unequal payments, as specifically approved by the Committee. If distribution of a Director's Account is to be made in annual installments under Option (b) of Section 7.2, the amount of each installment will equal the total amount in said Account on the date the installment is payable, divided by the number of installments remaining to be paid. In addition, if the distributions are made in installments under Option (b) of Section 7.2, the interest equivalent accrued on each Account each year after the date the first installment is payable will be distributed on each anniversary of such date.
Notwithstanding any other optional form of distribution or date for the payment (or commencement of payment) of benefits otherwise elected or provided for hereunder, each Director shall be permitted to make either one or both of the following special distribution elections: (x) to have the entire balance of his or her Accounts distributed in the form of a single lump sum payment in the event of the Director's Retirement upon the occurrence of a Change in Control, or (y) if a Change in Control occurs after the Director's Retirement but before all payments with respect to the balances of his or her Accounts have been made in accordance with the Director's elections under Sections 5.3 and 5.4, to have the entire
balance of each of his Accounts that remains unpaid at the time of such Change in Control distributed in the form of a single lump sum payment. Subject to Section 9(a), any such election shall be effective only if it is made at least twelve (12) months prior to such Change in Control and prior to the Director's Retirement. Any special election made under clause (x) or (y) above may be revoked, and a new special election may be made thereunder at any time; provided, however, that any such revocation or new election shall be effective only if it is made within the period specified in the preceding sentence, or within such other period as may be applicable under Section 9(a). Any special election, or revocation of a special election, that may be made hereunder shall be made in the manner set forth in Section 4.6. The lump sum payment to be made pursuant to a Director's special election hereunder shall be made {by} no later than thirty (30) days following the date of the Director's Retirement or, in the case of a special election under clause (y) above, the date of the Change in Control.
7.3 Except as the Committee may otherwise determine based on the circumstances at the time the distribution to the beneficiary is to commence
(a) If a Director should die after distribution of his / her Account maintained for the Director has commenced, but before the entire balance has been fully distributed, distributions will continue to be made to the Director's designated beneficiary or contingent beneficiary, in accordance with the distribution option in effect for such Account at the time of the Director's death.
(b) If a Director should die before any distribution from an Account maintained for the Director hereunder has been made to him or her, distribution to the Director's designated beneficiary or contingent beneficiary shall be made, or shall commence, as soon as practicable after the Director's death, in accordance with the distribution option in effect for such Account at the time of the Director's death.
Amounts remaining to be paid, after the death of the Director, to the designated beneficiary and the contingent beneficiary, will be paid in a lump sum to the estate of the last of such persons to die.
7.4 Notwithstanding anything herein to the contrary, any Account maintained for a Director hereunder may be distributed, in whole or in part, to such Director on any date earlier than the date on which distribution is to be made, or commence, pursuant to the Director's election if: (a) the Director requests early distribution, and (b) the Committee, in its sole discretion, determines that early distribution is necessary to help the Director meet some severe financial need arising from circumstances which were beyond the Director's control and which were not foreseen by the Director at the time he or she made the election as to the date or dates for distribution. A request by a Director for an early distribution shall be made in writing, shall set forth sufficient information as to the Director's needs for such distribution to enable the Committee to take action on his or her request, and shall be mailed or delivered to the Corporation's Corporate Secretary.
8.1 A Director's rights to payments under this Plan shall not be subject to any manner to anticipation, alienation, sale, transfer (other than transfer by will or by the laws of descent and distribution, in the absence of a beneficiary designation), assignment, pledge, encumbrance, attachment or garnishment by creditors of the Director or his or her spouse or other beneficiary.
8.2 All amounts paid under the Plan, including the interest equivalents credited to a Director's Account, are considered to be Remuneration. The crediting of interest equivalents is intended to preserve the value of the Remuneration so deferred for the Director.
9. Additional Change in Control Provisions
In the event of a Change in Control, the provisions set forth below shall apply, notwithstanding any other provisions of the Plan to the contrary.
(a) The regular distribution elections provided for under Section 5.4 with respect to a Director's Retirement Account and any special distribution
election provided for under Section 7.2 with respect to a Director's
Pre-Retirement and Retirement Accounts may be made by a Director, and any
such election previously made by a Director may be revoked and a new
election made by the Director under such Sections, at any time during the
period beginning on the date of any agreement entered into by the
Corporation which provides for the occurrence of one or more transactions
which, if consummated, would constitute a Change in Control, and ending on
the 45th day after such date (the "Window Period"). Any election, or
revocation of an election, that may be made pursuant to this Section 9(a)
shall be made in the manner set forth in Section 4.6. Any election, or
revocation of an election under Section 5.4 that is made pursuant to this
Section 9(a) shall be effective only if the transactions provided for in
the agreement referred to in the preceding sentence are consummated.
(b) In the case of any Director whose Retirement has not otherwise occurred prior to a Change in Control, such Director's Retirement shall be treated, for purposes of this Plan, as occurring on the date on which such Change in Control occurs, unless an election under (c) below is in effect for the Director at the time of such Change in Control.
(c) During the Window Period or on any date thereafter that is at least
one year prior to the date on which a Change in Control occurs, a Director
may make an election under this Section 9(c) pursuant to which, if he or
she is designated to serve as a member of the Successor Board (as
hereinafter defined) immediately following the occurrence of a Change in
Control, the Director's Retirement under this Plan will not be treated as
occurring on the date of the Change in Control but instead, will be
treated as occurring on the date on which his or her service as a member
of the Successor Board terminates for any reason. For purposes of this
Section 9, the term "Successor Board" shall mean the board of directors of
the corporation described in Section 9(e)(i). An election under this
Section 9(c) shall be made in the manner set forth in Section 4.6.
(d) In the case of any Director for whom an election under Section 9(c) is in effect at the time of a Change in Control, the Director's Retirement Account shall become payable upon his or her Retirement subsequent to the Change in Control. Payment of such benefits shall be made at the time or times, and in the form, specified in the election in effect for the Director under Section 5.3 at the time of his or her retirement.
(e) With respect to all periods subsequent to the occurrence of a Change in Control, the following terms shall have the following meanings:
(i) the term "Corporation" shall refer to the corporation whose acquisition of the Common Stock of the Corporation or substantially all of its assets, or whose merger with the Corporation, results in the occurrence of the Change in Control;
(ii) the term "Board of Directors" shall refer to the Successor Board;
(iii) the term "Committee" shall refer to the committee of the Successor Board that has responsibility for the administration of the Plan after the occurrence of the Change in Control; and
(iv) the term "Remuneration" shall not include any amounts earned by a Director for services performed as a member of the Successor Board, unless the Successor Board otherwise determines.
Exhibit 10W
STOCK OPTION AGREEMENT
THIS AGREEMENT made as of this -------- day of ------------, 2000, by and between GPU, Inc. (the "Corporation") and ------------(the "Recipient"):
WHEREAS, the Corporation maintains the 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries (the "Plan") under which the Personnel, Compensation and Nominating Committee of the Corporation's Board of Directors (the "Committee") may, among other things, grant options to purchase shares of the Corporation's common stock to such employees of the Corporation and its Subsidiaries as the Committee may determine, subject to such terms, conditions or restrictions as it may deem appropriate;
WHEREAS, pursuant to the Plan, the Committee has granted a stock option to the Recipient subject to the terms and conditions set forth in this Agreement; and
WHEREAS, the Plan requires that the grant of a stock option be evidenced by a written agreement between the Corporation and the Recipient which contains such restrictions, terms and conditions as the Committee may require;
NOW, THEREFORE, the parties hereto agree as follows:
1. Date of Grant. This Agreement evidences the grant by the Committee to the Recipient, on ------------------------ , 2000 (the "Date of Grant") of an option (the "Option") to purchase ------------- shares of common stock of the Corporation ("Shares").
2. Purchase Price. The price at which any Shares may be purchased pursuant to any exercise of this Option shall be $-----------(1) per Share.
3. Exercisability. This Option shall become exercisable in three equal annual installments, beginning on the first anniversary of the Date of Grant and continuing each year through the third anniversary of the Date of Grant. Each annual installment shall include a number of Shares equal to 33-1/3% of the total number of Shares specified in Section 1 above. As of any date, the portion of this Option that is then exercisable, and the portion of this Option that is
(1) Insert amount equal to 100% of per share closing price of GPU shares on the Date of Grant.
not yet exercisable as of such date, are referred to herein, respectively, as the "Exercisable Portion", and the "Non-Exercisable Portion", of this Option.
4. Option Term. The term of this Option ("Option Term") shall be the period beginning on the Date of Grant and ending on the 10th anniversary thereof. Subject to the provisions of Sections 5, 8 and 11 hereof and the applicable provisions of the Plan, this Option may be exercised at any time during the Option Term to purchase any part or all of the Shares included in the Exercisable Portion of the Option at the time of exercise. Unless sooner terminated, cancelled or forfeited pursuant to Section 5, 8 or 11 hereof and the applicable provisions of the Plan, this Option shall expire at, and shall cease to be exercisable after, the end of the Option Term.
5. Exercise in the Event of Termination of Employment. In the event the Recipient's employment with the Corporation and its subsidiaries should terminate, this Option may be exercised in accordance with the following provisions:
(a) If the Recipient's employment terminates as a result of death, the Non-Exercisable Portion of this Option at the date of the Recipient's death shall become immediately and fully exercisable, and this Option (including the portion thereof that becomes exercisable upon the Recipient's death) may be exercised by the Recipient's Beneficiary (as defined in Section 13 below) at any time or from time to time during the Recipient's Post-Termination Exercise Period (as defined in Section 5(f) below).
(b) If the Recipient's employment terminates as a result of Total Disability (as defined in the Plan), the Non-Exercisable Portion of this Option at the date of the Recipient's termination of employment shall become immediately and fully exercisable, and this Option (including the portion thereof that becomes exercisable upon such termination of the Recipient's employment) may be exercised by the Recipient at any time and from time to time during the Recipient's Post-Termination Exercise Period. If the Recipient's employment has terminated as a result of Total Disability and the Recipient should thereafter die before the end of the Recipient's Post-Termination Exercise Period, the Exercisable Portion of this Option at the date of the Recipient's death shall continue to be exercisable by the Recipient's Beneficiary at any time or from time to time after the date of the Recipient's death until the earlier of the second anniversary of such date of death or the date on which the Option Term expires.
(c) If the Recipient's employment terminates as a result of Eligible Retirement (as defined in the Plan), this Option may be exercised (i) with respect to the Exercisable Portion of the Option, at any time or from time to time during the Recipient's Post-Termination Exercise Period and (ii) with respect to the Non-Exercisable Portion of the Option, at any time or from time to time on or after the date or dates during the Recipient's Post-Termination Exercise Period on which such portion of the Option becomes exercisable, but only during such Period. If the Recipient should die prior to the end of the Recipient's Post-Termination Exercise Period, the Non-Exercisable Portion, if any, of this Option at the date of the Recipient's death shall become immediately and fully exercisable, and this Option (including the portion thereof that becomes exercisable upon the Recipient's death) may be exercised by the Recipient's Beneficiary at any time or from time to time after the Recipient's death until the earlier of the second anniversary of such date of death or the date on which the Option Term expires.
(d) If the Recipient's employment terminates for any reason other than death, Total Disability or Eligible Retirement, this Option (including the Exercisable Portion of this Option, to the extent it has not been exercised prior to the date of such termination of the Recipient's employment) shall be forfeited and cancelled as of the date of the Recipient's termination of employment.
(e) Notwithstanding the foregoing, the Committee may, in its sole discretion, determine that any part or all of the Non-Exercisable Portion of this Option at the date of the Recipient's termination of employment (and any part or all of the Exercisable Portion at such date, if the Recipient's employment terminates for any reason other than death, Total Disability or Eligible Retirement) shall not be forfeited and cancelled, and may be exercised by the Recipient (or in the event of the Recipient's death by the Recipient's Beneficiary) for such period after such date of termination of employment and prior to the expiration of the Option Term, as the Committee shall specify in such determination.
(f) For purposes of the foregoing, the Recipient's "Post-Termination Exercise Period" shall mean the period beginning on the date of the Recipient's termination of employment and ending (i) on the second anniversary of such date, if the Recipient's employment has terminated as a result of the Recipient's death, or (ii) on the first anniversary of such date, if the Recipient's employment has terminated as a result of Total Disability, or (iii) on the fifth anniversary of such date, if the Recipient's employment has terminated as a
result of Eligible Retirement. Notwithstanding the foregoing, the Recipient's Post-Termination Exercise Period shall end no later than the date on which the Option Term expires.
(g) For purposes of this Agreement, the Recipient's employment shall not be treated as having terminated unless the Recipient is no longer employed with the Corporation or any "subsidiary" as defined in the Plan.
6. Manner of Exercise. This Option may be exercised in accordance with such procedures as the Committee, in its discretion may approve from time to time. The Option may be exercised only with respect to a whole number of Shares, and may not be exercised, at any single time, as to less than 100 Shares or, if less, the total number of Shares as to which the Option is then exercisable. To the extent the Option exercise procedure approved by the Committee so provides, the Recipient or his [her] Permitted Transferee (as defined in Section 10 below) or Beneficiary (as defined in Section 13 below), as the case may be, shall be responsible for the payment of any fee or brokerage commissions charged by ChaseMellon Shareholder Services (or by any other entity retained by the Corporation to administer the stock option program) in connection with any exercise of this Option.
7. Manner of Payment. Payment of the purchase price for Shares purchased pursuant to any exercise of this Option may be made (a) in cash, (b) by delivery of certificates, duly endorsed or accompanied by appropriate stock powers, representing Shares previously owned by the Recipient having an aggregate fair market value equal to the purchase price, or (c) by a combination of payment in cash and delivery of certificates for Shares, as provided in (a) and (b) above, having a combined sum and value equal to the purchase price. For purposes of the foregoing, the fair market value of any Shares included in the payment of the purchase price shall be determined on the basis of the per share closing price of the Corporation's common stock as reported on the New York Stock Exchange Composite Tape for the date of exercise, or if there were no sales on such date, for the next preceding day on which there were sales. The purchase price may also be paid in such other form or manner as the Committee may from time to time approve.
8. Change in Control. Notwithstanding any other provision herein to the contrary, if a Change in Control (as defined in the Plan) occurs at any time during the Option Term, this Option shall, upon the occurrence of the Change in Control, become immediately exercisable as to all Shares that are then still subject to this Option. The Recipient shall be provided an opportunity to
exercise this Option at such time prior to the time as of which the Change in Control becomes effective, and in accordance with such procedures, as the Committee shall determine.
9. Tax Status of Option. This Option shall be treated as a "non-qualified option", as defined in the Plan.
10. Nontransferability. This Option shall be nontransferable and may be exercised during the Recipient's lifetime only by the Recipient. Notwithstanding the foregoing, the Recipient may transfer this Option (or any portion thereof) by gift to a "Permitted Transferee" as defined below, subject to the following:
(i) such transfer shall be permitted only if the Recipient does not receive any consideration for the transfer;
(ii) such transfer shall not be effective unless and until the Recipient has furnished the Committee with written notice of the transfer and copies of all documents evidencing the transfer;
(iii) any portion of this Option that is transferred by the Recipient to a Permitted Transferee may be exercised by the Permitted Transferee to the same extent as the Recipient would have been entitled to exercise it, and shall remain subject to all of the terms and conditions that would have applied to this Option or portion thereof under the provisions of this Agreement and the Plan if the Recipient had not transferred the Option or portion thereof to the Permitted Transferee;
(iv) any portion of this Option that is transferred by the Recipient to a Permitted Transferee may not be further transferred by the Permitted Transferee other than by will or the laws of descent and distribution.
For purposes of the foregoing, a Permitted Transferee shall mean (i) one or more
members of the Recipient's Immediate Family (as hereinafter defined), (ii) a
trust solely for the benefit of the Recipient and/or one or more members of his
[her] Immediate Family, or (iii) a partnership or limited liability company
whose only partners or members are the Recipient and/or one or more members of
his [her] Immediate Family. For this purpose, members of the Recipient's
"Immediate Family" shall include his [her] parents, spouse, children or
grandchildren (including adopted children and grandchildren and step-children
and step-grandchildren).
11. Other Terms and Conditions. This Option is subject to the following additional terms and conditions:
(a) Notwithstanding any other provisions herein to the contrary, this Option (including both the Exercisable Portion and the Non-Exercisable Portion thereof) may be cancelled by the Committee at any time, and upon such cancellation the Recipient shall cease to have any further right to exercise this Option, if the Committee determines that the Recipient has been discharged from employment with the Corporation or any of its subsidiaries for cause.
(b) The Recipient shall not have any rights as a shareholder with respect to any Shares that are subject to this Option prior to the date as of which such Shares are issued to the Recipient pursuant to his exercise of this Option.
(c) The Recipient's rights under this Option shall be subject to all applicable provisions of the Plan, as in effect from time to time at and after the Date of Grant.
12. Taxes. The Corporation or any of its subsidiaries may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of all federal, state and local taxes required by law to be withheld with respect to this Option and the exercise thereof including, but not limited to, (a) deducting the amount so required to be withheld from any other amount then or thereafter payable to the Recipient, and/or (b) requiring the Recipient or the Recipient's Permitted Transferee or Beneficiary to pay to the Corporation or any of its subsidiaries the amount so required to be withheld as a condition of the issuance, delivery, distribution or release of any Shares. Such payment shall be made in cash unless, and except to the extent that, the Corporation permits such payment to be made in Shares.
13. Designation of Beneficiary. The Recipient shall file with the Committee a written designation of one or more persons (the "Beneficiary") who shall be entitled to exercise this Option after the Recipient's death, to the extent such exercise is otherwise permitted hereunder. The Recipient may, from time to time, revoke or change the Recipient's Beneficiary designation without the consent of any previously designated Beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Recipient's death, and in no event shall it be effective as of a date prior to such receipt. If at the date of the Recipient's death there is no designation of a Beneficiary in effect for the Recipient pursuant to the provisions of this
Section 13, or if no Beneficiary designated by the Recipient in accordance with the provisions hereof survives to exercise this Option, the Recipient's estate shall be treated as the Recipient's Beneficiary for all purposes. Notwithstanding any other provision herein to the contrary, if any portion of this Option is transferred to a Permitted Transferee pursuant to Section 10, the Permitted Transferee shall be treated, at all times after such transfer, as the Recipient's Beneficiary with respect to the portion so transferred.
14. Governing Laws. This Agreement shall be governed by the laws of the Commonwealth of Pennsylvania applicable to contracts made, and to be enforced, within the Commonwealth of Pennsylvania.
15. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Corporation and its successors and assigns, and the Recipient, the Recipient's Beneficiary and the Recipient's estate.
16. Entire Agreement. This Agreement contains the entire understanding of the parties and shall not be modified or amended except in writing and duly signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the date set forth above.
GPU, INC.
[Print Name of Recipient]
Exhibit 10-X
PERFORMANCE UNITS AGREEMENT UNDER
THE 1990 STOCK PLAN FOR EMPLOYEES OF
GPU, INC.
AND SUBSIDIARIES
(2000 AGREEMENT)
AGREEMENT made as of -------------------------------, by and between GPU, Inc. (the "Corporation") and ----------------------------- (the "Recipient"):
WHEREAS, the Corporation maintains the 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries (the "Plan") under which the Personnel, Compensation and Nominating Committee of the Corporation's Board of Directors (the "Committee") may, among other things, award units ("Performance Units") representing rights to acquire shares of the Corporation's Common Stock, $2.50 par value ("Common Stock") to such employees of the Corporation and its subsidiaries as the Committee may determine, subject to such terms, conditions or restrictions as it may deem appropriate;
WHEREAS, pursuant to the Plan, the Committee has granted to the Recipient an award of Performance Units subject to the terms and conditions set forth in this Agreement; and
WHEREAS, the Plan requires that an award of Performance Units be evidenced by a written agreement between the Corporation and the Recipient that contains such restrictions, terms and conditions as the Committee may require;
NOW, THEREFORE, the parties hereto agree as follows:
1. AWARD OF PERFORMANCE UNITS; NATURE OF RIGHTS
(a) In accordance with the provisions of the Plan, the Committee
awarded to the Recipient on ----------------- (the "Award Date")
----------- Performance Units. Each unit so awarded, and each
additional Performance Unit credited to the Recipient pursuant to
Section 2 (the Performance Units so awarded and the additional
Performance Units so credited are hereinafter referred to
collectively as the Recipient's "Units"), shall entitle the
Recipient, upon the vesting of such units as provided in Section 3
hereof, to receive one share of Common Stock, or a cash payment in
lieu of such share, subject to the terms, conditions, and
restrictions set forth herein.
(b) Prior to the issuance, as provided in Section 4 or 5 hereof, of shares of Common Stock with respect to the Recipient's Units, or with respect to the Recipient's "Deferred Vested Units" as defined in Section 5(a)(ii) hereof, the Recipient shall not be entitled to any of the rights of a stockholder of the Corporation by reason of such Units or Deferred Vested Units.
(c) Notwithstanding anything in this Agreement to the contrary, the Recipient shall have the status of a mere unsecured creditor of the Corporation with respect to the Recipient's right to receive any payment hereunder; and this Agreement shall constitute a mere promise by the Corporation to make payments in the future in accordance with the terms hereof. It is the intention of the parties hereto that the arrangements set forth in this Agreement be treated as unfunded for tax purposes and, if it should be determined that Title I of ERISA is applicable to such arrangements, for purposes of Title I of ERISA.
2. ADDITIONAL PERFORMANCE UNITS
(a) As of each date prior to the Vesting Date (as defined in Section 3(a) below) on which a dividend is paid on the Common Stock ("Dividend Payment Date"), there shall be credited to the Recipient hereunder a number of additional Performance Units determined by multiplying (i) the aggregate number of Units standing to the Recipient's credit immediately prior to such Dividend Payment Date, by (ii) the quotient resulting from dividing (A) the per share amount of the dividend so paid by (B) the price per share used for the reinvestment of dividends paid on such Dividend Payment Date under the provisions of the Corporation's Dividend Reinvestment and Stock Purchase Plan.
(b) Any additional Performance Units credited to the Recipient pursuant to this Section 2 shall be subject to the same terms, conditions and restrictions as are applicable with respect to the Recipient's initially awarded Performance Units.
3. ADJUSTMENT AND VESTING OF UNITS
(a) For purposes of this Agreement, the Recipient's "Vesting Date" shall mean the earliest to occur of the following dates:
(i) the third anniversary of the Award Date;
(ii) the date as of which the Recipient's employment with the Corporation or any subsidiary terminates as a result of the Recipient's death; or
(iii) an "Acceleration Date," as defined in the Plan.
(b) As of the Recipient's Vesting Date, the aggregate number of Units then standing to the Recipient's credit shall be adjusted in accordance with the following provisions:
(i) The aggregate number of the Recipient's Units shall be adjusted by multiplying such aggregate number by the Performance Percentage determined pursuant to the following table:
If the Corporation's TSR The Performance Percentile Ranking is in the Percentage shall be: ---------------------------- -------------------- 85th percentile - or above 200% 75th to 84th 150 65th to 74th 125 55th to 64th 100 50th to 54th 75 40th to 49th 50 below 40th 0 |
For purposes of the foregoing, the Corporation's TSR Percentile Ranking shall be determined by (A) ascertaining, for each company (including the Corporation) included in the Standard & Poor's Electric Utility Companies Index (the "Index") on the last day of the Performance Period (as defined below), such company's average quarterly total shareholder return ("TSR") for all calendar quarters in the Performance Period, as reported in the Index (but taking into account only those calendar quarters during which the company was included in the Index); (B) ascertaining the number of companies so included in the Index whose average quarterly TSR for the Performance Period is lower than the Corporation's; (C) dividing such number by the total number of companies included in the Index on the last day of the Performance Period; and (D) rounding the resulting quotient to the nearest whole percentage point. The "Performance Period" shall mean the period from January 1, 2000 through December 31, 2002.
(ii) Notwithstanding the foregoing, (A) if the Recipient's Vesting Date occurs by reason of the Recipient's death prior to the first day of the calendar year which includes the third anniversary of the Award Date, the Recipient's Units shall not be adjusted in the manner described in subparagraph (i) above; and (B) if the Recipient's Vesting Date occurs by reason of an Acceleration Date occurring prior to such first day, the adjustment with respect to the Recipient's Units required under subparagraph (i) above shall be made using as the applicable Performance Percentage 100% or, if greater, the Performance Percentage that would apply under the table set forth in subparagraph (i) above if the Performance Period had ended on December 31 of the calendar year immediately preceding such Acceleration Date.
(iii) If the Recipient's employment with the Corporation or
any subsidiary terminates prior to the third anniversary of
the Award Date as a result of the Recipient's death, "Eligible
Retirement" as defined in the Plan or "Total Disability" as
defined in the Plan, the number of Units standing to the
Recipient's credit as of the Recipient's Vesting Date (after
taking into account any adjustment required under subparagraph
(i) above) shall be adjusted (or further adjusted) by
multiplying such number of Units by the Recipient's Service
Percentage. The Recipient's "Service Percentage" shall mean
the percentage determined by dividing by 36 the number of
months in the period beginning on the Award Date and ending on
the date of such termination of the Recipient's employment;
and for this purpose, any fraction of a month included in such
period shall be treated as a full month. This subparagraph
(iii) shall not apply if the Recipient's Vesting Date occurs
by reason of the occurrence of an Acceleration Date.
(c) As of the Recipient's Vesting Date, all Units then standing to the Recipient's credit (after taking into account any adjustments required under subparagraphs (i), (ii) and (iii) of paragraph (b) above) shall become vested. If the number of Units standing to the Recipient's credit immediately prior to any adjustments
made pursuant to subparagraphs (i), (ii) and (iii) of paragraph (b) above exceed the number of Units standing to the Recipient's credit after giving effect to such adjustments, all of the Recipient's rights with respect to such excess number of Units shall be forfeited as of the Vesting Date. If the Recipient's employment with the Corporation or any subsidiary should terminate before the Recipient's Vesting Date for any reason other than as a result of the Recipient's Eligible Retirement or Total Disability, all of the Recipient's rights with respect to any Units credited to the Recipient hereunder shall be forfeited as of the date of such termination.
(d) For purposes of this Agreement, (i) the term "subsidiary" shall have the same meaning as in paragraph 4(a) of the Plan and (ii) the transfer of the Recipient's employment from one subsidiary to another shall not be treated as a termination of the Recipient's employment.
4. PAYMENT FOR VESTED UNITS
(a) Upon the Vesting Date, the Recipient shall become entitled to receive payment with respect to the Units which have become vested on such date (such Units are hereafter referred to as the Recipient's "Vested Units"). Except as otherwise provided in Section 5, payment with respect to the Recipient's Vested Units shall be made as soon as practicable after the Vesting Date, in the manner hereinafter set forth in this Section 4.
(b) Except as otherwise provided in paragraph (c) below, payment with respect to the Recipient's Vested Units shall be made by the issuance to the Recipient of shares of Common Stock. Except as otherwise provided in paragraph (d) (ii) below, one share of Common Stock shall be issued for each of the Recipient's Vested Units. The Recipient shall own any shares of Common Stock so issued free and clear of any restrictions and shall be free to hold or dispose of such shares at will, subject, however, to any restrictions that may be imposed by law.
(c) The Committee, in its sole discretion, may determine that payment with respect to any or all of the Recipient's Vested Units shall be made in cash instead of in shares of Common Stock, and payment with respect to any fractional part of a Vested Unit shall be made in cash. Except as otherwise provided in paragraph (d) (i) below, the amount of the cash payment to be made with respect to any Vested Unit shall be equal to (and the amount of the cash payment to be made with respect to any fractional part of a Vested Unit shall be based upon) the per share closing price of one share of Common Stock as reported on the New York Stock Exchange Composite Tape for the Vesting Date, or if there are no sales of Common Stock on such date, for the next preceding day on which there were sales of Common Stock.
(d) Upon the occurrence of an Acceleration Date, the amount payable with respect to the Recipient's Vested Units (including any Units that became vested prior to such date but for which payment hereunder has not been made as of such date) shall be determined as follows:
(i) To the extent that the payment for any of the Recipient's Vested Units is to be made in cash, the amount of cash to be paid for such Vested Units shall be equal to the product of (A) the number of such Vested Units, multiplied by (B) the highest closing price per share of the Common Stock, as reported on the New York Stock Exchange Composite Tape, occurring during the 90-day period preceding and the 90-day period following the Acceleration Date (the "Multiplication Factor").
(ii) To the extent that payment for any of the Recipient's
Vested Units is to be made in shares of Common Stock, the
number of shares of Common Stock to be issued with respect to
such Vested Units shall be determined by dividing (A) the
product of (y) the number of such Vested Units multiplied by
(z) the Multiplication Factor, by (B) the per share closing
price of the Common Stock as reported on the New York Stock
Exchange Composite Tape for the day preceding the payment
date, or if there are no sales of Common Stock on such date,
for the next preceding day on which there were sales of Common
Stock.
(e) If the Recipient has died prior to the date on which any payment is to be made hereunder with respect to the Recipient's Vested Units, the payment otherwise required to be made to the Recipient shall be made to the Recipient's beneficiary or estate, as the case may be.
5. DEFERRAL OF PAYMENT FOR VESTED UNITS
(a) Subject to the provisions of paragraph (b) below, payment with respect to part or all of the Recipient's Vested Units shall be deferred, and shall be made at the time and in the manner hereinafter set forth, if the Recipient so elects in accordance with the following provisions:
(i) An election by the Recipient hereunder shall be made in writing, on a form furnished to the Recipient for such purpose by the Committee. The form shall be filed with the Committee at least one year prior to the Vesting Date.
(ii) In the Recipient's election form, the Recipient shall specify the number of Vested Units payment with respect to which the Recipient wishes to defer (the number of Vested Units payment with respect to which is deferred pursuant to the Recipient's election hereunder, and the number of additional units credited to the Recipient pursuant to subparagraph (vi) below are hereinafter collectively referred to as the Recipient's "Deferred Vested Units"); the date on which payment with respect to the Recipient's Deferred Vested Units shall be made or commence (the "Payment Commencement Date") in accordance with subparagraph (iii) below; and the method by which payment with respect to the Recipient's Deferred Vested Units shall be made (the "Payment Method") in accordance with subparagraph (iv) below.
(iii) The Recipient may select, as the Payment Commencement Date, the first business day of any of the following: (A) the third calendar year following the calendar year in which the Vesting Date occurs, or any later calendar year; (B) the
earlier of (x) any calendar year which the Recipient is permitted to select under clause (A), or (y) the calendar year following the later of the Vesting Date or the date of the termination of the Recipient's employment with the Corporation or any subsidiary or the Recipient's Total Disability; or (C) the calendar year following the later of the Vesting Date or the date of the termination of the Recipient's employment with the Corporation or any subsidiary or the Recipient's Total Disability, or any later calendar year.
(iv) The Recipient may select, as the Payment Method, either (A) a single lump sum payment, or (B) payment in annual installments, over a period of at least five years, or such greater number of years as the Recipient specifies in the Recipient's election form. With each such annual installment, payment shall be made with respect to a number of the Recipient's Deferred Vested Units equal to the quotient resulting from dividing (C) the total number of Deferred Vested Units standing to the Recipient's credit hereunder on the applicable payment date, by (D) the number of installment payments remaining to be made on such date. Immediately after each annual installment payment has been made, the number of Deferred Vested Units standing to the Recipient's credit hereunder shall be reduced by the number of Deferred Vested Units with respect to which such payment was made.
(v) Any election made hereunder by the Recipient shall be irrevocable.
(vi) Until payment has been made with respect to all of the Recipient's Deferred Vested Units (including those credited to the Recipient under this subparagraph), there shall be credited to the Recipient hereunder, as of each Dividend Payment Date, a number of additional Deferred Vested Units determined by multiplying (A) the number of Deferred Vested Units (including any additional Deferred Vested Units previously credited to the Recipient under this subparagraph) standing to the Recipient's credit hereunder on the day immediately preceding such Dividend Payment Date, by (B) the quotient referred to in Section 2(a)(ii) hereof.
(vii) Payment with respect to the Recipient's Deferred Vested Units shall be made in cash, or in shares of Common Stock, or in any combination of cash or such shares, as the Committee shall determine in its sole discretion. To the extent that payment with respect to any of the Recipient's Deferred Vested Units is to be made in shares of Common Stock, one share of Common Stock shall be issued for each such Deferred Vested Unit. The Recipient shall own any shares of Common Stock so issued free and clear of any restrictions and shall be free to hold or dispose of such shares at will, subject, however, to any restrictions that may be imposed by law. The amount of the cash payment to be made with respect to any Deferred Vested Units shall be equal to (and with respect to any fractional part of a Deferred Vested Unit, shall be based upon) the per share closing price of one share of Common Stock as reported on the New York Stock Exchange Composite Tape for the last business day immediately preceding the date on which such cash payment is to be made.
(viii) A deferral election otherwise permitted to be made hereunder shall be subject to the following limitations:
(A) If the Recipient's Vesting Date should occur within one year following the date on which the Recipient's election form is filed with the Committee, or if the Vesting Date occurs more than one year from such date but occurs as a result of the occurrence of an Acceleration Date, the Recipient's deferral election shall not be given effect, and payment with respect to the Recipient's Vested Units shall be made in accordance with the applicable provisions of Section 4.
(B) No deferral election shall be effective hereunder if at any time during the 12-month period ending on the Vesting Date, the Recipient received a hardship withdrawal under Section 7.2(e) of the GPU Companies
Employee Savings Plan for Nonbargaining Employees or under the comparable provisions of any other plan maintained by any of the GPU Companies that is qualified under section 401(k) of the Code.
(C) No amount may be deferred with respect to the Recipient's Vested Units pursuant to the Recipient's deferral election hereunder to the extent that any tax is required to be withheld with respect to such amount pursuant to applicable federal, state or local law.
(ix) If the Recipient has died prior to the date on which any payment is to be made hereunder with respect to the Recipient's Deferred Vested Units, the payment otherwise required to be made to the Recipient shall be made to the Recipient's beneficiary or estate, as the case may be.
(x) Notwithstanding any other provision in this paragraph (a) to the contrary, to the extent the Committee in its sole discretion so determines, payment with respect to any part or all of the Recipient's Deferred Vested Units may be made to the Recipient or to the Recipient's beneficiary or estate, on any date earlier than the date on which such payment is to be made pursuant to the Recipient's election hereunder, in the following circumstances: (A) in the event of the Recipient's death prior to the Payment Commencement Date specified in the Recipient's election hereunder; (B) in the event the Recipient becomes entitled to receive payments under the Long-Term Disability Plan or Employee Pension Plan of any GPU Company as a result of incurring a Total Disability; or (C) in the event the Recipient requests such early payment and the Committee, in its sole discretion, determines that such early payment is necessary to help the Recipient meet some severe financial need arising from circumstances which were beyond the Recipient's control and which were not foreseen by the Recipient at the time of the Recipient's election hereunder.
(b) Notwithstanding any provision in paragraph (a) above to the contrary or any other election made by the Recipient under paragraph
(a), the Recipient may make a special election under this paragraph
(b) regarding payment with respect to the Recipient's Deferred
Vested Units in the event a "Change in Control", as defined in the
Plan, should occur.
(i) The Recipient may elect under this subparagraph (i) to have payment with respect to all of the Recipient's Deferred Vested Units made in the form of a single lump sum payment upon the occurrence of a Change in Control prior to the Recipient's termination of employment. Such payment shall be made as soon as practicable after the date on which such Change in Control occurs.
(ii) The Recipient may elect under this subparagraph (ii) to have payment with respect to all of the Recipient's Deferred Vested Units made in the form of a single lump sum payment in the event of the Recipient's termination of employment for any reason within the two-year period following a Change in Control. Such payment shall be made by no later than 30 days after the date of the Participant's termination of employment.
(iii) Under this subparagraph (iii) the Recipient may elect,
in the event a Change in Control occurs after the
Participant's termination of employment but before all
payments with respect to the Recipient's Deferred Vested Units
have been made pursuant to the Participant's election under
Section 5(a), to have payment with respect to all of the
Deferred Vested Units that are still standing to the
Recipient's credit hereunder at the time of such Change in
Control made in the form of a single lump sum payment. Such
payment shall be made as soon as practicable after the date on
which such Change of Control occurs.
(iv) Payment with respect to the Recipient's Deferred Vested Units pursuant to an election made by the Recipient under subparagraph (i), (ii) or (iii) above shall be made in the manner provided in Section 5(a)(vii); provided, however, that if payment is to be made pursuant to the Recipient's election under subparagraph (i) or (iii), the second and fourth sentences of Section 5(a)(vii) shall not apply, and the amount
of cash payable and/or the number of shares of Common Stock to
be issued with respect to the Recipient's Deferred Vested
Units shall be determined in accordance with the provisions of
Section 4(d)(i) and (ii).
(v) An election under subparagraph (i) shall be effective only
if it is made at least one year prior to the Change in Control
referred to in subparagraph (i). An election under
subparagraph (ii) shall be effective only if it is made either
(A) at least twenty-four (24) months prior to the Recipient's
termination of employment, or (B) if such termination of
employment constitutes an "Involuntary Termination", as
defined in subparagraph (vi) below, at least one year prior to
the Change in Control referred to in subparagraph (ii). An
election under subparagraph (iii) shall be effective only if
it is made prior to the Recipient's termination of employment
and at least one year prior to the occurrence of the Change in
Control referred to in subparagraph (iii). Any special
election made under subparagraphs (i), (ii) or (iii) may be
revoked, and a new special election may be made thereunder, at
any time; provided, however, that any such revocation or new
election shall be effective only if it is made within the
applicable election period specified herein. Any special
election, or revocation of a special election, that may be
made under subparagraphs (i), (ii) or (iii) shall be made in
the manner set forth in the first sentence of Section 5(a)(i).
Any special election made by the Recipient under subparagraph
(i), (ii) or (iii) shall be effective only if, at the date as
of which payment is to be made pursuant to such election,
there is in effect for the Recipient a special election under
the comparable provision of each other Performance Units
Agreement and Restricted Units Agreement between the Recipient
and GPU, Inc. in effect on such date.
(vi) For purposes of this paragraph (b), "Involuntary Termination" shall mean the termination of Recipient's employment (A) as a result of the Recipient's death, (B) by the Corporation or any subsidiary, for any reason, or (C) by
the Recipient for "Good Reason". For purposes of the foregoing, "Good Reason" shall mean the occurrence after a Change in Control of any of the following events or conditions:
(1) change in the Recipient's status, title, position or responsibilities (including reporting responsibilities) which, in the Recipient's reasonable judgment, represents an adverse change from the Recipient's status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Recipient of any duties or responsibilities which, in the Recipient's reasonable judgment, are inconsistent with the Recipient's status, title, position or responsibilities; or any removal of the Recipient from or failure to reappoint or reelect the Recipient to any of such offices or positions, other than in connection with the termination of the Recipient's employment for disability, for cause, or by the Recipient other than for Good Reason;
(2) a reduction in the rate of the Recipient's annual base salary;
(3) the relocation of the offices at which the Recipient is principally employed to a location more than twenty-five (25) miles from the location of such offices immediately prior to such relocation, or the Recipient being required to be based anywhere other than at such offices, except to the extent the Recipient was not previously assigned to a principal place of duty and except for required travel on business of the Corporation or any subsidiary to an extent substantially consistent with the Recipient's previous business travel obligations;
(4) the failure by the Corporation or any subsidiary to pay to the Recipient any amount of the Recipient's current compensation, or any amount payable under this Agreement, within seven (7) days of the date on which payment of such amount is due; or
(5) the failure by the Corporation or any subsidiary (x) to continue in effect (without reduction in benefit level, and/or reward opportunities) any material compensation or employee benefit plan in which the Recipient was participating immediately prior to such failure by the Corporation or any subsidiary unless a substitute or replacement plan has been implemented which provides substantially identical compensation or benefits to the Recipient or (y) to continue to provide the Recipient with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under all other compensation or employee benefit plans, programs and practices in which the Recipient was participating immediately prior to such failure by the Corporation or any subsidiary.
Any event or condition described in clauses (1) through (5) above which occurs (A) within twelve (12) months prior to a Change in Control or (B) prior to a Change in Control but which the Recipient reasonably demonstrates (x) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control or (y) otherwise arose in connection with, or in anticipation of a Change in Control which has been threatened or proposed, shall constitute Good Reason for purposes of this Agreement notwithstanding that it occurred prior to a Change in Control.
6. WITHHOLDING TAXES
In connection with the issuance of any Common Stock or the making of any cash payment in accordance with the provisions of this Agreement, the Corporation shall withhold the taxes then required by applicable federal, state and local law to be so withheld. In lieu thereof, the Corporation may require the Recipient (or, in the event of the Recipient's death, the Recipient's beneficiary or estate) to pay to the Corporation an amount equal to the amount of taxes so required to be withheld. Such payment to the Corporation shall be
made in cash, or, if the Committee so determines, in cash, in shares of Common Stock with a market value equal to such withholding obligation, or in any combination thereof.
7. ADMINISTRATION
(a) The Committee shall have full authority and sole discretion (subject only to the express provisions of the Plan) to decide all matters relating to the administration and interpretation of the Plan and this Agreement. All such Committee determinations shall be final, conclusive, and binding upon the Corporation, the Recipient, the Recipient's estate and any and all other interested parties. Notwithstanding the foregoing, any determination made by the Committee after the occurrence of a "Change in Control" (as defined in the Plan) shall be subject to judicial review under a "de novo" rather than a deferential standard.
(b) This Agreement shall be subject to the terms of the Plan, and in the case of any inconsistency between the Plan and this Agreement, the provisions of the Plan shall govern. The Recipient hereby acknowledges receipt of the Corporation's Prospectus which includes the text of the Plan.
8. NONASSIGNABILITY
The Recipient's rights to payments under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer (other than transfer by will or by the laws of descent and distribution), assignment, pledge, encumbrance, attachment or garnishment by the Recipient's creditors or the creditors of the Recipient's spouse or any other beneficiary.
9. RIGHT TO CONTINUED EMPLOYMENT
Nothing in the Plan or this Agreement shall confer on the Recipient any right to continue as an employee of the Corporation or any subsidiary or in any way affect the Corporation or any subsidiary's right to terminate the Recipient's employment at any time.
10. FORCE AND EFFECT
The various provisions of this Agreement are severable in their entirety. Any determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions.
11. PREVAILING LAWS
This Agreement shall be governed by the laws of the Commonwealth of Pennsylvania applicable to contracts made, and to be enforced, within the Commonwealth of Pennsylvania.
12. SUCCESSORS
This Agreement shall be binding upon and inure to the benefit of the successors, assigns and heirs of the respective parties.
13. NOTICE
Any notice to the Corporation hereunder shall be in writing addressed to:
Executive Vice President, Corporate Affairs
GPU Service, Inc.
300 Madison Avenue
Morristown, New Jersey 07962-1957
Any notice to the Recipient hereunder shall be in writing addressed to:
or such other address as the Recipient shall specify to the Corporation in writing.
14. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the parties and shall not be modified or amended except in writing and duly signed by each of the parties hereto. No waiver by either party of any default under this agreement shall be deemed a waiver of any later default set forth above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the date set forth above.
GPU, INC.
Exhibit 10-Y
Deferred Stock Unit Plan for Outside Directors of GPU, Inc.
1. Purpose
The purpose of the Plan is to more closely align the interests of the outside directors of GPU, Inc. with those of GPU, Inc.'s stockholders by providing for a significant portion of the total annual compensation payable to such directors to be paid in the form of units representing shares of GPU, Inc.'s common stock.
2. Definitions
As used herein, the following terms shall have the following meanings:
"Account" shall mean the account established for a Participant pursuant to
Section 5.
"Award Date" shall mean July 1, 1997 and July 1 of each calendar year thereafter.
"Beneficiary" shall mean the person or persons designated by a Participant in accordance with Section 11 to receive any amount, or any shares of Common Stock, payable under the Plan upon the Participant's death.
"Board of Directors" shall mean the Board of Directors of the Corporation.
"Change in Control" shall mean the occurrence of any of the following events:
(1)An acquisition (other than directly from Corporation of any Common Stock or other voting securities of the Corporation entitled to vote generally for the election of directors (the "Voting Securities") by any "Person" (as the
term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the then outstanding shares of Common Stock or the combined voting power of the Corporation's then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (A) an employee benefit plan (or a trust forming a part thereof) maintained by (i) the Corporation or (ii) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Corporation (for purposes of this definition, a "Subsidiary"), (B) the Corporation or its Subsidiaries, or (C) any Person in connection with a "Non-Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996, are members of the board of directors of the Corporation (the "Incumbent Board"), cease for any reason to constitute at least seventy percent (70%) of the members of the board of directors of the Corporation; provided, however, that if the election, or nomination for election by the Corporation's shareholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the board of directors of the Corporation (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(3) The consummation of:
(a) A merger, consolidation or reorganization with or into the Corporation or in which securities of the Corporation are issued, unless such merger, consolidation or reorganization is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a merger, consolidation or reorganization with or into the Corporation or in which securities of the Corporation are issued where:
(i) the shareholders of the Corporation, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least sixty percent (60%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization,
(ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least seventy percent (70%) of the members of the board of directors of the Surviving Corporation, or a corporation, directly or indirectly, beneficially owning a majority of the Voting Securities of the Surviving Corporation, and
(iii) no Person other than (w) the Corporation, (x) any Subsidiary,
(y) any employee benefit plan (or any trust forming a part thereof) that,
immediately prior to such merger, consolidation or reorganization, was
maintained by the Corporation or any Subsidiary, or (z) any Person who,
immediately prior to such merger, consolidation or reorganization had
Beneficial Ownership of twenty percent (20%) or more of the then
outstanding Voting Securities or common stock of the Corporation, has
Beneficial Ownership of twenty percent (20%) or more of the combined
voting power of the Surviving Corporation's then outstanding voting
securities or its common stock.
(b)A complete liquidation or dissolution of the Corporation; or
(c)The sale or other disposition of all or substantially all of the assets of the Corporation to any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the then outstanding Common Stock or Voting Securities as a result of the acquisition of Common Stock or Voting Securities by the Corporation which, by reducing the number of shares of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares of Common Stock or Voting Securities by the Corporation, and after such share acquisition by the Corporation, the Subject Person becomes the Beneficial Owner of any additional shares of Common Stock or Voting Securities which increases the percentage of the then outstanding shares of Common Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
"Committee" shall mean the Personnel, Compensation and Nominating Committee of the Board of Directors.
"Common Stock" shall mean the shares of common stock of the Corporation.
"Corporation" shall mean GPU, Inc.
"Deferred Stock Unit" shall mean a unit of measurement equivalent to one share of Common Stock, with none of the attendant rights of a shareholder of such share, including, without limitation, the right to vote such share and the right to receive dividends thereon, except to the extent otherwise specifically provided herein.
"Outside Director" shall mean a member of the Board of Directors who, as of any date of reference, is not an employee of the Corporation or any subsidiary thereof.
"Participant" shall mean any Outside Director for whom an Account has been established, and is being maintained, pursuant to Section 5.
"Plan" shall mean the Deferred Stock Unit Plan for Outside Directors of GPU, Inc., as set forth herein and as amended from time to time.
"Retirement" shall mean, with respect to any Participant, the Participant's ceasing to be a member of the Board of Directors for any reason.
"Vesting Date" shall mean, with respect to any Participant, the earliest to occur of the following dates:
(i) the date as of which the Participant has completed at least 54 months of service, whether or not continuous, as an Outside Director;
(ii) the date of the Participant's death; or
(iii) the date on which a Change in Control occurs.
3. Maximum Number of Shares of Common Stock Available
The number of shares of Common Stock that may be distributed with respect to Deferred Stock Units awarded under the Plan shall be limited to 200,000 shares of Common Stock. If any Deferred Stock Units credited to a Participant's Account shall be forfeited, the number of shares of Common Stock no longer payable with respect to the Deferred Stock Units so forfeited shall thereupon be released and shall thereafter be available for distribution with respect to new awards of Deferred Stock Units under the Plan. The limitation provided under this Section 3 shall be subject to adjustment as provided in Section 9.
The shares of Common Stock distributed under the Plan may be authorized and unissued shares, or shares purchased on the open market by the Corporation at such time or times and in such manner as it may determine.
4. Annual Awards
As of each Award Date, the Account maintained hereunder for each member of the Board of Directors who is an Outside Director on such date shall be credited with a number of Deferred Stock Units determined by first multiplying the amount of his or her Annual Cash Retainer by 1.5, and then dividing the resulting product by the per share closing price of the Common Stock as reported on the New York Stock Exchange Composite Tape for such Award Date, or if there are no
sales of Common Stock on such date, for the next preceding day on which there were sales of Common Stock. An Outside Director's "Annual Cash Retainer" shall mean, as of any Award Date, the annual rate of cash retainer in effect for the Outside Director as of the day preceding such Award Date.
5. Accounts
There shall be established on the books and records of the Corporation, for bookkeeping purposes only, a separate Account for each member of the Board of Directors who is an Outside Director on July 1, 1997, and for each individual who becomes an Outside Director thereafter, to reflect such Participant's interest under the Plan. The Account so established shall be maintained in accordance with the following provisions:
(a)As of each Award Date, each Participant's Account shall be credited
with the number of Deferred Stock Units required to be credited pursuant to
Section 4.
(b)Each Participant's Account shall be adjusted to reflect all additional Deferred Stock Units required to be credited to such Account pursuant to Section 6, and the cancellation of all Deferred Stock Units with respect to which payments are made pursuant to Section 7.
(c)In the case of each Participant for whom an election under Section 9(b) of the GPU, Inc. Restricted Stock Plan for Outside Directors is in effect on the business day immediately preceding the date on which a Change in Control occurs, such Participant's Account shall be adjusted to reflect the number of additional Deferred Stock Units required to be credited to such account on such day pursuant to Section 9(b)(ii) of such plan as a result of the Participant's election.
(d)A Participant's interest in his or her Account shall become fully vested and nonforfeitable upon his or her Vesting Date.
6. Crediting of Dividend Equivalents
Until payment with respect to a Participant's Account has been made in full in accordance with Section 7, a Participant's Account shall be credited, as of each date on which the Corporation pays a dividend on its Common Stock ("Dividend Payment Date"), with additional Deferred Stock Units, the number of which shall be determined by multiplying (i) the number of Deferred Stock Units
standing to the Participant's credit in his or her Account immediately prior to such Dividend Payment Date by (ii) the quotient resulting from dividing (A) the per share amount of the dividend so paid by (B) the price per share used for the reinvestment of dividends paid on such Dividend Payment Date under the provisions of the Corporation's Dividend Reinvestment and Stock Purchase Plan.
7. Payment of Account Balances
Payment with respect to a Participant's Account shall be made in accordance with the following provisions:
(a)A Participant's Account shall become payable upon the Participant's Retirement on or after his or her Vesting Date. If a Participant ceases to serve as a member of the Board of Directors for any reason prior to his or her Vesting Date, all of the Deferred Stock Units standing to the Participant's credit in his or her Account shall be forfeited as of the date of such cessation of the Participant's service.
(b)Except as otherwise provided in (c) below, payment with respect to a Participant's Account shall be made in the form of a single lump sum payment. Such payment shall be made to the Participant or, if the Participant's Account becomes payable by reason of his or her death, to the Participant's Beneficiary. Payment shall be made on the first business day of the second calendar month following the month in which the Participant's Retirement occurs.
(c)A Participant may elect to have payment with respect to his or her Account made to the Participant, or in the event of the Participant's death, to his or her Beneficiary, in the form of annual installments payable over a period of five years, or such greater number of years as the Participant specifies in his or her election. An election under this Section 7(c) shall be made in writing, on a form that is provided by the Committee for such purpose and that is filed by the Participant with the Committee at least one year prior to the date of the Participant's Retirement, or within such other period as may be applicable under Section 15(a). Any election so made may be revoked, and a new election may be made hereunder after such revocation. Any such revocation or new election shall be made in the same manner, and by the same date, as described in the second preceding sentence. If a Participant's Account becomes payable in the form of annual installments, payments shall be made in accordance with the following provisions:
(i) The first installment payment shall be made on the first business day of the second calendar month following the month in which the Participant's Retirement occurs, and the remaining installment payments shall be made on the anniversary of such payment commencement date in each succeeding year.
(ii) With each annual installment, payment shall be made with respect to a number of Deferred Stock Units equal to the quotient resulting from dividing (A) the total number of Deferred Stock Units included in the balance of the Participant's Account as of the last day of the calendar month preceding the date on which such payment is to be made, by (B) the number of installment payments remaining to be made. Immediately after each annual installment payment has been made, the number of Deferred Stock Units included in the balance of the Participant's Account shall be reduced by the number of Deferred Stock Units with respect to which such payment was made.
(iii) If the Participant should die before receiving all installment payments required to be made hereunder with respect to the Participant's Account, any installment payments remaining to be made at the date of the Participant's death shall be made to the Participant's Beneficiary in the same form, at the same times and in the same amounts, as such payments would have been made to the Participant if he or she had not died.
(d)Payment with respect to any Deferred Stock Units included in the balance of a Participant's Account shall be made (i) by the issuance of one share of Common Stock for each whole Deferred Stock Unit with respect to which payment is being made, and (ii) in cash, with respect to any fractional part of a Deferred Stock Unit with respect to which payment is being made. Notwithstanding the foregoing, the Committee, in its sole discretion, may determine that payment with respect to any or all of the Deferred Stock Units included in the balance of a Participant's Account shall be made in cash instead of in shares of Common Stock. The amount of the cash payment to be made with respect to any Deferred Stock Unit shall be equal to (and the amount of the cash payment to be made with respect to any fractional part of a Deferred Stock Unit shall be based upon) the per share closing price of the Common Stock as reported on the New York Stock Exchange Composite Tape for the last business day immediately preceding the date on which such cash payment is to be made.
(e)Notwithstanding any other provision in this Section 7 to the contrary, payment with respect to any part or all of the Participant's Account may be made to the Participant or, if the Participant has died, to the Participant's Beneficiary, on any date earlier than the date on which such payment is to be made pursuant to such other provisions of this Section 7 if (i) the Participant, or his or her Beneficiary, requests such early payment and (ii) the Committee, in its sole discretion, determines that such early payment is necessary to help the Participant, or his or her Beneficiary, meet an "unforeseeable emergency" within the meaning of Section 1.457-2(h)(4) of the federal Income Tax Regulations. The amount that may be so paid may not exceed the amount necessary to meet such emergency.
8. Change in Control
Notwithstanding any other provision of the Plan to the contrary or any
other optional form of distribution otherwise elected or provided for hereunder,
each Participant shall be permitted to make either one or both of the following
special distribution elections: (a) to have the entire balance of his or her
Account paid in the form of a single lump sum payment in the event of the
Participant's Retirement upon the occurrence of a Change in Control, or (b) if a
Change in Control occurs after the Participant's Retirement but before all
payments with respect to his or her Account have been made in accordance with
Section 7, to have the entire remaining unpaid balance of his or her Account at
the time of such Change in Control paid in the form of a single lump sum
payment. Subject to Section 15(a), any such election shall be effective only if
it is made at least one year prior to the Change in Control and prior to the
Participant's Retirement. Any special election made under clause (a) or (b)
above may be revoked, and a new special election may be made thereunder at any
time; provided, however, subject to Section 15(a), that any such revocation or
new election shall be effective only if it is made within the election period
specified in the preceding sentence. Any special election, or revocation of a
special election, that may be made hereunder shall be made in the manner set
forth in Section 7(c).
The lump sum payment to be made pursuant to a Participant's special distribution election under clause (a) or (b) above shall be made as soon as practicable after the Participant's Retirement or, in the case of a special
election under clause (b) above, following the date of the Change in Control. Such payment shall be made in cash, or in shares of Common Stock, or in any combination of cash or such shares, as the Committee shall determine, and the amount of such payment shall be determined as follows:
(i) To the extent that the payment for any of the Participants' Deferred Stock Units is to be made in cash, the amount of cash to be paid for such Deferred Stock Units shall be equal to the product of (A) the number of such Deferred Stock Units, multiplied by (B) the highest closing price per share of the Common Stock, as reported on the New York Stock Exchange Composite Tape, occurring during the 90-day period preceding and the 90-day period following the Change in Control (the "Multiplication Factor").
(ii) To the extent that payment for any of the Participant's Deferred Stock Units is to be made in shares of Common Stock, the number of shares of Common Stock to be issued with respect to such Deferred Stock Units shall be determined by dividing (A) the product of (y) the number of such Deferred Stock Units multiplied by (z) the Multiplication Factor, by (B) the per share closing price of the Common Stock as reported on the New York Stock Exchange Composite Tape for the day preceding the payment date, or if there are no sales of Common Stock on such date, for the next preceding day on which there were sales of Common Stock.
9. Certain Adjustments to Plan Shares
In the event of any change in the shares of Common Stock by reason of any stock dividend, stock split, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares, or any rights offering to purchase Common Stock at a price substantially below fair market value, or any similar change affecting the shares of Common Stock, the number and kind of shares represented by Deferred Stock Units shall be appropriately adjusted consistent with such change in such manner as the Committee, in its sole discretion, may deem equitable to prevent substantial dilution or enlargement of the rights granted to, or available for, the Participants hereunder. The Committee shall give notice to each Participant of any adjustment made pursuant to this Section and, upon such notice, such adjustment shall be effective and binding for all purposes.
10. Listing and Qualification of Common Shares
The Corporation, in its discretion, may postpone the issuance, delivery, or distribution of shares of Common Stock with respect to any Deferred Stock Units until completion of such stock exchange listing or other qualification of such shares under any state or federal law, rule or regulation as the Corporation may consider appropriate, and may require any Participant or Beneficiary to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of the shares in compliance with applicable laws, rules and regulations.
11. Designation and Change of Beneficiary
Each Participant shall file with the Committee a written designation of one or more persons as the Beneficiary who shall be entitled to receive any amount, or any shares of Common Stock, payable under the Plan upon his or her death. A Participant may, from time to time, revoke or change his or her Beneficiary designation without the consent of any previously designated Beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant's death, and in no event shall it be effective as of a date prior to such receipt. If at the date of a Participant's death, there is no designation of a Beneficiary in effect for the Participant pursuant to the provisions of this Section 11, or if no Beneficiary designated by the Participant in accordance with the provisions hereof survives to receive any amount, or any shares of Common Stock, payable under the Plan by reason of the Participant's death, the Participant's estate shall be treated as the Participant's Beneficiary for purposes of the Plan.
12. Rights of Participants
A Participant's rights and interests under the Plan shall be subject to the following provisions:
(a)A Participant shall have the status of a general unsecured creditor of the Corporation with respect to his or her right to receive any payment under the Plan. The Plan shall constitute a mere promise by the Corporation to make payments in the future of the benefits provided for herein. It is intended that the arrangements reflected in this Plan be treated as unfunded for tax purposes.
(b)A Participant's rights to payments under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or his or her Beneficiary.
(c)Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained as a member of the Board of Directors.
13. Administration
The Plan shall be administered by the Committee. A majority of the members of the Committee shall constitute a quorum. The Committee may act at a meeting, including a telephone meeting, by action of a majority of the members present, or without a meeting by unanimous written consent. In addition to the responsibilities and powers assigned to the Committee elsewhere in the Plan, the Committee shall have the authority, in its discretion, to establish from time to time guidelines or regulations for the administration of the Plan, interpret the Plan, and make all determinations considered necessary or advisable for the administration of the Plan. The Committee may delegate any ministerial or nondiscretionary function pertaining to the administration of the Plan to any one or more officers or employees of the Corporation or any subsidiary of the Corporation.
All decisions, actions or interpretations of the Committee under the Plan shall be final, conclusive and binding upon all parties. Notwithstanding the foregoing, any determination made by the Committee after the occurrence of a Change in Control that denies in whole or in part any claim made by any individual for benefits under the Plan shall be subject to judicial review, under a "de novo", rather than a deferential, standard.
14. Amendment or Termination
The Board of Directors may, with prospective or retroactive effect, amend,
suspend or terminate the Plan or any portion thereof at any time; provided,
however, that Section 7(a), Section 8, the last sentence of Section 13, this
Section 14, and the definitions of Change in Control and Vesting Date in Section
2, may not be amended, and the Plan may not be suspended or terminated, (i) at
the request of a third party who has indicated an intention or taken steps to
effect a Change in Control and who effectuates a Change in Control, (ii) within
six months prior to, or otherwise in connection with, or in anticipation of, a
Change in Control which has been threatened or proposed and which actually
occurs, or (iii) following a Change in Control, if the amendment, suspension or
termination adversely affects the rights of any Participant under the Plan. In
addition, no amendment, suspension or termination of the Plan shall deprive any
Participant of any rights with respect to Deferred Stock Units previously
credited to his or her Account under the Plan without his or her written
consent.
15. Additional Change in Control Provisions
In the event of a Change in Control, the provisions set forth below shall apply, notwithstanding any other provisions of the Plan to the contrary.
(a) The regular distribution election provided for under Section 7(c) and any special distribution election provided for under Section 8 may be made by a Participant, and any such election previously made by a Participant may be revoked and a new election made by the Participant under such Sections, at any time during the period beginning on the date of any agreement entered into by the Corporation which provides for the occurrence of one or more transactions which, if consummated, would constitute a Change in Control, and ending on the 45th day after such date (the "Window Period"). Any election, or revocation of an election, that may be made pursuant to this Section 15(a) shall be made in the manner set forth in Section 7(c). Any election or revocation of an election under Section 7(c) that is made pursuant to this Section 15(a) shall be effective only if the transactions provided for in the agreement referred to in the preceding sentence are consummated.
(b) In the case of any Participant whose Retirement has not otherwise occurred prior to a Change in Control, such Participant's Retirement shall be treated, for purposes of this Plan, as occurring on the date on which such Change in Control occurs, unless an election under (c) below is in effect for the Participant at the time of such Change in Control.
(c) During the Window Period or on any date thereafter that is at least one year prior to the date on which a Change in Control occurs, a Participant may make an election under this Section 15(c) pursuant to which, if he or she is designated to serve as a member of the Successor Board (as hereinafter defined) immediately following the occurrence of a Change in Control, the Participant's Retirement under this Plan will not be treated as occurring at the time of the Change in Control but instead, will be treated as occurring on the date on which his or her service as a member of the Successor Board terminates for any reason. For purposes of this Section 15, the term Successor Board shall mean the board of directors of the corporation described in Section 15(e)(i). An election under this Section 15(c) shall be made in the manner set forth in Section 7(c).
(d) In the case of any Participant for whom an election under Section
15(c) is in effect at the time of a Change in Control, the Participant's Account
shall become payable upon his or her Retirement subsequent to the Change in
Control. Payment with respect to the Participant's Account shall be made at the
time or times, and in the form, determined under the applicable provisions of
Section 7.
(e) With respect to all periods subsequent to the occurrence of a Change in Control, the following terms shall have the following meanings:
(i) the term "Corporation" shall refer to the corporation whose acquisition of the Common Stock of the Corporation or substantially all of its assets, or whose merger with the Corporation, results in the occurrence of the Change in Control;
(ii) the term "Board of Directors" shall refer to the Successor Board; and
(iii) the term "Committee" shall refer to the committee of the Successor Board that has responsibility for the administration of the Plan after the occurrence of the Change in Control.
16. Successor Corporation
The obligations of the Corporation under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Corporation, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Corporation. The Corporation agrees that it will make appropriate provision for the preservation of Participants' rights under the Plan in any agreement or plan which it may enter into or adopt to effect any such merger, consolidation, reorganization or transfer of assets.
Exhibit 10-Z
MYR Group, Inc.
PERFORMANCE UNITS AGREEMENT UNDER
THE 1990 STOCK PLAN FOR EMPLOYEES OF
GPU, INC.
AND SUBSIDIARIES
(2000 AGREEMENT)
AGREEMENT made as of ---------------------------, by and between GPU, Inc. (the "Corporation") and ------------------------- (the "Recipient"):
WHEREAS, the Corporation maintains the 1990 Stock Plan for Employees of GPU, Inc. and Subsidiaries (the "Plan") under which the Personnel, Compensation and Nominating Committee of the Corporation's Board of Directors (the "Committee") may, among other things, award units ("Performance Units") representing rights to acquire shares of the Corporation's Common Stock, $2.50 par value ("Common Stock") to such employees of the Corporation and its subsidiaries as the Committee may determine, subject to such terms, conditions or restrictions as it may deem appropriate;
WHEREAS, pursuant to the Plan, the Committee has granted to the Recipient an award of Performance Units subject to the terms and conditions set forth in this Agreement; and
WHEREAS, the Plan requires that an award of Performance Units be evidenced by a written agreement between the Corporation and the Recipient that contains such restrictions, terms and conditions as the Committee may require;
NOW, THEREFORE, the parties hereto agree as follows:
1. AWARD OF PERFORMANCE UNITS; NATURE OF RIGHTS
(a) In accordance with the provisions of the Plan, the Committee
awarded to the Recipient on ----------------- (the "Award Date")
---------- Performance Units. Each unit so awarded, and each
additional Performance Unit credited to the Recipient pursuant to
Section 2 (the Performance Units so awarded and the additional
Performance Units so credited are hereinafter referred to
collectively as the Recipient's "Units"), shall entitle the
Recipient, upon the vesting of such units as provided in Section 3
hereof, to receive one share of Common Stock, or a cash payment in
lieu of such share, subject to the terms, conditions, and
restrictions set forth herein.
(b) Prior to the issuance, as provided in Section 4 or 5 hereof, of shares of Common Stock with respect to the Recipient's Units, or with respect to the Recipient's "Deferred Vested Units" as defined in Section 5(a)(ii) hereof, the Recipient shall not be entitled to any of the rights of a stockholder of the Corporation by reason of such Units or Deferred Vested Units.
(c) Notwithstanding anything in this Agreement to the contrary, the Recipient shall have the status of a mere unsecured creditor of the Corporation with respect to the Recipient's right to receive any payment hereunder; and this Agreement shall constitute a mere promise by the Corporation to make payments in the future in accordance with the terms hereof. It is the intention of the parties hereto that the arrangements set forth in this Agreement be treated as unfunded for tax purposes and, if it should be determined that Title I of ERISA is applicable to such arrangements, for purposes of Title I of ERISA.
2. ADDITIONAL PERFORMANCE UNITS
(a) As of each date prior to the Vesting Date (as defined in Section 3(a) below) on which a dividend is paid on the Common Stock ("Dividend Payment Date"), there shall be credited to the Recipient hereunder a number of additional Performance Units determined by multiplying (i) the aggregate number of Units standing to the Recipient's credit immediately prior to such Dividend Payment Date, by (ii) the quotient resulting from dividing (A) the per share amount of the dividend so paid by (B) the price per share used for the reinvestment of dividends paid on such Dividend Payment Date under the provisions of the Corporation's Dividend Reinvestment and Stock Purchase Plan.
(b) Any additional Performance Units credited to the Recipient pursuant to this Section 2 shall be subject to the same terms, conditions and restrictions as are applicable with respect to the Recipient's initially awarded Performance Units.
3. ADJUSTMENT AND VESTING OF UNITS
(a) For purposes of this Agreement, the Recipient's "Vesting Date" shall mean the earliest to occur of the following dates:
(i) the third anniversary of the Award Date;
(ii) the date as of which the Recipient's employment with the Corporation or any subsidiary terminates as a result of the Recipient's death; or
(iii) an "Acceleration Date," as defined in the Plan.
(b) Subject to the provisions of paragraph (c) below, as of the Recipient's Vesting Date, the aggregate number of Units then standing to the Recipient's credit shall be adjusted by multiplying such aggregate number by the sum of (1) the MYR After-Tax Margin Performance Percentage, as determined in accordance with subparagraph (i) below, (2) the MYR Revenue Growth Rate Performance Percentage, as determined in accordance with subparagraph (ii) below, and (3) the MYR Return on Assets Performance Percentage, as determined in accordance with subparagraph (iii) below:
(i) The MYR After-Tax Margin Performance Percentage shall be 35% of the Percentage determined pursuant to the
following table
If the MYR After Tax-Margin
for the Performance Period is: The Percentage shall be:
------------------------------ ------------------------
4.1% or above 200%
At least 3.8% but less than 4.1% 175%
At least 3.5% but less than 3.8% 150%
At least 3.2% but less than 3.5% 125%
At least 3.0% but less than 3.2% 100%
At least 2.8% but less than 3.0% 75%
At least 2.4% but less than 2.8% 50%
Less than 2.4% 0%
|
For purposes of the foregoing, the MYR After-Tax Margin for the Performance Period shall mean the percentage determined by dividing (A) the average of the net income of MYR Group, Inc. ("MYR") for each of the years in the period from January 1, 2000 through December 31, 2002 (the "Performance Period"), by (B) the average of MYR's gross revenues for each of the years in the Performance Period.
(ii) The MYR Revenue Growth Rate Performance Percentage shall be 30% of the Percentage determined pursuant to the following table:
If the MYR Revenue Growth Rate for the Performance Period is: The Percentage shall be: ------------------------------ ------------------------ 27% or above 200% At least 24$ but less than 27% 175% At least 21% but less than 24% 150% At least 18% but less than 21% 125% At least 15% but less than 18% 100% At least 12% but less than 15% 75% At least 9% but less than 12% 50% Less than 9% 0% |
For purposes of the foregoing, the MYR Revenue Growth Rate for the Performance Period shall mean the average of the compounded rate of growth in MYR's gross revenues, over a base of $480 million, for each of the years in the Performance Period.
(iii) The MYR Return on Assets Performance Percentage shall be 35% of the Percentage determined pursuant to the following
table:
If the MYR Return on Assets
for the Performance Period is: The Percentage shall be:
------------------------------ ------------------------
27% or above 200%
At least 15.9% but less than 17% 175%
At least 14.9% but less than 15.9% 150%
At least 13.8% but less than 14.9% 125%
At least 12.7% but less than 13.8% 100%
At least 11.4% but less than 12.7% 75%
At least 10.0% but less than 11.4% 50%
Less than 10.0% 0%
|
For purposes of the foregoing, the MYR Return on Assets for the Performance Period shall mean the average of the percentages, determined, for each year in the Performance Period, by dividing MYR's net income for such year, by the average of MYR's total assets as of the beginning and end of such year.
(iv) For purposes of this paragraph (b), the amount of MYR's net income and revenues for any year, and the amount of its total assets as of the beginning and end of any year, shall be the amounts determined by MYR's Board of Directors, in its discretion.
(c) If the Recipient's Vesting Date occurs by reason of the Recipient's death prior to the first day of the calendar year which includes the third anniversary of the Award Date, the Recipient's Units shall not be adjusted in the manner described in paragraph (b) above; and if the Recipient's Vesting Date occurs by reason of an Acceleration Date occurring prior to such first day, the adjustment with respect to the Recipient's Units required under paragraph (b) above shall be made using as the applicable Performance Percentage under each of subparagraphs (i), (ii) and (iii) of paragraph (b) above either 100% or, if greater, the Performance Percentage that would apply under the table set forth in such subparagraph if the
Performance Period had ended on December 31 of the calendar year immediately preceding such Acceleration Date.
(d) If the Recipient's employment with the Corporation or any subsidiary terminates prior to the third anniversary of the Award Date as a result of the Recipient's death, "Eligible Retirement" as defined in paragraph (f)(iii) below or "Total Disability" as defined in the Plan, the number of Units standing to the Recipient's credit as of the Recipient's Vesting Date (after taking into account any adjustment required under paragraph (b)) shall be adjusted (or further adjusted) by multiplying such number of Units by the Recipient's Service Percentage. The Recipient's "Service Percentage" shall mean the percentage determined by dividing by 36 the number of months in the period beginning on the Award Date and ending on the date of such termination of the Recipient's employment; and for this purpose, any fraction of a month included in such period shall be treated as a full month. This paragraph (d) shall not apply if the Recipient's Vesting Date occurs by reason of the occurrence of an Acceleration Date.
(e) As of the Recipient's Vesting Date, all Units then standing to
the Recipient's credit (after taking into account any adjustments
required under paragraphs (b), (c) and (d) above) shall become
vested. If the number of Units standing to the Recipient's credit
immediately prior to any adjustments made pursuant to paragraphs
(b), (c) and (d) above exceed the number of Units standing to the
Recipient's credit after giving effect to such adjustments, all of
the Recipient's rights with respect to such excess number of Units
shall be forfeited as of the Vesting Date. If the Recipient's
employment with the Corporation or any subsidiary should terminate
before the Recipient's Vesting Date for any reason other than as a
result of the Recipient's Eligible Retirement or Total Disability,
all of the Recipient's rights with respect to any Units credited to
the Recipient hereunder shall be forfeited as of the date of such
termination.
(f) For purposes of this Agreement, (i) the term "subsidiary" shall have the same meaning as in paragraph 4(a) of the Plan; (ii) the transfer of the Recipient's employment from one subsidiary to another shall not be treated as a termination of the Recipient's employment; and (iii) the term "Eligible
Retirement" shall mean the termination of the Recipient's employment with the Corporation or any subsidiary for any reason other than death or Total Disability after having attained age 55 and completing at least 10 years of service with MYR or any other subsidiary of the Corporation.
4. PAYMENT FOR VESTED UNITS
(a) Upon the Vesting Date, the Recipient shall become entitled to receive payment with respect to the Units which have become vested on such date (such Units are hereafter referred to as the Recipient's "Vested Units"). Except as otherwise provided in Section 5, payment with respect to the Recipient's Vested Units shall be made as soon as practicable after the Vesting Date, in the manner hereinafter set forth in this Section 4.
(b) Except as otherwise provided in paragraph (c) below, payment with respect to the Recipient's Vested Units shall be made by the issuance to the Recipient of shares of Common Stock. Except as otherwise provided in paragraph (d) (ii) below, one share of Common Stock shall be issued for each of the Recipient's Vested Units. The Recipient shall own any shares of Common Stock so issued free and clear of any restrictions and shall be free to hold or dispose of such shares at will, subject, however, to any restrictions that may be imposed by law.
(c) The Committee, in its sole discretion, may determine that payment with respect to any or all of the Recipient's Vested Units shall be made in cash instead of in shares of Common Stock, and payment with respect to any fractional part of a Vested Unit shall be made in cash. Except as otherwise provided in paragraph (d) (i) below, the amount of the cash payment to be made with respect to any Vested Unit shall be equal to (and the amount of the cash payment to be made with respect to any fractional part of a Vested Unit shall be based upon) the per share closing price of one share of Common Stock as reported on the New York Stock Exchange Composite Tape for the Vesting Date, or if there are no sales of Common Stock on such date, for the next preceding day on which there were sales of Common Stock.
(d) Upon the occurrence of an Acceleration Date, the amount payable with respect to the Recipient's Vested Units (including any Units that became vested prior to such date but for which payment hereunder has not been made as of such date) shall be determined as follows:
(i) To the extent that the payment for any of the Recipient's Vested Units is to be made in cash, the amount of cash to be paid for such Vested Units shall be equal to the product of (A) the number of such Vested Units, multiplied by (B) the highest closing price per share of the Common Stock, as reported on the New York Stock Exchange Composite Tape, occurring during the 90-day period preceding and the 90-day period following the Acceleration Date (the "Multiplication Factor").
(ii) To the extent that payment for any of the Recipient's
Vested Units is to be made in shares of Common Stock, the
number of shares of Common Stock to be issued with respect to
such Vested Units shall be determined by dividing (A) the
product of (y) the number of such Vested Units multiplied by
(z) the Multiplication Factor, by (B) the per share closing
price of the Common Stock as reported on the New York Stock
Exchange Composite Tape for the day preceding the payment
date, or if there are no sales of Common Stock on such date,
for the next preceding day on which there were sales of Common
Stock.
(e) If the Recipient has died prior to the date on which any payment is to be made hereunder with respect to the Recipient's Vested Units, the payment otherwise required to be made to the Recipient shall be made to the Recipient's beneficiary or estate, as the case may be.
5. DEFERRAL OF PAYMENT FOR VESTED UNITS
(a) Subject to the provisions of paragraph (b) below, payment with respect to part or all of the Recipient's Vested Units shall be deferred, and shall be made at the time and in the manner hereinafter set forth, if the Recipient so elects in accordance with the following provisions:
(i) An election by the Recipient hereunder shall be made in writing, on a form furnished to the Recipient for such purpose by the Committee. The form shall be filed with the Committee at least one year prior to the Vesting Date.
(ii) In the Recipient's election form, the Recipient shall specify the number of Vested Units payment with respect to which the Recipient wishes to defer (the number of Vested Units payment with respect to which is deferred pursuant to the Recipient's election hereunder, and the number of additional units credited to the Recipient pursuant to subparagraph (vi) below are hereinafter collectively referred to as the Recipient's "Deferred Vested Units"); the date on which payment with respect to the Recipient's Deferred Vested Units shall be made or commence (the "Payment Commencement Date") in accordance with subparagraph (iii) below; and the method by which payment with respect to the Recipient's Deferred Vested Units shall be made (the "Payment Method") in accordance with subparagraph (iv) below.
(iii) The Recipient may select, as the Payment Commencement Date, the first business day of any of the following: (A) the third calendar year following the calendar year in which the Vesting Date occurs, or any later calendar year; (B) the earlier of (x) any calendar year which the Recipient is permitted to select under clause (A), or (y) the calendar year following the later of the Vesting Date or the date of the termination of the Recipient's employment with the Corporation or any subsidiary or the Recipient's Total Disability; or (C) the calendar year following the later of the Vesting Date or the date of the termination of the Recipient's employment with the Corporation or any subsidiary or the Recipient's Total Disability, or any later calendar year.
(iv) The Recipient may select, as the Payment Method, either (A) a single lump sum payment, or (B) payment in annual installments, over a period of at least five years, or such greater number of years as the Recipient specifies in the Recipient's election form. With each such annual installment, payment shall be made with respect to a number of the Recipient's Deferred Vested Units equal to the quotient resulting from dividing (C) the total number of Deferred Vested Units standing to the Recipient's credit hereunder on
applicable payment date, by (D) the number of installment payments remaining to be made on such date. Immediately after each annual installment payment has been made, the number of Deferred Vested Units standing to the Recipient's credit hereunder shall be reduced by the number of Deferred Vested Units with respect to which such payment was made.
(v) Any election made hereunder by the Recipient shall be irrevocable.
(vi) Until payment has been made with respect to all of the Recipient's Deferred Vested Units (including those credited to the Recipient under this subparagraph), there shall be credited to the Recipient hereunder, as of each Dividend Payment Date, a number of additional Deferred Vested Units determined by multiplying (A) the number of Deferred Vested Units (including any additional Deferred Vested Units previously credited to the Recipient under this subparagraph) standing to the Recipient's credit hereunder on the day immediately preceding such Dividend Payment Date, by (B) the quotient referred to in Section 2(a)(ii) hereof.
(vii) Payment with respect to the Recipient's Deferred Vested Units shall be made in cash, or in shares of Common Stock, or in any combination of cash or such shares, as the Committee shall determine in its sole discretion. To the extent that payment with respect to any of the Recipient's Deferred Vested Units is to be made in shares of Common Stock, one share of Common Stock shall be issued for each such Deferred Vested Unit. The Recipient shall own any shares of Common Stock so issued free and clear of any restrictions and shall be free to hold or dispose of such shares at will, subject, however, to any restrictions that may be imposed by law. The amount of the cash payment to be made with respect to any Deferred Vested Units shall be equal to (and with respect to any fractional part of a Deferred Vested Unit, shall be based upon) the per share closing price of one share of Common Stock as reported on the New York Stock Exchange Composite Tape for the last business day immediately preceding the date on which such cash payment is to be made.
(viii) A deferral election otherwise permitted to be made hereunder shall be subject to the following limitations:
(A) If the Recipient's Vesting Date should occur within one year following the date on which the Recipient's election form is filed with the Committee, or if the Vesting Date occurs more than one year from such date but occurs as a result of the occurrence of an Acceleration Date, the Recipient's deferral election shall not be given effect, and payment with respect to the Recipient's Vested Units shall be made in accordance with the applicable provisions of Section 4.
(B) No deferral election shall be effective hereunder if at any time during the 12-month period ending on the Vesting Date, the Recipient received a hardship withdrawal under Section 7.2(e) of the GPU Companies Employee Savings Plan for Nonbargaining Employees or under the comparable provisions of any other plan maintained by any of the GPU Companies that is qualified under section 401(k) of the Code.
(C) No amount may be deferred with respect to the Recipient's Vested Units pursuant to the Recipient's deferral election hereunder to the extent that any tax is required to be withheld with respect to such amount pursuant to applicable federal, state or local law.
(ix) If the Recipient has died prior to the date on which any payment is to be made hereunder with respect to the Recipient's Deferred Vested Units, the payment otherwise required to be made to the Recipient shall be made to the Recipient's beneficiary or estate, as the case may be.
(x) Notwithstanding any other provision in this paragraph (a) to the contrary, to the extent the Committee in its sole discretion so determines, payment with respect to any part or all of the Recipient's Deferred Vested Units may be made to the Recipient or to the Recipient's beneficiary or estate, on any date earlier than the date on which such payment is to be made pursuant to the Recipient's election hereunder, in the following
circumstances: (A) in the event of the Recipient's death prior to the Payment Commencement Date specified in the Recipient's election hereunder; (B) in the event of the Recipient's Total Disability; or (C) in the event the Recipient requests such early payment and the Committee, in its sole discretion, determines that such early payment is necessary to help the Recipient meet some severe financial need arising from circumstances which were beyond the Recipient's control and which were not foreseen by the Recipient at the time of the Recipient's election hereunder.
(b) Notwithstanding any provision in paragraph (a) above to the
contrary or any other election made by the Recipient under paragraph
(a), the Recipient may make a special election under this paragraph
(b) regarding payment with respect to the Recipient's Deferred
Vested Units in the event a "Change in Control", as defined in the
Plan, should occur.
(i) The Recipient may elect under this subparagraph (i) to have payment with respect to all of the Recipient's Deferred Vested Units made in the form of a single lump sum payment upon the occurrence of a Change in Control prior to the Recipient's termination of employment. Such payment shall be made as soon as practicable after the date on which such Change in Control occurs.
(ii) The Recipient may elect under this subparagraph (ii) to have payment with respect to all of the Recipient's Deferred Vested Units made in the form of a single lump sum payment in the event of the Recipient's termination of employment for any reason within the two-year period following a Change in Control. Such payment shall be made by no later than 30 days after the date of the Participant's termination of employment.
(iii) Under this subparagraph (iii) the Recipient may elect, in the event a Change in Control occurs after the Participant's termination of employment but before all payments with respect to the Recipient's Deferred Vested Units have been made pursuant to the Participant's election under
Section 5(a), to have payment with respect to all of the Deferred Vested Units that are still standing to the Recipient's credit hereunder at the time of such Change in Control made in the form of a single lump sum payment. Such payment shall be made as soon as practicable after the date on which such Change of Control occurs.
(iv) Payment with respect to the Recipient's Deferred Vested
Units pursuant to an election made by the Recipient under
subparagraph (i), (ii) or (iii) above shall be made in the
manner provided in Section 5(a)(vii); provided, however, that
if payment is to be made pursuant to the Recipient's election
under subparagraph (i) or (iii), the second and fourth
sentences of Section 5(a)(vii) shall not apply, and the amount
of cash payable and/or the number of shares of Common Stock to
be issued with respect to the Recipient's Deferred Vested
Units shall be determined in accordance with the provisions of
Section 4(d)(i) and (ii).
(v) An election under subparagraph (i) shall be effective only
if it is made at least one year prior to the Change in Control
referred to in subparagraph (i). An election under
subparagraph (ii) shall be effective only if it is made either
(A) at least twenty-four (24) months prior to the Recipient's
termination of employment, or (B) if such termination of
employment constitutes an "Involuntary Termination", as
defined in subparagraph (vi) below, at least one year prior to
the Change in Control referred to in subparagraph (ii). An
election under subparagraph (iii) shall be effective only if
it is made prior to the Recipient's termination of employment
and at least one year prior to the occurrence of the Change in
Control referred to in subparagraph (iii). Any special
election made under subparagraphs (i), (ii) or (iii) may be
revoked, and a new special election may be made thereunder, at
any time; provided, however, that any such revocation or new
election shall be effective only if it is made within the
applicable election period specified herein. Any special
election, or revocation of a special election, that may be
made under subparagraphs (i), (ii) or (iii) shall be made in
the manner set forth in the first sentence of Section 5(a)(i).
Any special election made by the Recipient under subparagraph
(i), (ii) or (iii) shall be effective only if, at the date as
of which payment is to be made pursuant to such election, there is in effect for the Recipient a special election under the comparable provision of each other Performance Units Agreement and Restricted Units Agreement between the Recipient and GPU, Inc. in effect on such date.
(vi) For purposes of this paragraph (b), "Involuntary Termination" shall mean the termination of Recipient's employment (A) as a result of the Recipient's death, (B) by the Corporation or any subsidiary, for any reason, or (C) by the Recipient for "Good Reason". For purposes of the foregoing, "Good Reason" shall mean the occurrence after a Change in Control of any of the following events or conditions:
(1) change in the Recipient's status, title, position or responsibilities (including reporting responsibilities) which, in the Recipient's reasonable judgment, represents an adverse change from the Recipient's status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Recipient of any duties or responsibilities which, in the Recipient's reasonable judgment, are inconsistent with the Recipient's status, title, position or responsibilities; or any removal of the Recipient from or failure to reappoint or reelect the Recipient to any of such offices or positions, other than in connection with the termination of the Recipient's employment for disability, for cause, or by the Recipient other than for Good Reason;
(2) a reduction in the rate of the Recipient's annual base salary;
(3) the relocation of the offices at which the Recipient is principally employed to a location more than twenty-five (25) miles from the location of such offices immediately prior to such relocation, or the Recipient being required to be based anywhere other than at such offices, except to the extent the Recipient was not previously assigned to a principal place of duty and except for required travel on business of the Corporation or any subsidiary to an extent
substantially consistent with the Recipient's previous business travel obligations;
(4) the failure by the Corporation or any subsidiary to pay to the Recipient any amount of the Recipient's current compensation, or any amount payable under this Agreement, within seven (7) days of the date on which payment of such amount is due; or
(5) the failure by the Corporation or any subsidiary (x) to continue in effect (without reduction in benefit level, and/or reward opportunities) any material compensation or employee benefit plan in which the Recipient was participating immediately prior to such failure by the Corporation or any subsidiary unless a substitute or replacement plan has been implemented which provides substantially identical compensation or benefits to the Recipient or (y) to continue to provide the Recipient with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under all other compensation or employee benefit plans, programs and practices in which the Recipient was participating immediately prior to such failure by the Corporation or any subsidiary.
Any event or condition described in clauses (1) through (5) above which occurs (A) within twelve (12) months prior to a Change in Control or (B) prior to a Change in Control but which the Recipient reasonably demonstrates (x) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control or (y) otherwise arose in connection with, or in anticipation of a Change in Control which has been threatened or proposed, shall constitute Good Reason for purposes of this Agreement notwithstanding that it occurred prior to a Change in Control.
6. WITHHOLDING TAXES
In connection with the issuance of any Common Stock or the making of any cash payment in accordance with the
provisions of this Agreement, the Corporation shall withhold the taxes then required by applicable federal, state and local law to be so withheld. In lieu thereof, the Corporation may require the Recipient (or, in the event of the Recipient's death, the Recipient's beneficiary or estate) to pay to the Corporation an amount equal to the amount of taxes so required to be withheld. Such payment to the Corporation shall be made in cash, or, if the Committee so determines, in cash, in shares of Common Stock with a market value equal to such withholding obligation, or in any combination thereof.
7. ADMINISTRATION
(a) Except for the responsibilities assigned to the MYR Board of Directors under Section 3(b)(iv), the Committee shall have full authority and sole discretion (subject only to the express provisions of the Plan) to decide all matters relating to the administration and interpretation of the Plan and this Agreement. All such Committee determinations shall be final, conclusive, and binding upon the Corporation, the Recipient, the Recipient's estate and any and all other interested parties. Notwithstanding the foregoing, any determination made by the Committee after the occurrence of a "Change in Control" (as defined in the Plan) shall be subject to judicial review under a "de novo" rather than a deferential standard.
(b) This Agreement shall be subject to the terms of the Plan, and in the case of any inconsistency between the Plan and this Agreement, the provisions of the Plan shall govern. The Recipient hereby acknowledges receipt of the Corporation's Prospectus which includes the text of the Plan.
8. NONASSIGNABILITY
The Recipient's rights to payments under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer (other than transfer by will or by the laws of descent and distribution), assignment, pledge, encumbrance, attachment or garnishment by the Recipient's creditors or the creditors of the Recipient's spouse or any other beneficiary.
9. RIGHT TO CONTINUED EMPLOYMENT
Nothing in the Plan or this Agreement shall confer on the Recipient any right to continue as an employee of the Corporation or any subsidiary or in any way affect the Corporation or any subsidiary's right to terminate the Recipient's employment at any time.
10. FORCE AND EFFECT
The various provisions of this Agreement are severable in their entirety. Any determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions.
11. PREVAILING LAWS
This Agreement shall be governed by the laws of the Commonwealth of Pennsylvania applicable to contracts made, and to be enforced, within the Commonwealth of Pennsylvania.
12. SUCCESSORS
This Agreement shall be binding upon and inure to the benefit of the successors, assigns and heirs of the respective parties.
13. NOTICE
Any notice to the Corporation hereunder shall be in writing addressed to:
Executive Vice President, Corporate Affairs
GPU Service, Inc.
300 Madison Avenue
Morristown, New Jersey 07962-1957
Any notice to the Recipient hereunder shall be in writing addressed to:
or such other address as the Recipient shall specify to the Corporation in writing.
14. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the parties and shall not be modified or amended except in writing and duly signed by each of the parties hereto. No waiver by either party of any default under this agreement shall be deemed a waiver of any later default set forth above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the date set forth above.
GPU, INC.
Exhibit 10EE
GPU COMPANIES
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as amended through August 9, 2000)
GPU COMPANIES
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1. Purpose
This document sets forth the GPU Companies Supplemental Executive Retirement Plan, as amended effective August 9, 2000.
The purpose of the Plan is to provide certain senior executives of the GPU Companies with a supplemental pension benefit to the extent necessary for the executives' total annual retirement income from all pension sources to be at least equal to the executive's Target Pension Amount, as defined herein.
The Plan is intended to constitute an unfunded plan of deferred compensation for "a select group of management or highly compensated employees" within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Each Company has adopted this Plan as its own plan. Accordingly, each Company shall be obligated hereunder only with respect to amounts payable to Participants who are its own employees; and the right to receive any amount payable hereunder with respect to any Participant shall be enforceable only against the Company with which such Participant is or was last employed.
2. Definitions
As used herein, the following terms shall have the following meanings:
"Change in Control" shall mean the occurrence during the term of the Plan of:
(1) An acquisition (other than directly from GPU, Inc. (the "Corporation") of any common stock of the Corporation ("Common Stock") or other voting securities of the Corporation entitled to vote generally for the election of directors (the "Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty
percent (20%) or more of the then outstanding shares of Common Stock or the combined voting power of the Corporation's then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (A) an employee benefit plan (or a trust forming a part thereof) maintained by (i) the Corporation or (ii) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Corporation (for purposes of this definition, a "Subsidiary"), (B) the Corporation or its Subsidiaries, or (C) any Person in connection with a "Non-Control Transaction" (as hereinafter defined);
(2) The individuals who, as of August 1, 1996, are members of the board of directors of the Corporation (the "Incumbent Board"), cease for any reason to constitute at least seventy percent (70%) of the members of the board of directors of the Corporation; provided, however, that if the election, or nomination for election by the Corporation's shareholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the board of directors of the Corporation (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(3) The consummation of:
(A) A merger, consolidation or reorganization with or into the Corporation or in which securities of the Corporation are issued, unless such merger, consolidation or reorganization is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a merger, consolidation or reorganization with or into the Corporation or in which securities of the Corporation are issued where:
(i) the shareholders of the Corporation, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least sixty percent (60%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization,
(ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least seventy percent (70%) of the members of the board of directors of the Surviving Corporation, or a corporation, directly or indirectly, beneficially owning a majority of the Voting Securities of the Surviving Corporation, and
(iii) no Person other than (w) the Corporation, (x) any Subsidiary, (y) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to such merger, consolidation or reorganization, was maintained by the Corporation or any Subsidiary, or (z) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities or common stock of the Corporation, has Beneficial Ownership of twenty percent (20%) or more of the combined voting power of the Surviving Corporation's then outstanding voting securities or its common stock.
(B) A complete liquidation or dissolution of the Corporation; or
(C) The sale or other disposition of all or substantially all of the assets of the Corporation to any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the then outstanding Common Stock or Voting Securities as a result of the acquisition of Common Stock or Voting Securities by the Corporation which, by reducing the number of shares of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares of Common Stock or Voting Securities by the Corporation, and after such share acquisition by the Corporation, the Subject Person becomes the Beneficial Owner of any additional shares of Common Stock or Voting Securities which increases the percentage of the then outstanding shares of Common Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
"Committee" shall mean the Personnel, Compensation and Nominating Committee of the Board of Directors of GPU, Inc.
"Company" shall mean GPU Service, Inc., GPU Nuclear, Inc. and any other direct or indirect subsidiary of GPU, Inc. that has adopted this Plan. When used in reference to a Participant, the term "Company" shall mean the Company with which such Participant is or was last employed unless the context otherwise requires.
"GPU Companies" shall mean GPU, Inc. and each of its direct and indirect subsidiaries.
"Incentive Compensation Plan" shall mean the Incentive Compensation Plan for Elected Officers maintained by any of the GPU Companies.
"Normal Retirement Date" shall mean, with respect to any Participant, the Participant's Normal Retirement Date as determined for purposes of the Pension Plan under Section 3.1 thereof.
"Other Retirement Plan" shall mean, with respect to any Participant, (i) any defined benefit pension plan, whether or not tax qualified, (including without limitation any such plan that is a "cash balance" plan) maintained by any employer other than one of the GPU Companies with which the Participant was employed at any time prior to his or her Retirement, and (ii) any individual contract between the Participant and any of the GPU Companies, or between the Participant and any such other employer, under which the Participant is entitled to receive, upon his or her retirement or other termination of employment, a benefit that is defined as, or as the actuarial equivalent of, a
fixed amount of annual income payable for the Participant's lifetime. The term "Other Retirement Plan" shall also include the Energy Initiatives, Inc. Retirement Plan (the "EII Plan"), in the case of any Participant who was a participant in the EII Plan and received a distribution with respect to his account balance in that plan upon its termination.
"Participant" shall mean any individual who has been elected to an office with a Company that is specified in Section 3.
"Payment Starting Date" shall mean the date as of which payment of a Participant's Supplemental Pension Benefit is to be made, or is to commence, pursuant to the provisions of Section 4(d) hereof.
"Pension Plan" shall mean the GPU Companies Employee Pension Plan.
"Plan" refers to the GPU Companies Supplemental Executive Retirement Plan as set forth in this document and as it may be amended from time to time in the future.
"Retirement" shall mean, with respect to any Participant, the termination of the Participant's employment with all of the GPU Companies at any time after July 1, 1999, for any reason other than death, if (but only if) (i) at the time of such termination the Participant has attained age 62, or (ii) at the time of such termination the Participant has attained age 55 and has completed at least 15 Years of Service, or (iii) such termination of the Participant's employment occurs upon, or at any time after, the occurrence of a Change in Control. For purposes of clause (iii) of the preceding sentence, if a Participant's employment is terminated by the Company for any reason (1) within twelve (12) months prior to a Change in Control, or (2) any time prior to the date of a Change in Control but the Participant reasonably demonstrates that such termination (A) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control or (B) otherwise arose in connection with, or in anticipation of, a Change in Control which has been threatened or proposed, such termination shall be deemed to have occurred after a Change in Control, provided a Change in Control shall actually have occurred.
"Supplemental and Excess Benefits Plan" shall mean the GPU Companies Supplemental and Excess Benefits Plan.
"Years of Service" shall mean, with respect to any Participant, the sum of
(a) his years of "Creditable Service" as determined under Section 5 of the
Pension Plan without taking into account any additional years of "Creditable
Service" otherwise credited to the Participant under Section 5.9 of the Pension
Plan, plus (b) the number of additional years of "Creditable Service", so
determined, that would have been credited to the Participant under the Pension
Plan if he had commenced participation in the Pension Plan as of the date on
which his employment with any of the GPU Companies commenced, plus (c) such
number of additional years of service, if any, as provided in any individual
contract of employment between the Participant and any of the GPU Companies that
has been approved by the Committee. Notwithstanding the foregoing, a
Participant's Years of Service shall not include any period of the Participant's
employment with any of the GPU Companies after the date as of which he or she
has ceased to hold any corporate office specified in Section 3 hereof.
3. Eligibility
Any person who is elected to serve in one of the corporate offices listed below shall become eligible for participation in the Plan effective as of the later of July 1, 1999 or the date as of which his or her election to such office becomes effective.
Company Officer
GPU Service, Inc. Chief Executive Officer
Each Executive Vice President
President of Operations
Division
President of Fossil Generation
|
GPU Nuclear, Inc. President
Notwithstanding the foregoing, no person who is elected to serve as the President of GPU Nuclear, Inc. on or after August 9, 2000 shall be eligible for participation in the Plan.
4. Supplemental Pension Benefit
Upon a Participant's Retirement, he or she shall become entitled to receive from his or her Company a supplemental pension benefit (the "Supplemental Pension Benefit") in accordance with the following provisions:
(a) The Supplemental Pension Benefit payable to a Participant hereunder, when expressed as a single life annuity, shall be an annual amount of income payable to the Participant for his or her life equal to the excess of (i) the Participant's Target Pension Amount, as defined in (b) below, over (ii) the sum of the Participant's Other Pension Amounts, as defined in (c) below.
(b) A Participant's Target Pension Amount shall be an annual amount of income which, when expressed as a single life annuity payable to the Participant for his or her life commencing on the Participant's Normal Retirement Date, shall equal 2% of the Participant's Average Annual Compensation, as defined below, for each Year of Service (but not more than 30 Years of Service) completed by the Participant as of the date of his or her Retirement.
A Participant's "Average Annual Compensation" shall mean the quotient resulting from dividing by three the aggregate amount of the Participant's Earnings, as defined below, during his or her highest paid 36 calendar months (whether or not consecutive) within the Participant's most recent period of employment with the GPU Companies (not exceeding 10 years) ending on the date of his or her Retirement. In the case of any Participant who has been employed with the GPU Companies for less than 36 calendar months at the time of his or her Retirement, such Participant's Average Annual Compensation shall be determined by first dividing the aggregate amount of the Participant's Earnings during his or her entire period of employment by the number of calendar months (or portions thereof) in such period, and then, multiplying the resulting quotient by 12, or if less, the number of calendar months (or portions thereof) in such period. For purposes of the foregoing, a Participant's "Earnings" for any month shall mean his Earnings for such month as determined for purposes of the Pension Plan, except that for purposes of this Plan the following provisions shall apply:
(i) the limitation on the amount of the Participant's Earnings that
can be taken into account for purposes of the Pension Plan a result of
Section 401(a)(17) of the Internal Revenue Code of 1986, as amended, shall
not apply;
(ii) all amounts of base salary or Incentive Compensation Plan awards that are deferred pursuant to the Participant's election under the GPU Companies Deferred Compensation Plan shall be included in the Participant's Earnings for purposes of this Plan. Any amount of base salary so deferred shall be treated as Earnings for the month in which such amount would have been paid to the
Participant in cash if he or she had not elected to defer such amount; and a pro rata portion of the amount of any Incentive Compensation Plan award for any "Performance Period", as defined in such Plan, that is so deferred shall be treated as Earnings for each of the calendar months within such "Performance Period" or, in the case of any Participant who has received an award for the Performance Period in which his Retirement occurs, for each of the calendar months in the portion of such Performance Period ending on or prior to the date of his or her Retirement. No amount of base salary or Incentive Compensation Plan award so deferred shall be treated as Earnings for any months other than the months determined under the preceding sentence; and
(iii) a Participant's Earnings during any period of employment with any of the GPU Companies after the date as of which he or she has ceased to hold any corporate office specified in Section 3 shall not be taken into account.
(c) A Participant's Other Pension Amounts shall include the following:
(i) the sum of (A) the Basic Pension, if any, that would be payable to the Participant under the Pension Plan and (B) the aggregate annual benefit amount that would be payable to the Participant under the Supplemental and Excess Benefits Plan, if, in each case, such Basic Pension and such aggregate annual benefit amount were payable in the form of a single life annuity commencing on the Participant's Normal Retirement Date, and were determined without taking into account the 20% increase in the amounts.
(ii) the annual amount (exclusive of any portion thereof attributable to the Participant's own contributions) payable to the Participant under each of the Participant's Other Retirement Plans if the amount payable under each such plan were payable in the form of a single life annuity commencing on the Participant's Normal Retirement Date; provided, however, that (A) in the case of any such amount payable to the Participant under any Other Retirement Plan maintained by an employer other than one of the GPU Companies, there shall be taken into account for purposes of this Section 4(c)(ii) only the portion of such amount that is attributable to the same number of the Participant's years of service with such employer as the number of additional years of service credited to the Participant under clause (b) of the definition of "Years of Service"
contained in Section 1, and (B) in the case of amounts payable to a Participant under any supplemental pension agreement between the Participant and any of the GPU Companies, the 20% increase in the amounts otherwise payable to the Participant under such agreement during the first twelve (12) months for which amounts are payable thereunder shall not be treated as a "Pension Amount" for purposes of this Section 4(c)(ii);
(iii) in the case of any Participant referred in the last sentence of the definition of "Other Retirement Plan" contained in Section 2, the annual pension amount that would have been payable to such Participant if his account balance under the EII Plan had not been distributed to him upon termination of that plan but had been payable to him instead, in the form of a single life annuity commencing on his Normal Retirement Date, in an amount that is Actuarially Equivalent (as defined in the Pension Plan and determined as of the Participant's Payment Starting Date) to the distribution that was made to the Participant upon termination of the EII Plan; and
(iv) an amount equal to the product resulting from multiplying by 12 the Participant's Social Security Primary Insurance Amount, determined as of the date of his or her Retirement (hereinafter referred to as the Participant's "Social Security Benefit"); provided, however, that if the Participant's Payment Starting Date is prior to the earliest date as of which payment of his or her Social Security Benefit could commence, then (A) the amount of the Supplemental Pension Benefit payable to the Participant during the period commencing on his or her Payment Starting Date and ending on the day immediately preceding such earliest date shall be determined without taking into account the Participant's Social Security Benefit as an Other Pension Amount, and (B) the amount of each monthly payment due on and after such earliest date, as so determined, shall be reduced by the Social Security Benefit payment that would be made to the Participant for such month if his or her Social Security Benefit were payable commencing on such earliest date.
(d) A Participant's Supplemental Pension Benefit shall be paid to the Participant in the same form, and payment shall be made or shall commence at the same time, as the Participant's benefits under the Supplemental and Excess Benefits Plan are paid to the Participant. For this purpose, any election in effect for a Participant at the time of his or her Retirement as to the form and/or time of payment of his or her benefits under the Supplemental and Excess
Benefits Plan shall also govern the form and time of payment of his or her Supplemental Pension Benefit under this Plan. If, as a result of any such election, a Participant's Supplemental Pension Benefit is payable in any annuity form other than as a single life annuity, the amount of the Participant's Supplemental Pension Benefit shall be adjusted so as to be the Actuarial Equivalent (as defined in the Pension Plan) of the Participant's Supplemental Pension Benefit if payable in the form of a single life annuity. If, as a result of any such election, a Participant's Supplemental Pension Benefit is payable in the form of a lump-sum payment, the amount of such lump-sum payment shall be determined in the same manner as the amount of the lump-sum payment payable to the Participant under the Supplemental and Excess Benefits Plan is determined.
(e) The amount of the Supplemental Pension Benefit otherwise payable to a Participant in accordance with the previous provisions of this Section 4 shall be subject to the following adjustments:
(i) Except as otherwise provided in (ii) below, if a Participant's Payment Starting Date occurs prior to the first date (hereinafter referred to as a Participant's "Early Retirement Date") as of which the Participant has either attained age 62 or has attained age 60 and has completed at least 25 Years of Service, the amount of his or her Supplemental Pension Benefit shall be reduced so as to be equal to the Applicable Percentage, as defined below, of the Supplemental Pension Benefit that would be payable to the Participant if payment thereof commenced on the first day of the month following the Participant's 62nd birthday. The "Applicable Percentage" shall mean the percentage determined pursuant to the following table, based on the number of months by which the Participant's Payment Starting Date precedes the first day of the month following his or her 62nd birthday.
Number of Months
Before First of
Month After 62nd Applicable
Birthday Percentage
---------------- ----------
O 100%
12 89
24 79
36 70
48 63
60 56
72 51
84 46
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(ii) If a Participant's Payment Starting Date occurs prior to his or her Early Retirement Date, the amount of the Participant's Supplemental Pension Benefit shall be reduced by 1/12th of 4% for each full month by which his or her Payment Starting Date precedes the end of the month in which the Participant's 62nd birthday occurs, if any of the following conditions apply:
(A) the Committee has consented to such reduction,
(B) the Participant's Retirement occurs after a Change in Control, or
(C) the Participant's termination of employment with the Company occurs prior to a Change in Control but is treated as having occurred after a Change in Control pursuant to the last sentence of the definition of the term "Retirement" contained in Section 2.
(iii) In the case of any Participant described in Section 4(e)(ii)(C) whose Payment Starting Date occurs prior to a Change in Control, the Participant's Supplemental Pension Benefit (and the additional amounts payable with respect thereto pursuant to Section 4(f) below) shall be adjusted upon the occurrence of the Change in Control in the same manner as provided in Section 3.3(c) of the Supplemental and Excess Benefits Plan.
(f) With each monthly payment of the Supplemental Pension Benefit payable to a Participant during the first 12-month period beginning on his or her Payment Starting Date, the Participant shall be entitled to receive from his or her Company an additional amount equal to 20% of the amount of such monthly payment. If a Participant's Supplemental Pension Benefit is payable to the Participant in the form of a lump-sum payment pursuant to Section 4(d), the Participant shall be entitled to receive an additional lump-sum payment in an amount that is Actuarially Equivalent (as defined in the Pension Plan and determined as of the last day of the month preceding the date on which such additional lump-sum payment is made) to the additional payments the Participant would have received during the first 12-month period beginning on his or her Payment Starting Date pursuant to the preceding sentence if the Participant's Supplemental Pension Benefit had been paid in the form of a single life annuity.
5. Supplemental Death Benefit
If a Participant dies prior to his or her Retirement but after the Participant has attained age 55 and has completed at least 15 Years of Service, the Participant's surviving spouse, if any, shall be entitled to receive from the Participant's Company an annuity for such spouse's lifetime, in an amount equal to 50% of the Supplemental Pension Benefit that would have been payable to the Participant hereunder (including the 20% increase in the monthly payments thereof that would have been payable pursuant to Section 4(f) above) if he or she had not died, if the Participant's Retirement had occurred on the last day of the month in which his or her death occurs, and if the Participant's Supplemental Pension Benefit were payable in the form of a single life annuity commencing on the first day of the month following the date of the Participant's death.
6. Administration
(a) The Plan shall be administered by the Committee. In addition to the responsibilities and powers assigned to the Committee elsewhere in the Plan, the Committee shall have the authority, in its discretion, to interpret the Plan, to decide all questions that may arise as to the construction or application of any of its provisions, and make all determinations as to the rights of Participants or other persons to benefits under the Plan. Any determination made by the Committee prior to a Change in Control as to the interpretation, construction or application of the Plan, or as to the rights of any Participant or other person to benefits under the Plan, shall be conclusive and binding on all parties. Any such determination made by the Committee after the occurrence of a Change in Control that denies, in whole or in part, any claim made by any individual for benefits hereunder shall be subject to judicial review, under a "de novo", rather than a deferential, standard.
(b) The Committee may delegate any administerial or non-discretionary function pertaining to the administration of the Plan to any one or more officers or employees of any of the GPU Companies, as the Committee may determine in its discretion.
7. Amendment and Termination
(a) Subject to Section 7(c), the Plan may be amended or terminated at any time by GPU Service, Inc. ("GPUS"), with the concurrence of the Committee. Any such amendment may be made with retroactive effect to the extent not prohibited by law.
(b) Action to amend the Plan may be taken by GPUS either by resolution duly adopted by its Board of Directors, or by an instrument in writing executed by an officer of GPUS to whom authority to adopt or approve amendments to the Plan has been delegated pursuant to a resolution duly adopted by the Board of Directors of GPUS. Action to terminate the Plan shall be taken by GPUS by resolution of its Board of Directors.
(c) Notwithstanding the provisions of Sections 7(a) and 7(b),
(i) no amendment to or termination of the Plan shall impair any rights to benefits which have accrued hereunder, and
(ii) no amendment to Section 6(a) or to this Section 7(c), nor any termination of the Plan, effectuated (A) at the request of a third party who had indicated an intention or taken steps to effect a Change in Control and who effectuates a Change in Control, (B) within six months prior to, or otherwise in connection with, or in anticipation of, a Change in Control which has been threatened or proposed and which actually occurs, or (C) following a Change in Control, shall be effective if the amendment or termination adversely affects the rights of any Participant under the Plan.
8. Rights of Participants
A Participant's rights and interests under the Plan shall be subject to the following provisions:
(a) A Participant shall have the status of a general unsecured creditor of his or her Company with respect to his or her right to receive any payment under the Plan. The Plan shall constitute a mere promise by the Participant's Company to make payments in the future of the benefits provided for herein. It is intended that the arrangements reflected in the Plan be treated as unfunded for tax purposes, as well as for purposes of any applicable provisions of Title I of ERISA.
(b) A Participant's rights to payments under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or his or her beneficiary.
(c) Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employment of any of the GPU Companies.
(d) Notwithstanding any other provision herein to the contrary, there shall be deducted from any payment otherwise required to be made hereunder any federal, state or local taxes required by law to be withheld with respect to such payment.
9. Successor Corporation
The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.
10. Additional Change in Control Provisions
Notwithstanding any provision in the Plan to the contrary, the following provisions shall apply in determining the Supplemental Pension Benefit or Supplemental Death Benefit payable with respect to any Participant whose employment terminates either (i) for any reason upon or at any time after the occurrence of such Change in Control, or (ii) as a result of an Involuntary Termination at any time after August 8, 2000 and prior to such Change in Control:
(a) five years shall be added to the Participant's Years of Service, as determined under the other applicable provisions of the Plan, for purposes of determining the Participant's Target Pension Amount under Section 4(b); and
(b) five years shall be added to the Participant's Years of Service, as determined under the other applicable provisions of the Plan, and five years shall be added to the Participant's actual attained age, for purposes of determining (x) whether the Participant's termination of employment qualifies as a Retirement, (y) the amount of the adjustment, if any, to be made with respect to the Participant's Supplemental Pension Benefit pursuant to Section 4(e), and (z) whether the Participant's surviving spouse is entitled to receive a Supplemental Death Benefit under Section 5 in the event of the Participant's death prior to his or her Retirement, and if so, the amount thereof.
In the case of any Participant described in clause (ii) of the preceding paragraph whose Payment Starting Date precedes such Change in Control, or in the case of the surviving spouse of any
Participant whose Supplemental Death Benefit is required to be paid or to
commence to be paid on a date prior to the occurrence of such Change in Control,
the amount of the Supplemental Pension Benefit or Supplemental Death Benefit
payable on, or payment of which is to commence on, such preceding or prior date
shall be determined without regard to this Section 10, but upon the subsequent
occurrence of the Change in Control, such Participant's Supplement Pension
Benefit, or his or her surviving spouse's Supplemental Death Benefit, shall be
adjusted to reflect the additional Years of Service and age provided for in this
Section 10. Such adjustment shall be made in the same manner as provided in
clauses (i) and (ii) of Section 3.3(c) of the Supplemental and Excess Benefits
Plan.
Exhibit 12-A
GPU, INC. AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
For the Years Ended December 31,
--------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- --------- ---------
OPERATING REVENUES $5,196,256 $4,757,124 $4,248,792 $4,143,379 $3,970,711
--------- --------- --------- ---------- ---------
OPERATING EXPENSES 4,411,609 3,748,294 3,352,713 3,272,644 3,292,796
Interest portion
of rentals (A) 23,439 34,171 30,594 26,108 26,093
Fixed charges of
service company
subsidiaries (B) 5,331 5,323 2,424 3,121 3,695
--------- --------- --------- ------- --------
Net expense 4,382,839 3,708,800 3,319,695 3,243,415 3,263,008
--------- --------- --------- --------- ---------
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 3,253 4,329 5,264 5,583 10,672
Equity in undistributed
earnings/(losses) of
affiliates, net 28,456 89,746 72,012 (27,100) 33,981
Other income, net 149,635 85,616 48,366 5,585 23,490
Minority interest
net income (2,871) (3,490) (2,171) (1,337) (2,701)
--------- --------- --------- -------- ---------
Total other income
and deductions 178,473 176,201 123,471 (17,269) 65,442
--------- --------- --------- -------- --------
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $ 991,890 $1,224,525 $1,052,568 $882,695 $ 773,145
======= ========= ========= ======= =========
FIXED CHARGES:
Interest on funded
indebtedness $ 515,026 $ 436,391 $ 346,513 $277,387 $ 216,352
Other interest (C) 36,176 44,320 38,248 38,039 59,398
Preferred stock dividends
of subsidiaries on a
pretax basis (E) 11,978 16,619 18,045 19,500 24,008
Interest portion
of rentals (A) 23,439 34,171 30,594 26,108 26,093
--------- --------- --------- ------- ---------
Total fixed
charges $ 586,619 $ 531,501 $ 433,400 $361,034 $ 325,851
========= ========= ========= ======= =========
RATIO OF EARNINGS
TO FIXED CHARGES 1.69 2.30 2.43 2.44 2.37
==== ==== ==== ==== ====
RATIO OF EARNINGS
TO COMBINED FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS (D) 1.69 2.30 2.43 2.44 2.37
==== ==== ==== ==== ====
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Exhibit 12-A
GPU, INC. AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
Notes:
(A) GPU has included the equivalent of the interest portion of all rentals charged to income as fixed charges for this statement and has excluded such components from operating expenses.
(B) Represents fixed charges of GPU Service, Inc. and GPU Nuclear, Inc. which are accounted for as operating expenses in GPU's consolidated income statement. GPU has removed the fixed charges from operating expenses and included such amounts in fixed charges as interest on funded indebtedness and other interest for this statement.
(C) Includes amount for subsidiary-obligated mandatorily redeemable preferred securities of $10,700, $24,627, $28,888, $28,888 and $28,888 for the years 2000, 1999, 1998, 1997 and 1996, respectively, and amount for subsidiary-obligated trust preferred securities of $13,690 and $8,345 for the years 2000 and 1999, respectively.
(D) GPU, Inc., the parent holding company, does not have any preferred stock outstanding, therefore, the ratio of earnings to combined fixed charges and preferred stock dividends is the same as the ratio of earnings to fixed charges.
(E) Calculation of preferred stock dividends of subsidiaries on a pretax basis is as follows:
For the Years Ended December 31,
----------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- --------- ---------
Income before provision
for income taxes and
preferred stock dividends
of subsidiaries and
gain on preferred
stock reacquisition $417,249 $709,643 $637,213 $541,161 $471,302
Income before extraordinary
item in 1998 and preferred
stock dividends of
subsidiaries (incl. gain/
loss on preferred stock
reacquisition) 240,442 470,020 397,124 347,625 304,583
Pretax earnings ratio 173.5% 151.0% 160.5% 155.7% 154.7%
Preferred stock dividends
of subsidiaries 6,904 11,006 11,243 12,524 15,519
Preferred stock dividends
of subsidiaries on
a pretax basis 11,978 16,619 18,045 19,500 24,008
|
Exhibit 12-B
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
For the Years Ended December 31,
-----------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- --------- ----------
OPERATING REVENUES $1,979,297 $2,018,209 $2,069,648 $2,093,972 $2,057,918
--------- --------- --------- --------- ---------
OPERATING EXPENSES 1,572,051 1,652,420 1,607,589 1,658,382 1,729,532
Interest portion
of rentals (A) 6,229 14,920 11,838 10,614 10,666
--------- --------- --------- --------- ---------
Net expense 1,565,822 1,637,500 1,595,751 1,647,768 1,718,866
--------- --------- --------- --------- ---------
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 2,006 1,775 2,424 2,319 6,647
Other income, net 27,234 12,461 13,227 1,919 7,202
--------- --------- --------- --------- ---------
Total other income
and deductions 29,240 14,236 15,651 4,238 13,849
--------- --------- --------- --------- ---------
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $ 442,715 $ 394,945 $ 489,548 $ 450,442 $ 352,901
========= ========= ========= ========= =========
FIXED CHARGES:
Interest on funded
indebtedness $ 93,888 $ 95,325 $ 95,361 $ 100,706 $ 89,648
Other interest (B) 11,911 11,350 14,829 14,992 21,847
Interest portion
of rentals (A) 6,229 14,920 11,838 10,614 10,666
--------- --------- --------- --------- ---------
Total fixed
charges $ 112,028 $ 121,595 $ 122,028 $ 126,312 $ 122,161
========= ========= ========= ========= =========
RATIO OF EARNINGS
TO FIXED CHARGES 3.95 3.25 4.01 3.57 2.89
==== ==== ==== ==== ====
Preferred stock
dividend requirement 6,904 8,670 10,065 11,376 13,072
Ratio of income before
provision for
income taxes to
net income (C) 156.9% 158.6% 165.2% 152.9% 147.6%
Preferred stock
dividend requirement
on a pretax basis 10,832 13,751 16,627 17,394 19,294
Fixed charges, as above 112,028 121,595 122,028 126,312 122,161
--------- --------- --------- --------- ---------
Total fixed charges
and preferred
stock dividends $ 122,860 $ 135,346 $ 138,655 $ 143,706 $ 141,455
========= ========= ========= ========= =========
RATIO OF EARNINGS
TO COMBINED FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS 3.60 2.92 3.53 3.13 2.50
==== ==== ==== ==== ====
|
Exhibit 12-B
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
Notes:
(A) JCP&L has included the equivalent of the interest portion of all rentals charged to income as fixed charges for this statement and has excluded such components from Operating Expenses.
(B) Includes amount for company-obligated mandatorily redeemable preferred securities of $10,700, $10,700, $10,700, $10,700 and $10,700 for the years 2000, 1999, 1998, 1997 and 1996, respectively.
(C) Represents income before provision for income taxes divided by net income as follows:
For the Years Ended December 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
Income before provision
for income taxes $330,687 $273,350 $367,520 $324,130 $230,740
Net income 210,812 172,380 222,442 212,014 156,303
|
Exhibit 12-C
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
For the Years Ended December 31,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- --------- ---------
OPERATING REVENUES $842,333 $902,827 $919,594 $943,109 $910,408
------- ------- ------- -------
OPERATING EXPENSES 673,844 689,579 752,168 728,644 733,664
Interest portion
of rentals (A) 1,543 4,381 9,784 6,151 5,367
------- ------- ------- ------- -------
Net expense 672,301 685,198 742,384 722,493 728,297
------- ------- ------- ------- -------
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 505 1,212 943 1,100 1,245
Other income/
(expense), net 12,169 3,901 (13,539) 3,371 1,220
------- ----- ------- ------- -------
Total other income
and deductions 12,674 5,113 (12,596) 4,471 2,465
------- ----- ------- ------- -------
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $182,706 $222,742 $164,614 $225,087 $184,576
======= ======= ======= ======= =======
FIXED CHARGES:
Interest on funded
indebtedness $ 45,866 $ 45,996 $ 47,557 $ 48,789 $ 45,373
Other interest (B) 9,314 15,846 12,130 10,861 14,436
Interest portion
of rentals (A) 1,543 4,381 9,784 6,151 5,367
------- ------- ------- ------- -------
Total fixed
charges $ 56,723 $ 66,223 $ 69,471 $ 65,801 65,176
======= ======= ======= ======= =======
RATIO OF EARNINGS
TO FIXED CHARGES 3.22 3.36 2.37 3.42 2.83
==== ==== ==== ==== ====
Preferred stock
dividend requirement - 66 483 483 944
Ratio of income before
provision for
income taxes to
net income (C) 153.8% 164.5% 164.8% 170.3% 172.9%
Preferred stock
dividend requirement
on a pretax basis - 109 796 823 1,632
Fixed charges, as above 56,723 66,223 69,471 65,801 65,176
------- ------- ------- ------- -------
Total fixed charges
and preferred
stock dividends $ 56,723 $ 66,332 $ 70,267 $ 66,624 $ 66,808
======= ======= ======= ======= =======
RATIO OF EARNINGS
TO COMBINED FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS 3.22 3.36 2.34 3.38 2.76
==== ==== ==== ==== ====
|
Exhibit 12-C
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
Notes:
(A) Met-Ed has included the equivalent of the interest portion of all rentals charged to income as fixed charges for this statement and has excluded such components from Operating Expenses.
(B) Includes amount for company-obligated mandatorily redeemable preferred securities of $8,950, $9,000, $9,000 and $9,000 for the years 1999, 1998, 1997 and 1996, respectively, and amount for company-obligated trust preferred securities of $6,656 and $4,369 for the years 2000 and 1999, respectively.
(C) Represents income before provision for income taxes divided by income before extraordinary item/net income as follows:
For the Years Ended December 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
Income before provision
for income taxes $125,983 $156,519 $ 95,143 $159,286 $119,400
Income before extraordinary
item/Net income 81,895 95,123 57,720 93,517 69,067
|
Exhibit 12-D
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
For the Years Ended December 31,
------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
OPERATING REVENUES $ 901,881 $ 921,965 $1,032,226 $1,052,936 $1,019,645
--------- --------- --------- --------- ---------
OPERATING EXPENSES 796,210 730,365 861,453 824,596 840,288
Interest portion
of rentals (A) 3,020 4,306 4,970 4,236 4,490
--------- --------- --------- --------- ---------
Net expense 793,190 726,059 856,483 820,360 835,798
--------- --------- --------- --------- ---------
OTHER INCOME AND DEDUCTIONS:
Allowance for funds
used during
construction 742 1,342 1,897 2,164 2,780
Other income/
(expense), net 11,135 59,081 (6,429) 2,469 (825)
--------- --------- --------- --------- ---------
Total other income
and deductions 11,877 60,423 (4,532) 4,633 1,955
--------- --------- --------- --------- ---------
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $ 120,568 $ 256,329 $ 171,211 $ 237,209 $ 185,802
========= ========= ========= ========= =========
FIXED CHARGES:
Interest on funded
indebtedness $ 36,839 $ 34,588 $ 54,907 $ 56,095 $ 49,654
Other interest (B) 11,705 10,561 10,207 10,556 16,300
Interest portion
of rentals (A) 3,020 4,306 4,970 4,236 4,490
--------- --------- --------- --------- ---------
Total fixed
charges $ 51,564 $ 49,455 $ 70,084 $ 70,887 $ 70,444
========= ========= ========= ========= =========
RATIO OF EARNINGS
TO FIXED CHARGES 2.34 5.18 2.44 3.35 2.64
==== ==== ==== ==== ====
Preferred stock
dividend requirement - 154 695 665 1,503
Ratio of income before
provision for
income taxes to
net income (C) 175.8% 135.7% 172.6% 175.0% 165.2%
Preferred stock
dividend requirement
on a pretax basis - 209 1,200 1,164 2,483
Fixed charges, as above 51,564 49,455 70,084 70,887 70,444
--------- --------- --------- --------- ----------
Total fixed charges
and preferred
stock dividends $ 51,564 $ 49,664 $ 71,284 $ 72,051 $ 72,927
========= ========= ========= ========= ==========
RATIO OF EARNINGS
TO COMBINED FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS 2.34 5.16 2.40 3.29 2.55
==== ==== ==== ==== ====
|
Exhibit 12-D
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
Notes:
(A) Penelec has included the equivalent of the interest portion of all rentals charged to income as fixed charges for this statement and has excluded such components from Operating Expenses.
(B) Includes amount for company-obligated mandatorily redeemable preferred securities of $4,977, $9,188, $9,188 and $9,188 for the years 1999, 1998, 1997 and 1996, respectively, and amount for company-obligated trust preferred securities of $7,034 and $3,976 for the years 2000 and 1999, respectively.
(C) Represents income before provision for income taxes divided by income before extraordinary item/net income as follows:
For the Years Ended December 31,
--------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ---------
Income before provision
for income taxes $ 69,004 $206,874 $101,127 $166,322 $115,358
Income before extraordinary
item/Net income 39,250 152,491 58,590 95,023 69,809
|
Exhibit 21-A
JERSEY CENTRAL POWER & LIGHT COMPANY
SUBSIDIARIES OF THE REGISTRANT
STATE OF
NAME OF SUBSIDIARY BUSINESS ORGANIZATION
------------------ -------- ------------
JCP&L PREFERRED CAPITAL, INC. SPECIAL-PURPOSE FINANCE DELAWARE
JCP&L CAPITAL, L.P. SPECIAL-PURPOSE FINANCE DELAWARE
JCP&L TRANSITION HOLDINGS, INC. SPECIAL-PURPOSE FINANCE DELAWARE
JCP&L TRANSITION, INC. SPECIAL-PURPOSE FINANCE DELAWARE
JCP&L TRANSITION FUNDING LLC SPECIAL-PURPOSE FINANCE DELAWARE
|
Note: JCP&L, along with its affiliates Met-Ed and Penelec, collectively own all of the common stock of Saxton Nuclear Experimental Corporation, a Pennsylvania nonprofit corporation organized for nuclear experimental purposes which is now inactive. The carrying value of the owners' investment has been written down to a nominal value.
Exhibit 21-B
METROPOLITAN EDISON COMPANY
SUBSIDIARIES OF THE REGISTRANT
STATE OF
NAME OF SUBSIDIARY BUSINESS ORGANIZATION
------------------ -------- ------------
YORK HAVEN POWER COMPANY HYDROELECTRIC GENERATION NEW YORK
MET-ED PREFERRED CAPITAL, INC. SPECIAL-PURPOSE FINANCE DELAWARE
MET-ED CAPITAL, L.P. SPECIAL-PURPOSE FINANCE DELAWARE
MET-ED PREFERRED CAPITAL II, INC. SPECIAL-PURPOSE FINANCE DELAWARE
MET-ED CAPITAL II, L.P. SPECIAL-PURPOSE FINANCE DELAWARE
MET-ED CAPITAL TRUST SPECIAL-PURPOSE FINANCE DELAWARE
|
Note: Met-Ed, along with its affiliates JCP&L and Penelec, collectively own all of the common stock of Saxton Nuclear Experimental Corporation, a Pennsylvania nonprofit corporation organized for nuclear experimental purposes which is now inactive. The carrying value of the owners' investment has been written down to a nominal value.
Exhibit 21-C
PENNSYLVANIA ELECTRIC COMPANY
SUBSIDIARIES OF THE REGISTRANT
STATE OF
NAME OF SUBSIDIARY BUSINESS ORGANIZATION
------------------ -------- ------------
NINEVEH WATER COMPANY WATER SERVICE PENNSYLVANIA
THE WAVERLY ELECTRIC LIGHT ELECTRIC DISTRIBUTION PENNSYLVANIA
AND POWER COMPANY
PENELEC PREFERRED CAPITAL, INC. SPECIAL-PURPOSE FINANCE DELAWARE
PENELEC CAPITAL, L.P. SPECIAL-PURPOSE FINANCE DELAWARE
PENELEC PREFERRED CAPITAL II, INC. SPECIAL-PURPOSE FINANCE DELAWARE
PENELEC CAPITAL II, L.P. SPECIAL-PURPOSE FINANCE DELAWARE
PENELEC CAPITAL TRUST SPECIAL-PURPOSE FINANCE DELAWARE
|
Note: Penelec, along with its affiliates JCP&L and Met-Ed, collectively own all of the common stock of Saxton Nuclear Experimental Corporation, a Pennsylvania nonprofit corporation organized for nuclear experimental purposes which is now inactive. The carrying value of the owners' investment has been written down to a nominal value.
EXHIBIT 23-A
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 33-32325, 33-32326, 33-34661, 33-32327, 33-51037, 33-32328 and 33-51035), and Form S-3 (File Nos. 33-30765 and 33-07895) of GPU, Inc. of our report dated January 31, 2001, relating to the consolidated financial statements and financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 21, 2001
EXHIBIT 23-B
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 33-31250, 33-57905, 33-57905-01 and 33-88783) of Jersey Central Power & Light Company of our report dated January 31, 2001, relating to the consolidated financial statements and financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 21, 2001
EXHIBIT 23-C
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 33-62967, 33-62967-01 and 33-62967-02) of Metropolitan Edison Company of our report dated January 31, 2001, relating to the consolidated financial statements and financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 21, 2001
EXHIBIT 23-D
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 33-62295, 33-62295-01 and 33-62295-02) of Pennsylvania Electric Company of our report dated January 31, 2001, relating to the consolidated financial statements and financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 21, 2001