FIRST SUPPLEMENTAL INDENTURE
between
POTOMAC ELECTRIC POWER COMPANY
and
THE BANK OF NEW YORK, as Trustee
Dated as of __________, 1998
TABLE OF CONTENTS*
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1 Definition of Terms 1
ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE DEBENTURES
SECTION 2.1 Designation and Principal Amount 3
SECTION 2.2 Maturity 3
SECTION 2.3 Form and Payment 3
SECTION 2.4 Global Debenture 3
SECTION 2.5 Interest 4
ARTICLE III
REDEMPTION OF THE DEBENTURES
SECTION 3.1 Optional Redemption 5
SECTION 3.2 Tax Event Redemption 5
SECTION 3.3 Redemption Procedures 5
SECTION 3.4 No Sinking Fund 5
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1 Extension of Interest Payment Period 5
SECTION 4.2 Notice of Extension 6
SECTION 4.3 Limitation of Transactions 6
ARTICLE V
EXPENSES
SECTION 5.1 Payment of Expenses 6
SECTION 5.2 Payment Upon Resignation or Removal 7
ARTICLE VI
COVENANT TO LIST ON EXCHANGE
SECTION 6.1 Listing on an Exchange 7
ARTICLE VII
FORM OF DEBENTURE
SECTION 7.1 Form of Debenture 8
*THIS TABLE OF CONTENTS SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE A PART OF
THIS FIRST SUPPLEMENTAL INDENTURE.
ARTICLE VIII
ORIGINAL ISSUE OF DEBENTURES
SECTION 8.1 Original Issue of Debentures 12
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Ratification of Indenture 12
SECTION 9.2 Trustee Not Responsible for Recitals 12
SECTION 9.3 Governing Law 12
SECTION 9.4 Separability 12
SECTION 9.5 Counterparts 13
FIRST SUPPLEMENTAL INDENTURE, dated as of _________, 1998 (the "First
Supplemental Indenture"), between Potomac Electric Power Company, a District
of Columbia and Virginia corporation (the "Company"), and The Bank of New
York, a New York banking corporation, as trustee (the "Trustee"), under the
Indenture dated as of ______, 1998 between the Company and the Trustee (the
"Indenture").
WHEREAS, the Company executed and delivered the Indenture to the Trustee to
provide for the future issuance of the Company's junior subordinated unsecured
debentures, notes and other evidences of indebtedness to be issued from time
to time in one or more series as may be determined by the Company under the
Indenture, in an unlimited aggregate principal amount that may be
authenticated and delivered as provided in the Indenture;
WHEREAS, pursuant to the terms of the Indenture, the Company desires to
provide for the establishment of a new series of such securities to be known
as its [ ]% Junior Subordinated Deferrable Interest Debentures due 2038 (the
"Debentures"), the form and substance of such Debentures and the terms,
provisions and conditions thereof to be set forth as provided in the Indenture
and this First Supplemental Indenture;
WHEREAS, Potomac Electric Power Company Trust I, a Delaware statutory
business trust (the "Trust"), has offered to the public $[ ] aggregate
liquidation amount of its [ ]% Preferred Securities (the "Preferred
Securities"), representing preferred undivided beneficial interests in the
assets of the Trust, and proposes to invest the proceeds from such offering,
together with the proceeds of the issuance and sale by the Trust to the
Company of $[ ] aggregate liquidation amount of its [ ]% Common
Securities (the "Common Securities"), in $[ ] aggregate principal
amount of the Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver
this First Supplemental Indenture, and all requirements necessary to make this
First Supplemental Indenture a valid instrument in accordance with its terms,
and to make the Debentures, when executed by the Company and authenticated and
delivered by the Trustee, the valid obligations of the Company, have been
performed, and the execution and delivery of this First Supplemental Indenture
has been duly authorized in all respects.
NOW, THEREFORE, in consideration of the purchase and acceptance of the
Debentures by the Holder (as defined herein) thereof, and for the purpose of
setting forth, as provided in the Indenture, the form and substance of the
Debentures and the terms, provisions and conditions thereof, the Company
covenants and agrees with the Trustee as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definition of Terms.
Unless the context otherwise requires:
(a) a term defined in the Indenture has the same meaning when used in
this First Supplemental Indenture;
(b) a term defined anywhere in this First Supplemental Indenture has the
same meaning throughout;
(c) the singular includes the plural and vice versa;
(d) a reference to a Section or Article is to a Section or Article of
this First Supplemental Indenture;
(e) headings are for convenience of reference only and do not affect
interpretation;
(f) the following terms have the meanings given to them in the
Declaration (as hereinafter defined): (i) Purchase Agreement; (ii) Delaware
Trustee; (iii) Distribution; (iv) Institutional Trustee; (v) Preferred
Securities Guarantee; (vi) Preferred Security Certificate; (vii) Regular
Trustee; and (viii) Trust Securities.
(g) the following terms have the meanings given to them in this Section
1.1(g):
"Additional Interest" shall have the meaning set forth in Section 2.5(c).
"Compound Interest" shall have the meaning set forth in Section 4.1.
"Coupon Rate" shall have the meaning set forth in Section 2.5(a).
"Creditor" shall have the meaning set forth in Section 5.1.
"Declaration" means the Amended and Restated Declaration of Trust of
Potomac Electric Power Company Trust I, a Delaware statutory business trust,
dated as of _________, 1998.
"Deferred Interest" shall have the meaning set forth in Section 4.1.
"Dissolution Event" means the dissolution of the Trust and distribution of
the Debentures held by the Institutional Trustee pro rata to the holders of
the Trust Securities in accordance with the Declaration, such event to occur
at the option of the Company at any time.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 4.1.
"Global Debenture" shall have the meaning set forth in Section 2.4(a).
"Holder" means any person in whose name at the time a Debenture is
registered on the Security Register.
"Interest Payment Date" shall have the meaning set forth in Section 2.5(a).
"Non Book-Entry Preferred Securities" shall have the meaning set forth in
Section 2.4(a).
"Optional Prepayment Price" shall have the meaning set forth in Section
3.1.
"Prepayment Price" shall mean either of the Optional Prepayment Price or
the Tax Event Prepayment Price.
"Stated Maturity" means the date on which the Debentures mature and on
which the principal shall be due and payable, together with all accrued and
unpaid interest thereon (including Compound Interest and Additional Interest,
if any) which date shall be ________, 2038.
"Tax Event" means that the Regular Trustees shall have received an opinion
of a nationally recognized independent tax counsel experienced in such matters
to the effect that, as a result of (a) any amendment to, or change (including
any announced prospective change) in, the laws or any regulations thereunder
of the United States or any political subdivision or taxing authority thereof
or therein, or (b) any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such pronouncement or decision is announced on or after
the date of the original issuance of the Trust Securities, there is more than
an insubstantial risk that (i) the Trust is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on the Debentures, (ii) interest payable by the
Company on the Debentures is not, or within 90 days of the date of such
opinionwill not be, deductible by the Company, in whole or in part, for United
States federal income tax purposes, or (iii) the Trust is, or will be within
90 days of the date of such opinion, subject to more than a de minimis amount
of other taxes, duties or other governmental charges.
"Tax Event Prepayment Price" shall have the meaning set forth in Section
3.2.
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ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE DEBENTURES
SECTION 2.1. Designation and Principal Amount.
There is hereby authorized a series of Securities designated the "[ ]%
Junior Subordinated Deferrable Interest Debentures due 2038", limited in
aggregate principal amount to $[ ], which amount shall be as set
forth in any written order of the Company for the authentication and delivery
of Debentures pursuant to Section 2.04 of the Indenture.
SECTION 2.2. Maturity.
(a) The Debentures shall mature on the Stated Maturity.
SECTION 2.3. Form and Payment.
Except as provided in Section 2.4, the Debentures shall be issued in fully
registered certificated form without interest coupons. Principal and interest
on the Debentures issued in certificated form will be payable, the transfer of
such Debentures will be registrable and such Debentures will be exchangeable
for Debentures bearing identical terms and provisions at the office or agency
of the Trustee in New York, New York; provided, however, that payment of
interest may be made, at the option of the Company, by check mailed to the
Holder entitled thereto at such address as shall appear in the Security
Register or by wire transfer to an account appropriately designated by the
Holder entitled thereto. Notwithstanding the foregoing, so long as the Holder
of any Debentures is the Institutional Trustee, the payment of the principal
of and interest (including Compound Interest and Additional Interest, if any)
on such Debentures held by the Institutional Trustee will be made at such
place and to such account as may be designated by the Institutional Trustee.
SECTION 2.4. Global Debenture.
(a) In connection with a Dissolution Event,
(i) the Debentures in certificated form shall be presented to the
Trustee by the Institutional Trustee (as the Holder of the Debentures) in
exchange for a global Debenture in an aggregate principal amount equal to the
aggregate principal amount of all outstanding Debentures (a "Global
Debenture"), to be registered in the name of the Depository Institution, or
its nominee, and delivered by the Trustee to the Depository Institution for
crediting to the accounts of its participants. The Company upon any such
presentation shall execute a Global Debenture in such aggregate principal
amount and deliver the same to the Trustee for authentication and delivery in
accordance with the Indenture and this First Supplemental Indenture. Payments
on the Debentures issued as a Global Debenture will be made to the Depository
Institution; and
(ii) if any Preferred Securities are held in non book-entry form,
any Preferred Security Certificate which represents Preferred Securities other
than Preferred Securities held by the Depository Institution or its nominee
("Non Book-Entry Preferred Securities") will be deemed to represent beneficial
interests in Debentures presented to the Trustee by the Institutional Trustee
having an aggregate principal amount equal to the aggregate liquidation amount
of the Non Book-Entry Preferred Securities until such Preferred Security
Certificates are presented to the security registrar for transfer or
reissuance, at which time such Preferred Security Certificates will be
cancelled and a Debenture, registered in the name of the holder of the
Preferred Security Certificate or the transferee of the holder of such
Preferred Security Certificate, as the case may be, with an aggregate
principal amount equal to the aggregate liquidation amount of the Preferred
Security Certificate cancelled, will be executed by the Company and delivered
to the Trustee for authentication and delivery in accordance with the
Indenture and this First Supplemental Indenture. On issue of such Debentures,
Debentures evidenced by a Global Debenture will be deemed to have been
cancelled.
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(b) A Global Debenture may be transferred by the Depository Institution,
in whole but not in part, only to a nominee of the Depository Institution, or
to a successor Depository Institution selected or approved by the Company or
to a nominee of such successor Depository Institution.
(c) If there shall have occurred an Event of Default, then the Company
shall execute, and, subject to Section 2.07 of the Indenture, the Trustee,
upon receipt of an Officers' Certificate evidencing such determination by the
Company, shall authenticate and make available for delivery the Debentures in
definitive registered form without coupons, in authorized denominations, and
in an aggregate principal amount equal to the principal amount of the Global
Debenture, in exchange for such Global Debenture. Upon the exchange of the
Global Debenture for such Debentures in definitive registered form without
coupons, in authorized denominations, the Global Debenture shall be cancelled
by the Trustee. Such Debentures in definitive registered form issued in
exchange for the Global Debenture shall be registered in such names and in
such authorized denominations as the Depository Institution, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Debentures to the
Depository Institution for delivery to the Persons in whose names such
Debentures are so registered.
SECTION 2.5. Interest.
(a) Each Debenture will bear interest at the rate of [ ]% per annum (the
"Coupon Rate") from the date of original issuance until the principal thereof
becomes due and payable, and on any overdue principal and, to the extent that
payment of such interest is enforceable under applicable law, on any overdue
installment of interest at the Coupon Rate, compounded quarterly, payable
quarterly in arrears on March 1, June 1, September 1 and December 1 of each
year (each, an "Interest Payment Date"), commencing on September 1, 1998, to
the Person in whose name such Debenture or any Predecessor Security is
registered, at the close of business on the relevant record date, which will
be, as long as the Preferred Securities remain in book-entry form, one
Business Day prior to the relevant Interest Payment Date and, in the event the
Debentures are not in book-entry form, the tenth day of the month prior to the
month in which the relevant Interest Payment Date occurs, except as otherwise
provided pursuant to the provisions of Article IV hereof.
(b) The amount of interest payable for any full quarterly period will be
computed on the basis of a 360-day year of twelve 30-day months. Except as
provided in the following sentence, the amount of interest payable for any
period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed. In the
event that any date on which interest is payable on the Debentures is not a
Business Day, then payment of interest payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, then such payment shall be made on
the immediately preceding Business Day, in each case with the same force and
effect as if made on the date that such interest otherwise would have been
payable.
(c) If, at any time while the Institutional Trustee is the holder of any
Debentures, the Trust or the Institutional Trustee is required to pay any
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States, or any other taxing
authority, then, in any such case, the Company will pay as additional interest
("Additional Interest") on the Debentures held by the Institutional Trustee,
such additional amounts as shall be required so that the net amounts received
and retained by the Trust and by the Institutional Trustee, after paying such
taxes, duties, assessments or other governmental charges, will be equal to the
amounts the Trust and the Institutional Trustee would have received had no
such taxes, duties, assessments or other governmental charges been imposed.
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ARTICLE III
REDEMPTION OF THE DEBENTURES
SECTION 3.1 Optional Redemption
The Debentures are prepayable, in whole or in part, at the option of the
Company at any time on or after ______, 2003, at a prepayment price (the
"Optional Prepayment Price") equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon (including Compound Interest and
Additional Interest, if any) to the date of prepayment.
SECTION 3.2 Tax Event Redemption
If a Tax Event shall occur, the Company may, at its option, prepay the
Debentures in whole (but not in part) at any time prior to ________, 2003,
within 90 days after the occurrence of such Tax Event, at a prepayment price
(the "Tax Event Prepayment Price") equal to 100% of the principal amount of
such Debentures, plus accrued and unpaid interest thereon (including Compound
Interest and Additional Interest, if any) to the date of prepayment.
SECTION 3.3 Redemption Procedures
Notice of any redemption will be mailed at least 30 days, but not more than
60 days, before the redemption date specified therein to each Holder of
Debentures to be prepaid at its registered address. Unless the Company
defaults in payment of the prepayment price, on and after the redemption date
interest shall cease to accrue on such Debentures as are called for
redemption. If the Debentures are redeemed only in part pursuant to Section
3.1, the Debentures will be redeemed pro rata, by lot or by any other method
selected by the Trustee; provided that, if at the time of redemption the
Debentures are registered as a Global Debenture, the Depository Institution
shall determine, in accordance with its customary procedures, the principal
amount of such Debentures held by each Depository Institution participant to
be redeemed. The Prepayment Price shall be paid prior to 12:00 noon, New York
time, on the date of such redemption or at such earlier time as the Company
determines; provided that the Company shall have deposited with the Trustee an
amount sufficient to pay the Prepayment Price prior to such time.
SECTION 3.4. No Sinking Fund.
The Debentures are not entitled to the benefit of any sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. Extension of Interest Payment Period.
So long as the Company shall not be in default in the payment of interest
on the Debentures, the Company shall have the right, at any time and from time
to time during the term of the Debentures, to defer payments of interest by
extending the interest payment period of such Debentures for a period not
exceeding 20 consecutive quarterly periods (the "Extended Interest Payment
Period"), during which Extended Interest Payment Period no interest shall be
due and payable; provided that no Extended Interest Payment Period may extend
beyond the Stated Maturity. To the extent permitted by applicable law,
interest, the payment of which has been deferred because of the extension of
the interest payment period pursuant to this Section 4.1, shall bear interest
thereon at the Coupon Rate, compounded quarterly, for each quarterly period of
the Extended Interest Payment Period ("Compound Interest"). After the
expiration of the Extended Interest Payment Period, the Company shall pay all
interest accrued and unpaid on the Debentures, including Compound Interest and
Additional Interest, if any (together, "Deferred Interest"), on the first
Interest Payment Date following the Extended Interest Payment Period to the
Holders in whose names the Debentures are registered in the Security Register
on the record date for such Interest Payment Date. Prior to the termination
of any Extended Interest Payment Period, the Company may further extend such
period, provided that such period, together with all such further extensions
thereof, shall not exceed 20 consecutive quarterly periods or extend beyond
the Stated Maturity of the
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Debentures. At the termination of any Extended Interest Payment Period and
upon the payment of all Deferred Interest then due, the Company may commence a
new Extended Interest Payment Period, subject to the foregoing limitations. No
interest shall be due and payable during an Extended Interest Payment Period,
but the Company may prepay at any time all or any portion of the interest
accrued during an Extended Interest Payment Period.
SECTION 4.2. Notice of Extension.
(a) If the Institutional Trustee is the only Holder at the time the
Company elects to commence an Extended Interest Payment Period, the Company
shall give written notice to the Institutional Trustee and the Trustee of its
election of such Extended Interest Payment Period one Business Day prior to
the earlier of (i) the next succeeding date on which Distributions on the
Trust Securities issued are payable, or (ii) the date the Trust is required to
give notice to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Preferred Securities of the record or
distribution date, but in any event at least one Business Day prior to such
record date.
(b) If the Institutional Trustee is not the only Holder at the time the
Company elects to commence an Extended Interest Payment Period, the Company
shall give the Holders and the Trustee written notice of its election of such
Extended Interest Payment Period at least ten Business Days prior to the
earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the
Company is required to give notice to the New York Stock Exchange or other
applicable self-regulatory organization or to the Holders of the record date
or the Interest Payment Date.
(c) The quarterly period in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20
quarterly periods permitted in computing the maximum duration of the Extended
Interest Payment Period permitted under Section 4.1.
SECTION 4.3. Limitation of Transactions.
If (i) the Company shall exercise its right to defer payment of interest as
provided in Section 4.1 and the Extended Interest Payment Period is continuing
or (ii) there shall have occurred any Event of Default, then (a) the Company
shall not declare or pay any dividend on, make any distribution with respect
to, or redeem, purchase, acquire or make a liquidation payment with respect
to, any of its capital stock (other than (1) purchases or acquisitions of
shares of its common stock in connection with the satisfaction by the Company
of its obligations under any employee benefit plans or any other contractual
obligation of the Company (other than a contractual obligation ranking pari
passu with or junior to the Debentures) or (2) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted
or exchanged), (b) the Company shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by the Company that rank pari passu with or junior to the
Debentures and (c) the Company shall not make any guarantee payments with
respect to the foregoing (other than pursuant to the Preferred Securities
Guarantee and, to the extent permitted by the Declaration, the Common
Securities Guarantee).
ARTICLE V
EXPENSES
SECTION 5.1. Payment of Expenses.
In connection with the offering, sale and issuance of the Debentures to the
Institutional Trustee and in connection with the sale of the Trust Securities
by the Trust, the Company, in its capacity as borrower with respect to the
Debentures, shall:
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(a) pay all costs and expenses relating to the offering, sale and
issuance of the Debentures and compensation of the Trustee under the Indenture
in accordance with the provisions of Section 6.06 of the Indenture;
(b) be responsible for and shall pay all debts and obligations (other than
with respect to the Trust Securities) and all costs and expenses of the Trust
(including, but not limited to, costs and expenses relating to the
organization, maintenance and dissolution of the Trust, the offering, sale and
issuance of the Trust Securities (including commissions to the underwriters in
connection therewith), the fees and expenses (including reasonable counsel
fees and expenses) of the Institutional Trustee, the Delaware Trustee and the
Regular Trustees, the costs and expenses relating to the operation of the
Trust, including without limitation, costs and expenses of accountants,
attorneys, statistical or bookkeeping services, expenses for printing and
engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition and disposition of Trust assets and the enforcement by the
Institutional Trustee of the rights of the holders of the Prererred
Securities);
(c) be liable for any indemnification obligations arising with respect to
the Declaration; and
(d) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes, of the Trust.
The Company's obligations under this Section 5.1 shall be for the benefit
of, and shall be enforceable by, any person to whom such debts, obligations,
costs, expenses and taxes are owed (a "Creditor"), whether or not such
Creditor has received notice hereof. Any such Creditor may enforce the
Company's obligations under this Section 5.1 directly against the Company and
the Company irrevocably waives any right of remedy to require that any such
Creditor take any action against the Trust or any other Person before
proceeding against the Company. The Company agrees to execute such additional
agreements as may be necessary or desirable in order to give full effect to
the provisions of this Section 5.1.
SECTION 5.2. Payment Upon Resignation or Removal.
Upon termination of this First Supplemental Indenture or the Indenture or
the removal or resignation of the Trustee, the Company shall pay to the
Trustee all amounts accrued to the date of such termination, removal or
resignation that are payable pursuant to Section 6.06 of the Indenture. Upon
termination of the Declaration or the removal or resignation of the Delaware
Trustee or the Institutional Trustee, as the case may be, pursuant to Section
5.6 of the Declaration, the Company shall pay to the Delaware Trustee or the
Institutional Trustee, as the case may be, all compensation and expenses
payable as of the date of such termination, removal or resignation.
ARTICLE VI
COVENANT TO LIST ON EXCHANGE
SECTION 6.1. Listing on an Exchange.
If the Debentures are distributed to the holders of the Trust Securities
and the Preferred Securities are then listed on the New York Stock Exchange,
Inc. or another exchange, the Company will use its best efforts to list the
Debentures on such exchange.
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ARTICLE VII
FORM OF DEBENTURE
SECTION 7.1. Form of Debenture.
The Debentures and the Trustee's Certificate of Authentication to be
endorsed thereon are to be substantially in the following forms:
(FORM OF FACE OF DEBENTURE)
[If the Debenture is to be a Global Debenture, Insert -- This Debenture is a
Global Debenture within the meaning of the Indenture hereinafter referred to
and is registered in the name of a Depository or a nominee of a Depository.
This Debenture is exchangeable for Debentures registered in the name of a
person other than the Depository or its nominee only in the limited
circumstances described in the Indenture, and no transfer of this Debenture
(other than a transfer of this Debenture as a whole by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository) may be registered except in limited
circumstances.]
Unless this Debenture is presented by an authorized representative of The
Depository Trust Company (55 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx) to the issuer
or its agent for registration of transfer, exchange or payment, and any
Debenture issued in exchange therefor is registered in the name of Cede & Co.
or such other name as requested by an authorized representative of The
Depository Trust Company and any payment hereon is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL since the registered owner hereof, Cede & Co., has an interest
herein.
No. ______________________________
POTOMAC ELECTRIC POWER COMPANY
[ ]% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE 2038
CUSIP No.
------------
POTOMAC ELECTRIC POWER COMPANY, a District of Columbia and Virginia
corporation (the "Company", which term includes any successor corporation
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to The Bank of New York, as Institutional Trustee of Potomac
Electric Power Company Trust I under that certain Amended and Restated
Declaration of Trust dated as of __________, 1998 (the "Declaration"), or
registered assigns, the principal sum of [ ]Dollars ($_________) on
_________, 2038 (the"Stated Maturity"), and to pay interest on said principal
sum from ________, 1998, or from the most recent interest payment date (each
such date, an "Interest Payment Date") to which interest as been paid or duly
provided for, quarterly (subject to deferral as set forth herein) in arrears
on March 1, June 1, September 1 and December 1 of each year commencing
September 1, 1998, at the rate of [ ]% per annum (the "Coupon Rate"), until
the principal hereof shall have become due and payable, and on any overdue
principal, and (without duplication and to the extent that payment of such
interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum, compounded quarterly. The amount of
interest payable on any Interest Payment Date shall be computed on the basis
of a 360-day year of twelve 30-day months and, except as provided in the
following sentences, for any shorter period on the basis of the actual number
of days elapsed. In the event that any date on which interest is payable on
this Debenture is not a Business Day, then payment of interest payable on such
date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the date such interest otherwise
would have
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been payable. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the person in whose name this Debenture (or one or more Predecessor
Securities, as defined in the Indenture) is registered at the close of
business on the relevant record dates, which will be, as long as the Debenture
remains in book-entry form, one Business Day prior to the relevant Interest
Payment Date and, in the event the Debenture is not in book-entry form, the
tenth day of the month prior to the month in which the relevant Interest
Payment Date occurs. Payments of interest may be deferred by the Company
pursuant to the provisions of Article IV of the Supplemental Indenture (as
hereinafter defined). Any such interest installment not punctually paid or
duly provided for shall forthwith cease to be payable to the registered
holders on such regular record date and shall be paid to the Person in whose
name this Debenture (or one or more Predecessor Securities) is registered at
the close of business on a special record date to be fixed by the Trustee for
the payment of such defaulted interest, notice whereof shall be given to the
registered holders of this series of Debentures not less than 10 days nor more
than 15 days prior to such special record date, or may be paid at any time in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Debentures may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture. The principal of and the interest on this Debenture shall be
payable at the office or agency of the Trustee maintained for that purpose in
any coin or currency of the United States of America that at the time of
payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the registered holder at such address as shall appear in the
Security Register. Notwithstanding the foregoing, so long as the holder of
this Debenture is the Institutional Trustee, the payment of the principal of
and interest on this Debenture will be made at such place and to such account
as may be designated by the Institutional Trustee.
The indebtedness evidenced by this Debenture is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Indebtedness and Other Financial Obligations (each as
defined in the Indenture), and this Debenture is issued subject to the
provisions of the Indenture with respect thereto. Each holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to
take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination so provided and (c) appoints the Trustee his or
her attorney-in-fact for any and all such purposes. Each holder hereof, by
his or her acceptance hereof, hereby waives all notice of the acceptance of
the subordination provisions contained herein and in the Indenture by each
holder of Senior Indebtedness and Other Financial Obligations,
whether now outstanding or hereafter incurred, and waives reliance by each
such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until
the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee.
The provisions of this Debenture are continued on the reverse side hereof
and such continued provisions shall for all purposes have the same effect as
though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
POTOMAC ELECTRIC POWER COMPANY
By:____________________________________
Name
Title
Attest:
By:______________________________________
Name:
Title:
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(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
Dated: ____________, 1998
This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.
The Bank of New York,
as Trustee
By: _______________________________________
Authorized Signatory
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of Debentures of the
Company (herein sometimes referred to as the "Debentures"), specified in the
Indenture, all issued or to be issued in one or more series under and pursuant
to an Indenture dated as of __________, 1998, duly executed and delivered
between the Company and The Bank of New York, as trustee (the "Trustee"), as
supplemented by the First Supplemental Indenture dated as of _______, 1998
(the "Supplemental Indenture"), between the Company and the Trustee (the
Indenture as so supplemented, the "Indenture"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities
thereunder of the Trustee, the Company and the holders of the Debentures. By
the terms of the Indenture, the Debentures are issuable in series that may
vary as to amount, date of maturity, rate of interest and in other respects as
provided in the Indenture. This series of Debentures is limited in aggregate
principal amount as specified in said First Supplemental Indenture.
This Debenture is redeemable by the Company (i) in whole but not in part
(a "Tax Event Redemption") at any time prior to _______ ___, 2003, within 90
days after the occurrence of a Tax Event (as defined in the Indenture) and
(ii) in whole or in part (an "Optional Redemption") on or after _______, 2003.
Any such redemption will be made upon not less than 30 days nor more than 60
days notice, at a price equal to 100% of the principal amount hereof, plus any
accrued and unpaid interest hereon, to the date of such redemption (the
"Prepayment Price"). The Prepayment Price shall be paid prior to 12:00 noon,
New York time, on the date of such redemption or at such earlier time as the
Company determines. If the Debentures are only partially redeemed by the
Company pursuant to an Optional Redemption, the Debentures will be redeemed
pro rata, by lot or by any other method selected by the Trustee; provided that
if, at the time of redemption, the Debentures are registered as a Global
Debenture, the Depository shall determine, in accordance with its customary
procedures, the principal amount of such Debentures held by each Depository
Institution participant to be redeemed.
In the event of redemption of this Debenture in part only, a new Debenture
or Debentures of this series for the unredeemed portion hereof will be issued
in the name of the holder hereof upon the cancellation hereof.
In case an Event of Default shall have occurred and be continuing, the
principal of all of the Debentures may be declared, and upon such declaration
shall become, due and payable, in the manner, with the effect and subject to
the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Debentures of each series affected at the time
outstanding, as defined in the Indenture, to execute supplemental indentures
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or of modifying in any manner the rights of the holders of the
Debentures; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Debentures of any series, or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of interest thereon, or
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reduce any amount payable on redemption thereof or make the principal thereon
or any interest or premium thereon payable in any coin or currency other than
that provided in this Debenture, or impair or affect the right of any holder
of a Debenture to institute suit for payment thereof or the right of
repayment, if any, at the option of the holder, without the consent of the
holder of each Debenture so affected, or (ii) reduce the aforesaid percentage
of Debentures, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of each Debenture
then outstanding and affected thereby. The Indenture also contains provisions
permitting the holders of a majority in aggregate principal amount of the
Debentures of any series at the time outstanding affected thereby, on behalf
of all of the holders of the Debentures of such series, to waive any past
default in the performance of any of the covenants contained in the Indenture,
or established pursuant to the Indenture with respect to such series, and its
consequences, except a default in the payment of the principal of or premium,
if any, or interest on any of the Debentures of such series. Any such consent
or waiver by the holder of this Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and upon all
future holders of this Debenture and of any Debenture issued in exchange
hereof or in place hereof (whether by registration of transfer or otherwise),
irrespective of whether or not any notation of such consent or waiver is made
upon this Debenture.
No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and interest on, this
Debenture at the time and place and at the rate and in the money herein
prescribed.
The Company shall have the right, at any time and from time to time during
the term of the Debentures, to defer payments of interest by extending the
interest payment period of such Debentures for up to 20 consecutive quarterly
periods (an "Extended Interest Payment Period"), at the end of which period
the Company shall pay all interest then accrued and unpaid (together with
interest on such deferred amounts at the Coupon Rate, compounded quarterly, to
the extent that payment of such interest is permitted by applicable law);
provided that no Extended Interest Payment Period may extend beyond the Stated
Maturity of the Debentures. Prior to the termination of any such Extended
Interest Payment Period, the Company may further extend such period, provided
that such period, together with all such further extensions thereof, shall not
exceed 20 consecutive quarterly periods or extend beyond the Stated Maturity
of the Debentures. At the termination of any such Extended Interest Payment
Period and upon the payment of all accrued and unpaid interest then due
(including Compound Interest), the Company may commence a new Extended
Interest Payment Period.
As provided in the Indenture and subject to certain limitations therein set
forth, this Debenture is transferable by the registered holder hereof on the
Security Register, upon surrender of this Debenture for registration of
transfer at the office or agency of the Trustee in the City and State of New
York, accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company or the Trustee duly executed by the registered
holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Debentures of authorized denominations and for the same aggregate
principal amount and series will be issued to the designated transferee or
transferees. No service charge will be made for any such transfer, but the
Company or the Trustee may require payment of a sum sufficient to cover any
tax, fee or other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Debenture,
the Company, the Trustee, any authenticating agent, any paying agent, any
transfer agent and any security registrar may deem and treat the registered
holder hereof as the absolute owner hereof (whether or not this Debenture
shall be overdue and notwithstanding any notice of ownership or writing hereon
made by anyone other than the security registrar) for the purpose of receiving
payment of or on account of the principal hereof and interest due hereon and
for all other purposes, and none of the Company, the Trustee, any
authenticating agent, any paying agent, any transfer agent, or any security
registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether
by virtue of any constitution, statute or rule of law, or by the enforcement
of any assessment or penalty or otherwise, all such liability being, by the
acceptance hereof and as part of the consideration for the issuance hereof,
expressly waived and released.
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The Debentures of this series are issuable only in registered form without
coupons in denominations of $25 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations herein and
therein set forth, Debentures of this series so issued are exchangeable for a
like aggregate principal amount of Debentures of this series of a different
authorized denomination, as requested by the Holder surrendering the same.
This Debenture shall be governed by, and construed in accordance with, the
laws of the State of New York.
All terms used in this Debenture that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
ARTICLE VIII
ORIGINAL ISSUE OF DEBENTURES
SECTION 8.1. Original Issue of Debentures.
Debentures in the aggregate principal amount of $[ ], may, upon
execution of this First Supplemental Indenture or upon any written order of
the Company setting forth the amount therefor, be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Debentures to or upon the written order of the
Company, signed by its Chairman, its President, or any Vice President and its
Treasurer, its Secretary, any Assistant Treasurer, or any Assistant Secretary,
without any further action by the Company.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Ratification of Indenture.
The Indenture, as supplemented by this First Supplemental Indenture, is in
all respects ratified and confirmed, and this First Supplemental Indenture
shall be deemed part of the Indenture in the manner and to the extent herein
and therein provided.
SECTION 9.2. Trustee Not Responsible for Recitals.
The recitals herein contained are made by the Company and not by the
Trustee, and the Trustee assumes no responsibility for the correctness
thereof. The Trustee makes no representation as to the validity or
sufficiency of this First Supplemental Indenture.
SECTION 9.3. Governing Law.
This First Supplemental Indenture and each Debenture shall be deemed to be
a contract made under the internal laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of said State.
SECTION 9.4. Separability.
In case any one or more of the provisions contained in this First
Supplemental Indenture or in the Debentures shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this First
Supplemental Indenture or of the Debentures, but this First Supplemental
Indenture and the Debentures shall be construed as if such invalid or illegal
or unenforceable provision had never been contained herein or therein.
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SECTION 9.5. Counterparts.
This First Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed by their respective officers thereunto duly
authorized and their respective corporate seals to be hereunto duly affixed
and attested, all as of the day and year first above written.
POTOMAC ELECTRIC POWER COMPANY
Attest:
By:
------------------------- ---------------------------
Name: Name:
Title: Title:
Attest: THE BANK OF NEW YORK,
as Trustee
------------------------ By:----------------------------
Name: Name:
Title: Title:
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