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Exhibit 1.1
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
---------
___% TRUST PREFERRED SECURITIES
OF
CLEVELAND ELECTRIC FINANCING TRUST I
UNDERWRITING AGREEMENT
__________ ___, 2001
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________ ___, 2001
XXXXXX XXXXXXX & CO. INCORPORATED
and the other Underwriters listed on Annex A hereto
C/O MORGAN XXXXXXX & CO. INCORPORATED
0000 XXXXXXXX
Xxx Xxxx, XX 00000
Dear Sirs:
Cleveland Electric Financing Trust I, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), and The Cleveland
Electric Illuminating Company, an Ohio corporation, (hereinafter called the
"Company"), as owner of the trust interests represented by common securities
(the "Common Securities") issued by the Trust and as guarantor (the
"Guarantor"), propose that the Trust issue an aggregate number of __________ of
its preferred securities (the "Preferred Securities") designated as ___% Trust
Preferred Securities representing undivided beneficial interests in the assets
of the Trust, guaranteed by the Guarantor as to the payment of distributions,
and as to payments on liquidation or redemption, to the extent set forth in the
Guarantee Agreement to be dated as of ________ ___, 2001 (the "Guarantee")
between the Guarantor and The Bank of New York, as trustee (the "Guarantee
Trustee"). The proceeds of the sale of the Preferred Securities by the Trust are
to be invested in ___% Subordinated Debentures, Due 2031 (the "Subordinated
Debentures") of the Company, to be issued pursuant to an Indenture to be dated
as of ________ ___, 2001 (the "Indenture") between the Company and The Bank of
New York, as trustee (the "Debenture Trustee"). The Preferred Securities shall
have the designation, preferences, rights, powers and restrictions set forth in
the Trust's Amended and Restated Trust Agreement to be dated as of ________ ___,
2001 (the "Trust Agreement"). The Preferred Securities and the Subordinated
Debentures are more fully described in the Prospectus hereinafter referred to.
The Company and the Trust have filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-2 (Nos.
333-64776 and 333-64776-01), including a preliminary prospectus relating to the
Preferred Securities, the Guarantee and the Subordinated Debentures, and will
file with or electronically transmit for filing to the Commission a final form
of a prospectus specifically relating to the terms of the Preferred Securities,
the Guarantee and the Subordinated Debentures pursuant to Rule 424 under the
Securities Act of 1933 (the "Act"). Such registration statement has become
effective. The term "Registration Statement" means such registration statement
as amended at the time it became effective, including any information deemed to
be part of the registration statement at the time of effectiveness pursuant to
Rule 430A under the Act. The term "Prospectus" means the final prospectus
specifically relating to the Preferred Securities, as filed with or
electronically transmitted for filing to the Commission pursuant to Rule 424.
The term "preliminary prospectus" means the preliminary prospectus specifically
relating to the Preferred Securities contained in the Registration Statement at
the time it became effective. As used herein, the terms "Registration
Statement," "Prospectus" and "preliminary prospectus" shall include in each case
the documents, if any, incorporated by reference therein.
I.
The Company and the Trust hereby agree that the Trust sell to the
several Underwriters named on Annex A hereto, and the Underwriters, upon the
basis of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agree to purchase from the Trust, severally and
not jointly, the number of Preferred Securities set forth on Annex A hereto
opposite their names at a purchase price of $25.00 per Preferred Security.
The Company agrees to issue the Subordinated Debentures to the Trust
concurrently with the issue and sale of the Preferred Securities as contemplated
herein. The Company hereby guarantees the timely performance by the Trust of its
obligations under Articles I and III herein. The Trust agrees to purchase the
Subordinated Debentures with the proceeds of, and concurrently with, the issue
and sale of the Preferred Securities.
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As compensation to the Underwriters for their commitments hereunder,
and because the proceeds of the sale of the Preferred Securities will be loaned
by the Trust to purchase the Subordinated Debentures from the Company, the
Company hereby agrees to pay on the Closing Date to the Underwriters an amount
equal to (i) in the case of such number of Preferred Securities as are reserved
by the Underwriters for sale to institutional investors, $___ per Preferred
Security and (ii) in the case of such number of Preferred Securities as are not
so reserved, $____ per Preferred Security. The Underwriters shall inform the
Company in writing, not later than 12:00 noon New York time on the business day
prior to the Closing Date, of the number of Preferred Securities reserved for
sale to such institutional investors.
II.
The Company and the Trust are advised by you that the Underwriters
propose to make a public offering of their respective Preferred Securities as
soon after this underwriting agreement (the "Agreement") is entered into as in
your judgment is advisable. The Company and the Trust are further advised by you
that the Preferred Securities are to be offered to the public at a public
offering price of $25 per Preferred Security and to certain dealers selected by
you at a price which represents a concession not in excess of $___ per Preferred
Security under the public offering price of the Preferred Securities, and that
any Underwriter may allow, and such dealers may reallow, a concession not in
excess of $___ per Preferred Security to certain other dealers.
III.
Payment for the Preferred Securities shall be made to the Trust or its
order by wire transfer or by certified or official bank check or checks in
immediately available funds at the office of Pillsbury Winthrop LLP, One Battery
Park Plaza, New York, N.Y., at 10:00 o'clock A.M., New York City time, on
__________ ___, 2001, or at such other time on the same or such other date, not
later than __________ ___, 2001, as we shall mutually agree, upon delivery of
the certificate(s) representing the Preferred Securities. Certificates for the
Preferred Securities shall be in definitive form and registered in such names
and in such denominations as you shall request in writing not less than two full
business days prior to the date of delivery. The time and date of such payment
and delivery are herein referred to as the Closing Date.
IV.
The Company represents and warrants to you that as of the date hereof:
(a) (i) Each preliminary prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto or filed pursuant to Rule 424 under the Act complied when so
filed in all material respects with the Act and the applicable rules
and regulations of the Commission thereunder, and each document
incorporated by reference therein complied when originally filed in all
material respects with the requirements of the Act or the Exchange Act
pursuant to which it was filed and the applicable rules and regulations
of the Commission thereunder, (ii) the Registration Statement and the
Prospectus, as amended or supplemented or modified by the filing of a
document incorporated by reference therein, will comply (at a time of
such amendment, supplement or modification and, if amended,
supplemented or modified prior to the Closing Date, on the Closing
Date) in all material respects with the Act and the applicable rules
and regulations thereunder, (iii) the preliminary prospectus does not
contain and the Prospectus, in the form used by the Underwriters to
confirm sales and on the Closing Date, will not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (iv) the Registration
Statement, as amended or supplemented or modified by the filing of a
document incorporated by reference therein, will not contain (at the
time of such amendment, supplement or modification and, if amended,
supplemented or modified prior to the Closing Date, on the Closing
Date) any untrue statement of a material fact or omit to state a
material fact required to be stated or necessary in order to make the
statements therein not misleading; except that these representations
and warranties do not apply to statements or omissions in the
Registration Statement or the Prospectus, in each case as amended,
supplemented or modified, or any preliminary prospectus, based upon
information furnished to the Company and the Trust in writing by you or
by any Underwriter expressly for use therein.
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(b) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Ohio, has the corporate power and authority to own its property and
to conduct its business as described in the preliminary prospectus and
the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries taken as a whole.
(c) Each Significant Subsidiary (as defined below) of the
Company (i) other than those subsidiaries specified in clause (ii) of
this Section IV(c) has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, and has corporate power and authority to own its
property and to conduct its business as presently being conducted or
(ii) that is not a corporation is a limited partnership, has been duly
formed and is validly existing as a limited partnership in good
standing under the laws of the jurisdiction of its formation, and has
full power and authority to own its property and to conduct its
business as presently being conducted; and, in either case, is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole. "Significant Subsidiary" shall have the meaning as
set forth in Rule 1-02 of Regulation S-X under the Act.
(d) The Trust was duly created and is validly existing in good
standing as a business trust under the Business Trust Act (the
"Delaware Act") of the State of Delaware, and, under the Delaware Act
and the Trust Agreement, has the power and authority to own property
and conduct its business as described in the Prospectus.
(e) The financial statements included or incorporated by
reference in the preliminary prospectus and the Prospectus present
fairly the financial position of the Company and its consolidated
subsidiaries and the results of their operations for the periods
specified; and except as otherwise stated in the preliminary prospectus
and the Prospectus, those financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis.
(f) This Agreement has been duly authorized, executed and
delivered by the Company.
(g) The Guarantee has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement
enforceable against the Company in accordance with its terms except as
the same may be limited in bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating
to or affecting the enforcement of creditors' rights generally, by
general equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or in law) and by an implied
covenant of good faith and fair dealing.
(h) The Preferred Securities have been duly authorized by the
Trust Agreement, and, when issued and delivered against payment
therefor as provided herein by the Company, will be validly issued,
fully paid and nonassessable undivided beneficial interests in the
assets of the Trust, not subject to any preemptive or similar rights;
the certificates for the Preferred Securities are in due and proper
form; neither the Company as holder of the Common Securities nor any
holder of outstanding shares of capital stock of the Company is
entitled to preemptive or other rights to subscribe for the Preferred
Securities.
(i) The Subordinated Debentures have been duly authorized,
executed, authenticated and delivered and constitute binding and valid
obligations of the Company in accordance with the terms thereof,
subject to the effect of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting the enforcement of creditors' rights generally, by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and by an implied
covenant of good faith and fair dealing.
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(j) The execution, delivery and performance by the Company of
the Trust Agreement has been duly authorized by all the necessary
corporate action on the part of the Company; the Trust Agreement has
been duly executed and delivered by the Company and constitutes a valid
and legally binding agreement of the Company, enforceable against the
Company in accordance with the terms thereof, subject to the effect of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the
enforcement of creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and by an implied covenant of good
faith and fair dealing.
(k) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Trust Agreement, the Indenture, the Guarantee, the Preferred
Securities and the Subordinated Debentures will not contravene any
provision of applicable law or the articles of incorporation or code of
regulations of the Company or any agreement or other instrument binding
upon the Company, or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company, and no
consent, approval, authorization or order of, or qualification with,
any governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, the Trust Agreement,
the Indenture, the Guarantee, the Preferred Securities or the
Subordinated Debentures, except such as may be required by the
securities or Blue Sky laws of the various states and the Act in
connection with the offer of the Preferred Securities and from the
Public Utilities Commission of Ohio (whose approval for the performance
by the Company of its obligations under the Agreement, the Trust
Agreement, the Indenture, the Guarantee, the Preferred Securities and
the Subordinated Debentures has been obtained).
(l) Since the respective dates as of which information is
given in the Prospectus, there has not occurred any material adverse
change, or any development involving a prospective material adverse
change, in the business, properties, condition (financial or otherwise)
or in the operations of the Company and its subsidiaries, taken as a
whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement).
(m) Neither the Company nor any subsidiary of the Company is
in violation of its respective articles of incorporation or
regulations, partnership agreement or other organizational documents
and neither the Company nor any subsidiary of the Company is in default
in the performance of any bond, debenture, note or any other evidence
of indebtedness or any indenture, mortgage, deed of trust or other
contract, lease or other instrument to which it is a party or by which
any of them is bound, or to which any of its property or assets is
subject, except such violations or defaults as have been waived or
which would not have, singly or in the aggregate, a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(n) Other than as disclosed in the Prospectus, there are no
legal or governmental proceedings pending or, to the knowledge of the
Company, threatened to which the Company or any subsidiary of the
Company is a party or to which any of the properties of the Company or
any subsidiary of the Company is subject wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
business, properties, condition (financial or otherwise) or operations
of the Company and its subsidiaries, taken as a whole, or on the power
or ability of the Company to, perform its obligations under this
Agreement, or to consummate the transactions contemplated by the
Prospectus.
(o) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
the Investment Company Act of 1940, as amended.
(p) The Company and each of its subsidiaries (i) is in
compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) has received
all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and (iii) is in
compliance with all terms and conditions of any such permit, license or
approval, except in cases in which that noncompliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals, or failure to comply with the terms and
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conditions of such permits, licenses or approvals would not, singly or
in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(q) The Company is a "subsidiary" of FirstEnergy Corp., which
is a "holding company," as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended. FirstEnergy Corp. is exempt
from regulation under the Public Utility Holding Company Act pursuant
to Section 3(a)(1) thereof and the rules and regulations thereunder
promulgated by the Securities and Exchange Commission (the
"Commission") and, therefore, the Company is also exempt from such
regulation.
V.
The joint and several obligations of the Company and the Trust and the
several obligations of the Underwriters hereunder are subject to the condition
that an appropriate order or orders of the Public Utilities Commission of Ohio
permitting the issuance and sale of the Preferred Securities as contemplated
hereby and containing no provision unacceptable to the Underwriters (it being
understood that no order known to the Underwriters and in effect on the date
hereof contains any such unacceptable provision) shall have been entered not
later than the close of business on the day when the public offering price shall
be determined and shall be in full force and effect as of the Closing Date.
The several obligations of the Underwriters hereunder are subject to
the following further conditions:
(a) (i) No stop order suspending the effectiveness of the
Registration Statement shall be in effect, no order of the Commission
directed to the adequacy or accuracy of any document incorporated by
reference therein shall be in effect, and no proceedings for either
purpose shall be pending before or threatened by the Commission; (ii)
subsequent to the execution and delivery of this Agreement and prior to
the Closing Date, there shall not have occurred any downgrading in the
rating accorded any of the Company's securities by any "nationally
recognized statistical rating organization," as such term is defined
for purposes of Rule 436 (g) (2) under the Act (a "Rating"); (iii) (x)
subsequent to the execution and delivery of this Agreement and prior to
the Closing Date, no notice shall have been given of an intended or
potential downgrading of the Rating of any of the Company's securities
and (y) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or other,
or in the earnings, business or operations, of the Company and its
subsidiaries taken as a whole, from that set forth in the Registration
Statement, that in your judgment is material and adverse and which, in
either case, makes it, in your judgment, impracticable to market the
Preferred Securities; and (iv) you shall have received on the Closing
Date certificates, dated the Closing Date and signed by an executive
officer of the Company and an Administrative Trustee (as defined in the
Trust Agreement) of the Trust, in each case to the effect set forth in
clause (i) above, and in the case of the Company's certificate but not
the Trust's certificate, to the effect set forth in clause (ii) above
and in each case to the effect that the representations and warranties
of the Company or the Trust, as the case may be, contained herein are
true and correct as of the Closing Date and in the case of the
Company's certificate but not the Trust's certificate, to the effect
that there shall not have occurred any material adverse changes, in the
condition, financial or other, or in the earnings, business or
operations, of the Company and its subsidiaries taken as a whole, from
that set forth in the Registration Statement (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement). In each case, the officer or trustee signing and delivering
such certificate may rely upon the best of his or her knowledge as to
proceedings threatened.
(b) You shall have received, on and as of the Closing Date,
the favorable opinion of Xxxxx X. Xxxxxxx, Esq., Associate General
Counsel for the Company, or of such other member or members of the bar
of the State of Ohio who may be designated for that purpose by the
Company and who shall not be unsatisfactory to your counsel, to the
effect that:
(i) the Company was duly organized and is validly
existing under the laws of the State of Ohio, and has due
corporate authority to carry on the public utility business in
which it is engaged and to own and operate the properties
owned and used by it in such business;
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(ii) the Trust was duly created and is validly
existing in good standing as a business trust under the
Delaware Act, and, under the Delaware Act and the Trust
Agreement, has the power and authority to own property and
conduct its business as described in the Prospectus;
(iii) the statements made in the Prospectus under the
captions "Description of the Preferred Securities,"
"Description of the Guarantee," and "Description of the
Subordinated Debentures" insofar as such statements constitute
summaries of the legal matters or documents referred to
therein, are accurate in all material respects;
(iv) the Preferred Securities have been duly
authorized by the Trust Agreement, and, when issued and
delivered against payment therefor as provided herein, will be
validly issued, and subject to the qualifications set forth in
such opinion, fully paid and nonassessable undivided
beneficial interests in the assets of the Trust, not subject
to any preemptive or similar rights; the certificates for the
Preferred Securities are in due and proper form; neither the
Company as holder of the Common Securities nor any holder of
outstanding shares of capital stock of the Company is entitled
to preemptive or other rights to subscribe for the Preferred
Securities;
(v) the Subordinated Debentures have been duly
authorized, executed, authenticated and delivered and
constitute binding and valid obligations of the Company in
accordance with the terms thereof, subject to the effect of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the
enforcement of creditors' rights generally, by general
equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at
law) and by an implied covenant of good faith and fair
dealing;
(vi) all legally required proceedings in connection
with the authorization, issue and validity of the Preferred
Securities and the Subordinated Debentures and the sale of the
Preferred Securities by the Trust and the sale of the
Subordinated Debentures by the Company to the Trust in
accordance with this Agreement have been taken and all legally
required orders, consents or other authorizations or approvals
of the Commission, of PUCO and of any other public boards or
bodies (other than in connection with or in compliance with
the provisions of the securities or Blue Sky laws of any
jurisdiction, as to which such counsel need not express an
opinion) have been obtained;
(vii) the Indenture has been duly qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"); the Registration Statement has become effective under
the Act, and, to the best of the knowledge of such counsel, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the
Act;
(viii) this Agreement has been duly authorized,
executed and delivered by the Company and the Trust and
constitutes a valid and legally binding agreement of each of
the Company and the Trust, in accordance with its terms,
subject to any principles of public policy limiting the right
to enforce the indemnification provisions contained herein and
subject to general principles of equity which may limit the
availability of equitable remedies;
(ix) the Guarantee has been duly authorized, executed
and delivered by the Company and constitutes a valid and
legally binding agreement of the Company, in accordance with
its terms, subject to general principles of equity which may
limit the availability of equitable remedies;
(x) the execution, delivery and performance by the
Company of the Trust Agreement has been duly authorized by all
necessary corporate action on the part of the Company; the
Trust Agreement has been duly executed and delivered by the
Company and constitutes a valid and legally binding agreement
of the Company, enforceable against the Company in accordance
with the terms thereof, subject to the effect of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting the
enforcement of
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creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) and by an implied covenant of
good faith and fair dealing;
(xi) the Registration Statement, the Prospectus and
any supplements or amendments thereto (except for the
financial statements and other financial and statistical data
therein, as to which such counsel need not express an
opinion), as of their respective effective or issue dates,
complied as to form in all material respects with the
requirements of the Act and the Trust Indenture Act and the
applicable rules and regulations of the Commission thereunder;
(xii) each document incorporated by reference in the
Prospectus, as such document was originally filed pursuant to
the Act or the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (except for the financial statements and
other financial and statistical data therein, as to which such
counsel need not express an opinion), complied as to form when
so filed in all material respects with the requirements of the
Act or the Exchange Act pursuant to which it was filed and the
applicable rules and regulations of the Commission thereunder;
(xiii) to the best knowledge of such counsel, no
order directed to the adequacy of any document incorporated by
reference in the Prospectus has been issued by the Commission,
and no challenge by the Commission has been made to the
adequacy of any such document;
(xiv) the descriptions in the Registration Statement
and Prospectus of franchises, regulations, statutes, legal and
governmental proceedings and contracts and other documents are
accurate as to legal matters, and such counsel does not know
of any legal or governmental proceedings required to be
described in the Registration Statement or the Prospectus
which are not so described (or the descriptions of which are
not incorporated by reference therein) as required, nor of any
contracts or documents of a character required to be described
in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement which are not so
described (or the descriptions of which are not incorporated
by reference therein) or filed as required, other than
proceedings that such counsel believes are not likely to have
a material adverse effect on the Company and its subsidiaries
taken as a whole, or on the power or ability of the Company to
perform its obligations under this Agreement or to consummate
the transactions contemplated by the Prospectus;
(xv) the Company is not an "investment company" or an
entity "controlled" by an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended;
[(xvi) the Company is a "subsidiary" of FirstEnergy
Corp., which is a "holding company," as such terms are defined
in the Public Utility Holding Company Act of 1935, as amended.
FirstEnergy Corp. is exempt from regulation under the Public
Utility Holding Company Act pursuant to Section 3(a)(1)
thereof and the rules and regulations thereunder promulgated
by the Commission and, therefore, the Company is also exempt
from such regulation;] and
(xvii) the Company and each of its subsidiaries has
obtained all necessary consents, authorizations, approvals,
orders, licenses, certificates and permits of and from, and
has made all declarations and filings with, all foreign,
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other
tribunals, required to own, lease, license and operate and use
its properties and assets and to conduct its business in the
manner described in the Prospectus, except to the extent that
the failure to obtain, declare or file would not have a
material adverse effect on the Company and its subsidiaries,
taken as a whole.
In rendering such opinion, such counsel may rely as to all
matters of New York law upon the opinion referred to in (c) below and
as to all matters of Delaware law upon the opinion referred to in (d)
below. In addition, such counsel shall state that nothing has come to
the attention of such counsel which would lead such counsel to believe
that the Registration Statement or any post-effective amendment thereto
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(except for the financial and statements and other financial and
statistical data included therein, as to which such counsel need
express no opinion), at the time such Registration Statement or any
amendment became effective, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or
that the Prospectus, as amended or supplemented or modified by the
filing of a document incorporated by reference therein (except for the
financial statements and other financial and statistical data therein,
as to which such counsel need express no opinion), contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) You shall have received, on and as of the Closing Date,
the favorable opinion of Pillsbury Winthrop LLP, also counsel for the
Company and the Trust, covering the matters in (b) above, except
subdivisions (xiv), (xv), (xvi) and (xvii) thereof and stating that the
Trust will not be classified as an association taxable as a corporation
for federal income tax purposes. In rendering such opinion, such
counsel may rely as to all matters of Ohio law upon the opinion
referred to in (b) above and as to all matters of Delaware law upon the
opinion referred to in (d) below. In addition, such counsel shall state
that nothing has come to the attention of such counsel which would lead
such counsel to believe that the Registration Statement or any
post-effective amendment thereto (except for the financial statements
and other financial and statistical data therein, as to which such
counsel need express no opinion), at the time such Registration
Statement or any amendment became effective, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus, as amended or
supplemented or modified by the filing of a document incorporated by
reference therein (except for the financial statements and other
financial and statistical data therein, as to which such counsel need
express no opinion), contains any untrue statement of a material fact
of omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) You shall have received, on and as of the Closing Date,
the favorable opinion of Xxxxxxxx, Xxxxxx & Finger, Delaware counsel to
the Company and the Trust, to the effect that (i) the Trust was duly
created and is validly existing in good standing as a business trust
under the Delaware Act and under the Trust Agreement, has the business
trust power and authority to own property and conduct its business as
described in the Prospectus; (ii) the Trust Agreement is a legal, valid
and binding agreement of the Company and the Trustees (as defined in
the Trust Agreement) and is enforceable against the Company and such
Trustees in accordance with its terms; (iii) the Preferred Securities
have been duly authorized by the Trust Agreement and, when issued and
delivered against payment therefor as provided herein, will be validly
issued, and subject to the qualifications set forth in such opinion and
described below, fully paid and nonassessable undivided beneficial
interests in the assets of the Trust, not subject to any preemptive
rights; certificates for the Preferred Securities are in due and proper
form; (iv) this Agreement has been duly authorized by the Trust; (v) no
authorization, approval, consent or order of any Delaware court or
governmental authority or agency is required to be obtained by the
Trust solely in connection with the issuance and sale of the Preferred
Securities; (vi) the issuance and sale by the Trust of the Preferred
Securities and Common Securities, the execution, delivery and
performance by the Trust of this Agreement, the consummation by the
Trust of the transactions contemplated hereby and the compliance by the
Trust with its obligations hereunder do not violate any of the
provisions of the Certificate of Trust or the Trust Agreement or any
applicable Delaware law or Delaware administrative regulation; and
(vii) the holders of the Preferred Securities (other than those holders
who reside or are domiciled in the State of Delaware) will have no
liability for income taxes imposed by the State of Delaware solely as a
result of their participation in the Trust, and the Trust will not be
liable for any income tax imposed by the State of Delaware. Such
counsel may note that the holders of the Preferred Securities, as
beneficial owners of the Trust, will be entitled to the same limitation
of personal liability extended to stockholders of private corporations
for profit organized under the General Corporation Law of the State of
Delaware. Such counsel may also note that the holders of the Preferred
Securities may be obligated, pursuant to the Trust Agreement, to (i)
provide indemnity and/or security in connection with and pay taxes or
governmental charges arising from transfers or exchanges of Preferred
Security certificates and the issuance of replacement Preferred
Security certificates, and (ii) provide security and indemnity in
connection with
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requests of or directions to the Property Trustee to exercise its
rights and remedies under the Trust Agreement.
(e) You shall have received, on and as of the Closing Date,
the favorable opinion of Xxxxxx, Xxxxxx & Xxxxxxxx LLP, counsel for the
Underwriters, with respect to the issue and sale of the Preferred
Securities. In rendering such opinion, such counsel shall state that
nothing has come to the attention of such counsel which would lead such
counsel to believe that the Registration Statement or any
post-effective amendment thereto (except for the financial statements
or other financial data therein, as to which such counsel need express
no opinion), at the time such Registration Statement or any amendment
becomes effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus, as amended or supplemented or modified by the filing of a
document incorporated by reference therein (except for the financial
statements and other financial data therein, as to which such counsel
need express no opinion), contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(f) You shall have received on the Closing Date a letter,
dated the Closing Date, in form and substance satisfactory to you, from
Xxxxxx Xxxxxxxx LLP, independent public accountants for the Company,
containing statements and information of the type ordinarily included
in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in or
incorporated by reference in the Registration Statement or the
Prospectus.
VI.
In further consideration of the agreements of the Underwriters herein
contained, the Company and the Trust covenant as follows:
(a) To furnish without charge to you a signed copy of the
Registration Statement, including all exhibits filed with the
Registration Statement and with the documents incorporated by reference
therein (other than exhibits which are incorporated by reference
therein) and to each other Underwriter a copy of the Registration
Statement without exhibits and, during the period mentioned in
paragraph (c) below, as many copies of the Prospectus and any documents
incorporated by reference therein at or after the date thereof and any
amendments and supplements thereto as you may reasonably request. The
terms "supplement" and "amendments" or "amend" as used in this
Agreement shall include all documents filed by the Company and the
Trust with the Commission subsequent to the date of the Prospectus,
pursuant to the Exchange Act which are deemed to be incorporated by
reference in the Prospectus.
(b) Before amending or supplementing the Registration
Statement or the Prospectus or filing with the Commission any document
pursuant to Section 13, 14 or 15(d) of the Exchange Act, during the
period referred to in paragraph (c) below, to furnish to you a copy of
each such proposed amendment, supplement or document.
(c) If, during such period (not in excess of nine months)
after the first date of the public offering of the Preferred Securities
as in the opinion of your counsel a prospectus covering the Preferred
Securities is required by law to be delivered in connection with sales
by an Underwriter or dealer, any event shall occur as a result of which
it is necessary to amend or supplement the Prospectus or modify the
information incorporated by reference therein in order to make the
statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Prospectus or modify such
information to comply with law, forthwith to prepare and furnish, at
its own expense, to the Underwriters and to the dealers (whose names
and addresses you will furnish to the Company) to which Preferred
Securities may have been sold by you on behalf of the Underwriters, and
to any other dealers upon request, either amendments or supplements to
the Prospectus or modifications to the documents incorporated by
reference therein, so that the statements in the Prospectus as so
amended, supplemented or modified will not, in the light of the
circumstances when such Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus will comply with law.
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(d) To endeavor to qualify the Preferred Securities for offer
and sale under the securities or Blue Sky laws of such jurisdiction as
you shall reasonably request and to pay all filings fees, expenses and
legal fees (including fees and disbursements of counsel) in connection
with such qualification and in connection with the determination of the
eligibility of the Preferred Securities as legal investments under the
laws of such jurisdictions as you may designate as well as any filing
fees payable in connection with a review of the offering of the
Preferred Securities by the National Association of Securities Dealers,
Inc.
(e) The Preferred Securities have been approved for listing on
the New York Stock Exchange ("NYSE"), subject only to official notice
of issuance.
(f) To make available generally to the Company's security
holders as soon as practicable an earning statement covering a twelve
month period beginning after the date of this Agreement which earning
statement shall satisfy the provisions of Section 11(a) of the Act.
(g) During the period beginning on the date of this Agreement
and continuing to and including the Closing Date, not to offer, sell,
contract to sell or otherwise dispose of any (A) securities of the
Company or the Trust substantially similar to the Subordinated
Debentures or the Preferred Securities or (B) other beneficial
interests of the Trust, in each case without your prior consent.
(h) In the case of the Guarantor, to issue the Guarantee
concurrently with the issue and sale of the Preferred Securities as
contemplated herein.
(i) Whether or not any sale of the Preferred Securities is
consummated, to pay all expenses incident to the performance of their
obligations under this Agreement, including: (1) the preparation of the
Prospectus and all amendments and supplements thereto, (2) the
preparation, issuance and delivery of the Preferred Securities, (3) the
fees and disbursements of the Company's counsel and accountants and the
Trustee and its counsel, if any (but not the fees and disbursements of
counsel to the Underwriters), (4) the printing and delivery to the
Underwriters in quantities as hereinabove stated of copies of the
Prospectus and any amendment or supplement thereto, (5) any fees
charged by rating agencies and (6) the fees and expenses, if any,
incurred in connection with the admission of the Preferred Securities
for trading in any appropriate market system.
(j) To use the net proceeds received by it from the sale of
the Preferred Securities, in the case of the Trust, and the
Subordinated Debentures, in the case of the Company, pursuant to this
Agreement in the manner specified in the Prospectus under the caption
"Use of Proceeds."
VII.
The Company and the Trust agree to jointly and severally indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Act or Section 20 of
the Exchange Act from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus (if used
within the period set forth in paragraph (c) of Article VI hereof and as
amended, supplemented or modified if the Company or the Trust shall have
furnished any amendments, supplements or modifications thereto) or any
preliminary prospectus (including documents incorporated by inference therein),
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information furnished in writing to the Company or the Trust
by you or by any Underwriter expressly for use therein; provided, however, that
the foregoing indemnification with respect to any preliminary prospectus shall
not inure to the benefit of any Underwriter (or any person controlling such
Underwriter) from whom the person asserting any such losses, claims, damages or
liabilities purchased any of the Preferred Securities, if a copy of the
Prospectus (other than documents incorporated by reference therein) as then
amended or supplemented or modified (if the Company shall have furnished any
amendments, supplements or modifications thereto) had not been sent or given by
or on behalf of such Underwriter to such person at or prior to the written
confirmation of the sale of such Preferred Securities to such person.
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The Company agrees jointly and severally to indemnify and hold harmless
the Trust from and against any and all losses, claims, damages and liabilities
whatsoever, as due from the Trust under the above paragraph of this Article VII
hereof.
Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company and the Trust, its directors, its officers who sign
the Registration Statement and any person controlling the Company and the Trust
to the same extent as the foregoing indemnity from the Company and the Trust to
each Underwriter, but only with reference to information relating to such
Underwriter furnished in writing by you or by such Underwriter expressly for use
in the Registration Statement or the Prospectus or any preliminary prospectus.
In case any proceeding (including any governmental investigation) shall
be instituted involving any person in respect of which indemnity may be sought
pursuant to either of the two preceding paragraphs, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such action (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to a conflict of interest
between them. It is understood that the indemnifying party shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees and expenses of more than one separate counsel
for all such indemnified parties, and that all such fees and expenses shall be
reimbursed as they are incurred. Such counsel shall be designated in writing by
you in the case of parties indemnified pursuant to the second preceding
paragraph, and by the Company and the Trust in the case of parties indemnified
pursuant to the first preceding paragraph. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment.
If the indemnification provided for in this Article VII is unavailable
to an indemnified party under the second or third paragraphs hereof in respect
to any losses, claims, damages or liabilities referred to therein, then each
indemnifying party in lieu of indemnifying such indemnified party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the Company and the Trust on the
one hand and of the Underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations, including relative benefit.
The relative fault of the Company and the Trust on the one hand and of the
Underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Trust or by the Underwriters and the parties'
relevant intent, knowledge, access to information and opportunity to correct or
prevent such statement of omission.
The Company and the Trust and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Article VII were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Article VII, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Preferred Securities underwritten by it
and distributed to the public were offered to the public exceeds the amounts of
any damages which such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters'
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obligations to contribute pursuant to this Article VII are several in the
proportions which the number of Preferred Securities set forth opposite their
names in Annex A bear to the total number of Preferred Securities so set forth
in Annex A, or in such other proportions as may be determined pursuant to
Article IX, and not joint.
The indemnity and contribution agreements contained in this Article VII
and the representations and warranties of the Company and the Trust in this
Agreement shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Underwriter to any person controlling any Underwriter or by or on behalf
of the Company and the Trust, any of its directors, officers or any person
controlling the Company and the Trust and (iii) acceptance of and payment for
the Preferred Securities.
VIII.
This Agreement shall be subject to termination in your absolute
discretion, by notice given to the Company, if (a) after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., the Chicago Board Options Exchange, the
Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities, or (iv) there shall have occurred any outbreak or escalation
of hostilities, or any change in financial markets, or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a) (i) through (iv), such event singly or
together with any other such event makes it, in your reasonable judgment,
impracticable to market the Preferred Securities.
IX.
This Agreement shall become effective when it has been executed by the
Company, the Trust and you.
If any one or more of the Underwriters shall fail or refuse to purchase
the Preferred Securities which it or they have agreed to purchase hereunder, and
the total number of Preferred Securities which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the total number of Preferred Securities, the other Underwriters shall be
obligated severally in the proportions which the number of Preferred Securities
set forth opposite their names in Article I bear to the total number of
Preferred Securities so set forth opposite the names of all such nondefaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Preferred Securities which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase; provided that in no event shall the number of
Preferred Securities which any Underwriter has agreed to purchase pursuant to
Article I hereof be increased pursuant to this Article IX by an amount in excess
of one-ninth of such number of Preferred Securities without the consent of such
Underwriter. If any Underwriter or Underwriters shall fail or refuse to purchase
Preferred Securities and the total number of Preferred Securities with respect
to which such default occurs is more than one tenth of the total number of the
Preferred Securities and arrangements satisfactory to you and the Company and
the Trust for the purchase of such Preferred Securities are not made within 36
hours after such default, this Agreement will terminate without liability on the
part of any non-defaulting Underwriter or of the Company and the Trust except as
provided in Article VII. In any such case which does not result in such
termination, either you or the Company and the Trust shall have the right to
postpone the Closing Date, but in no event for longer than seven days in each
case, in order that the required changes, if any, in the Registration Statement
and in the Prospectus or in any other documents or arrangements may be effected.
Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company and the Trust
to comply with the terms or to fulfill any of the conditions of this Agreement,
or if for any reason the Company and the Trust shall be unable to perform their
obligations under this Agreement, the Company and the Trust will reimburse the
Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and
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disbursements of their counsel) reasonably incurred by them in connection with
this Agreement or the offering contemplated hereunder.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
This Agreement may be executed in counterparts each of which shall be
deemed to constitute an original and all of which shall be deemed to be one and
the same instrument binding on all of the parties hereto.
Very truly yours,
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By:
------------------------------------------
Name and Title:
------------------------------
CLEVELAND ELECTRIC FINANCING TRUST I
By: THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY, as Depositor
By:
------------------------------------------
Name and Title:
------------------------------
Accepted ________ ___, 2001
XXXXXX XXXXXXX & CO. INCORPORATED
and the other Underwriters listed on Annex A hereto
BY: XXXXXX XXXXXXX & CO. INCORPORATED
By:
-------------------------------------------------------------
Name and Title:
Acting severally on behalf of themselves and on behalf of the several
Underwriters named herein and on Annex A hereto.
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Annex A
to Underwriting
Agreement
LIST OF UNDERWRITERS
Number of
Name Preferred Securities
---- --------------------
Xxxxxx Xxxxxxx & Co. Incorporated...........................................
............................................................................
............................................................................
............................................................................
............................................................................
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............................................................................
............................................................................
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............................................................................
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............................................................................
............................................................................
............................................................................
............................................................................
Total.......................................................................
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