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Exhibit 1(a)
PLACEMENT AGREEMENT
October 16, 1997
Xxxxxx Xxxxxxx & Co. Incorporated
Chase Securities Inc.
First Chicago Capital Markets, Inc.
XxXxxxxx & Company Securities, Inc.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
TD Securities (USA) Inc.
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Dear Sirs:
The Cleveland Electric Illuminating Company, an Ohio
corporation ("Cleveland Electric" or the "Company") proposes to issue and sell
to the purchasers named in Schedule I hereto (the "Purchasers") $150,000,000
principal amount of 7.43% Series C Secured Notes Due 2009 and $300,000,000
principal amount of 7.88% Series C Secured Notes Due 2017 (those two tranches of
Notes collectively, the "Notes"), to be issued pursuant to an Indenture to be
dated as of October 24, 1997 and a First Supplemental Indenture to be dated as
of October 24, 1997 (that Indenture, as supplemented by that First Supplemental
Indenture, the "Indenture") between the Company and The Chase Manhattan Bank, a
New York banking corporation, as trustee (the "Trustee").
The Notes will be offered without being registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance on
exemptions therefrom. You have advised the Company and agree that you will make
an offering of the Notes purchased by you hereunder in accordance with Section 6
hereof on the terms set forth in the Preliminary Memorandum and the Final
Memorandum (each as defined below), as soon as practicable after the date hereof
as in your judgment is advisable. The Company hereby confirms that it has
authorized the use of the Preliminary Memorandum and the Final Memorandum in
connection with that offering of the Notes by you. Purchasers of the Notes
(including subsequent transferees) will have the registration rights set forth
in the Registration Agreement of even date herewith (the "Registration
Agreement"), among the Company and the Purchasers. Pursuant to the Registration
Agreement, the Company has agreed to file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Exchange Offer
Registration Statement") under the Securities Act pursuant to which the Company
will offer to exchange the Notes of each tranche for a series under the
Indenture of secured notes of the Company (the "Exchange Notes") with terms
identical to the Notes of that tranche (except that the Exchange Notes will not
contain terms with respect to transfer restrictions).
In connection with the sale of the Notes, the Company has
prepared a preliminary offering memorandum (the "Preliminary Memorandum") and
will prepare a final offering memorandum (the "Final Memorandum" and, with the
Preliminary Memorandum, each a
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"Memorandum") setting forth or including a description of the terms of the
Notes, the terms of the offering, a description of the Company and any material
developments relating to the Company occurring after the date of the most recent
financial statements included therein.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to, and agrees with, you that as of the date hereof:
(a) The Preliminary Memorandum does not contain and the Final
Memorandum, in the form used by the Purchasers 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 the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this Section l(a) do not apply to
statements or omissions in either Memorandum based upon information relating to
any Purchaser furnished to the Company in writing by that Purchaser through you
expressly for use therein.
(b) The Company has been duly incorporated, 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 each Memorandum 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 (as defined below), taken as a whole.
(c) Each Subsidiary of the Company (i) other than those
subsidiaries specified in clause (ii) of this paragraph (1)(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 described in the
Final Memorandum 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 described in
the Final Memorandum; 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 required 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; and the Company is not a general partner in any
partnership. As used herein, the term "Subsidiary" has the meaning ascribed to
it in the Indenture.
(d) The financial statements included or incorporated by
reference in each Memorandum 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 each Memorandum,
those financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis.
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(e) The pro forma adjustments described in each Memorandum
have been properly applied on the bases described therein and the Company
believes that such adjustments with respect to it and the assumptions that
underlie those adjustments are reasonable.
(f) This Agreement has been duly authorized, executed and
delivered by the Company.
(g) The Indenture has been duly authorized, and when executed
and delivered by the Company (assuming due authorization, execution and delivery
by the Trustee) will constitute a valid and binding agreement of the Company,
enforceable in accordance with its terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
(h) The Notes have been duly authorized by the Company and,
when the Notes are executed by the Company and authenticated by the Trustee in
accordance with the Indenture and delivered to and paid for by the Purchasers in
accordance with this Agreement, the Notes will be entitled to the benefits of
the Indenture, and will be valid and binding obligations of the Company,
enforceable in accordance with their terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors, rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
(i) The Registration Agreement has been duly authorized,
executed and delivered by the Company and (assuming due authorization, execution
and delivery by the Purchasers) constitutes a valid and binding agreement of the
Company, enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) the availability of equitable
remedies may be limited by equitable principles of general applicability.
(j) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the
Indenture, the Notes and the Registration Agreement will not contravene any
provision of applicable law or the articles of incorporation, regulations,
partnership agreement or other organizational documents of the Company or any
Subsidiary of the Company or any agreement or other instrument binding upon the
Company or any Subsidiary of the Company, or any judgment, order or decree of
any governmental body, agency or court having jurisdiction over the Company or
any Subsidiary of 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
Indenture, the Notes or the Registration Agreement, except such as may be
required (i) by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Notes and (ii) by the securities or
Blue Sky laws of the various states and the Securities Act in connection with
the offer of the Exchange Notes and (iii) from The Public
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Utilities Commission of Ohio (whose approval for the performance by the Company
of its obligations under the Agreement, the Indenture, the Notes and the
Registration Agreement has been obtained).
(k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its Subsidiaries, taken as a whole, from that set forth in the Final
Memorandum.
(l) 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.
(m) 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, construct, operate and use its properties and assets and to
conduct its business in the manner described in the Final Memorandum, 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.
(n) 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 other than proceedings
accurately described in all material respects in the Final Memorandum and
proceedings that would not 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, the Indenture, the Notes or the
Registration Agreement or to consummate the transactions contemplated by the
Final Memorandum.
(o) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act, an "Affiliate") of the Company
has directly, or through any agent, (i) sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the Notes in a
manner that would require the registration under the Securities Act of the Notes
or (ii) engaged in any form of general solicitation or general advertising in
connection with the offering of the Notes (as those terms are used in Regulation
D under the Securities Act) or in any manner involving a public offering within
the meaning of section 4(2) of the Securities Act.
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(p) 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.
(q) It is not necessary in connection with the offer, sale and
delivery of the Notes to the Purchasers in the manner contemplated by this
Agreement to register the Notes under the Securities Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended.
(r) 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 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.
(s) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its Subsidiaries, in the course of
which it identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of that review, the
Company has reasonably concluded that such associated costs and liabilities
would not, singly or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries, taken as a whole.
(t) Neither the Company nor any of the Company's Affiliates or
any person acting on its or their behalf (other than the Purchasers) has engaged
in any directed selling efforts (as that term is defined in Regulation S under
the Securities Act ("Regulation S")) with respect to the Notes and the Company
and its Affiliates and any person acting on its or their behalf (other than the
Purchasers) has complied with the offering restrictions requirement of
Regulation S.
(u) The Company is a "subsidiary" of Centerior Energy
Corporation, which is a "holding company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended. Centerior Energy
Corporation is exempt from regulation under such 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.
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(v) Cleveland Electric's Mortgage and Deed of Trust dated July
1, 1940, to Guaranty Trust Company of New York as Trustee, under which The Chase
Manhattan Bank is successor trustee (the "Mortgage Trustee"), as supplemented
and modified in certain respects by indentures supplemental thereto (the "
Mortgage"), including the Seventy-Sixth Supplemental Indenture dated October 15,
1997 (the "Supplemental Indenture"), and the First Mortgage Bonds, 7.43% Series
due 2009-D and the First Mortgage Bonds, 7.88% Series due 2017-B, of Cleveland
Electric (collectively, the "First Mortgage Bonds") issued under the Mortgage
and the Supplemental Indenture, on or before the Closing Date will have been
duly authorized, executed and delivered by Cleveland Electric and, as to the
First Mortgage Bonds, assuming that they have been duly authenticated by the
Mortgage Trustee, constitute valid and binding obligations enforceable against
the Company in accordance with their terms, except to the extent that the
binding effect and enforceability thereof are subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws in effect from time to
time affecting the rights of creditors generally or the enforcement of the
security provided by the Mortgage, and except to the extent that the
enforceability thereof may be limited by the application of general principles
of equity and may be subject to limitations upon the right to obtain judicial
orders requiring specific performance;
(w) The execution and delivery of the Supplemental Indenture
and the First Mortgage Bonds and the performance by Cleveland Electric of its
obligations thereunder and under the Mortgage (to the extent pertinent to the
issuance of the First Mortgage Bonds), will not constitute a default under, or
conflict with or violate any of the provisions of, the Articles of
Incorporation, the Regulations, any law, rule, regulation, judgment, order or
decree to which Cleveland Electric is subject or any agreement, indenture,
mortgage, lease, note or other obligation or instrument to which Cleveland
Electric is a party or by which it is bound;
(x) All consents or approvals of the PUCO and of any other
federal or state regulatory agency required in connection with Cleveland
Electric's execution and delivery of, and the performance of its obligations
under the Supplemental Indenture and the First Mortgage Bonds have been
obtained;
(y) Except as specifically described in the Memorandum, there
are no actions, suits, proceedings, inquiries or investigations at law or in
equity before or by any judicial or administrative court or agency, pending or
threatened against Cleveland Electric and there is no basis for any such action,
suit, proceeding, inquiry or investigation wherein the decision, ruling or
finding would materially or adversely affect the validity or enforceability of
the Mortgage (to the extent pertinent to the issuance of the First Mortgage
Bonds) or the First Mortgage Bonds; and
(z) Cleveland Electric has good title to substantially all the
properties referred to or described in the granting clauses of the Mortgage as
being subject to the lien thereof and now owned by it, subject only to the
conditions and exceptions set forth in the Memorandum "Description of Bonds --
Title to Property," none of which materially impairs the use of the property
affected thereby in the operation of the business of Cleveland Electric.
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2. OFFERING. You have advised the Company that the Purchasers
will make an offering of the Notes purchased by the Purchasers hereunder on the
terms to be set forth in the Final Memorandum, as soon as practicable after this
Agreement is entered into as in your judgment is advisable.
3. PURCHASE AND DELIVERY. The Company hereby agrees to sell to
the several Purchasers, and the Purchasers, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agree, severally and not jointly, to purchase from the
Company the respective principal amounts of Notes set forth in Schedule I hereto
opposite their names at a purchase price equal to the sum of 98.75% of the
principal amount of the 7.43% Series C Secured Notes Due 2009 and 98.50% of the
principal amount of the 7.88% Series C Secured Notes Due 2017, in each case plus
accrued interest, if any, from October 24, 1997, to the date of payment and
delivery.
Payment for the Notes will be made against delivery of the
Notes at a closing to be held at the offices of Squire, Xxxxxxx & Xxxxxxx,
L.L.P., at 10:00 A.M., local time, on October 24, 1997. The time and date of
that payment are herein referred to as the Closing Date. Payment for the Notes
will be made by wire transfer to the Company of immediately available funds.
The Company will deliver against payment of the purchase price
the Notes of each tranche to be offered and sold by the Purchasers in reliance
on Regulation S (the "Regulation S Notes") in the form of one permanent global
security in definitive form for that tranche (each, a "Regulation S Global
Note") that will be deposited with the Trustee as custodian for The Depository
Trust Company ("DTC") and registered in the name of Cede & Co., as nominee for
DTC, for the accounts of Euroclear System ("Euroclear") or Cedel Bank ("Cedel").
The Company will deliver against payment of the purchase price the Notes of each
tranche to be purchased by each Purchaser hereunder and to be offered and sold
by each Purchaser in reliance on Rule 144A under the Securities Act (the "144A
Notes") in the form of one permanent global security in definitive form for that
tranche (each, a "Restricted Global Note") deposited with the Trustee as
custodian for DTC and registered in the name of Cede & Co., as nominee for DTC.
The Regulation S Global Notes and the Restricted Global Notes will be assigned
separate CUSIP numbers. The Restricted Global Notes will include the legend
regarding restrictions on transfer set forth under "Transfer Restrictions" in
the Final Memorandum. Until the termination of the restricted period (as defined
in Regulation S) with respect to the offering of the Regulation S Notes,
interests in the Regulation S Global Notes may only be held by the DTC
participants for Euroclear & Cedel. Interests in any permanent global security
will be held only in book-entry form through DTC except in the limited
circumstances described in the Final Memorandum. Both the Restricted Global
Notes and the Regulation S Global Notes will be made available for inspection by
the Purchasers and by DTC by 4:00 p.m., New York time, on the business day prior
to the Closing Date at such place in New York City as the Purchasers and the
Company shall agree.
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The certificates evidencing the Notes will be delivered to you
on the Closing Date for the respective accounts of the several Purchasers, with
any transfer taxes payable in connection with the transfer of the Notes to the
Purchasers duly paid, against payment of the purchase price therefor.
Notwithstanding the foregoing, any Notes sold to Institutional
Accredited Investors (as hereinafter defined) pursuant to Section 6(a) shall be
issued in definitive, fully registered form and shall bear the legend relating
thereto set forth under "Transfer Restrictions" in the Final Memorandum, but
shall be paid for in the same manner as any Notes to be purchased by the
Purchasers hereunder and to be offered and sold by them in reliance on Rule 144A
under the Securities Act.
4. CONDITIONS TO CLOSING. The several obligations of the
Purchasers under this Agreement to purchase the Notes will be subject to the
following conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date,
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or notice of any review for a possible
change that does not indicate the direction of the possible
change, 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 Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations, of the Company and its Subsidiaries, taken as a
whole, from that set forth in the Final Memorandum that, in
your judgment, is material and adverse and that makes it, in
your judgment, impracticable to market the Notes on the terms
and in the manner contemplated in the Final Memorandum.
(b) You shall have received on the Closing Date a certificate
or certificates, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in clause (a)(i) above and to the effect
that the representations and warranties of the Company contained in this
Agreement are true and correct as of the Closing Date and that the Company has
complied with all of the agreements and satisfied all of the conditions on its
part to be performed or satisfied on or before the Closing Date. The officer
signing and delivering such certificate or certificates may rely upon the best
of knowledge as to proceedings threatened.
(c) You shall have received on the Closing Date an opinion of
Squire, Xxxxxxx & Xxxxxxx, L.L.P., counsel for the Company, dated the Closing
Date, to the effect that:
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(i) the Indenture is a valid and binding agreement of
the Company, enforceable in accordance with its terms except
as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (b) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability; and the Indenture is in
such form that it may be qualified under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), in
compliance with the terms of the provisions of the
Registration Agreement without material modification;
(ii) when the Notes are executed by the Company and
authenticated by the Trustee in accordance with the provisions
of the Indenture and delivered to and paid for by the
Purchasers in accordance with this Agreement, the Notes will
be entitled to the benefits of the Indenture and will be valid
and binding obligations of the Company, enforceable in
accordance with their terms except as (a) the enforceability
thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (b) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(iii) the Registration Agreement (assuming due
authorization, execution and delivery by the Purchasers)
constitutes a valid and binding agreement of the Company,
enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights
generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability;
(iv) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement, the Notes, the Indenture and the Registration
Agreement will not, to such counsel's knowledge, contravene
any judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Company or any
Subsidiary of 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
Notes, the Indenture and the Registration Agreement, except
such as may be required (i) by the securities or Blue Sky laws
of the various states in connection with the offer and sale of
the Notes, (ii) by the securities or Blue Sky laws of the
various states and the Securities Act in connection with the
offer of the Exchange Notes and (iii) from The Public
Utilities Commission of Ohio ("PUCO");
(v) the statements in the Final Memorandum under the
captions "Description of Secured Notes," "1997 First Mortgage
Bonds and First Mortgage," "Certain Tax Considerations,"
"Private Placement," "Transfer
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Restrictions," and "Considerations for Employee Benefit
Plans," insofar as those statements constitute summaries of
the legal matters, documents and proceedings referred to
therein, fairly present the information called for with
respect to those legal matters, documents and proceedings and
fairly summarize the matters referred to therein;
(vi) after due inquiry, such counsel does not know of
any legal or governmental proceedings pending or threatened to
which the Company or any of its Subsidiaries is a party or to
which any of the properties of the Company or any of its
Subsidiaries is subject other than proceedings fairly
summarized in all material respects in the Final Memorandum
and 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,
the Indenture, the Notes or the Registration Agreement or to
consummate the transactions contemplated by the Final
Memorandum;
(vii) based upon the representations, warranties and
agreements of the Company in Sections 1(o), 1(t), 5(f), 5(g),
5(h) and 5(l) of this Agreement and of the Purchasers in
Section 6 of this Agreement and on the representations and
agreements contained in Exhibit A to this Agreement, it is not
necessary in connection with the offer, sale and delivery of
the Notes to the Purchasers under this Agreement or in
connection with the initial resale of the Notes by the
Purchasers in accordance with Section 6 of this Agreement to
register the Notes under the Securities Act or to qualify the
Indenture under the Trust Indenture Act, it being understood
that no opinion is expressed as to any subsequent resale of
any Secured Note; and
(viii) 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.
Such counsel shall also include a statement to the effect that
no facts have come to such counsel's attention that would lead such counsel to
believe that (except for financial statements, schedules and other financial and
statistical information as to which such counsel need not express any belief)
the Final Memorandum when issued did not, and as of the date such opinion is
delivered does not, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(d) You shall have received on the Closing Date an opinion of
Xxxxxxxx X. Xxxxxxx or Xxxx X. Xxxxxxx, as counsel of Centerior Energy
Corporation, to the effect that:
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(i) the Company has been duly incorporated, 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 Final Memorandum (references herein to the
Final Memorandum being taken to mean the Final Memorandum, as
amended or supplemented), 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;
(ii) this Agreement has been duly authorized,
executed and delivered by the Company;
(iii) the Indenture has been duly authorized,
executed and delivered by the Company;
(iv) the Notes have been duly authorized, executed
and delivered by the Company;
(v) the Registration Agreement has been duly
authorized, executed and delivered by the Company;
(vi) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement, the Notes, the Indenture and the Registration
Agreement will not contravene any provision of applicable law
or the articles of incorporation, regulations, partnership
agreement or other organizational documents of the Company or
of any Subsidiary of the Company or, to such counsel's
knowledge, any agreement or other instrument binding on the
Company or on any Subsidiary of the Company that is material
to the Company and its Subsidiaries taken as a whole, or, to
such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over
the Company or any Subsidiary of 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
Notes, the Indenture and the Registration Agreement, except
such as may be required by (i) the securities or Blue Sky laws
of the various states in connection with the offer and sale of
the Notes and (ii) the securities or Blue Sky laws of the
various states and the Securities Act in connection with the
offer of the Exchange Notes;
(vii) the statements in the Final Memorandum under
the captions "Description of Secured Notes," "1997 First
Mortgage Bonds and First Mortgage," "Private Placement" and
"Transfer Restrictions," insofar as those
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statements constitute summaries of the legal matters,
documents and proceedings referred to therein, fairly present
the information called for with respect to those legal
matters, documents and proceedings and fairly summarize the
matters referred to therein;
(viii) after due inquiry, such counsel does not know
of any legal or governmental proceedings pending or threatened
to which the Company or any of its Subsidiaries is a party or
to which any of the properties of the Company or any of its
Subsidiaries is subject other than proceedings fairly
summarized in all material respects in the Final Memorandum
and 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,
the Indenture, the Notes or the Registration Agreement or to
consummate the transactions contemplated by the Final
Memorandum;
(ix) each Subsidiary of the Company (A) 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 described in the
Final Memorandum or (B) 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; and the Company is not a
general partner in any partnership;
(x) 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, operate and use
its properties and assets and to conduct its business in the
manner described in the Final Memorandum, 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;
(xi) such counsel is of the opinion that the Company
and each Subsidiary of the Company (A) is in compliance with
any and all applicable Environmental Laws, (B) has received
all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and (C)
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
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with the terms and conditions of such permits, licenses or
approvals would not, singly or in the aggregate, have a
material adverse effect on the Company;
(xii) the Company is a "subsidiary" of Centerior
Energy Corporation, which is a "holding company," as such
terms are defined in the Public Utility Holding Company Act of
1935, as amended. Centerior Energy Corporation is exempt from
regulation under such 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.
(xiii) The Mortgage and the First Mortgage Bonds have
been duly authorized, executed and delivered by Cleveland
Electric and, as to the First Mortgage Bonds, assuming that
they have been duly authenticated by the Mortgage Trustee,
constitute valid and binding obligations enforceable against
the Company in accordance with their terms, except to the
extent that the binding effect and enforceability thereof are
subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws in effect from time to time
affecting the rights of creditors generally or the enforcement
of the security provided by the Mortgage, and except to the
extent that the enforceability thereof may be limited by the
application of general principles of equity and may be subject
to limitations upon the right to obtain judicial orders
requiring specific performance;
(xiv) The execution and delivery of the Supplemental
Indenture and the First Mortgage Bonds and the performance by
Cleveland Electric of its obligations thereunder and under the
Mortgage (to the extent pertinent to the issuance of the First
Mortgage Bonds), does not constitute a default under, or
conflict with or violate any of the provisions of, the
Articles of Incorporation, the Regulations, any law, rule,
regulation, judgment, order or decree to which Cleveland
Electric is subject or any agreement, indenture, mortgage,
lease, note or other obligation or instrument to which
Cleveland Electric is a party or by which it is bound;
(xv) All consents or approvals of the PUCO and of any
other federal or state regulatory agency required in
connection with Cleveland Electric's execution and delivery
of, and the performance of its obligations under the
Supplemental Indenture and the First Mortgage Bonds have been
obtained;
(xvi) Except as specifically described in the Final
Memorandum, there are no actions, suits, proceedings,
inquiries or investigations at law or in equity before or by
any judicial or administrative court or agency, pending or
threatened against Cleveland Electric and there is no basis
for any such action, suit, proceeding, inquiry or
investigation wherein the decision, ruling or finding would
materially or adversely affect the validity or enforceability
of the Mortgage
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(to the extent pertinent to the issuance of the First Mortgage
Bonds) or the First Mortgage Bonds;
(xvii) Cleveland Electric has good title to
substantially all the properties referred to or described in
the granting clauses of the Mortgage as being subject to the
lien thereof and now owned by it, subject only to the
conditions and exceptions set forth in the Final Memorandum
under "1997 First Mortgage Bonds and First Mortgage," none of
which materially impairs the use of the property affected
thereby in the operation of the business of Cleveland
Electric;
(xviii) The Mortgage and all financing statements
have been duly filed and recorded in all places where such
filing or recording is necessary for the perfection or
preservation of the lien of the Mortgage and the Mortgage
constitutes a valid and direct first lien upon all of the
property referred to in subparagraph (xvii) above, subject
only to the conditions and exceptions referred to therein and,
under current law, all property acquired by Cleveland Electric
hereafter, other than property excepted from the lien of the
Mortgage, will become subject to the lien thereof upon
acquisition;
(xix) The First Mortgage Bonds are entitled to the
benefits and security of the Mortgage, equally and ratably
with all other bonds outstanding under the Mortgage, except as
the enforceability thereof may be subject to the limitations
set forth in subparagraph (xiii), above;
(xx) The First Mortgage Bonds are not required to be
registered under the Securities Act of 1933, as amended, and
the Supplemental Indenture is exempt from qualification under
the Trust Indenture Act of 1933, as amended; and
(xxi) Assuming that the Trustee holds the First
Mortgage Bonds as provided in the Indenture, the Indenture
creates a valid and perfected first priority security interest
in the First Mortgage Bonds.
(e) You shall have received on the Closing Date an opinion of
Xxxxxx, Halter & Xxxxxxxx LLP, counsel for the Purchasers, dated the Closing
Date, covering the matters referred to in subparagraphs (i), (ii), (iii), (v)
(but only as to the statements under the captions "Description of the Secured
Notes," "Private Placement" and "Transfer Restrictions") and (vii), and the
final subparagraph of paragraph (c) above, and the matters referred to in
subparagraphs (ii), (iii), (iv) and (v) of paragraph (d) above.
With respect to the final subparagraph of paragraph (c) above,
Squire, Xxxxxxx & Xxxxxxx, L.L.P. and Xxxxxx, Halter & Xxxxxxxx LLP may state
that their belief is based upon their participation in the preparation of each
Memorandum and any amendments or supplements thereto and review and discussion
of the contents thereof, but is without independent check or
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verification except as specified. With respect to matters of fact, such counsel
may rely on certificates of officers of the Company and of governmental
officials, in which case their opinion is to state that they are so doing and
that the Purchasers are justified in relying on such opinions or certificates
and copies of said opinions or certificates are to be attached to the opinion.
The opinion of Squire, Xxxxxxx & Xxxxxxx, L.L.P. described in
paragraph (c) above shall be rendered to you at the request of the Company and
shall so state therein.
(f) You shall have received on each of the date hereof and the
Closing Date a letter, dated the date hereof or the Closing Date, as the case
may be, 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 (of the type ordinarily applicable for registration statements
filed under the Securities Act) with respect to the financial statements and
certain financial information contained in each Memorandum.
5. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Purchasers herein contained, the Company covenants as follows:
(a) To furnish to you, without charge, during the period
mentioned in paragraph (c) below, as many copies of the Final Memorandum, any
documents incorporated by reference therein and any supplements and amendments
thereto as you may reasonably request; with respect to the Final Memorandum, to
furnish copies of the Final Memorandum in New York City, prior to 3:00 p.m. on
the business day following the date of this Agreement, in such quantities as you
reasonably request; but the Company is not responsible for the costs of
distributing either Memorandum other than to the Purchasers.
(b) Before amending or supplementing either Memorandum, to
furnish to you a copy of each such proposed amendment or supplement and not to
use any such proposed amendment or supplement to which you reasonably object.
(c) If, during such period after the date hereof and prior to
the date on which all of the Notes shall have been sold by the Purchasers, any
event shall occur or condition exist as a result of which it is necessary to
amend or supplement the Final Memorandum in order to make the statements
therein, in the light of the circumstances when such Memorandum is delivered to
a purchaser, not misleading, or if, in the opinion of your counsel, it is
necessary to amend or supplement that Memorandum to comply with applicable law,
forthwith to prepare and furnish, at its own expense, to the Purchasers, either
amendments or supplements to that Memorandum so that the statements in that
Memorandum as so amended or supplemented will not, in the light of the
circumstances when that Memorandum is delivered to a purchaser, be misleading or
so that that Memorandum, as so amended or supplemented, will comply with
applicable law.
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(d) To endeavor to qualify the Notes for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) Whether or not any sale of Notes is consummated, to pay
all expenses incident to the performance of their obligations under this
Agreement, including: (i) the preparation of each Memorandum and all amendments
and supplements thereto, (ii) the preparation, issuance and delivery of the
Notes, (iii) the fees and disbursements of the Company's counsel and accountants
and the Trustee and its counsel, if any, (iv) the qualification of the Notes
under securities or Blue Sky laws in accordance with Section 5(d), including
filing fees and the fees and disbursements of counsel for the Purchasers in
connection therewith and in connection with the preparation of any Blue Sky or
legal investment memoranda, (v) the printing and delivery to the Purchasers in
quantities as hereinabove stated of copies of the Memorandum and any amendment
or supplement thereto, (vi) any fees charged by rating agencies for the rating
of Notes, (vii) all document production charges and expenses of counsel to the
Purchasers (but not including their fees for professional services) in
connection with the preparation of this Agreement and (viii) the fees and
expenses, if any, incurred in connection with the admission of Notes for trading
in any appropriate market system.
(f) Neither the Company nor any Affiliate of the Company will
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in the Securities Act) that could be integrated with
the sale of the Notes in a manner that would require the registration under the
Securities Act of those Notes.
(g) Not to solicit any offer to buy or offer or sell the Notes
by means of any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of section 4(2) of the Securities
Act.
(h) While any of the Notes remain outstanding, to make
available, upon request, to any seller of Notes the information specified in
Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to
section 13 or 15(d) of the Exchange Act.
(i) Until the expiration of two years after the original
issuance of the Notes, the Company will not, and will cause its Affiliates not
to, purchase or agree to purchase or otherwise acquire any Notes which are
"restricted securities" (as such term is defined under Rule 144(a)(3) under the
1933 Act), whether as beneficial owner or otherwise (except as agent acting as a
securities broker on behalf of and for the account of customers in the ordinary
course of business in unsolicited broker's transactions) unless, immediately
upon any such purchase, the Company or any Affiliate shall submit such Notes to
the Trustee for cancellation.
(j) To include information substantially in the form set forth
in Exhibit A in each Memorandum.
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(k) If requested by you, to use its best efforts to permit the
Notes to be designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
relating to trading in the PORTAL Market.
(l) None of the Company, its Affiliates or any person acting
on its or their behalf (other than the Purchasers) will engage in any directed
selling efforts (as that term is defined in Regulation S) with respect to the
Notes, and the Company and its Affiliates and each person acting on its or their
behalf (other than the Purchasers) will comply with the offering restrictions of
Regulation S.
(m) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell, contract to
sell or otherwise dispose of any debt securities of the Company or warrants to
purchase debt securities of the Company substantially similar to the Notes
(other than the Notes), without your prior written consent.
(n) To use the proceeds from the sale of the Notes in the
manner discussed in the Final Memorandum under the caption "Use of Proceeds".
6. Offering of Notes; Restrictions on Transfer.
--------------------------------------------
(a) Each Purchaser, severally and not jointly, represents and
warrants that Purchaser is a qualified institutional buyer as defined in Rule
144A under the Securities Act (a "QIB"). Each Purchaser, severally and not
jointly, agrees with the Company that (a) it has not solicited and will not
solicit offers for, and it has not offered and sold and it will not offer or
sell, Notes by any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of section 4(2) of the Securities
Act and (b) it has solicited and will solicit offers for Notes only from, and
has offered and will offer Notes only to, persons that it reasonably believes to
be (A) in the case of offers or sales inside the United States, (i) QIBs or (ii)
other institutional accredited investors (as defined in Rule 501 (a) (1), (2),
(3) or (7) under the Securities Act (each, an "Institutional Accredited
Investor") that, prior to their purchase of Notes, deliver to that Purchaser a
letter containing the representations and agreements set forth in Annex A to the
Memorandum and (B) in the case of offers or sales outside the United States, to
persons other than U.S. persons ("foreign purchasers," which term shall include
dealers or other professional fiduciaries in the United States acting on a
discretionary basis for foreign beneficial owners (other than an estate or
trust)) that, in each case, in purchasing Notes are deemed to have represented
and agreed as provided in Exhibit A hereto.
(b) Each Purchaser, severally and not jointly, represents,
warrants, and agrees with respect to offers and sales outside the United States
that:
(i) it understands that no action has been or will be
taken in any jurisdiction by any Purchaser or the Company that
would permit a public offering of the Notes, or possession or
distribution of either Memorandum or any
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other offering or publicity material relating to the Notes, in
any country or jurisdiction where action for that purpose is
required;
(ii) that Purchaser will comply with all applicable
laws and regulations in each jurisdiction in which it
acquires, offers, sells or delivers Notes or has in its
possession or distributes either Memorandum or any such other
material, in all cases at its own expense;
(iii) the Notes have not been and will not be
registered under the Securities Act and may not be offered or
sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation
S under the Securities Act or pursuant to another exemption
from the registration requirements of the Securities Act;
(iv) that Purchaser has offered the Notes and will
offer and sell the Notes (A) as part of their distribution, at
any time and (B) otherwise until 40 days after the later of
the commencement of the Offering and the Closing Date, only in
accordance with Rule 903 of Regulation S. Accordingly, neither
that Purchaser, its Affiliates nor any persons acting on its
or their behalf have engaged or will engage in any directed
selling efforts (within the meaning of Regulation S) with
respect to the Notes, and any such Purchaser, its Affiliates
and any such persons have complied and will comply with the
offering restrictions requirement of Regulation S;
(v) that Purchaser has (A) not offered or sold, and
prior to the date 180 days after the Closing Date will not
offer or sell any Notes in the United Kingdom except to
persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995,
(B) it has complied and will comply with all applicable
provisions of the Financial Services Xxx 0000 with respect to
anything done by it in relation to the Notes in, from or
otherwise involving the United Kingdom, and (C) it has only
issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with
the offering of the Notes to a person who is of a kind
described in Article 11(3) of the Financial Services Xxx 0000
(Investment Advertisements) (Exemptions) Order 1996 or is a
person to whom that document may otherwise lawfully be issued
or passed on;
(vi) that Purchaser understands that the Notes have
not been and will not be registered under the Securities and
Exchange Law of Japan, and represents that it has not offered
or sold, and agrees that it will not offer or sell, any Notes
acquired by it in connection with the distribution
contemplated hereby,
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directly or indirectly, in Japan or to or for the account of
any resident thereof, except for offers or sales to Japanese
dealers and except pursuant to any exemption from the
registration requirements of the Securities and Exchange Law
of Japan and otherwise in compliance with applicable
provisions of Japanese law, and further agrees that it will
send to any dealer who purchases from it any of the Notes a
notice stating in substance that, by purchasing those Notes,
that dealer represents and agrees that it has not offered or
sold, and will not offer or sell, any Notes, directly or
indirectly, in Japan or to or for the account of any resident
thereof, except for offers or sales to Japanese dealers and
except pursuant to any exemption from the registration
requirements of the Securities and Exchange Law of Japan and
otherwise in compliance with applicable provisions of Japanese
law, and that that dealer will send to any other dealer to
whom it sells any of the Notes a notice containing
substantially the same statement as is contained in this
sentence.
(vii) that Purchaser agrees that, at or prior to
confirmation of sales of the Notes made in reliance on
Regulation S, it will have sent to each distributor, dealer or
person receiving a selling concession, fee or other
remuneration that purchases Notes from it during the
restricted period a confirmation or notice substantially to
the following effect:
"The Notes covered hereby have not been registered
under the U.S. Securities Act of 1933, as amended (the
"Securities Act") and may not be offered and sold within the
United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution, at any time or,
(ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date, except in
either case in accordance with Regulation S (or Rule 144A if
available) under the Securities Act. Terms used above have the
meaning given to them by Regulation S."
Terms used in this Section 6 have the meanings given to them by Regulation S.
(c) Each Purchaser understands and agrees that, upon original
issuance of the Notes, and until such time as the applicable provisions of the
Securities Act and the rules promulgated thereunder and under the Indenture no
longer so require, the Notes will bear the legends set forth in "Transfer
Restrictions" in the Final Memorandum.
7. Indemnification and Contribution.
---------------------------------
(a) The Company agrees to indemnify and hold harmless each
Purchaser, and each person, if any, who controls that Purchaser within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, or is under common control with, or is controlled by, that Purchaser, from
and against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred by any
Purchaser
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or any such controlling or affiliated person in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in either Memorandum (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in light of the
circumstances under which they were made 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
relating to any Purchaser furnished to the Company in writing by such Purchaser
through you expressly for use therein. The indemnity agreement contained in this
Section 7(a) with respect to any Preliminary Memorandum does not inure to the
benefit of any Purchaser (or the benefit of any person controlling any
Purchaser) if the person asserting any such losses, liabilities, claims,
damages, or expenses purchased the Notes which are the subject thereof if at or
prior to the written confirmation of the sale of the Notes a copy of the Final
Memorandum (or the Final Memorandum as amended or supplemented) was not sent or
delivered to that person and the Final Memorandum (or the Final Memorandum as
amended or supplemented) would have cured the defect giving rise to those
losses, claims, damages or liabilities so long as the Company has complied with
its obligations set forth in Sections 5(a) and 5(c) hereof to permit that
sending or delivery.
(b) Each Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to that Purchaser, but only with
reference to information relating to that Purchaser furnished to the Company by
that Purchaser in writing through you expressly for use in either Memorandum or
any amendment or supplement thereto.
(c) If any proceeding (including any governmental
investigation) is instituted involving any person in respect of which indemnity
may be sought pursuant to either paragraph (a) or (b) above, that person (the
"indemnified party") shall promptly notify the person against whom that
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 that proceeding and
shall pay the fees and disbursements of that counsel related to that proceeding.
In any such proceeding, any indemnified party has the right to retain its own
counsel, but the fees and expenses of that counsel will be at the expense of
that indemnified party unless (i) the indemnifying party and the indemnified
party have mutually agreed to the retention of that counsel or (ii) the named
parties to any such proceeding (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 because of actual or
potential differing interests between them. It is understood that the
indemnifying party will not in respect of the legal expenses of any indemnified
party in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties and that all
such fees and expenses
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shall be reimbursed as they are incurred. That firm shall be designated in
writing by Xxxxxx Xxxxxxx & Co. Incorporated in the case of parties indemnified
pursuant to paragraph (a) above and by the Company in the case of parties
indemnified pursuant to paragraph (b) above. The indemnifying party will not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with that 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 that settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party has
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second and third sentences of this
paragraph, the indemnifying party agrees that it will be liable for any
settlement of any proceeding affected without its written consent if (i) that
settlement is entered into more than 60 days after receipt by that indemnifying
party of the aforesaid request and (ii) that indemnifying party has not
reimbursed the indemnified party in accordance with that request prior to the
date of that settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by that indemnified
party, unless that settlement includes an unconditional release of that
indemnified party from all liability on claims that are the subject matter of
that proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 7 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under that paragraph, in lieu of
indemnifying that indemnified party thereunder, shall contribute to the amount
paid or payable by that indemnified party as a result of those losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Purchasers on
the other hand from the offering of those Notes or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and the Purchasers on the other hand in connection with the statements or
omissions that resulted in those losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Purchasers on the other hand in
connection with the offering of Notes will be deemed to be in the same
respective proportions as the aggregate net proceeds from the offering of those
Notes (before deducting expenses) received by the Company and the total
discounts and commissions received by the Purchasers in respect thereof, in each
case as set forth in the Final Memorandum, bear to the aggregate offering price
of those Notes. The relative fault of the Company on the one hand and of the
Purchasers on the other hand will 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 or by the Purchasers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent that
statement or omission. The Purchasers' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the respective principal
amount of Notes they have purchased hereunder, and not joint.
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(e) The Company and the Purchasers agree that it would not be
just or equitable if contribution pursuant to this Section 7 were determined by
PRO RATA allocation (even if the Purchasers were treated as one entity for that
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (d) above. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in paragraph (d) above will be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by that indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7, no Purchaser will be required to contribute any amount in excess of
the amount by which the total price at which the Notes resold by it in the
initial placement of those Notes were offered to investors exceeds the amount of
any damages that that Purchaser has otherwise been required to pay by reason of
that 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 Securities Act) is entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The indemnity and contribution
provisions contained in this Section 7 and the representations and warranties of
the Company contained in this Agreement will 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 the Purchasers or any person controlling
the Purchasers or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Notes. The remedies provided for in this Section 7 are not exclusive and
do not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
8. TERMINATION. This Agreement is subject to termination by
notice given by Xxxxxx Xxxxxxx & Co. Incorporated (the "Purchaser
Representative") 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 of 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), that event singly or
together with any other such event makes it, in the Purchaser Representative's
judgment, impracticable to market the Notes on the terms and in the manner
contemplated in the Final Memorandum.
9. MISCELLANEOUS. If, on the Closing Date, any one or more of
the Purchasers fails or refuses to purchase Notes that it or they have agreed to
purchase hereunder on that date, and the aggregate principal amount of Notes
that that defaulting Purchaser or Purchasers agreed but failed or refused to
purchase is not more than one-tenth of the aggregate principal amount of
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Notes to be purchased on that date, the other Purchasers will be obligated
severally in the proportions that the principal amount of Notes set forth
opposite their respective names in Schedule I bear to the aggregate principal
amount of Notes set forth opposite the names of all such non-defaulting
Purchasers, or in such other proportions as you may specify, to purchase the
Notes that the defaulting Purchaser or Purchasers agreed but failed or refused
to purchase on that date, but in no event will the principal amount of Notes
that any Purchaser has agreed to purchase pursuant to Section 3 be increased
pursuant to this Section 9 by an amount in excess of one-ninth of that principal
amount of Notes without the written consent of that Purchaser. If, on the
Closing Date any Purchaser or Purchasers fails or refuses to purchase Notes that
it or they have agreed to purchase hereunder on that date and the aggregate
principal amount of Notes with respect to which that default occurs is more than
one-tenth of the aggregate principal amount of Notes to be purchased on that
date, and arrangements satisfactory to you and the Company for the purchase of
those Notes are not made within 36 hours after that default, this Agreement will
terminate without liability on the part of any non-defaulting Purchaser or of
the Company. In any such case either you or the Company may postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Final Memorandum or in any other document or arrangement
may be effected. Any action taken under this paragraph will not relieve any
defaulting Purchaser from liability in respect of any default of that Purchaser
under this Agreement.
This Agreement may be signed in any number of counterparts,
each of which is an original, with the same effect as if the signatures thereto
and hereto were on the same instrument.
If this Agreement is terminated by the Purchasers, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company is unable to perform its obligations under this
Agreement, the Company will reimburse the Purchasers or such Purchasers as have
so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by those Purchasers in connection with this Agreement or the
offering contemplated hereunder.
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
The headings of the sections of this Agreement have been
inserted for convenience of reference only and will not be deemed a part of this
Agreement.
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Please confirm your agreement to the foregoing by signing in
the space provided below for that purpose and returning to us a copy hereof,
whereupon this Agreement will constitute a binding agreement between us.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By /s/ Xxxxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President
------------------------
Accepted as of the date first written above
Xxxxxx Xxxxxxx & Co. Incorporated
Chase Securities Inc.
First Chicago Capital Markets, Inc.
XxXxxxxx & Company Securities, Inc.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
TD Securities (USA) Inc.
By XXXXXX XXXXXXX & CO. INCORPORATED
By /s/ Xxxxxxx Xxxxx
----------------------------------
Name: Xxxxxxx Xxxxx
Title:
---------------------
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SCHEDULE I
Principal Amount
Purchaser of Notes To Be Purchased
--------- ------------------------
Xxxxxx Xxxxxxx & Co. Incorporated $60,000,000 principal amount of 7.43%
Series C Secured Notes Due 2009; and
$120,000,000 principal amount of 7.88%
Series C Secured Notes Due 2017
Chase Securities Inc. $30,000,000 principal amount of 7.43%
Series C Secured Notes Due 2009; and
$60,000,000 principal amount of 7.88%
Series C Secured Notes Due 2017
First Chicago Capital Markets, Inc. $15,000,000 principal amount of 7.43%
Series C Secured Notes Due 2009; and
$30,000,000 principal amount of 7.88%
Series C Secured Notes Due 2017
XxXxxxxx & Company Securities, Inc. $15,000,000 principal amount of 7.43%
Series C Secured Notes Due 2009; and
$30,000,000 principal amount of 7.88%
Series C Secured Notes Due 2017
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx $15,000,000 principal amount of 7.43%
Incorporated Series C Secured Notes Due 2009; and
$30,000,000 principal amount of 7.88%
Series C Secured Notes Due 2017
TD Securities (USA) Inc. $15,000,000 principal amount of 7.43%
Series C Secured Notes Due 2009; and
$30,000,000 principal amount of 7.88%
Series C Secured Notes Due 2017
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EXHIBIT A
Each Memorandum will contain language to the following effect:
"Each purchaser of the Notes will be deemed to:
(1) represent that it is purchasing the Notes for its own
account or an account with respect to which it exercises sole
investment discretion and that it and any such account is (i) a QIB and
is aware that the sale to it is being made in reliance on Rule 144A,
(ii) an Institutional Accredited Investor, or (iii) a foreign purchaser
that is outside the United States (or a foreign purchaser that is a
dealer or other fiduciary as referred to above);
(2) acknowledge that the Notes have not been registered under
the Securities Act and may not be offered or sold in the United States
or to, or for the account or benefit of, U.S. persons except as set
forth below;
(3) if it is a person other than a foreign purchaser outside
of the United States, agree that if it resells or otherwise transfers
the Notes within the time period referred to in Rule 144(k) under the
Securities Act with respect to such transfer, it will do so only (i) to
The Cleveland Electric Illuminating Company (the "Company") or any
Subsidiary thereof, (ii) inside the United States to a QIB in
compliance with Rule 144A, (iii) inside the United States to an
Institutional Accredited Investor that, prior to such transfer,
furnishes to the Trustee a signed letter containing certain
representations and agreements relating to the restrictions on transfer
of the Notes (the form of which letter can be obtained from the
Trustee) and, if that transfer is in respect of an aggregate principal
amount of Notes at the time of transfer of less than $100,000, an
opinion of counsel acceptable to the Company that that transfer is in
compliance with the Securities Act, (iv) outside the United States in
compliance with Rule 904 under the Securities Act, (v) pursuant to the
exemption from registration provided by Rule 144 under the Securities
Act (if available) or (vi) pursuant to an effective registration
statement under the Securities Act. Each Institutional Accredited
Investor that is not a QIB and that is an original purchaser of the
Notes will be required to sign an agreement to the foregoing effect in
the form attached hereto as Appendix I. Subject to the procedures set
forth under "Description of Secured Notes--Book Entry, Delivery and
Form," prior to any proposed transfer of any of the Notes (otherwise
than pursuant to an effective registration statement) within the time
period referred to above, the holder thereof must check the appropriate
box set forth on the reverse of its Notes relating to the manner of
such transfer and submit the Notes to the Trustee;
(4) agree that it will deliver to each person to whom it
transfers any of the Notes notice of any restrictions on transfer of
those Notes;
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(5) if it is a foreign purchaser outside the United States,
understand that the Notes will initially be represented by a
Regulations S Global Note and that transfers thereof are restricted as
described under "Description of Secured Notes--Book Entry, Delivery and
Form";
(6) if it is a QIB, understand that the Notes offered in
reliance on Rule 144A will be represented by a Restricted Global Note.
Before any interest in a Restricted Global Note may be offered, sold,
pledged or otherwise transferred to a person who is not a QIB, the
transferee will be required to provide the Trustee with a written
certification (the form of which certification can be obtained from the
Trustee) as to compliance with the transfer restriction referred to
above;
(7) understand that, unless or until registered under the
Securities Act, the Notes (other than those issued to foreign
purchasers) will bear a legend to the following effect unless otherwise
agreed by the Company and the holder thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501 (A)(1), (2), (3) or (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT,
IF IT IS A PURCHASER OTHER THAN A FOREIGN PURCHASER OUTSIDE
THE UNITED STATES, IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT AS IN
EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY ("COMPANY"), (B) INSIDE THE UNITED STATES
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO
AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF THAT TRANSFER
IS IN RESPECT OF AN AGGREGATE PRINCI-
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PAL AMOUNT OF NOTES AT THE TIME OF TRANSFER OF LESS THAN
$100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
THAT TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS ANY OF
THEM MAY REASONABLY REQUIRE TO CONFIRM THAT THAT TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE
TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION
OF THE FOREGOING RESTRICTIONS;
(8) acknowledge that the Company, the Placement Agents and
others will rely upon the truth and accuracy of the foregoing
acknowledgements, representations and agreements, and agree that, if
any of the acknowledgements, representations or warranties deemed to
have been made by it by its purchase of Notes are no longer accurate,
it shall promptly notify the Company and the Placement Agents. If it is
acquiring Notes as a fiduciary or agent for one or more investor
accounts, it represents that is has sole investment discretion with
respect to each such account and it has full power to make the
foregoing acknowledgements, representations and agreements on behalf of
each such account.
Each Memorandum must also contain language to the following
effect:
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"Each person receiving this Memorandum acknowledges that (i)
that person has been afforded an opportunity to request from the
Company, and to review, all additional information considered by it to
be necessary to verify the accuracy of, or to supplement, the
information contained herein; (ii) that person has not relied on the
Placement Agents or any person affiliated with the Placement Agents in
connection with its investigation of the accuracy of that information
or its investment decision; and (iii) no person has been authorized to
give any information or to make any representation concerning the
Company or the Notes (other than as contained herein and information
given by duly authorized officers and employees of the Company in
connection with the investor's examination of the Company and the terms
of the sale of the Notes), and, if given or made, any such other
information or representation should not be relied upon as having been
authorized by the Company or the Placement Agents."
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