-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TYxDu2H3zhdGvMou3hDaWRR15pUTgBZ6dzdSh5v0ONqKDiLCjiDEP4TUBe43mDzP JZPbNqqz4mgiJNo4Oe2FFg== 0000950152-01-503136.txt : 20010710 0000950152-01-503136.hdr.sgml : 20010710 ACCESSION NUMBER: 0000950152-01-503136 CONFORMED SUBMISSION TYPE: S-2 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 20010709 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEVELAND ELECTRIC ILLUMINATING CO CENTRAL INDEX KEY: 0000020947 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 340150020 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-2 SEC ACT: SEC FILE NUMBER: 333-64776 FILM NUMBER: 1676947 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN STREET STREET 2: C/O FIRSTENERGY CORP CITY: AKRON STATE: OH ZIP: 44308 BUSINESS PHONE: 2166229800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEVELAND ELECTRIC FINANCING TRUST I CENTRAL INDEX KEY: 0001142248 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-2 SEC ACT: SEC FILE NUMBER: 333-64776-01 FILM NUMBER: 1676948 BUSINESS ADDRESS: STREET 1: C/O FIRSTENERGY CORP STREET 2: 76 SOUTH MAIN STREET CITY: AKRON STATE: OH ZIP: 44308-1890 BUSINESS PHONE: 8007363402 MAIL ADDRESS: STREET 1: C/O FIRSTENERGY CORP STREET 2: 76 SOUTH MAIN STREET CITY: AKRON STATE: OH ZIP: 44308-1890 S-2 1 l88526as-2.txt CLEVELAND ELECTRIC ILLUMINATING CO. S-2 1 As filed with the Securities and Exchange Commission on July 9, 2001 Registration Nos. 333-______ and 333-______-01 SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM S-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY (Exact name of Registrant as specified in its charter)
OHIO 34-0150020 (State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.) organization)
CLEVELAND ELECTRIC FINANCING TRUST I (Exact name of Registrant as specified in its charter)
DELAWARE 34-7140162 (State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.) organization)
C/O FIRSTENERGY CORP., 76 SOUTH MAIN STREET, AKRON, OHIO 44308 (Address of principal executive offices) Registrant's Telephone Number Including Area Code: (800)736-3402 N.C. ASHCOM, CORPORATE SECRETARY C/O FIRSTENERGY CORP. 76 SOUTH MAIN STREET AKRON, OHIO 44308-1890 (800)736-3402 (Name, address and telephone number of agent for service) The Commission is requested to send copies of all orders, notices and communications to:
LUCAS F. TORRES JOHN J. JENKINS PILLSBURY WINTHROP LLP CALFEE, HALTER & GRISWOLD LLP ONE BATTERY PARK PLAZA 800 SUPERIOR AVENUE NEW YORK, NY 10004-1490 1400 MCDONALD INVESTMENT CENTER (212) 858-1000 CLEVELAND, OH 44114 FAX: (212) 858-1500 (216) 622-8200 FAX: (216) 241-0816
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /__/ If the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this Form, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /__/ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /__/ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /__/ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. /__ / 2
CALCULATION OF REGISTRATION FEE ================================================================================================================================== Proposed Proposed maximum maximum aggregate Amount of Title of each class of Amount to be offering price offering registration securities being registered registered per unit(1) price(1)(2) fee - ---------------------------------------------------------------------------------------------------------------------------------- [ ]% Cumulative Trust Preferred Securities 9,800,000 $25.00 $245,000,000 $61,250.00 of Cleveland Electric Financing Trust I.......... - ---------------------------------------------------------------------------------------------------------------------------------- Guarantee of [ ]% Cumulative Trust Preferred Securities of The Cleveland Electric Illuminating Company(3)....................................... - ---------------------------------------------------------------------------------------------------------------------------------- Subordinated Debentures of The Cleveland Electric Illuminating Company(4).......................... ==================================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee. (2) Exclusive of accumulated interest and distributions, if any. (3) Includes the rights of holders of the Preferred Securities under the Guarantee of Preferred Securities and certain back-up undertakings as described in this Registration Statement. No separate consideration will be received for the Guarantee of the Preferred Securities by The Cleveland Electric Illuminating Company. (4) The Subordinated Debentures will be purchased by Cleveland Electric Financing Trust I with the proceeds of the sale of the Preferred Securities. No separate consideration will be received for the Subordinated Debentures. THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. 3 PROSPECTUS SUBJECT TO COMPLETION, JULY 9, 2001 Trust Preferred Securities Cleveland Electric Financing Trust I [___]% CUMULATIVE TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY) FULLY AND UNCONDITIONALLY GUARANTEED BY The Cleveland Electric Illuminating Company --------------- CLEVELAND ELECTRIC FINANCING TRUST I IS OFFERING PREFERRED SECURITIES WHICH WE WILL GUARANTEE TO THE EXTENT DESCRIBED IN THIS PROSPECTUS. --------------- FOR A MORE DETAILED DESCRIPTION OF THE PREFERRED SECURITIES, PLEASE REFER TO "DESCRIPTION OF THE PREFERRED SECURITIES" BEGINNING ON PAGE 20. --------------- WE HAVE APPLIED TO LIST THE PREFERRED SECURITIES ON THE NEW YORK STOCK EXCHANGE UNDER THE TRADING SYMBOL "CVX PrU." WE EXPECT THAT THE PREFERRED SECURITIES WILL BEGIN TRADING ON THE NEW YORK STOCK EXCHANGE WITHIN 30 DAYS AFTER THEY ARE FIRST ISSUED. --------------- INVESTING IN THE PREFERRED SECURITIES INVOLVES RISKS. PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 9. -------------
Underwriting Discounts Price to Public and Commissions Proceeds to the Trust --------------- ---------------------- --------------------- Per preferred security.................... $25.00 See below $25.00 Total..................................... $ [__________] See below $ [__________]
The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The Trust will not pay any underwriting commissions. We will pay underwriting commissions of $ per preferred security ($[___] for all preferred securities). Any accumulated distributions from [__________], 2001 should be added to the price to public. We have granted the underwriter(s) the right to purchase up to an additional [ ] preferred securities to cover over-allotments, if any. The underwriter(s) expect(s) to deliver the preferred securities to purchasers on or about [_______], 2001. --------------- MORGAN STANLEY [CO-MANAGER(S)] [__________], 2001 4 [red herring language appears here to be inserted on left hand side legend on the cover page] THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. ii 5 TABLE OF CONTENTS
Page ---- ABOUT THIS PROSPECTUS.............................................................................................1 WHERE YOU CAN FIND MORE INFORMATION...............................................................................1 PROSPECTUS SUMMARY................................................................................................3 SUMMARY CONSOLIDATED FINANCIAL INFORMATION........................................................................8 RISK FACTORS......................................................................................................9 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS.............................................................16 CAPITALIZATION...................................................................................................17 ACCOUNTING TREATMENT.............................................................................................17 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY......................................................................18 CLEVELAND ELECTRIC FINANCING TRUST I.............................................................................18 USE OF PROCEEDS..................................................................................................20 DESCRIPTION OF THE PREFERRED SECURITIES..........................................................................20 DESCRIPTION OF THE GUARANTEE.....................................................................................33 DESCRIPTION OF THE SUBORDINATED DEBENTURES.......................................................................36 RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE SUBORDINATED DEBENTURES AND THE GUARANTEE.......................45 BOOK-ENTRY SECURITIES............................................................................................47 UNITED STATES TAXATION...........................................................................................48 UNDERWRITERS.....................................................................................................52 LEGAL OPINIONS...................................................................................................54 EXPERTS..........................................................................................................54 Annex A - 2000 Annual Report to Stockholders of The Cleveland Electric Illuminating Company ...........................................................A-1 Annex B - Form 10-Q for the Quarter ended March 31, 2001 of The Cleveland Electric Illuminating Company ...........................................................B-1
iii 6 ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we and the Trust filed with the Securities and Exchange Commission. You should rely only on the information incorporated by reference or provided in this prospectus. We have not authorized anyone else to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus and the documents we incorporate by reference is accurate as of any date other than the date of this prospectus or those documents, respectively. WHERE YOU CAN FIND MORE INFORMATION We are required by the Securities Exchange Act of 1934 to file annual, quarterly and special reports and other information with the Commission. These reports and other information can be inspected and copied at the Commission's public reference room at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 or by written request addressed to the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. You may also read and copy these Commission filings by visiting the Commission's Website at http://www.sec.gov. In addition, so long as any preferred securities are outstanding, we will furnish to the holders of the preferred securities the annual and quarterly financial reports that we are required to file with the Commission, or similar reports if we are not at the time required to file these reports with the Commission. We and the Trust have filed with the Commission a registration statement on Form S-2 under the Securities Act of 1933 with respect to the securities offered by this prospectus. This prospectus does not contain all of the information included in the registration statement. For further information, you should refer to the registration statement. The Commission allows us to incorporate by reference the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus. The information included in this prospectus is not complete, and should be read together with the information incorporated by reference. We incorporate by reference in this prospectus our Annual Report on Form 10-K for the year ended December 31, 2000 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. WE ARE ALSO DELIVERING WITHOUT CHARGE A COPY OF OUR 2000 ANNUAL REPORT TO STOCKHOLDERS AND OUR QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001 TOGETHER WITH THIS PROSPECTUS ON OUR ANNEXES A AND B, RESPECTIVELY. You may also request additional copies of that report or copies of our Commission filings at no cost by writing or telephoning us at the following address: 7 The Cleveland Electric Illuminating Company 76 South Main Street Akron, Ohio 44308 Attention: Corporate Secretary Telephone: (330) 384-5504 We will not prepare separate financial statements of the Trust and therefore none will be included in this prospectus. We do not consider that these financial statements will be material to the holders of the preferred securities because the Trust is a special purpose entity owned by us with no operating history or independent operations and has not engaged in and does not propose to engage in any activity other than: - holding as trust assets our subordinated debentures, and - issuing its common and preferred securities. 2 8 PROSPECTUS SUMMARY You should read the following summary together with the other information contained in this prospectus. References in this document to "we," "us," "our," "Cleveland Electric" or the "Company" are references to The Cleveland Electric Illuminating Company. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY We are a wholly owned electric utility operating subsidiary of FirstEnergy Corp. We engage in the generation, distribution and sale of electric energy in northeastern Ohio. We also engage in the sale, purchase and interchange of electric energy with other electric companies. Our service area has a population of 1.9 million. FirstEnergy also owns four other electric utility operating companies, namely, Ohio Edison Company, Pennsylvania Power Company, The Toledo Edison Company and American Transmission Systems, Inc. (ATSI). On September 1, 2000, we sold our transmission assets to ATSI as did each of FirstEnergy's other electric operating subsidiaries. As a result, ATSI owns and operates FirstEnergy's major high-voltage transmission facilities and has interconnections with other regional utilities. Pursuant to FirstEnergy's corporate separation plan implemented under Ohio utility restructuring legislation, FirstEnergy transferred operational control of the non-nuclear generation assets of its electric utility operating subsidiaries to FirstEnergy Generation Corporation as of January 1, 2001. We expect that the transfer of ownership of those assets to FirstEnergy Generation will be completed by December 31, 2005, the end of the legislation's market development period. Our principal office is located at 76 South Main Street, Akron, Ohio 44308-1890. Our telephone number is (330) 384-5100. CLEVELAND ELECTRIC FINANCING TRUST I Cleveland Electric Financing Trust I is a Delaware business trust created for the exclusive purposes of: - issuing the preferred securities and common securities representing undivided beneficial interests in the assets of the Trust, - investing the gross proceeds from the sale of the preferred securities and common securities in our subordinated debentures, and - engaging in only those other activities necessary, convenient or incidental to these purposes. We will own all of the common securities of the Trust having an aggregate liquidation amount equal to at least 3% of the Trust's capital. The Trust has a term of approximately 55 years, but may be dissolved earlier. We will conduct all business and affairs of the Trust. As described above, the Trust will not engage in any business or activities other than as necessary, convenient or incidental to the issuance and sale of the preferred securities and common securities and investment of the proceeds from the sale in the subordinated debentures. In this prospectus, we refer to the preferred securities and common securities collectively as the "trust securities." The principal place of business of the Trust is c/o The Cleveland Electric Illuminating Company, 76 South Main Street, Akron, Ohio 44308, telephone number (800) 736-3402. 3 9 THE OFFERING The issuer Cleveland Electric Financing Trust I, a Delaware statutory business trust. The securities offered [__________] preferred securities having a liquidation amount of $25 per preferred security. The preferred securities represent preferred undivided beneficial interests in the assets of the Trust, which will consist solely of subordinated debentures. We will guarantee payments on the preferred securities to the extent of funds in the Trust. We may sell up to [___] additional preferred securities to the underwriter(s) to cover over-allotments, if any. The offering price $25 per preferred security. The payment of distributions The Trust will pay distributions to you on each preferred security at an annual rate of [___]% or $____ per quarter ($___ per year). The distributions will be cumulative, will accumulate from [__________], 2001, and will be payable in arrears on March 31, June 30, September 30 and December 31 of each year, commencing [__________], 2001. Subordinated debentures The Trust will invest the proceeds from the issuance of the preferred securities and the common securities in an equivalent amount of our [___]% subordinated debentures. Maturity The subordinated debentures are scheduled to mature on [__________], 2031 unless we extend the maturity date. Certain conditions must be satisfied before we can extend the maturity date. The Trust must redeem the preferred securities when the subordinated debentures are paid on the maturity date or following any earlier redemption of the subordinated debentures. We have the option to extend At any time when we are not in default under the interest payment period the subordinated debentures, we may extend the interest payment period on the subordinated debentures for up to 20 consecutive quarters, but not beyond their stated maturity date. The Trust would defer quarterly distributions on the 4 10 preferred securities during the extension period on the subordinated debentures. Deferred quarterly distributions will accumulate additional distributions at an annual rate of [___]% compounded quarterly. During any extension period on the subordinated debentures, we may not declare or pay any cash distributions on our capital stock or debt securities that are ranked equal to or lower than the subordinated debentures. Once an extension period has ended and all amounts then due have been paid, we may start a new extension period of up to 20 consecutive quarters. If we extend the interest payment period on the subordinated debentures, you will be required to accrue interest income as original issue discount in respect of deferred distributions on your preferred securities and include that original issue discount in your gross income for United States federal income tax purposes before you receive the deferred distributions. Redemption of the preferred The Trust will redeem the preferred securities is possible securities in whole or in part if we redeem the subordinated debentures. We may redeem the subordinated debentures prior to their scheduled maturity - at any time on or after [__________], 20__, in whole or in part from time to time, or - at any time, in whole, but not in part, within 90 days after the occurrence of certain adverse tax events or Investment Company Act developments. Upon any redemption of the subordinated debentures, the Trust will use the cash proceeds of the redemption to redeem on a proportionate basis preferred securities and common securities having an aggregate liquidation amount equal to the aggregate principal amount of the subordinated debentures redeemed. The redemption price you will receive will be equal to the liquidation amount of $25 per preferred security plus any accumulated and unpaid distributions to the date of redemption. 5 11 How the preferred securities The preferred securities will rank equally will rank in right of payment with the common securities. The Trust will pay distributions on the preferred securities and the common securities pro rata. However, if we default by failing to pay interest payments on the subordinated debentures, then no distributions on the common securities will be paid until all accumulated and unpaid distributions on the preferred securities have been paid. Our obligations under the subordinated debentures are unsecured and generally will rank junior in priority to our senior and other subordinated indebtedness. If we create any other trusts similar to the Trust, then the subordinated debentures will rank equally with any other subordinated debentures we issue to those trusts. As of March 31, 2001, our total senior debt outstanding was approximately $2.6 billion. We have no subordinated debt outstanding. Our obligations under the guarantee are unsecured and will rank junior to our senior and other subordinated indebtedness. If we issue any other guarantees in the future relating to preferred securities issued by the other trusts, then the guarantee issued in this transaction will rank equally with those other guarantees. The subordinated debentures We may dissolve the Trust at any time. may be distributed to you If we dissolve the Trust, after satisfaction of any liabilities to creditors, the Trust will distribute the subordinated debentures ratably to holders of the preferred securities and common securities. Our guarantee of payments We will fully and unconditionally guarantee the preferred securities based on: - our obligations to make payments on the subordinated debentures; - our obligations under a guarantee executed for the benefit of the holders of the preferred securities; and - our obligations under the trust agreement. 6 12 If we do not make payments on the subordinated debentures, the Trust will not have sufficient funds to make payments on the preferred securities. The guarantee does not cover payments when the Trust does not have sufficient funds. Limited voting rights You will have no voting rights except in limited circumstances. The use of proceeds The Trust will invest all of the proceeds from the sale of the preferred and the common securities in our subordinated debentures. We will use the proceeds from the sale of the subordinated debentures for general corporate purposes. New York Stock Exchange symbol The proposed NYSE symbol is "CVX PrU." Book-entry The preferred securities will be represented by a global security that will be deposited with and registered in the name of The Depository Trust Company, New York, New York, or its nominee. This means that you will not receive a certificate for your preferred securities. Risk Factors Before purchasing the preferred securities offered by this prospectus you should carefully consider the "Risk Factors" beginning on page 9. 7 13 SUMMARY CONSOLIDATED FINANCIAL INFORMATION THE CLEVELAND ELECTRIC ILLUMINATING COMPANY The following consolidated financial information is derived from, and should be read in conjunction with, the consolidated audited financial statements contained in our most recent Annual Report on Form 10-K and in our 2000 Annual Report to Stockholders, a copy of which is being delivered with this prospectus. Cleveland Electric is a wholly owned subsidiary of FirstEnergy. Prior to the merger in November 1997, Cleveland Electric and Toledo Edison were the principal operating subsidiaries of Centerior Energy. The merger was accounted for using the purchase method of accounting in accordance with accounting principles generally accepted in the United States, and the applicable effects were reflected on the separate financial statements of Centerior Energy's direct subsidiaries as of the merger date. Accordingly, the post-merger financial statements reflect a new basis of accounting, and pre-merger period and post-merger period financial results (separated by a heavy black line) are presented. Cleveland Electric discontinued the application of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" for its nuclear operations in October 1997. As a result, regulatory assets attributable to nuclear operations of $499.1 million ($324.4 million after taxes) were written off as an extraordinary item. Net Income and Earnings on Common Stock for the period November 8 to December 31, 1997 include net after tax charges of $5.8 million relating to a voluntary retirement program. "Earnings" for purposes of the calculations of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Dividends have been computed by adding to "income before extraordinary item" all taxes based on income or profits, total interest charges and the estimated interest element of rentals charged to income. "Fixed charges" include total interest charges and the estimated interest element of rentals.
YEAR ENDED TWELVE MONTHS ------------------------------------------------------------------------------- ENDED MARCH 1996 1997 1998 1999 2000 31, 2001 ----------- --------------------- ---------- ---------- --------- --------------- JAN. 1- NOV. 8- NOV. 7 DEC. 31 ($ IN THOUSANDS) (UNAUDITED) ------ ------- INCOME SUMMARY (1): - ---------------------------- Operating Revenues $1,798,850 $1,537,459 $254,892 $1,795,997 $1,864,954 $1,887,039 $1,979,799 Income Before Extraordinary Item $116,553 $95,191 $19,290 $164,891 $194,089 $202,950 $175,873 Net Income (Loss) $116,553 $(229,247) $19,290 $164,891 $194,089 $202,950 $175,873 Earnings (Loss) on Common Stock $77,810 $(274,276) $19,290 $140,097 $160,565 $182,107 $156,259 Ratio of Earnings to Fixed Charges 1.57 1.64 1.73 1.92 2.14 2.23 2.09 Ratio of Earnings to Combined Fixed Charges and Preferred Dividends 1.32 1.26 1.73 1.68 1.79 1.98 1.87
(1) The data corresponding to the years 1996 to 2000 was obtained from audited financial statements. 8 14 RISK FACTORS An investment in the preferred securities involves a number of risks. You should carefully consider the following information, together with the other information in this prospectus and the documents that are incorporated by reference in this prospectus, about risks concerning the preferred securities, before buying any preferred securities. RISK FACTORS RELATING TO THE SECURITIES OFFERED IF WE DO NOT MAKE PAYMENTS ON THE SUBORDINATED DEBENTURES, THE TRUST WILL NOT BE ABLE TO PAY DISTRIBUTIONS AND OTHER AMOUNTS DUE ON THE PREFERRED SECURITIES AND THE GUARANTEE WILL NOT APPLY. The Trust will depend solely upon our payment of amounts when due on the subordinated debentures to pay amounts due to you on the preferred securities. If we fail to pay principal or interest when due on the subordinated debentures, the Trust will not have funds to pay distributions on, or amounts due on redemption or liquidation of, the preferred securities or amounts due on the liquidation of the Trust. If this happens, holders of preferred securities will not be able to rely upon the guarantee for payment of those amounts because the guarantee only guarantees that we will make distributions and redemption payments on the preferred securities if the Trust has the funds to do so itself but does not. Instead, you or the property trustee may proceed directly against us for payment of any amounts due on the preferred securities. HOLDERS OF OUR SENIOR INDEBTEDNESS WILL GET PAID BEFORE YOU WILL GET PAID UNDER THE SUBORDINATED DEBENTURES OR THE GUARANTEE. Our obligations to you under the subordinated debentures and the guarantee are subordinate and junior in right of payment to all our existing and future senior indebtedness. This means that we cannot make any payments to you on the subordinated debentures or the guarantee if we are in default on any of our senior indebtedness. Therefore, in the event of our bankruptcy, liquidation or dissolution, our assets must be used to pay off our senior indebtedness in full before any payments may be made on the subordinated debentures or the guarantee. As of March 31, 2001, we had approximately $2.6 billion principal amount of indebtedness for borrowed money constituting senior indebtedness on a consolidated basis. None of the preferred securities, the subordinated debentures or the guarantee contains any provision that limits our ability to incur additional indebtedness, including indebtedness that would rank senior to the subordinated debentures and the guarantee. WE MAY EXTEND THE INTEREST PAYMENT PERIOD ON THE SUBORDINATED DEBENTURES. We have the right to extend the interest payment period on the subordinated debentures, from time to time, for up to 20 consecutive quarters. At the end of an extension period, if all amounts due are paid, we may start a new extension period of up to 20 consecutive quarterly periods. No extension period may extend beyond the maturity date of the subordinated debentures. 9 15 During any extension period on the subordinated debentures, the Trust will defer quarterly distributions on the preferred securities, which will continue to accumulate distributions at an annual rate of [___]%, and unpaid distributions will accumulate additional distributions at the annual rate of [___]% compounded quarterly from the relevant distribution payment date. If we exercise this extension right, the preferred securities may trade at a price that does not reflect fully the value of the accumulated but unpaid distributions. If you dispose of the preferred securities during an extension period, you might not recover the same return on your investment as someone who continues to hold the preferred securities. Even if we do not exercise this right, our right to do so could mean the market price for the preferred securities may be more volatile than that for debt instruments or other securities without similar deferral rights. YOU COULD HAVE ADVERSE TAX CONSEQUENCES IF WE EXTEND THE INTEREST PAYMENT PERIOD ON THE SUBORDINATED DEBENTURES. If we extend the interest payment period on the subordinated debentures, you will be required to accrue interest income as original issue discount in respect of the deferred distributions on your preferred securities. As a result, for United States federal income tax purposes, you will be required to include that original issue discount in gross income before you receive the deferred distributions, regardless of your regular method of accounting. See "United States Taxation--Original Issue Discount." If you sell your preferred securities before the record date for the payment of deferred distributions at the end of an extension period, you will not receive those distributions. Instead, the deferred and any accumulated distributions will be paid to the holder of record on the record date, regardless of who the holder of record may have been on any other date during the extension period. Moreover, accrued original issue discount will be added to your adjusted tax basis in the preferred securities but may not be reflected in the amount you realize on the sale. To the extent the amount realized is less than your adjusted tax basis, you will recognize a capital loss for United States federal income tax purposes. The deductibility of capital losses is subject to limitations. Our right to extend the interest payment period on the subordinated debentures could mean the market price of the preferred securities may be more volatile than that for securities that do not give their issuer that right. IN CERTAIN CIRCUMSTANCES, THE TRUST MAY REDEEM THE PREFERRED SECURITIES, WHICH MAY REQUIRE YOU TO REINVEST YOUR PRINCIPAL SOONER THAN EXPECTED. We may redeem the subordinated debentures before their stated maturity: - in whole or in part, at any time on or after [_________], 20[__]. - in whole but not in part, at any time prior to maturity within 90 days after certain tax events occur or become likely to occur or the Trust is or becomes likely to be deemed to be an investment company under the Investment Company Act. 10 16 Upon any redemption of the subordinated debentures, the Trust will use the cash proceeds of the redemption to redeem on a proportionate basis preferred securities and common securities having an aggregate liquidation amount equal to the aggregate principal amount of the subordinated debentures redeemed. The redemption price you will receive will be equal to the liquidation amount of $25 per preferred security plus any accumulated and unpaid distributions to the date of redemption. In that case, you may not be able to reinvest the money you receive for your preferred securities at a rate of return that is as high as the rate of return you were earning on the preferred securities. The redemption of the preferred securities would be a taxable event to you for United States federal income tax purposes. See "United States Taxation - Receipt of Subordinated Debentures or Cash Upon Liquidation of the Trust" and " - - Sale of the Preferred Securities." WE CAN DISSOLVE THE TRUST AND DISTRIBUTE THE SUBORDINATED DEBENTURES TO YOU, WHICH MAY HAVE ADVERSE TAX CONSEQUENCES FOR YOU. We may at any time dissolve the Trust. If we dissolve the Trust, after satisfaction of any liabilities to creditors, the Trust will distribute the subordinated debentures ratably to holders of the preferred securities and common securities. Under current United States federal income tax law, a distribution of subordinated debentures to you upon the dissolution of the Trust would not be a taxable event to you. However, if the Trust is classified for United States federal income tax purposes as an association taxable as a corporation at the time it is dissolved or if there is a change in law, the distribution of the subordinated debentures may be a taxable event to you. See "United States Taxation - Receipt of Subordinated Debentures or Cash Upon Liquidation of the Trust" and " - Sale of the Preferred Securities." THERE MAY BE NO TRADING MARKET FOR THE SUBORDINATED DEBENTURES IF THE TRUST DISTRIBUTES THEM TO YOU. If the subordinated debentures are distributed by the Trust, we will use our best efforts to cause the subordinated debentures to be listed on the New York Stock Exchange or on any other exchange on which the preferred securities are then listed. However, we may not be able to achieve that listing and a market for the subordinated debentures may not develop. Moreover, there is no assurance as to the market prices for subordinated debentures that may be distributed in exchange for preferred securities if we dissolve the Trust. Those subordinated debentures may trade at a discount to the price that you paid to purchase the preferred securities in this offer. Because you may receive subordinated debentures upon a dissolution of the Trust, you must also make an investment decision with regard to the subordinated debentures and should carefully review all the information regarding the subordinated debentures contained in this prospectus. YOU WILL HAVE ONLY LIMITED VOTING RIGHTS. You will have limited voting rights as a holder of preferred securities. You will have a right to vote to appoint a special administrative trustee upon the occurrence of certain events as 11 17 described in this prospectus. You will not be entitled to vote to appoint, remove or replace, or to increase or decrease the number of, the Cleveland Electric trustees, as these voting rights are vested exclusively in the holder of the common securities, except if an event of default under the trust agreement occurs and continues. THERE IS NO CURRENT ESTABLISHED TRADING MARKET FOR PREFERRED SECURITIES AND NO ASSURANCE THAT AN ACTIVE MARKET WILL DEVELOP. The preferred securities are a new issue of securities with no established trading market. Although we have applied to list the preferred securities on the New York Stock Exchange, we cannot assure you that listing of the preferred securities will be approved, or that an active or liquid public trading market will develop or be maintained for the preferred securities. If an active trading market does not develop, the market price and liquidity of the preferred securities will be adversely affected. Even if an active public market does develop, we cannot assure you that the market price for the preferred securities will equal or exceed the price you pay for the preferred securities. Future trading prices of the preferred securities may be subject to significant fluctuations in response to prevailing interest rates, our future operating results and financial condition, the market for similar securities and general economic and market conditions. RISK FACTORS RELATING TO CLEVELAND ELECTRIC THERE IS NO ASSURANCE OF MAINTAINING OUR FINANCIAL CAPABILITY. We have substantial debt and other obligations. At March 31, 2001, we had long-term debt of approximately $2.6 billion (66.6% of total capitalization), preferred stock not subject to mandatory redemption provisions of approximately $238.3 million, preferred stock subject to mandatory redemption provisions of approximately $25.6 million, current maturities of approximately $170.1 million, and short-term borrowings of $60.8 million from associated companies. We also have future minimum operating lease commitments (net of trust cash receipts) of approximately $74 million for the 2001-2005 period. At March 31, 2001, we had approximately $2.6 billion in aggregate principal amount of first mortgage bonds outstanding under our mortgage. This consists of $870 million of first mortgage bonds included in the long term debt total discussed above and other first mortgage bonds pledged to secure certain debt obligations. At March 31, 2001, we were able to issue up to $830 million of additional first mortgage bonds on the basis of property additions and retired bonds, however, there are no restrictions on our ability to issue preferred or preference stock. Based on our present plans, we could provide for our cash requirements to service and, as required, to repay the obligations referred to above during the remainder of 2001 and 2002 from the following sources: - funds from operations; 12 18 - available cash and temporary cash investments (approximately $0.7 million as of March 31, 2001); - proceeds of the offering of the preferred securities; - the issuance of long-term debt (for refunding purposes); and - funds made available to us by FirstEnergy under its revolving credit facilities. If one or more of these sources is limited or unavailable, our ability to service our debt and other obligations could be materially adversely affected. Our current credit ratings are below investment grade. Other than our first mortgage bond rating from Moody's Investor Services, our credit ratings remain below investment grade. Maintaining our credit ratings below investment grade could increase our cost of borrowing, make efforts to raise additional funds through borrowings more difficult and have an adverse impact on us. Our current ratings are summarized in the following table: Standard & Poor's Moody's ----------------- ------- First mortgage bonds BB+ Baa3 Unsecured notes BB- Ba1 Preferred stock B+ ba1 Moody's upgraded our debt ratings during the second half of 2000 citing approval by the Public Utilities Commission of Ohio (PUCO) of our transition plan on July 19, 2000 (see "We face competitive challenges due to regulatory and tax constraints and our high retail cost structure -- Competition in retail electricity." below) as an important factor in their decision. Although Moody's has indicated that our current credit ratings remain under review for further possible upgrades and Standard & Poor's has placed our current credit ratings on "watch positive" pending completion of FirstEnergy's merger with GPU, Inc., we cannot assure you that we can maintain these ratings or that Moody's or Standard & Poor's will not downgrade our credit ratings. WE FACE COMPETITIVE CHALLENGES DUE TO REGULATORY CONSTRAINTS AND OUR HIGH RETAIL COST STRUCTURE. Competitive energy suppliers. Since January 1, 2001, when Ohio customers were first allowed to choose their electric generation suppliers, competition has come from the entry of more energy suppliers and existing municipal electric systems in our service area. Changes due to open competition legislation in Ohio have resulted in fundamental alterations in the way traditional integrated utilities and holding company systems like FirstEnergy conduct their business. These changes have and are 13 19 likely to continue to result in increased costs associated with transitioning to new organizational structures and ways of conducting business. Competition in retail electricity. A number of states have enacted transitional legislation that encourages competition for retail electric businesses and the recovery of stranded investment. Investment is "stranded" when fixed costs approved for recovery under traditional regulatory methods become unrecoverable as a result of legislative changes that allow for widespread competition. Ohio's electric utility restructuring legislation, which allowed Ohio electric customers to select their generation suppliers beginning January 1, 2001, was signed into law in July 1999. On July 19, 2000, PUCO approved FirstEnergy's plan for transition to customer choice on our behalf, as well as for its other Ohio electric utility operating companies--Ohio Edison and Toledo Edison. As part of its authorization, the PUCO approved the settlement agreement between FirstEnergy and major groups representing most of the parties in FirstEnergy's transition cost proceeding before the PUCO. Major parties to the approved settlement included the PUCO staff, the Ohio Consumers' Counsel, the Industrial Energy Users-Ohio, certain power marketers and others. Major provisions of the approved transition plan include: - The opportunity for us to recover transition costs as filed through 2008; - A commitment to sell 400 megawatts of our generating capacity to marketers, brokers and aggregators at set prices for sales to retail customers in our Ohio service area; - A 5% reduction in the generation portion of residential customer bills, saving those customers between 2% and 3% on a typical monthly bill; - Additional incentives applied to shopping credits for residential, commercial and industrial customers of 45%, 30% and 15%, respectively, as reductions from their bills, when they select alternative energy providers (the credits exceed the price we will be offering to electricity suppliers relating to the 400 megawatts described above); - Maintaining current rates for our customers for distribution services through December 31, 2007; and - We assume the risk of not recovering up to $170 million of transition revenue if the rate of customers switching their service from us has not reached an average of 20% over any twelve month period ending between January 1, 2001 and December 31, 2005. In addition, under the electric utility restructuring legislation, Ohio utilities that offer both competitive and regulated retail electric services were required to implement a corporate separation plan approved by PUCO - one which provides a clear separation between regulated and competitive operations. In connection with FirstEnergy's transition plan, FirstEnergy 14 20 separated its business into three distinct units - a competitive services unit, a utility services unit and a corporate support services unit. We are included in the utility services unit, which continues to deliver electricity through our existing distribution system and maintains the provider of last resort obligation under the transition plan. As a result of the transition plan, FirstEnergy's electric utility subsidiaries entered into power supply agreements whereby the competitive services unit purchases the generation from the electric utility subsidiaries' owned and leased generating plants and/or purchases power in wholesale power markets and then sells power to the electric utility subsidiaries who are now "full requirements" customers of the competitive services unit to enable them to meet their provider of last resort responsibilities in their respective service areas. We cannot predict the effect that all of these changes will have on our business, particularly if state and federal regulatory initiatives are implemented that further increase our competition, threaten our cost and investment recovery or adversely impact our rate structures. For example, if tariff rates applicable to electricity we supply as "provider of last resort" under state deregulation legislation are insufficient to cover our costs of generation or purchase of electricity or if costs associated with the implementation of our transition plan are greater than anticipated, our business, results of operations and financial condition may be materially adversely affected. In addition, increased competition in general may cause a reduction in energy prices that may adversely affect our results of operations. OUR THREE NUCLEAR GENERATING UNITS MAY BE IMPACTED BY ACTIVITIES OR EVENTS BEYOND OUR CONTROL. We currently have interests in three nuclear generating units: - Beaver Valley Power Station Unit 2; - Davis-Besse Nuclear Power Station; and - Perry Nuclear Power Plant Unit 1. Another FirstEnergy subsidiary, FirstEnergy Nuclear Operating Company, operates Davis-Besse, Perry Unit 1 and Beaver Valley Station, which was acquired from Duquesne Light Company on December 3, 1999 in connection with an exchange of generating assets between Duquesne and Ohio Edison, Pennsylvania Power and us. These three nuclear units may be impacted by activities or events beyond our control. Operating nuclear units have experienced unplanned outages or extensions of scheduled outages because of equipment problems or new regulatory requirements. A major accident at a nuclear facility anywhere in the world could cause the United States Nuclear Regulatory Commission to limit or prohibit the operation or licensing of any domestic nuclear unit. An action of this kind would require us to purchase replacement power on the open market. Depending on prevailing market prices for replacement power, our financial condition, cash flows and results of operations could be materially adversely affected if this were to occur. 15 21 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS We caution you that this prospectus and the periodic reports and other documents that are incorporated by reference in this prospectus contain forward-looking statements within the meaning of the Securities Exchange Act. They are statements about future performance or results (such as statements including, but not limited to, the terms "potential," "estimate," "believe," "expect" and "anticipate" and similar words) when we discuss our financial condition, results of operations and business. Forward-looking statements involve certain risks, assumptions and uncertainties. They are not guarantees of future performance. Factors may cause actual results to differ materially from those expressed in these forward-looking statements. These factors include those identified in the section concerning Risk Factors, as well as the following possibilities: - if national and regional economic conditions are less favorable than we had expected; and - if there are disruptions in the wholesale power markets because of supply or delivery constraints that affect the ability of the competitive service unit to provide power to us to meet our provider of east resort responsibilities. We believe that the expectations reflected in our forward-looking statements are reasonable. However, we cannot assure you that these expectations will prove to have been correct. You should consider the factors we have noted above and the "Risk Factors" section as you read the forward-looking statements in this prospectus. 16 22 CAPITALIZATION The following table shows our capitalization on a consolidated basis as of March 31, 2001. The "As Adjusted" column shows our capitalization as of March 31, 2001, after giving effect to the sale of the preferred securities offered in this prospectus.
(DOLLARS IN THOUSANDS) ACTUAL AS ADJUSTED --------------------- ---------------------- UNAUDITED) - ------------------------------------------------------------------------------------------------ OUTSTANDING RATIO AMOUNT RATIO ------------ ----- ---------- ----- CAPITALIZATION SUMMARY: Common Stockholder's Equity ....... $1,048,112 26.6% $1,048,112 25.1% Preferred Stock Not Subject to Mandatory Redemption ........... 238,325 6.1% 238,325 5.7% Preferred Stock Subject to Mandatory Redemption(1) ........ 25,628 0.7% 25,628 0.6% Cleveland Electric obligated mandatorily redeemable preferred securities of subsidiary trust holding solely Cleveland Electric subordinated debentures -- -- 245,000 5.9% Long-Term Debt(2) ................. 2,621,454 66.6% 2,621,454 62.7% Total Capitalization ........... $3,933,519 100.0% $4,178,519 100.0%
- -------------------------- (1) Excludes $80.5 million of preferred stock subject to mandatory redemption within one year. (2) Excludes $89.7 million of long-term debt due to be repaid or subject to put options within one year. ACCOUNTING TREATMENT For financial reporting purposes, the Trust will be treated as our subsidiary. Accordingly, the accounts of the Trust will be included in our consolidated financial statements. The preferred securities will be reported as "CEI obligated mandatorily redeemable preferred securities of subsidiary trust holding solely CEI subordinated debentures" on a separate line item in our consolidated balance sheet. Appropriate disclosures about the preferred securities, the guarantee and the subordinated debentures will be included in the notes to our consolidated financial statements. For financial reporting purposes, we will classify distributions payable on the preferred securities as an expense in our consolidated statements of income. 17 23 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY Cleveland Electric is a wholly owned electric utility operating subsidiary of FirstEnergy. We engage in the generation, distribution and sale of electric energy in an area of approximately 1,700 square miles in northeastern Ohio. We were incorporated under the laws of the State of Ohio in 1892. We also engage in the sale, purchase and interchange of electric energy at wholesale with other electric companies and to two municipal electric systems (directly and through AMP-Ohio) in our service area. At December 31, 2000, we served approximately 741,400 customers in an area with a population of approximately 1.9 million. Principal industries served by us include: - those producing steel and other primary metals; - automotive and other transportation equipment; - chemicals; - electrical and nonelectrical machinery; - fabricated metal products; and - rubber and plastic products. Nearly all of our operating revenues are derived from the sale of electric energy. We had 1,046 employees at December 31, 2000. In addition to us, the direct or indirect electric utility operating subsidiaries of FirstEnergy are Ohio Edison Company, Pennsylvania Power Company, The Toledo Edison Company and ATSI. Cleveland Electric, Ohio Edison, Pennsylvania Power and Toledo Edison operate as separate companies, each servicing the customers in its respective service area. On September 1, 2000, we sold our transmission assets to ATSI as did each of FirstEnergy's other electric operating subsidiaries. As a result, ATSI owns and operates FirstEnergy's major high-voltage transmission facilities and has interconnections with other regional utilities. Pursuant to FirstEnergy's corporate separation plan implemented under Ohio utility restructuring legislation, FirstEnergy transferred operational control of the non-nuclear generation assets of its electric utility operating subsidiaries to FirstEnergy Generation Corporation as of January 1, 2001. We expect that the transfer to ownership of those assets to FirstEnergy Generation will be completed by December 31, 2005, the end of the legislation's market development period. Sources of generation for Cleveland Electric during 2000 were 53.4% coal and 46.6% nuclear. Our principal executive offices are located at 76 South Main Street, Akron, Ohio 44308, telephone number (800) 736-3402. CLEVELAND ELECTRIC FINANCING TRUST I Cleveland Electric Financing Trust I is a Delaware business trust and was created pursuant to a trust agreement among us, as depositor, The Bank of New York, as property 18 24 trustee, The Bank of New York (Delaware), as Delaware trustee and two of our employees, as administrative trustees. The Trust exists for the exclusive purposes of: - issuing the preferred securities and common securities representing undivided beneficial interests in the assets of the Trust, - investing the gross proceeds from the sale of the Trust's securities in our subordinated debentures, and - engaging in only those other activities necessary, convenient or incidental to these purposes. In connection with the issuance by the Trust of its preferred securities, we will amend and restate the trust agreement in substantially the form filed as an exhibit to the registration statement containing this prospectus. References in this prospectus to the "trust agreement" should be read to refer to that agreement as so amended and restated. The trust agreement will be qualified as an indenture under the Trust Indenture Act and the property trustee will act as the indenture trustee for purposes of that Act. We refer to the administrative trustees, the Delaware trustee and the property trustee collectively as the "Cleveland Electric trustees" in this prospectus. The Bank of New York will also act as guarantee trustee and as indenture trustee under the subordinated indenture for our subordinated debentures. We will own all of the common securities of the Trust. The common securities will rank equally, and will be paid pro rata, with the preferred securities, except that if an event of default under the subordinated indenture occurs and continues, the right to payment of the holders of the common securities will be subordinated to the rights to payment of the holders of the preferred securities. We will acquire common securities having an aggregate liquidation amount equal to 3% of the Trust's capital. The Trust has a term of approximately 55 years, but may be dissolved earlier as provided in the trust agreement. Conduct of the trust's affairs. We will conduct all business and affairs of the Trust. As described above, the Trust will not engage in any business or activities other than as necessary, convenient or incidental to issuance and sale of the trust securities and investment of the proceeds from the sale in the subordinated debentures. The Cleveland Electric trustees may be appointed, removed or replaced by: - the holder of the common securities, or - if an event of default under the trust agreement occurs and continues, the holders of a majority in liquidation preference of the preferred securities. We will pay all fees and expenses related to the Trust and the issuance and sale of the trust securities. The office of the Delaware trustee in the State of Delaware is White Clay Center, Route 273, Newark, Delaware 19711. The principal place of business of the Trust is c/o The Cleveland 19 25 Electric Illuminating Company, 76 South Main Street, Akron, Ohio 44308, telephone number (800) 736-3402. USE OF PROCEEDS We will use the proceeds from the sale of the securities for general corporate purposes. Pending application of the proceeds, we may make short-term cash investments. The Trust will use the proceeds from the sale of its trust securities to acquire our subordinated debentures. DESCRIPTION OF THE PREFERRED SECURITIES The Trust will issue preferred securities and common securities under the trust agreement. The preferred securities will represent undivided beneficial interests in the Trust's assets and entitle the holders to a preference over the common securities with respect to distributions and amounts payable on redemption or liquidation, as well as other benefits described in the trust agreement. Selected provisions of the trust agreement are summarized below. This summary is not complete. A form of the trust agreement was filed with the Commission as an exhibit to the registration statement that contains this prospectus. You should read that document for a better understanding of all of the provisions of the trust agreement that may be important to you. Since the trust agreement will be qualified under the Trust Indenture Act, you should also refer to the Trust Indenture Act for more information. Wherever particular sections or defined terms of the trust agreement are referred to in this description, those sections or defined terms are incorporated in this prospectus by reference. General We own all of the Trust's common securities, which rank equally, and are paid pro rata, with the preferred securities except as described under "-- Subordination of Common Securities" below. (Section 4.03). The property trustee will hold our subordinated debentures in trust for the benefit of the Trust and the holders of the trust securities. (Section 2.09). Our guarantee is a full and unconditional guarantee with respect to the preferred securities but does not guarantee payment of distributions or amounts payable on redemption or liquidation of the preferred securities when the Trust does not have sufficient available funds to pay those distributions. In that event, the remedy of a holder of preferred securities is to vote, together with the holders of a majority in liquidation amount of the preferred securities, to appoint a special administrative trustee and to direct the property trustee to enforce the property trustee's rights under the subordinated debentures. Distributions Distributions on the preferred securities will: - be payable in U.S. dollars at [__]% per annum of the stated liquidation amount of $25 per preferred security and distributions that are in arrears for more than one quarter will accrue interest at the rate per annum of __% and interest so accrued at the end of each quarter and remaining unpaid will itself bear interest, to the extent permitted by applicable law, until paid on the same basis; 20 26 - begin to accrue from, and include the date of original issuance; and - be cumulative and payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing [__________], 2001. The term "distributions" as we use it in this prospectus includes any interest payable on distributions as described above, unless we state otherwise. We will compute the amount of distributions payable for any period on the basis of a 360-day year of twelve 30-day months. (Sections 4.01(a) and 4.01(b)). If any date on which a distribution is payable for any preferred securities is not a business day, payment will be made on the following business day, without any interest or other payment for the delay, unless that following business day is in the next calendar year. In that case, payment will be made on the immediately preceding business day, in each case with the same force and effect as if made on that date. Each date on which distributions are otherwise payable in accordance with the foregoing is a "distribution date." A "business day" means a day other than: - a Saturday or a Sunday, - a day on which banks in New York, New York are authorized or obligated by law or executive order to remain closed, or - a day on which the principal corporate trust office of the property trustee or the trustee for our subordinated debentures is closed for business. (Section 4.01(a)). We have the right, under the subordinated indenture for our subordinated debentures, to extend the interest payment period from time to time on the subordinated debentures for up to 20 consecutive quarters. If we do, quarterly distributions on the preferred securities would be deferred by the Trust during that period. The preferred securities would continue to accrue interest on the deferred distributions, including interest on unpaid interest, as described above. If we exercise this right, we may not, during this period: - declare or pay any dividends on, or make a distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of our capital stock, other than a dividend in stock of the same class as the stock on which it is paid, or - make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by us that rank equally with or junior to the subordinated debentures, or - make any guarantee payments with respect to any item described in the two preceding bullet points, other than payments under the guarantee. Before an extension period ends, we may further extend the interest payment period so long as the extension period together with all previous and further extensions will not: 21 27 - exceed 20 consecutive quarters at any one time, or - extend beyond the maturity of the subordinated debentures. Once an extension period has ended and all amounts then due have been paid, we may start a new extension period in accordance with the above requirements. See "Description of the Subordinated Debentures -- Interest" and "-- Option to Extend Interest Payment Period." The Trust's income available for distribution to preferred securities holders will be limited to payments we make under the related subordinated debentures. See "Description of the Subordinated Debentures." If we do not make interest payments on the subordinated debentures, the property trustee will not have funds available to pay distributions on the preferred securities. We will guarantee the Trust's payment of distributions on a limited and subordinated basis, but only if and to the extent the Trust has funds legally available for the payment of those distributions and cash sufficient to make those payments. See "Description of the Guarantee." The Trust will pay distributions to the registered holders of the preferred securities as of the relevant record dates. As long as the preferred securities remain in book-entry-only form, the relevant record date will be one business day prior to the distribution payment date and payment will be made as described under "Book Entry Securities" below, subject to any applicable laws and regulations and to the provisions of the trust agreement. If the preferred securities do not remain in book-entry-only form, the relevant record date will be the 15th day prior to the distribution payment date. (Section 4.01(d)). Mandatory Redemption The subordinated debentures will mature on [__________] 2031, unless the maturity is extended at our option under certain circumstances. The property trustee will use the cash proceeds from any repayment of the subordinated debentures at maturity or upon earlier redemption to redeem on a proportionate basis preferred securities and common securities having an aggregate liquidation amount equal to the aggregate principal amount of the subordinated debentures redeemed. The redemption price you will receive will be equal to the liquidation amount of $25 per preferred security plus accumulated and unpaid distributions on the preferred security to the date of redemption. The administrative trustee will provide not less than 30 nor more than 60 days' notice to holders of preferred securities of any mandatory redemption. That payment in redemption shall be due without limitation and in all events. See "Description of the Subordinated Debentures -- Optional Redemption." We have the right to redeem the subordinated debentures on or after [__________], in whole or in part, subject to the conditions described under "Description of the Subordinated Debentures -- Optional Redemption." We may also redeem the subordinated debentures, in whole but not in part, if a Tax Event or an Investment Company Event as described below occurs and continues. See "Description of the Subordinated Debentures -- Optional Redemption." Special Event Redemption. "Tax Event" means the administrative trustees' receipt of an opinion from nationally recognized independent counsel experienced in these matters to the effect that, as a result of: 22 28 - any amendment to, or change, including any announced prospective change, in, the laws or treaties, or any regulations under the laws and treaties, of the United States or any political subdivision or taxing authority of or in the United States, - any amendment to or change in an interpretation or application of those laws or regulations by any legislative body, court, governmental agency or regulatory authority, including the enactment of any legislation or the publication of any judicial decision or regulatory determination on or after the date of the issuance of the preferred securities, - any interpretation or pronouncement of any of those bodies, courts, agencies or authorities that provides for a position with respect to those laws or regulations that differs from the then generally accepted position, or - any action taken by any governmental agency or regulatory authority, in each case occurring on or after the issuance date of the preferred securities, there is more than an insubstantial risk that: - the Trust is, or will be, subject to United States federal income tax with respect to income accrued or received on the subordinated debentures, - interest payable by us on the subordinated debentures is not, or will not be, fully deductible by us for United States federal income tax purposes, or - the Trust is, or will be, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Investment Company Event" means the administrative trustees' receipt of an opinion of counsel experienced in practice under the Investment Company Act of 1940 to the effect that as a result of a change in law or regulation by any legislative body, court, governmental agency or regulatory authority, the Trust is or will be considered an "investment company" which is required to be registered under the Investment Company Act, where the change becomes effective after the issuance of the preferred securities. If a Tax Event or an Investment Company Event occurs we will have the right, upon not less than 30 nor more than 60 days notice, to redeem the subordinated debentures, in whole but not in part, for cash within 90 days following the occurrence of the Tax Event or Investment Company Event. Following that redemption, a like amount of preferred securities will be redeemed by the Trust at the applicable redemption price on a pro rata basis. Distribution of the Subordinated Debentures We will have the right at any time to dissolve the Trust, and after satisfaction of the liabilities of creditors of the Trust as provided by applicable law, cause the subordinated debentures to be distributed to the holders of the preferred securities. 23 29 If the subordinated debentures are distributed to the holders of the preferred securities, we will use our best efforts to list the subordinated debentures on the New York Stock Exchange or any other exchange on which the preferred securities are then listed. (Section 9.04(e)). After the date for any distribution of subordinated debentures upon dissolution of the Trust: - the preferred securities will no longer be deemed to be outstanding, - DTC or its nominee, as the record holder of the preferred securities, will receive a registered global certificate or certificate representing the subordinated debentures to be delivered upon the distribution, and - any certificates representing preferred securities not held by DTC or its nominee will be deemed to represent a like amount of subordinated debentures, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to the accumulated and unpaid distributions on, those preferred securities, until the certificates are presented to us or our agent for transfer or reissuance. If a dissolution and liquidation of the Trust were to occur, we could not assure you as to the market prices for the subordinated debentures that may be distributed in exchange for the preferred securities. Accordingly, the subordinated debentures that you may receive if a dissolution and liquidation of the Trust were to occur, may trade at a discount to the price that you paid to purchase the preferred securities offered by this prospectus. As used in this prospectus, "like amount" means: - with respect to a redemption of preferred securities, preferred securities having a liquidation amount equal to the principal amount of subordinated debentures to be contemporaneously redeemed in accordance with the subordinated indenture and the proceeds of which will be used to pay the applicable redemption price of those preferred securities, and - with respect to a distribution to holders of preferred securities of subordinated debentures in connection with the Trust's liquidation, subordinated debentures having a principal amount equal to the liquidation amount of the preferred securities of the holder to whom those subordinated debentures are distributed. Redemption Procedures Preferred securities redeemed on each redemption date will be redeemed at the applicable redemption price with the proceeds from the contemporaneous redemption of subordinated debentures. Redemptions of preferred securities will be made and the applicable redemption price will be deemed payable on each redemption date, but only to the extent that the Trust has funds legally available for the payment of that redemption price. (Section 4.02(c)). See also "-- Subordination of Common Securities." 24 30 If the Trust gives a notice of redemption for any preferred securities, then, by 12:00 noon, New York time, on the redemption date, so long as the preferred securities are in book-entry only form, the property trustee will: - irrevocably deposit with DTC funds sufficient to pay the applicable redemption price and - give DTC irrevocable instructions and authority to pay the redemption price to the holders of those preferred securities. See "Book-Entry Securities." If any preferred securities are no longer in book-entry-only form, the Trust will: - irrevocably deposit with the paying agent for those preferred securities funds sufficient to pay the applicable redemption price, and - give that paying agent irrevocable instructions and authority to pay the redemption price to holders of the preferred securities upon surrender of their certificates evidencing those securities. Distributions payable on or before the redemption date for any preferred securities called for redemption will be payable to the holders of those preferred securities on the relevant record dates for the related distribution dates. If notice of redemption is given and funds deposited as required, then upon the redemption date: - all rights of holders of those preferred securities called for redemption will cease, except the right of the holders of those preferred securities to receive the redemption price, but without interest on that redemption price, and - those preferred securities will cease to be outstanding. If any date fixed for redemption of preferred securities is not a business day, then payment of the redemption price payable on that date will be made on the next business day, and without any interest or other payment for the delay, except that, if the business day falls in the next calendar year, the payment will be made on the immediately preceding business day. If a redemption price payment for any preferred securities called for redemption is improperly withheld or refused and not paid either by the Trust or by us pursuant to the guarantee, distributions on those preferred securities will continue to accrue at the then applicable rate, from the original redemption date to the date of payment. In that case, the actual payment date will be considered the date fixed for redemption for purposes of calculating the redemption price. (Section 4.02(d)). Subject to applicable law, including United States federal securities law, we or our subsidiaries may from time to time purchase outstanding preferred securities by tender, in the open market or by private agreement. The redemption price on any preferred securities will be paid to the holders of record of those preferred securities as they appear on the register for the preferred securities on the relevant record date. While the preferred securities are in book-entry only-form, the relevant 25 31 record date will be the business day before the relevant redemption date. If, however, the preferred securities do not remain in book-entry-only form, the relevant record date will be the 15th day before the redemption date. (Section 4.02(e)). If less than all the trust securities of the Trust are to be redeemed on a redemption date, then the aggregate liquidation amount of those securities will be allocated 3% to the common securities and 97% to the preferred securities. The property trustee will select the particular preferred securities to be redeemed not more than 60 days prior to the redemption date by that method which: - the property trustee deems fair and appropriate, and - may provide for the redemption of portions of the preferred securities in denominations of $25 or greater. The property trustee will promptly notify the security registrar in writing of the preferred securities selected for redemption and, in the case of a partial redemption, the liquidation preference of preferred securities to be redeemed. For all purposes of the trust agreement, unless the context otherwise requires, all provisions relating to the redemption of preferred securities shall relate, in the case of any preferred securities redeemed or to be redeemed only in part, to the portion of the liquidation amount of preferred securities that has been or is to be redeemed. (Section 4.02(f)). Subordination of Common Securities Payment of distributions on, and the redemption price of, the preferred securities and the related common securities will be made pro rata based on the liquidation amount of those trust securities. No distribution payment or other payment on account of the redemption, liquidation or other acquisition of any common security will be made, however, if an event of default under the subordinated indenture has occurred and is continuing on the distribution, redemption or other payment date unless payment in full in cash of all accumulated and unpaid distributions on all outstanding preferred securities or the full redemption price due on preferred securities, as applicable, is made or provided for. The property trustee must first apply all available funds to payment in full in cash of all preferred securities distributions or redemption price then due and payable. (Section 4.03(a)). In the case of a trust agreement event of default resulting from a subordinated indenture event of default, the holder of common securities will be deemed to have waived the trust agreement event of default until the effect of all trust agreement events of default has been cured, waived or otherwise eliminated. Until those trust agreement events of default have been so cured, waived or otherwise eliminated, the property trustee shall act solely on behalf of the holders of the preferred securities and not the holder of the common securities, and only the holders of the preferred securities will have the right to direct the property trustee to act on their behalf. (Section 4.03(b)). 26 32 Liquidation Distribution upon Dissolution Pursuant to the trust agreement, the Trust will dissolve and will be liquidated by the Cleveland Electric trustees on the first to occur of: - [__________], the expiration of the term of the Trust; - our bankruptcy, dissolution or liquidation; - our election to dissolve the Trust and to distribute the subordinated debentures to the holders of the preferred securities and common securities; - the redemption of all of the preferred securities in connection with the redemption of all of the subordinated debentures; and - the entry by a court of an order for judicial dissolution (Sections 9.01 and 9.02). If an early dissolution occurs as described in the second, third and fifth bullet points above, the Cleveland Electric trustees will expeditiously liquidate the Trust by causing the property trustee to distribute to each holder of preferred securities and common securities a like amount of subordinated debentures, unless that distribution is determined by the property trustee to be impractical. If that distribution is impractical, the holders will be entitled to receive out of the available assets of the Trust, after satisfaction of creditors' liabilities, an amount equal to the aggregate of the stated liquidation preference per preferred security plus accumulated and unpaid distributions to the date of payment. If this liquidation distribution can be paid only in part because the Trust has insufficient assets to pay in full, then the amounts payable directly by the Trust on the preferred securities will be paid on a pro rata basis. The holders of the common securities will be entitled to receive distributions upon any dissolution pro rata with the holders of the preferred securities, except the preferred securities will have a preference over the common securities if a trust agreement event of default has occurred and is continuing. (Sections 9.04(a) and 9.04(d)). Events of Default; Notice Any one of the following events constitutes a trust agreement event of default: - the occurrence of an event of default under the subordinated indenture (see "Description of the Subordinated Debentures-- Events of Default"); or - default by the Trust in the payment of any distribution for 30 days after it becomes due and payable; or - default by the Trust in the payment of any redemption price of any preferred security or common security when it becomes due and payable; or - default in the performance, or breach, in any material respect, of any covenant or warranty of the Cleveland Electric trustees in the trust agreement, other than a default or breach dealt with in the second and third bullet points above, and continuation of 27 33 that default or breach for a period of 60 days after the defaulting trustee or trustees have been given written notice of by the holders of at least 10% in liquidation amount of the outstanding preferred securities; or - the occurrence of a bankruptcy event with respect to the Trust. Within five business days after the occurrence of any trust agreement event of default, the property trustee will send notice of any default actually known to it to the holders of preferred securities, the administrative trustees and the depositor, unless the default has been cured or waived. (Section 8.02). The holder of the common securities may remove the property trustee and appoint a successor at any time unless a trust agreement event of default has occurred and is continuing, in which case the holders of a majority in liquidation amount of the preferred securities may remove the property trustee and appoint a successor. No registration or removal of the property trustee and no appointment of a successor trustee will be effective until the successor property trustee accepts the appointment in accordance with the trust agreement. (Section 8.10). Mergers, Consolidations or Amalgamations of the Trust The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety, to any corporation or other body except as described below or under "-- Liquidation Distribution upon Dissolution." The Trust may, with the consent of the administrative trustees and without the consent of the holders of the trust securities, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State, if it satisfies the following conditions: - the successor entity either: - expressly assumes all of the obligations of the Trust under the trust securities, or - substitutes for the preferred securities other securities having substantially the same terms as the trust securities, so long as the successor securities rank the same as the trust securities rank with respect to distributions and payments upon liquidation, redemption and otherwise, - we expressly acknowledge a trustee of the successor entity possessing the same powers and duties as the property trustee, in its capacity as the holder of the subordinated debentures, - the preferred securities or any successor securities are listed or quoted, or any successor securities will be listed or quoted upon notification of issuance, on any national securities exchange or with another organization on which the preferred securities are then listed or quoted, 28 34 - the merger, consolidation, amalgamation or replacement does not cause the preferred securities, including any successor securities, to be downgraded by any nationally recognized statistical rating organization, - the merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the trust securities, including any successor securities, in any material respect, other than for any dilution of the holders' interest in the new entity, - the successor entity has a purpose substantially identical to that of the Trust, - prior to the merger, consolidation, amalgamation or replacement, the Trust has received an opinion of nationally recognized independent counsel to the Trust experienced in such matters to the effect that: - the merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the trust securities, including any successor securities, in any material respect, other than any dilution of the holders' interest in the new entity, - following the merger, consolidation, amalgamation or replacement, neither the Trust nor the successor entity will be required to register as an "investment company" under the Investment Company Act, - following the merger, consolidation, amalgamation or replacement, the Trust, or the successor entity, will not be classified as an association taxable as a corporation for United States federal income tax purposes, and - we guarantee the obligations of the successor entity under the successor securities at least to the extent provided by the guarantee. However, the Trust will not, except with the consent of holders of 100% in liquidation amount of the trust securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it, if in the opinion of nationally recognized independent counsel experienced in such matters, the consolidation, amalgamation, merger or replacement would cause the Trust or the successor entity to be classified as an association taxable as a corporation for United States federal income tax purposes. See "-- Special Event Redemption" and "-- Liquidation Distribution Upon Dissolution." Merger or Consolidation of a Cleveland Electric Trustee So long as it is otherwise qualified and eligible, any of the following may be the successor to a Cleveland Electric trustee: - any corporation into which any trustee that is not a natural person may be merged or converted or with which it may be consolidated, 29 35 - or any corporation resulting from any merger, conversion or consolidation to which any Cleveland Electric trustee is a party, or - any corporation succeeding to all or substantially all the corporate trust business of any Cleveland Electric trustee. (Section 8.12). Voting Rights Except as provided below and under "Description of the Guarantee -- Amendments and Assignment" and as otherwise required by law and the trust agreement, the holders of the preferred securities will have no voting rights. (Section 6.01(a)). A majority in liquidation amount of the holders of the outstanding preferred securities, acting as a single class, may appoint a special administrative trustee if: - the Trust fails to pay distributions in full on the preferred securities for 6 consecutive quarterly distribution periods, or - a trust agreement event of default occurs and is continuing. For purposes of determining whether the Trust has failed to pay distributions in full for 6 consecutive quarterly distribution periods, distributions are deemed to remain in arrears until full cumulative distributions have been paid for all quarterly distribution periods ending on or before the date of payment of the cumulative distributions. Any holders of preferred securities, other than us or any of our affiliates, will be entitled to nominate any person to be appointed as special administrative trustee. Not later than 30 days after the right to appoint a special administrative trustee arises, the administrative trustees will convene a meeting of the holders of preferred securities for the purpose of appointing a special administrative trustee. If the administrative trustees fail to convene this meeting within the 30-day period, the holders of not less than 10% of the aggregate stated liquidation amount of the outstanding preferred securities may convene that meeting. Any special administrative trustee appointment will end when an event described in either of the two immediately preceding bullet points no longer continues. Notwithstanding the appointment of any special administrative trustee, we retain all rights under the subordinated indenture, including the right to defer payments of interest by extending the interest payment period as provided under "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period." If an extension occurs, there will be no subordinated indenture event of default and, consequently, no trust agreement event of default, for failure to make any scheduled interest payment during the extension period on the date originally scheduled. Holders of a majority in liquidation amount of the outstanding preferred securities will have the right, however, in the circumstances described above, to appoint a special administrative trustee. (Section 6.01(d)). If any proposed amendment to the trust agreement provides for, or the Cleveland Electric trustees otherwise propose to effect: 30 36 - any action that would adversely affect the powers, preferences or special rights of the holders of any preferred securities, whether by way of amendment to the trust agreement or otherwise, or - the dissolution, winding-up or termination of the Trust, other than pursuant to the trust agreement, then the holders of outstanding preferred securities will be entitled to vote as a class on the amendment or proposal which shall not be effective except with the approval of the holders of 66-2/3% in liquidation preference of the outstanding preferred securities. No amendment to the trust agreement may be made if, as a result of such amendment, the Trust would be classified as an association taxable as a corporation for the United States federal income tax purposes. (Section 6.01(c)). The holders of a majority in aggregate liquidation amount of the outstanding preferred securities will have the right to: - direct the time, method and place of conducting any proceeding for any remedy available to the property trustee or to direct the exercise of any trust or power conferred upon the property trustee under the trust agreement, including the right to direct the property trustee to exercise the remedies available to it as a holder of the subordinated debentures under the subordinated indenture; - waive any past subordinated indenture event of default that is waivable under the subordinated indenture; or - exercise any right to rescind or annul a declaration that the principal of all the subordinated debentures shall be due and payable; provided, however, that where a consent under the subordinated indenture requires the consent of all holders of the subordinated debentures affected, the property trustee may only give that consent at the direction of all holders of the preferred securities. If the property trustee fails to enforce its rights under the subordinated debentures, to the fullest extent permitted by law, a holder of preferred securities may, after written request to the property trustee to enforce those rights, institute a legal proceeding directly against us to enforce those rights without first instituting any legal proceeding against the property trustee or any other person or entity. The property trustee will notify all holders of the preferred securities of any notice of default received from the subordinated indenture trustee with respect to the subordinated debentures. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the property trustee will not take any of the actions described in the three bullet points above unless it has received an opinion from nationally recognized independent counsel experienced in these matters to the effect that the Trust will not be classified as an association taxable as a corporation for United States federal income tax purposes on account of that action. (Section 6.01(b)). Holders of preferred securities are not required to vote or consent to the Trust's redemption or cancellation of any preferred securities in accordance with the trust agreement. 31 37 For the purposes of voting or consenting by holders of preferred securities, any of the preferred securities that are owned by us, the Cleveland Electric trustees or any affiliate of ours or of any Cleveland Electric trustee, generally will be treated as if not outstanding. The procedures by which holders of preferred securities may exercise their voting rights are described below. See "Book Entry Securities" below. Except in connection with the appointment of a special administrative trustee as described above or during a trust agreement event of default, holders of the preferred securities will have no rights to appoint or remove the Cleveland Electric trustees. As the indirect or direct holder of all of the Trust's common securities, only we may appoint, remove or replace a Cleveland Electric trustee. Co-Property Trustees and Separate Property Trustee In general, unless a continuing trust agreement event of default exists, the holder of the common securities and the administrative trustees may appoint, and upon the written request of the administrative trustees, we, as depositor of the Trust, will join with the administrative trustees in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more persons approved by the property trustee either to act as co-property trustee, jointly with the property trustee, of all or any part of the trust property, or to act as separate property trustee of any that property, in either case with the powers as may be provided in the instrument of appointment, and to vest in that person or those persons in that capacity, any property, title, right or power deemed necessary or desirable, subject to the provisions of the trust agreement. If we do not join in the appointment within 15 days after our receipt of a request to do so, or if a continuing subordinated indenture event of default exists, the administrative trustees alone will have power to make that appointment. (Section 8.09). Payment and Paying Agent Payments of preferred securities will be made to DTC, which will credit the relevant accounts at DTC on the applicable distribution dates or, if the preferred securities are not held by DTC, these payments will be made by check mailed to the address of the registered holder. The paying agent will initially be The Bank of New York. The paying agent may resign upon 30 days' written notice to the administrative trustees, the property trustee and us as depositor. In the event that The Bank of New York chooses to no longer be the paying agent, the administrative trustees will appoint a successor to act as paying agent, which will be a bank or trust company acceptable to the property trustee and the depositor. (Sections 4.04 and 5.09). Registrar and Transfer Agent The Bank of New York will act as registrar and transfer agent for the preferred securities. Registration of transfers of preferred securities will be effected without charge by or on behalf of the Trust, but upon payment for any tax or other governmental charges which may be imposed in relation to it. 32 38 The Trust will not be required to register or cause to be registered any transfer of preferred securities after they have been called for redemption or during a period of 15 days immediately preceding the date on which notice identifying the serial numbers for the preferred securities called for redemption is mailed. Concerning the Property Trustee We and certain of our subsidiaries maintain deposit accounts and conduct other banking transactions with the property trustee in the ordinary course of their businesses. The property trustee also acts as trustee under certain indentures relating to borrowings by or for the benefit of the lessors to finance their acquisition of our interest in the Perry Nuclear Power Plant and Beaver Valley Power Station in connection with the sale and leaseback of certain undivided interests in those plants. Under the sale/leaseback documents, we are ultimately responsible for the payment of this indebtedness. Miscellaneous We have applied to list the preferred securities on the New York Stock Exchange, subject to official notice of issuance. The administrative trustees are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not be deemed to be an "investment company" required to be registered under the Investment Company Act or taxed as a corporation for United States federal income tax purposes and so that the subordinated debentures will be treated as our indebtedness for United States federal income tax purposes. In this case, we as the depositor and the administrative trustees are authorized to take any action, not inconsistent with applicable law, the certificate of trust or the trust agreement, that we and the administrative trustees determine in our discretion to be necessary or desirable for those purposes, as long as that action does not adversely affect the interests of the holders of the preferred securities. Holders of the preferred securities have no preemptive or similar rights. DESCRIPTION OF THE GUARANTEE Selected provisions of the guarantee that we will execute and deliver to the guarantee trustee for the benefit of holders of preferred securities are summarized below. This summary is not complete. A form of the guarantee was filed with the Commission as an exhibit to the registration statement that contains this prospectus. You should read that document for a better understanding of all of the provisions of the guarantee that may be important to you. Since the guarantee will be qualified under the Trust Indenture Act, you should also refer to the Trust Indenture Act of 1939 for more information. Wherever particular sections or defined terms of the guarantee are referred to in this description, those sections or defined terms are incorporated in this prospectus by reference. 33 39 General We will fully and unconditionally agree, to the extent described herein, to pay the guarantee payments described below in full to the holders of preferred securities as and when due. We must make these payments regardless of any defense, right of set-off or counterclaim available to or asserted by the Trust. We will make the following guarantee payments with respect to the preferred securities to the extent not paid by or on behalf of the Trust: - any accumulated and unpaid distributions required to be paid on the preferred securities, to the extent we have made a required payment of interest or principal on the subordinated debentures; - the redemption price on any preferred securities called for redemption by the Trust, including all accumulated and unpaid distributions to the date of redemption, to the extent we have made a required payment of interest or principal on the subordinated debentures; and - upon a voluntary or involuntary dissolution, winding-up or termination of the Trust (other than in connection with the distribution of the subordinated debentures to the holders of the preferred securities or a redemption of all of the preferred securities upon the maturity or redemption of the subordinated debentures), the lesser of: - the aggregate of the liquidation amount and all accumulated and unpaid distributions on the preferred securities to the date of payment, to the extent the Trust has funds available therefor, and - the amount of assets of the Trust remaining available for distribution to holders of preferred securities in liquidation of the Trust. Our obligation to make a guarantee payment may be satisfied by our direct payment of the required amounts to the holders of preferred securities or by causing the Trust to pay those amounts to those holders. The guarantee will be a full and unconditional guarantee of the preferred securities issued by the Trust from the time of issuance of the preferred securities, but will not apply to any payment of distributions or redemption price due to the extent that the Trust lacks funds legally available therefor as a result of our failure to make required payments of interest, redemption price or principal on the subordinated debentures. If we do not make interest or redemption price payments on the subordinated debentures, the Trust will not have funds legally available for, and will not pay, distributions or redemption price on the preferred securities. The guarantee will rank subordinate and junior in right of payment to all our outstanding liabilities, except those made of equal rank by their terms. See "-- Status of the Guarantee." Amendments and Assignment The terms of the guarantee may be changed only with the prior approval of the holders of not less than 66-2/3% in liquidation amount of the outstanding preferred securities, except that any changes that do not adversely affect in any material respect the rights of holders of preferred 34 40 securities may be made with no vote required. All of our successors, assigns, receivers, trustees and representatives will be bound by all guarantees and agreements of the guarantee, and those guarantees and agreements will inure to the benefit of the holders of the outstanding preferred securities. Events of Default An event of default under the guarantee will occur if we fail to perform any of our payment obligations under the guarantee. The holders of a majority in liquidation amount of the preferred securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to, or the exercise of any trust or power conferred upon, the guarantee trustee under the guarantee. If an event of default under the guarantee has occurred and is continuing, the guarantee trustee will enforce the guarantee for the benefit of the holders of the preferred securities. If the guarantee trustee fails to enforce the guarantee, any holder of preferred securities may institute a legal proceeding directly against us to enforce the guarantee trustee's rights under the guarantee without first instituting a legal proceeding against the Trust, the guarantee trustee or any other person or entity. The guarantee requires us to annually provide the guarantee trustee with: - a report as to our performance of our guarantee obligations and as to any default in that performance and - an officer's certificate as to our compliance with all conditions under the guarantee. Information Concerning the Guarantee Trustee The guarantee trustee will perform only the duties specifically set forth in the guarantee unless we are in default under the guarantee. In case of an uncured event of default under the guarantee, the guarantee trustee must exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to this provision, the guarantee trustee is not obligated to exercise any of its powers under the guarantee at the request of any holder of preferred securities unless it is offered reasonable indemnity against costs, expenses and liabilities that might be incurred by the exercise of those powers. Termination of the Guarantee The guarantee will terminate and be of no further force and effect upon: - full payment of the applicable redemption price of the preferred securities, - the distribution of subordinated debentures to holders of preferred securities in exchange for all of the preferred securities, or - upon full payment of the amounts payable upon liquidation of the Trust. 35 41 The guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of preferred securities must restore payment of any sums paid under the preferred securities or the guarantee. Status of the Guarantee Our guarantee will constitute an unsecured obligation of ours and, except with respect to compensation or reimbursement payments to the guarantee trustee, will rank - subordinate and junior in right of payment to all our liabilities, except liabilities that may be made pari passu by their terms, - pari passu with the most senior preferred or preference stock issued or to be issued by us and with any guarantee now or hereafter entered into by us in respect of any preferred or preference stock of any of our affiliates, and - senior to our common stock. The trust agreement provides that each holder of preferred securities by acceptance of the preferred securities agrees to the subordination provisions and other terms of the guarantee. The guarantee will constitute a guarantee of payment and not of collection. Accordingly, the guaranteed party may institute a legal proceeding directly against us as the guarantor to enforce its rights under the guarantee without first instituting a legal proceeding against any other person or entity. Governing Law. The guarantee will be governed by and construed in accordance with the laws of the State of New York. DESCRIPTION OF THE SUBORDINATED DEBENTURES The Trust will use the proceeds of the issuance and sale of its trust securities to invest in our subordinated debentures. Selected provisions of the subordinated debentures and the subordinated indenture between us and The Bank of New York, as subordinated debenture trustee, are summarized below. This summary is not complete. We filed forms of the subordinated debentures and subordinated indenture with the Commission as exhibits to the registration statement that contains this prospectus. You should read those documents for a better understanding of all of their provisions that may be important to you. Since the subordinated indenture will be qualified under the Trust Indenture Act of 1939, you should also refer to the Trust Indenture Act for more information. Wherever particular sections or defined terms of the subordinated debentures or the subordinated indenture are referred to in this prospectus, those sections or defined terms are incorporated in this prospectus by reference. If the Trust is dissolved, subordinated debentures may be distributed to the holders of the trust securities in liquidation of the Trust. See "Description of the Preferred Securities --Distribution of the Subordinated Debentures." 36 42 If the subordinated debentures are distributed to the holders of the preferred securities, we will use our best efforts to cause those subordinated debentures to be listed on the New York Stock Exchange or on any other exchange on which the preferred securities are then listed. General The subordinated debentures will be limited in aggregate principal amount to $[_________] (or up to $____ aggregate principal amount in the event that the underwriters exercise their over-allotment option granted pursuant to the underwriting agreement), approximately the sum of the aggregate stated liquidation preference of the preferred securities and the consideration paid by us for the related common securities. The subordinated debentures will be our unsecured, subordinated obligations and will rank junior to all of our senior indebtedness, as described below. The subordinated debentures will not be subject to a sinking fund. The entire outstanding principal amount of the subordinated debentures will become due and payable, together with any accrued and unpaid interest and including any additional interest as described below, on [______]. That date may be extended to a date no later than [__________] if we elect to extend the scheduled maturity date of those subordinated debentures and if we satisfy specified conditions. See "-- Option to Extend Maturity Date." Optional Redemption On or after [__________], we will have the right, at any time and from time to time, to redeem the subordinated debentures, in whole or in part, at a redemption price equal to 100% of the principal amount of the subordinated debentures being redeemed, together with any accrued but unpaid interest to the redemption date, including any additional interest described below. In general, we may redeem the subordinated debentures, in whole but not in part, within 90 days after a Tax Event or Investment Company Event occurs at a redemption price of 100% of their principal amount, together with any accrued but unpaid interest, including any additional interest, to the redemption date. See "Description of the Preferred Securities -- Special Event Redemption." As long as the Trust holds all of the outstanding subordinated debentures relating to the trust securities, it must use the proceeds of the redemption of those subordinated debentures to redeem the preferred securities in accordance with their terms. We cannot redeem any subordinated debentures unless all accrued and unpaid interest, including any additional interest, has been paid in full on all outstanding subordinated debentures for all quarterly interest periods ending on or before the redemption date. We must give at least 30 but not more than 60 days' notice of any optional redemption of subordinated debentures to holders of those subordinated debentures. Interest The subordinated debentures will bear interest at the of [___]% per annum. Interest is payable every quarter in arrears on March 31, June 30, September 30 and December 31 of each 37 43 year, commencing on [________], 2001. Interest will be paid to the person in whose name a subordinated debenture is registered, subject to certain exceptions, at the close of business on the business day next preceding the interest payment date. Interest will accrue quarterly, to the extent permitted by applicable law, at the rate of [___]% per annum on any interest installment in arrears for more than one quarter and on any interest on overdue interest. We anticipate that the Trust will be the sole holder of the subordinated debentures unless the Trust is liquidated. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. If any date on which interest is payable on the subordinated debentures is not a business day, then we will pay the interest payable on that date on the next succeeding day which is a business day, without any interest or other payment for any delay. If that business day falls in the next succeeding calendar year, however, the payment will be made on the immediately preceding business day. In each case, the payment will be made with the same force and effect as if made on the date the payment was originally payable. Option to Extend Maturity Date The stated maturity of the subordinated debentures is [__________] 2031. However, before the stated maturity of the subordinated debentures, we may extend that maturity date no more than one time for up to an additional [___] years from the original stated maturity; so long as: - we are not in bankruptcy or otherwise insolvent, - we are not in default on the subordinated debentures, - we have made timely payments on the subordinated debentures for the immediately preceding six quarters without deferrals, - the Trust is not in arrears on payments of distributions on the preferred securities, and - the subordinated debentures are rated [___] or higher by Standard & Poor's Rating Group [___] or higher by Moody's Investors Service, Inc. or the equivalent for any other nationally recognized statistical rating organization. Pursuant to the trust agreement, the administrative trustees are required to give notice of our election to extend the stated maturity to the holders of the preferred securities. Option to Extend Interest Payment Period We will have the right at any time during the term of the subordinated debentures to extend the interest payment period, from time to time, for an extension period of up to 20 consecutive quarters, during which interest will accrue but not be paid. Interest will accrue quarterly on accrued but unpaid interest during any extension period. At the end of the extension period, we must pay all interest then accrued and unpaid--including interest accrued on unpaid 38 44 interest as described above at the rate specified for the subordinated debentures to the extent permitted by applicable law. During any extension period, we may not: - declare or pay any dividends on, or make a distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of our capital stock, other than a dividend in stock of the same class as the stock on which it is paid, or - make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any of our debt securities issued by us that rank equally with or junior to the subordinated debentures, or - make any guarantee payments with respect to any items described in the two preceding bullet points, other than payments under the guarantee. Before an extension period ends, we may further extend the interest payment period, so long as the extension period together with all previous and further extensions will not: - exceed 20 consecutive quarters at any one time, or - extend beyond the maturity date of the subordinated debentures. Once an extension period has ended and all amounts then due have been paid, we may start a new extension period, subject to the above requirements. No interest will be due and payable during an extension period, except at the end of the period. So long as the property trustee is the sole holder of the subordinated debentures, we must give the property trustee, the administrative trustees and the subordinated debenture trustee notice of our selection of the extension period at least one business day prior to the earlier of: - the date the distributions on the preferred securities are payable, or - the date the administrative trustees are required to give notice to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the preferred securities of the record date for the payment of these distributions or the date the distributions are payable, but in any event not less than one business day prior to that record date. Pursuant to the Trust Agreement, the administrative trustees must notify the holders of the preferred securities of our selection of an extension period. Additional Interest If the Trust is ever required to pay any taxes, duties, assessments or governmental charges of whatever nature -- other than withholding taxes -- imposed by the United States or any other taxing authority, then, in any case, we will also pay as "additional interest" the amount required so that the net amounts received and retained by the Trust after paying those taxes, duties, assessments or governmental charges will be not less than the amounts the Trust would have received had no taxes, duties, assessments or governmental charges been imposed. 39 45 Set-Off Notwithstanding anything to the contrary in the subordinated debenture indenture, we may set-off any payment we are otherwise required to make on the subordinated debentures to the extent we have already made, or are concurrently on the date of payment making, a payment under the guarantee. Subordination Our subordinated debentures will be subordinate and junior in right of payment to all our senior indebtedness, as defined below. The subordinated debentures rank equally with our obligations to trade creditors. No payment of principal of -- including redemption -- or interest on the subordinated debentures may be made if: - we have defaulted on any payment of senior indebtedness when due, any applicable grace period with respect to that default has ended and the default has not been cured or waived, or - if the maturity of any senior indebtedness has been accelerated because of a default. (Section 11.02). If we are voluntarily or involuntarily dissolved, wound-up, liquidated or reorganized and our assets are distributed to creditors, whether in bankruptcy, insolvency, receivership or other proceedings, all principal of and interest due or to become due on, all senior indebtedness must be paid in full before the holders of the subordinated debentures are entitled to receive or retain any payment thereon. (Section 11.03). Subject to the prior payment of all senior indebtedness, the rights of the holders of the subordinated debentures will be subrogated to the rights of the holders of senior indebtedness to receive payments or distributions applicable to senior indebtedness until all amounts owing on the subordinated debentures are paid in full. (Section 11.04). Under the subordinated indenture, "senior indebtedness" means generally the principal of, premium, if any, interest on and any other payment due pursuant to any of the following, whether outstanding at the date of execution of the subordinated indenture or incurred, created or assumed later: - all our indebtedness on a consolidated basis -- other than any obligations to trade creditors -- evidenced by notes, debentures, bonds, other securities or other instruments issued by us for money borrowed and capitalized lease obligations; - all indebtedness of others of the kinds described in the first bullet point above assumed by or guaranteed in any manner by us or in effect guaranteed by us; and - all renewals, extensions or refundings of indebtedness of the kinds described in either of the preceding first or second bullet point above, unless, in the case of any particular indebtedness, renewal, extension or refunding, the instrument creating or evidencing the same or the assumption or guarantee of the same expressly provides that the indebtedness, renewal, extension or refunding is not superior in right of payment to or is pari passu with the subordinated debentures. (Section 1.01). 40 46 The subordinated indenture does not limit the aggregate amount of senior indebtedness that we may issue. As of March 31, 2001, we had approximately $2.6 billion of principal amount of indebtedness for borrowed money constituting senior indebtedness on a consolidated basis. Certain Covenants of The Cleveland Electric Illuminating Company We will covenant that we will not declare or pay any dividends or distributions -- other than dividends or distributions payable in our common stock -- on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of our capital stock, or make any guarantee payments with respect to the foregoing, other than payments under the guarantee, if at the time: - any event of which we have actual knowledge has occurred that with the giving of notice or the lapse of time, or both, would constitute an event of default under the subordinated indenture, and that we have not taken reasonable steps to cure, - we will be in default in our payment of any obligations under the guarantee, or - we will have given notice of our selection of an extension period as provided in the subordinated indenture and that extension period, or any extension of that extension period, will be continuing. (Section 10.05). We will also covenant: - to maintain 100% ownership of the common securities of the Trust, provided, however, that any permitted successor of us under the subordinated indenture may succeed to our ownership of those subordinated debentures, and - to use our reasonable efforts, consistent with the terms and provisions of the trust agreement, to cause the Trust to remain a business trust and otherwise not to be classified as a corporation for United States federal income tax purposes. (Section 10.05). Events of Default Each of the following events constitutes an event of default with respect to the subordinated debentures: - failure for 30 days to pay interest on the subordinated debentures when due, including any additional interest, subject to the deferral of any due date in the case of an extension period; or - failure to pay principal on the subordinated debentures when due whether at maturity, upon redemption by declaration or otherwise; provided, however, that an extension of the maturity of the subordinated debentures in accordance with the terms of the subordinated indenture and the subordinated debentures shall not constitute an event of default; or 41 47 - failure to observe or perform in any material respect any other covenant contained in the subordinated indenture for 90 days after written notice to us from the subordinated debenture trustee or to us and the subordinated debenture trustee from the holders of at least 25% in principal amount of the outstanding subordinated debentures; or - certain events in bankruptcy, insolvency or reorganization. (Section 5.01). The holders of a majority in outstanding principal amount of the subordinated debentures have the right to direct the time, method and place of conducting any proceeding for any remedy available to the subordinated debenture trustee. (Section 5.12). The subordinated debenture trustee or the holders of not less than 25% in aggregate outstanding principal amount of the subordinated debentures may declare the principal of and interest on the subordinated debentures due and payable immediately upon a subordinated indenture event of default, and should the subordinated debenture trustee or those holders of subordinated debentures fail to make that declaration the holders of at least 25% in aggregate liquidation preference of preferred securities then outstanding will have that right. The holders of a majority in aggregate outstanding principal amount of the subordinated debentures may annul the declaration if all defaults have been cured or waived and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration, as well as all sums paid or advanced by the subordinated debenture trustee and its compensation, expenses and advances, have been deposited with the subordinated debenture trustee. (Section 5.02). The holders of a majority in outstanding principal amount of the subordinated debentures affected may, on behalf of the holders of all the subordinated debentures, waive any past default, except a default in the payment of principal or interest (unless the default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the subordinated debenture trustee) or a default in respect of a covenant or provision which under the subordinated indenture cannot be modified or amended without the consent of the holder of each outstanding subordinated debenture. (Section 5.13). We must file annually with the subordinated debenture trustee a certificate as to our compliance with all the material terms, provisions and conditions applicable to us under the subordinated indenture. (Section 10.04). In case any subordinated indenture event of default occurs and is continuing, the property trustee will have the right to declare the principal of and the interest, including any additional interest, on the subordinated debentures and any other amounts payable under the subordinated indenture to be due and payable and to enforce its other rights as a creditor with respect to the subordinated debentures. A voluntary or involuntary dissolution of the Trust prior to redemption or maturity of the subordinated debentures would not constitute a subordinated indenture event of default. If the Trust is dissolved, an event both we and the Trust consider remote, any of the following, among other things, could occur: - a distribution of the subordinated debentures to the holders of the preferred securities, 42 48 - a cash distribution to the holders of the preferred securities out of the sale of the Trust's assets, after satisfaction of liabilities to creditors, - a permitted redemption at par of the subordinated debentures, and a consequent redemption of a like amount of the preferred securities, at our option of under the circumstances described in "-- Optional Redemption," or - the rollover of the Trust's property into another entity with similar characteristics. Form, Exchange and Transfer The subordinated debentures will be issuable only in registered form, without coupons and only in denominations of $25 and multiples of $25. (Section 3.02). Subject to the terms of the subordinated indenture, subordinated debentures may be presented for registration of transfer or exchange -- duly endorsed or accompanied by satisfactory instruments of transfer or exchange -- at the office of the registrar for the subordinated debentures designated by us for that purpose. No service charge will be made for any registration of transfer or exchange of subordinated debentures, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith except with respect to certain exchanges not involving any transfer. The transfer or exchange will be effected upon the registrar or the transfer agent, as the case may be, being satisfied with the documents of transfer, title and identity of the person making the request. We have appointed the subordinated debenture trustee as the registrar for the subordinated debentures. (Section 3.05). We may at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts. (Section 10.02). We will not be required to: - issue, register the transfer of or exchange of any subordinated debentures during the 15 days before the day notice of redemption identifying those subordinated debentures being called for redemption is mailed or - issue, register the transfer or exchange any subordinated debentures selected for redemption in whole or in part, except the unredeemed portion of any subordinated debentures being redeemed in part. (Section 3.05). Payment and Paying Agents We will pay interest on a subordinated debenture on any interest payment date to the person in whose name the subordinated debenture, or one or more predecessor securities, is registered at the close of business on the regular record date for that interest payment date. (Section 3.07). 43 49 Principal of and any interest on the subordinated debentures will be payable at the office of the paying agent or agents designated by us for this purpose from time to time. We may at our option, however, pay interest by check mailed to the address of the person entitled to that interest as that address appears in the security register or by wire transfer. The subordinated debenture trustee is The Bank of New York and we have designated The Bank of New York as our initial paying agent and The Bank of New York's corporate trust office in The City of New York as our sole paying agency for payments on the subordinated debentures. We may at any time designate additional paying agents or rescind the designation of any paying agent or approve a change in the office through which any paying agent acts. (Section 10.02). Modification of the Subordinated Indenture The subordinated indenture contains provisions permitting us and the subordinated debenture trustee, with the consent of the holders of not less than 66-2/3% of the principal amount of the outstanding subordinated debentures, to modify the subordinated indenture in a manner affecting the rights of the holders of the subordinated debentures. However, no modification may, without the consent of the holder of each outstanding subordinated debenture: - change the fixed maturity of the subordinated debentures, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or change the place of payment where or the currency in which the subordinated debentures or their interest are payable, or impair the right to institute a suit for enforcement on or after maturity or redemption, or modify the subordination provisions in the subordinated indenture in a manner adverse to the holders of the subordinated debentures, or - reduce the percentage of principal amount of subordinated debentures, the holders of which are required to consent to any modification of the subordinated indenture, or - modify certain provisions of the subordinated indenture relating to the waiver of our past defaults or our compliance with our covenants in the subordinated indenture. Under the subordinated indenture, the consent of the holders of the preferred securities is also required for some amendments to or the termination of the subordinated indenture and in respect of our compliance with certain covenants in the subordinated indenture. (Section 9.02). Consolidation, Merger and Sale We may not consolidate with or merge into, or convey, transfer or lease our properties and assets substantially as an entirety to, any person, and may not permit any person to merge into, or convey, transfer or lease its properties and assets substantially as an entirety to, us unless: - the successor person, if any: - is a corporation, partnership or trust organized and validly existing under the laws of any domestic jurisdiction, and 44 50 - assumes our obligations on the subordinated debentures and under the subordinated indenture, - immediately after giving effect to the transaction, and treating any indebtedness which as a result of the transaction becomes our obligation or the obligation of any of our subsidiaries as having been incurred at the time of the transaction, no subordinated indenture event of default, and no event which, after notice or lapse of time or both, would become a subordinated indenture event of default, will have occurred and be continuing, - the consolidation or merger or conveyance, transfer or lease of our properties or our assets is permitted under, and does not give rise to any breach or violation of, the trust agreement or the guarantee, and - other conditions are met. (Section 8.01). Satisfaction and Discharge Under the terms of the subordinated indenture, we will be discharged from our obligations under the subordinated debentures if we deposit with the subordinated debenture trustee, in trust, moneys in an amount sufficient to pay all the principal of, and interest on, the subordinated debentures on the dates those payments are due in accordance with the terms of those subordinated debentures, provided that those subordinated debentures have become due and payable, or will become due and payable within one year whether at maturity or through redemption. Even if we make the deposit as described in the preceding sentence, however, our obligations to register the transfer or exchange of subordinated debentures, replace stolen, lost or mutilated subordinated debentures and hold moneys for payment in trust will not be discharged. (Section 4.01). Governing Law The subordinated indenture and the subordinated debentures will be governed by, and construed in accordance with, the laws of the State of New York. (Section 1.12). RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE SUBORDINATED DEBENTURES AND THE GUARANTEE As long as payments of interest and other payments are made when due on the subordinated debentures, those payments will be sufficient to cover distributions and other payments due on the preferred securities, primarily because: - the aggregate principal amount of subordinated debentures will be equal to the sum of the aggregate stated liquidation preference of the preferred securities and the common securities; 45 51 - the interest rate and interest and other payment dates on the subordinated debentures will match the distribution rate and distribution and other payment dates for the preferred securities; - the trust agreement obligates us, and not the Trust, to pay for any, costs, expenses and liabilities of the Trust, including any income taxes, duties and other governmental charges, and related costs and expenses, to which the Trust may become subject, except for United States withholding taxes and the Trust's obligations to holders of preferred securities under the preferred securities; and - the trust agreement further provides that the Cleveland Electric trustees will not cause or permit the Trust to, among other things, engage in any activity that is not consistent with the limited purposes of the Trust. We are guaranteeing the payment of distributions and other amounts due on the preferred securities to the extent the Trust has funds available for the payment of those distributions as and to the extent set forth under "Description of the Guarantee." If and to the extent that we do not make payments on the subordinated debentures, the Trust will not pay distributions or other amounts due on the preferred securities. If the guarantee trustee fails to enforce the guarantee, a holder of a preferred security may institute a legal proceeding directly against us to enforce its rights under the guarantee without first instituting a legal proceeding against the Trust or any other person or entity. The preferred securities evidence the rights of the holders of the preferred securities to the benefits of the Trust, which exists for the sole purpose of issuing its trust securities and investing the proceeds in our debt securities, while the subordinated debentures represent our indebtedness. A principal difference between the rights of a holder of a preferred security and a holder of a subordinated debenture is that a holder of a subordinated debenture will accrue, and is entitled to receive, subject to permissible extensions interest periods, interest on the principal amount of subordinated debentures held, while a holder of preferred securities is only entitled to receive distributions if and to the extent the Trust has funds legally available for the payment of those distributions. Upon any voluntary or involuntary dissolution, winding-up or termination of the Trust, the holders of preferred securities will be entitled to receive in cash, out of assets legally available for distribution to holders, the liquidation distribution described under "Description of the Preferred Securities -- Liquidation Distribution Upon Dissolution." Upon our voluntary or involuntary liquidation or bankruptcy, the Trust, as holder of the subordinated debentures, would be a subordinated creditor of ours, subordinated in right of payment to all senior indebtedness, but entitled to receive payment in full of principal and interest, before any of our stockholders receive payments or distributions. Since we are the guarantor under the guarantee and have agreed to pay for all costs, expenses and liabilities of the Trust (other than United States withholding taxes and other than the Trust's obligations to holders of preferred securities under the preferred securities), the positions of a holder of preferred securities and a holder of subordinated debentures relative to other creditors and to our stockholders in the event of our liquidation or bankruptcy would be substantially the same. 46 52 A default or event of default under any senior indebtedness would not constitute a default or subordinated indenture event of default. In the event of payment defaults under, or acceleration of, senior indebtedness, the subordination provisions of the subordinated debentures provide that no payments may be made on the subordinated debentures until that senior indebtedness has been paid in full or any payment default has been cured or waived. Failure to make required payments on the subordinated debentures would constitute a subordinated indenture event of default. BOOK-ENTRY SECURITIES The preferred securities will trade through DTC. The preferred securities will be represented by a global certificate and registered in the name of Cede & Co., DTC's nominee. DTC is a New York clearing corporation and a clearing agency registered under Section 17A of the Securities Exchange Act of 1934. DTC holds securities for its participants. DTC facilitates settlement of securities transactions among its participants, through electronic computerized book-entry changes in the participants' accounts. This eliminates the need for physical movement of securities certificates. The participants include securities brokers and dealers, banks, trust companies and clearing corporations. DTC is owned by a number of its participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Others who maintain a custodial relationship with a participant can use the DTC system. The rules that apply to DTC and those using its systems are on file with the Commission. Purchases of preferred securities within the DTC system must be made through participants, which will receive a credit for the preferred securities on DTC's records. The beneficial ownership interest of each purchaser will be recorded on the participants' records. Beneficial owners will not receive written confirmation from DTC of their purchases, but beneficial owners should receive written confirmations of the transactions, as well as periodic statements of their holdings, from the participants through which they purchased preferred securities. Beneficial owners will not receive certificates for their preferred securities, unless use of the book-entry system for the preferred securities is discontinued. To facilitate subsequent transfers, all the preferred securities deposited by direct participants with DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of preferred securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the preferred securities. DTC's records reflect only the identity of the participants to whose accounts those preferred securities are credited. These participants may or may not be the beneficial owners. Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to participants, and by participants to indirect participants and beneficial owners, will be governed by arrangements among them. 47 53 Redemption notices will be sent to Cede & Co. If less than all of the preferred securities are being redeemed, DTC's practice is to determine by lot the liquidation amount of each participant to be redeemed. Although voting with respect to the preferred securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to preferred securities. Under its usual procedures, DTC would mail an omnibus proxy to the Trust as soon as possible after the record date. The omnibus proxy assigns the consenting or voting rights of Cede & Co. to those participants to whose accounts the preferred securities are credited on the record date. We and the Trust believe that these arrangements will enable the beneficial owners to exercise rights equivalent in substance to the rights that can be directly exercised by a holder of a beneficial interest in the Trust. Distribution payments on the preferred securities will be made to DTC. DTC's practice is to credit participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on that payment date. Payments by participants to beneficial owners will be governed by standing instructions and customary practices. Payments will be the responsibility of participants and not DTC, the Trust or us. Payment of distributions to DTC is the responsibility of the Trust. Disbursement of those payments to participants is the responsibility of DTC, and disbursement of those payments to the beneficial owners is the responsibility of participants. Except as provided in this prospectus, a beneficial owner will not be entitled to receive physical delivery of preferred securities. Accordingly, each beneficial owner must rely on the procedures of DTC to exercise any rights under the preferred securities. DTC may discontinue providing its services as securities depositary with respect to the preferred securities at any time by giving reasonable notice to the Trust. In the event no successor securities depositary is obtained, preferred securities certificates will be printed and delivered. If the administrative trustees and we decide to discontinue use of the DTC system of book-entry transfers, certificates for the preferred securities will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that we believe to be accurate, but we assume no responsibility for its accuracy. Neither we nor the Trust has any responsibility for the performance by DTC or its participants of their respective obligations as described above or under the rules and procedures governing their respective operations. UNITED STATES TAXATION The following summary describes certain United States federal income tax consequences of the purchase, ownership and disposition of preferred securities as of the date of this prospectus, and represents the opinion of Pillsbury Winthrop LLP, our special tax counsel, insofar as it relates to matters of law or legal conclusions. Except where noted, it deals only with preferred securities held as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, and does not deal with special situations, like those of tax-exempt 48 54 organizations, dealers in securities or currencies, banks, financial institutions, life insurance companies, real estate investment trusts, regulated investment companies, persons holding preferred securities as a part of a hedging or conversion transaction or a straddle, persons who mark to market securities, United States holders (as defined below) whose "functional currency" is not the United States dollar, or persons who are not United States holders. In addition, this discussion does not address any tax consequences to persons who purchase preferred securities other than pursuant to their initial issuance and distribution. It also does not include any description of any alternative minimum tax consequences or of the tax laws of any state, local or foreign jurisdiction. Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code and income tax regulations, administrative rulings and judicial decisions under the Internal Revenue Code as of the date of this prospectus, and those authorities may be repealed, revoked or modified, possibly with retroactive effect, so as to result in United States federal income tax consequences different from those discussed below. PROSPECTIVE PURCHASERS OF PREFERRED SECURITIES, INCLUDING PERSONS WHO ARE NOT UNITED STATES HOLDERS AND PERSONS WHO PURCHASE PREFERRED SECURITIES IN THE SECONDARY MARKET, ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF PREFERRED SECURITIES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECTS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS. United States Holders As used in this prospectus, a "United States holder" means a beneficial owner of a preferred security that is, for United States federal income tax purposes: - a citizen or resident of the United States, - a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States or any political subdivision thereof, - an estate the income of which is subject to United States federal income taxation regardless of its source, or - a trust the administration of which is subject to the primary supervision of a court within the United States and for which one or more United States persons have the authority to control all substantial decisions. If a partnership holds preferred securities, the United States federal income tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. Partners of partnerships holding preferred securities should consult their tax advisors. Classification of the Trust Pillsbury Winthrop LLP, our special tax counsel, is of the opinion that, under current law and assuming full compliance with the terms of the subordinated indenture, the instruments establishing the Trust, and certain other documents, the Trust will be classified as a "grantor 49 55 trust" for United States federal income tax purposes and will not be classified as an association taxable as a corporation. Accordingly, each United States holder will be treated as owning an undivided beneficial interest in the subordinated debentures. Investors should be aware that the opinion of Pillsbury Winthrop LLP is not binding on the Internal Revenue Service or the courts. Classification of the Subordinated Debentures Based on the advice of Pillsbury Winthrop LLP, we believe and intend to take the position that the subordinated debentures will constitute indebtedness for United States federal income tax purposes. No assurance can be given that this position will not be challenged by the Internal Revenue Service or, if challenged, that the challenge will not be successful. If the Internal Revenue Service successfully challenged the treatment of the subordinated debentures as indebtedness, the preferred securities would be subject to redemption at our option as described under the caption "Description of the Preferred Securities - -- Special Event Redemption." By purchasing and accepting preferred securities, each United States holder covenants to treat the subordinated debentures as indebtedness and the preferred securities as evidence of an indirect beneficial ownership in the subordinated debentures. The remainder of this discussion assumes that the subordinated debentures will be classified as indebtedness for United States federal income tax purposes. Payments of Interest Except as set forth below, stated interest on the subordinated debentures will generally be taxable to a United States holder as ordinary income at the time it is paid or accrued in accordance with the United States holder's method of accounting for tax purposes. No portion of that income will be eligible for the dividends-received deduction. Original Issue Discount Under the subordinated indenture, we have the right to extend the interest payment period on the subordinated debentures at any time or from time to time for a period not exceeding 20 consecutive quarters with respect to each extension period, provided, however, that no extension period may extend beyond the stated maturity (as defined in the subordinated indenture) of the subordinated debentures. We believe that the likelihood of our extending the interest payment period on the subordinated debentures is "remote" within the meaning of applicable income tax regulations, in part because doing so would prevent us from making certain payments with respect to our capital stock and certain of our debt securities. See "Description of the Subordinated Debentures--Option to Extend Interest Payment Period." Consequently, we believe that the subordinated debentures will not be treated as having been issued with original issue discount for United States federal income tax purposes. It should be noted that the regulations have not yet been addressed in any rulings or other interpretations by the Internal Revenue Service. Accordingly, it is possible that the Internal Revenue Service could take a different position. If we exercised our right to extend an interest payment period, the subordinated debentures would at that time be treated as having been retired and reissued with original issue discount. As a result, United States holders would be required, for the remaining term of the 50 56 subordinated debentures, to accrue interest income even if they used the cash method of accounting. Consequently, in the event that the payment of interest was deferred, a United States holder would be required to include original issue discount in income on an economic accrual basis, notwithstanding that we would not make any interest payments on the subordinated debentures during the extension period. Receipt of Subordinated Debentures or Cash Upon Liquidation of the Trust As described under the caption "Description of the Preferred Securities - -- Distribution of Subordinated Debentures," the subordinated debentures may be distributed to holders in exchange for the preferred securities in liquidation of the Trust. Under current law, for United States federal income tax purposes, that distribution would be treated as a non-taxable event to each United States holder, and each United States holder would receive an aggregate tax basis in the subordinated debentures equal to the holder's aggregate tax basis in its preferred securities. A United States holder's holding period for the subordinated debentures received in liquidation of the Trust would include the period during which the holder held the preferred securities. However, if the Trust is classified for United States federal income tax purposes as an association taxable as a corporation at the time it is dissolved or if there is a change in law, the distribution of the subordinated debentures may be a taxable event to United States Holders. See "-- Sale of the Preferred Securities" below. Under certain circumstances, as described under the caption "Description of the Preferred Securities -- Special Event Redemption," the subordinated debentures may be redeemed for cash and the proceeds of the redemption distributed to holders of preferred securities in redemption of the preferred securities. Under current law, that redemption would, for United States federal income tax purposes, constitute a taxable disposition of the preferred securities, and a holder would recognize gain or loss as if the holder had sold the redeemed preferred securities. See "--Sale of the Preferred Securities" below. Sale of the Preferred Securities Upon a sale, exchange, redemption or other taxable disposition of preferred securities, a United States holder will recognize gain or loss equal to the difference between the amount realized upon the disposition, excluding amounts attributable to accrued and unpaid interest, and the holder's adjusted tax basis in the preferred securities. A United States holder's adjusted tax basis in a preferred security generally will equal the issue price of the preferred security, increased by the amount of any original issue discount previously includible in the gross income of the holder and decreased by the amount of any subsequent payments received on the preferred security. The gain or loss will be capital gain or loss and will be long-term capital gain or loss, if at the time of the disposition, the preferred securities have been held for more than one year. Generally, for non-corporate United States holders, net long-term capital gains are subject to United States federal income tax at a maximum rate of 20%. The preferred securities may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying subordinated debentures. If you sell your preferred securities between record dates for payments of distributions, you will not receive subsequent distributions but will nevertheless be required to include in gross income for United 51 57 States federal income tax purposes your ratable share of accrued and unpaid interest on the subordinated debentures through the date of the sale. To the extent the selling price is less than your adjusted tax basis in the preferred securities sold, you will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. Information Reporting and Backup Withholding In general, information reporting will apply to distributions paid and original issue discount accrued on the preferred securities, and to the proceeds of a sale of preferred securities, except in the case of an exempt holder, such as a corporation. A 30.5% backup withholding tax (subject to phased-in rate reductions until the rate equals 28% for payments after 2005) will apply to such payments if a holder fails to provide a taxpayer identification number and to satisfy other requirements, unless the holder has provided a certificate of exempt status. UNDERWRITERS Under the terms and conditions of an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. Incorporated and ________ are acting as representatives, have severally agreed to purchase, and the Trust has agreed to sell to them, the respective number of preferred securities indicated below: NUMBER OF PREFERRED NAME SECURITIES ---- ---------- Morgan Stanley & Co. Incorporated............... [______] [OTHERS] ________ Total...................................... [______] The underwriters are offering the preferred securities subject to their acceptance of the preferred securities from the Trust and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the preferred securities are conditioned on the delivery of legal opinions by their counsel. The underwriters are obligated to purchase all the preferred securities if any are purchased. The underwriters initially propose to offer part of the preferred securities directly to the public at the public offering price set forth on the cover page of this prospectus. The underwriters may also offer the preferred securities to securities dealers at a price that represents a concession not in excess of $[___] per preferred security. Any underwriter may allow, and dealers may reallow, a concession not in excess of $[___] per preferred security to other underwriters or to securities dealers. After the initial offering of the preferred securities, the offering price and other selling terms may from time to time be changed by the representatives. We have granted the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of _______ additional preferred securities at the price to the public on the cover page of this prospectus, less underwriting discounts and commissions. 52 58 The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the preferred securities. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional preferred securities as the number shown next to the underwriter's name in the preceding table bears to the total number of preferred securities listed next to the names of all underwriters in the preceding table. If underwriters' option is exercised in full, the total price to the public would be $ _____, the total underwriting discounts and commissions would be $ _______ and the total proceeds to the Trust would be $_____. Because the proceeds of the sale of the preferred securities will ultimately be used to purchase our subordinated debentures, the underwriting agreement provides that we will pay to the underwriters as compensation for their services $[___] per preferred security or $[___] in the aggregate. The underwriting commission for sales of 10,000 or more preferred securities to a single purchaser will be $[___] per preferred security. If any of these sales occur, the total underwriting commission will be less than $[___]. We and the Trust have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated, on behalf of the underwriters, we will not, during the period beginning on the date of the underwriting agreement and continuing to and including the closing under the underwriting agreement: - offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any securities that are substantially similar to the preferred securities or securities convertible into or exercisable or exchangeable for such securities; or - enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any transaction described above is to be settled by securities, in cash or otherwise, except in this offering. Prior to this offering, there has been no public market for the preferred securities. The preferred securities will be listed on the New York Stock Exchange under the trading symbol "CVX PrU." In order to meet one of the requirements for listing the preferred securities on the New York Stock Exchange, the underwriters intend to sell preferred securities to a minimum of 400 beneficial holders in lots of 100 or more. Trading of the preferred securities on the New York Stock Exchange is expected to begin within a 30-day period after the date of this prospectus. The representatives have advised the Trust that they presently intend to make a market in the preferred securities prior to the commencement of trading on the New York Stock Exchange. The representatives are not obligated to make a market in the preferred securities, however, and may cease market-making activities at any time. We cannot give any assurance as to the liquidity of any trading market for the preferred securities. We, the Trust and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. 53 59 In order to facilitate the offering of the preferred securities, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the preferred securities. Specifically, the underwriters may over-allot in connection with the offering, creating a short position in the preferred securities for their own account. In addition, to cover over-allotments or to stabilize the price of the preferred securities, the underwriters may bid for, and purchase, preferred securities in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the preferred securities in the offering, if the syndicate repurchases previously distributed preferred securities in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the preferred securities above independent market levels. The underwriters are not required to engage in these activities, and may end any of these activities at any time. From time to time, some of the underwriters and their affiliates have engaged in, and may in the future engage in commercial banking and investment banking transactions with us and our affiliates. LEGAL OPINIONS Richards, Layton & Finger, P.A., special Delaware counsel to the Trust and us, will pass upon certain matters of Delaware law relating to the validity of the preferred securities, the validity of the trust agreement and the formation of the Trust. David L. Feltner, Esq., Akron, Ohio, who is our Counsel, Pillsbury Winthrop LLP, One Battery Park Plaza, New York, N.Y. 10004-1490, our outside counsel, will render opinions to any underwriters or agents as to the legality of the guarantee and the subordinated debentures, and Calfee, Halter & Griswold LLP, 800 Superior Avenue, 1400 McDonald Investment Center, Cleveland, Ohio 44114, counsel for the underwriters, will pass upon certain other legal matters for the underwriters. Calfee, Halter & Griswold LLP provides legal services to FirstEnergy Corp., our parent company, on a regular basis. EXPERTS The audited consolidated financial statements and related schedule incorporated by reference or included in our Annual Report on Form 10-K, incorporated by reference in this prospectus, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports dated February 16, 2001 with respect thereto, and are incorporated by reference in this prospectus in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. With respect to the unaudited interim consolidated financial information for the quarters ended March 31, 2001 and March 31, 2000, incorporated by reference in this prospectus, Arthur Andersen LLP has applied limited procedures in accordance with professional standards for reviews of that information. However, their separate report thereon states that they did not audit and they do not express an opinion on that interim consolidated financial information. Accordingly, the degree of reliance on their report on that information should be restricted in light of the limited nature of the review procedures applied. In addition, the accountants are not 54 60 subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited interim consolidated financial information because that report is not a "report" or "part" of the registration statement prepared or certified by the accountants within the meaning of Sections 7 and 11 of such Act. The statements as to matters of law and legal conclusions included in our Annual Report on Form 10-K and Form 10-Q for the quarter ended March 31, 2001 incorporated by reference in this prospectus, and those statements included in this prospectus, have been prepared under the supervision of, and reviewed by, David L. Feltner, Esq., Akron, Ohio, who is our Counsel, and those statements have been incorporated by reference or included in this prospectus upon his authority as an expert. 55 61 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. Filing fees-Securities and Exchange Commission.............$ 61,250 Printing and composition of registration statement, prospectus, etc......................................... 19,000 NYSE fees.................................................. 87,400 NASD filing fees........................................... 25,000 Services of Trustee and its counsel ....................... 23,000 Services of Counsel-Pillsbury Winthrop LLP................. 75,000 Services of Counsel-Richards Layton & Finger, P.A.......... 15,000 Services of accountants-Arthur Andersen LLP. .............. 20,000 Blue Sky fees and expenses ................................ 4,000 Rating Agency fees: Moody's Investors Service, Inc. .................. 40,000 Standard & Poor's Corporation .................... 40,000 Miscellaneous ............................................. 3,350 ------------- Total....................................$ 413,000 ============= All of the above amounts, other than the filing fees, are estimates. Item 15. Indemnification of Directors and Officers. The Company's Regulations provide that each person who is or has been a director or officer of the Company shall be indemnified by the Company against judgments, penalties, reasonable settlements, legal fees and expenses arising out of any threatened, pending or completed proceedings of a criminal, administrative or investigative nature in which he or she may become involved by reason of his or her relationship to the Company (other than a proceeding by or on behalf of the Company) but only if he or she is found, by the disinterested members of the Company's Board, by independent counsel or by the Share Owners, (a) to have acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company and (b) in the case of a criminal matter, to have had no reasonable cause to believe his or her conduct was unlawful. In the case of actions brought by or on behalf of the Company against a director or officer, indemnification is provided only for reasonable legal fees and expenses and only if it is determined that he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company; but if he or she is adjudged to be liable due to negligence or misconduct, indemnification is provided only if an appropriate court determines that indemnification is fair and reasonable under the circumstances. Similar indemnification also may be made available by the Company to its directors and officers, and to a limited extent may be available as a matter of right to such persons, under Section 1701.13 of the Ohio Revised Code. II-1 62 Section 1701.13(E) of Title 17 of Page's Ohio Revised Code Annotated gives a corporation incorporated under the laws of Ohio power to indemnify any person who is or has been a director, officer or employee of that corporation, or of another corporation at the request of that corporation, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any threatened, pending or completed action, suit or proceeding, criminal or civil, to which he is or may be made a party because of being or having been such director, officer or employee, provided that in connection therewith, such person is determined to have acted in good faith in what he reasonably believed to be in or not opposed to the best interest of the corporation of which he is a director, officer or employee, without reasonable cause, in the case of a criminal matter, to believe that his conduct was unlawful. The determination as to the conditions precedent to the permitted indemnification of such person is made by the directors of the indemnifying corporation acting at a meeting at which, for the purpose, any director who is a party to or threatened with any such action, suit or proceeding may not be counted in determining the existence of a quorum and may not vote. If, because of the foregoing limitations, the directors are unable to act in this regard, such determination may be made by the majority vote of the corporation's voting shareholders (or without a meeting upon two-thirds written consent of such shareholders), by judicial proceeding or by written opinion of legal counsel not retained by the corporation or any person to be indemnified during the five years preceding the date of determination. Section 1701.13(E) of Title 17 of Page's Ohio Revised Code Annotated provides that the indemnification thereby permitted shall not be exclusive of any other rights that directors, officers or employees may have, including rights under insurance purchased by the corporation. The Company maintains and pays the premium on contracts insuring the Company (with certain exclusions) against any liability to directors and officers they may incur under the above indemnity provisions and insuring each director and officer of the Company (with certain exclusions) against liability and expense, including legal fees, which he or she may incur by reason of his or her relationship to the Company, even if the Company does not have the obligation or right to indemnify him or her against such liability or expense. Item 16. Exhibits. Exhibit Number - ------ 1.1* - Form of Underwriting Agreement. 4.1 - Form of Subordinated Indenture between The Cleveland Electric Illuminating Company and The Bank of New York, as trustee, to be used in connection with issuance of Subordinated Debentures. 4.2 - Certificate of Trust of Cleveland Electric Financing Trust I. 4.3 - Declaration of Trust for Cleveland Electric Financing Trust I. 4.4 - Form of Amended and Restated Declaration of Trust of Cleveland Electric Financing Trust I to be used in connection with issuance of Preferred Securities. II-2 63 4.5 - Form of Preferred Security Certificate for Cleveland Electric Financing Trust I (included in Exhibit 4.4). 4.6 - Form of Guarantee Agreement between The Cleveland Electric Illuminating Company and The Bank of New York to be used in connection with issuance of Preferred Securities. 4.7 - Form of Subordinated Debenture (included in Exhibit 4.1). 5.1 - Opinion of Richards, Layton & Finger, P.A. 5.2 - Opinion of David L. Feltner, Esq. 5.3 - Opinion of Pillsbury Winthrop LLP 8.1 - Opinion of Pillsbury Winthrop LLP as to certain United States federal income tax matters 10.1** - Amendment No. 6A dated as of December 1, 1991, to the Bond Guaranty dated as of October 1, 1973, by The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company to National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-33.) 10.2** - Amendment No. 6B dated as of December 30, 1991, to the Bond Guaranty dated as of October 1, 1973 by The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company to National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-34.) 10.3** - Bond Guaranty dated as of December 1, 1991, by The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company to National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-35.) 10.4** - Assignment, Assumption and Further Agreement dated as of March 16, 1987 among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Perry One Alpha Limited Partnership, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company and Toledo Edison Company. (1986 Form 10-K, Exhibit 28-9.) 10.5** - Assignment, Assumption and Further Agreement dated as of March 16, 1987 among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company and Toledo Edison Company. (1986 Form 10-K, Exhibit 28-20.) 10.6** - Assignment, Assumption and Further Agreement dated as of September 15, 1987, among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Beaver Valley Two Pi Limited Partnership, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, II-3 64 Pennsylvania Power Company and Toledo Edison Company. (1987 Form 10-K, Exhibit 28-11.) 10.7** - Assignment, Assumption and Further Agreement dated as of September 15, 1987, among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Chrysler Consortium Corporation, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, and Toledo Edison Company. (1987 Form 10-K, Exhibit 28-22.) 10.8** - Form of First Supplemental Note Indenture between Cleveland Electric, Toledo Edison and The Chase Manhattan Bank, as Trustee dated as of June 13, 1997 (Exhibit 4(d), Form S-4 File No. 333-35931, filed by Cleveland Electric and Toledo Edison.) 10.9** - CAPCO Administration Agreement dated November 1, 1971, as of September 14, 1967, among the CAPCO Group members regarding the organization and procedures for implementing the objectives of the CAPCO Group (Exhibit 5(p), Amendment No. 1, File No. 2-42230, filed by Cleveland Electric). 10.10** - CAPCO Transmission Facilities Agreement dated November 1, 1971, as of September 14, 1967, among the CAPCO Group members regarding the installation, operation and maintenance of transmission facilities to carry out the objectives of the CAPCO Group (Exhibit 5(q), Amendment No. 1, File No. 2-42230, filed by Cleveland Electric). 10.11** - Contract, dated as of December 5, 1975, among the CAPCO Group members for the construction of Beaver Valley Unit No. 2 (Exhibit 5(g), File No. 2-52996, filed by Cleveland Electric). 10.12** - Form of Collateral Trust Indenture among CTC Beaver Valley Funding Corporation, Cleveland Electric, Toledo Edison and Irving Trust Company, as Trustee (Exhibit 4(a), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.13** - Form of Supplemental Indenture to Collateral Trust Indenture constituting Exhibit 10-14 above, including form of Secured Lease Obligation bond (Exhibit 4(b), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.14** - Form of Collateral Trust Indenture among Beaver Valley II Funding Corporation, The Cleveland Electric Illuminating Company and The Toledo Edison Company and The Bank of New York, as Trustee (Exhibit (4)(a), File No. 33-46665, filed by Cleveland Electric and Toledo Edison). 10.15** - Form of Supplemental Indenture to Collateral Trust Indenture constituting Exhibit 10-16 above, including form of Secured Lease Obligation Bond (Exhibit (4)(b), File No. 33-46665, filed by Cleveland Electric and Toledo Edison). 10.16** - Form of Collateral Trust Indenture among CTC Mansfield Funding Corporation, Cleveland Electric, Toledo Edison and IBJ Schroder Bank & Trust Company, as Trustee (Exhibit 4(a), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). II-4 65 10.17** - Form of Supplemental Indenture to Collateral Trust Indenture constituting Exhibit 10-18 above, including forms of Secured Lease Obligation bonds (Exhibit 4(b), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.18** - Form of Facility Lease dated as of September 15, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the limited partnership Owner Participant named therein, Lessor, and Cleveland Electric and Toledo Edison, Lessee (Exhibit 4(c), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.19** - Form of Amendment No. 1 to Facility Lease constituting Exhibit 10-20 above (Exhibit 4(e), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.20** - Form of Facility Lease dated as of September 15, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the corporate Owner Participant named therein, Lessor, and Cleveland Electric and Toledo Edison, Lessees (Exhibit 4(d), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.21** - Form of Amendment No. 1 to Facility Lease constituting Exhibit 10-22 above (Exhibit 4(f), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.22** - Form of Facility Lease dated as of September 30, 1987 between Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Lessor, and Cleveland Electric and Toledo Edison, Lessees (Exhibit 4(c), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.23** - Form of Amendment No. 1 to the Facility Lease constituting Exhibit 10-24 above (Exhibit 4(f), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.24** - Form of Participation Agreement dated as of September 15, 1987 among the limited partnership Owner Participant named therein, the Original Loan Participants listed in Schedule 1 thereto, as Original Loan Participants, CTC Beaver Valley Fund Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit 28(a), File No. 33-18755, filed by Cleveland Electric And Toledo Edison). 10.25** - Form of Amendment No. 1 to Participation Agreement constituting Exhibit 10-26 above (Exhibit 28(c), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.26** - Form of Participation Agreement dated as of September 15, 1987 among the corporate Owner Participant named therein, the Original Loan Participants listed in Schedule 1 thereto, as Owner Loan Participants, CTC Beaver Valley Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit 28(b), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). II-5 66 10.27** - Form of Amendment No. 1 to Participation Agreement constituting Exhibit 10-28 above (Exhibit 28(d), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.28** - Form of Participation Agreement dated as of September 30, 1987 among the Owner Participant named therein, the Original Loan Participants listed in Schedule II thereto, as Owner Loan Participants, CTC Mansfield Funding Corporation, Meridian Trust Company, as Owner Trustee, IBJ Schroder Bank & Trust Company, as Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit 28(a), File No. 33-0128, filed by Cleveland Electric and Toledo Edison). 10.29** - Form of Amendment No. 1 to the Participation Agreement constituting Exhibit 10-28 above (Exhibit 28(b), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.30** - Form of Ground Lease dated as of September 15, 1987 between Toledo Edison, Ground Lessor, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the Owner Participant named therein, Tenant (Exhibit 28(e), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.31** - Form of Site Lease dated as of September 30, 1987 between Toledo Edison, Lessor, and Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Tenant (Exhibit 28(c), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.32** - Form of Site Lease dated as of September 30, 1987 between Cleveland Electric, Lessor, and Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Tenant (Exhibit 28(d), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.33** - Form of Amendment No. 1 to the Site Leases constituting Exhibits 10-31 and 10-32 above (Exhibit 4(f), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.34** - Form of Assignment, Assumption and Further Agreement dated as of September 15, 1987 among The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the Owner Participant named therein, Cleveland Electric, Duquesne, Ohio Edison, Pennsylvania Power and Toledo Edison (Exhibit 28(f), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.35** - Form of Additional Support Agreement dated as of September 15, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the Owner Participant named therein, and Toledo Edison (Exhibit 28(g), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.36** - Form of Support Agreement dated as of September 30, 1987 between Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Toledo Edison, Cleveland Electric, Duquesne, Ohio Edison and Pennsylvania Power (Exhibit 28(e), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). II-6 67 10.37** - Form of Indenture, Bill of Sale, Instrument of Transfer and Severance Agreement dated as of September 30, 1987 between Toledo Edison, Seller, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the Owner Participant named therein, Buyer (Exhibit 28(h), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.38** - Form of Bill of Sale, Instrument of Transfer and Severance Agreement dated as of September 30, 1987 between Toledo Edison, Seller, and Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Buyer (Exhibit 28(f), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.39** - Form of Bill of Sale, Instrument of Transfer and Severance Agreement dated as of September 30, 1987 between Cleveland Electric, Seller, and Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Buyer (Exhibit 28(g), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.40** - Forms of Refinancing Agreement, including exhibits thereto, among the Owner Participant named therein, as Owner Participant, CTC Beaver Valley Funding Corporation, as Funding Corporation, Beaver Valley II Funding Corporation, as New Funding Corporation, The Bank of New York, as Indenture Trustee, The Bank of New York, as New Collateral Trust Trustee, and The Cleveland Electric Illuminating Company and The Toledo Edison Company, as Lessees (Exhibit (28)(e)(i), File No. 33-46665, filed by Cleveland Electric and Toledo Edison). 10.41** - Form of Amendment No. 2 to Facility Lease among Citicorp Lescaman, Inc., Cleveland Electric and Toledo Edison (Exhibit 10(a), Form S-4 File No. 333-47651, filed by Cleveland Electric). 10.42** - Form of Amendment No. 3 to Facility Lease among Citicorp Lescaman, Inc., Cleveland Electric and Toledo Edison (Exhibit 10(b), Form S-4 File No. 333-47651, filed by Cleveland Electric). 10.43** - Form of Amendment No. 2 to Facility Lease among US West Financial Services, Inc., Cleveland Electric and Toledo Edison (Exhibit 10(c), Form S-4 File No. 333-47651, filed by Cleveland Electric). 10.44** - Form of Amendment No. 3 to Facility Lease among US West Financial Services, Inc., Cleveland Electric and Toledo Edison (Exhibit 10(d), Form S-4 File No. 333-47651, filed by Cleveland Electric). 10.45** - Form of Amendment No. 2 to Facility Lease among Midwest Power Company, Cleveland Electric and Toledo Edison (Exhibit 10(e), Form S-4 File No. 333-47651, filed by Cleveland Electric). 10.46** - Centerior Energy Corporation Equity Compensation Plan (Exhibit 99, Form S-8, File No. 33-59635). II-7 68 10.47** - Administration Agreement between the CAPCO Group dated as of September 14, 1967. (Registration No. 2-43102, Exhibit 5(c)(2).) 10.48** - Amendment No. 1 dated January 4, 1974 to Administration Agreement between the CAPCO Group dated as of September 14, 1967. (Registration No. 2-68906, Exhibit 5(c)(3).) 10.50** - Transmission Facilities Agreement between the CAPCO Group dated as of September 14, 1967. (Registration No. 2-43102, Exhibit 5(c)(3).) 10.51** - Amendment No. 1 dated as of January 1, 1993 to Transmission Facilities Agreement between the CAPCO Group dated as of September 14, 1967. (1993 Form 10-K, Exhibit 10-4.) 10.52** - Agreement for the Termination or Construction of Certain Agreements effective September 1, 1980, October 15, 1997 (Exhibit 4(a), Form S-4 File No. 333-47651, filed by Cleveland Electric). 12.1 - Computation of consolidated ratios of earnings to fixed charges. 12.2 - Computation of consolidated ratios of earnings to fixed charges and preferred dividends. 15.1 - Letter of Arthur Andersen LLP regarding unaudited interim financial information. 23.1 - Consent of Arthur Andersen LLP. 23.2 - Consent of Richards, Layton & Finger, P.A. (contained in Exhibit 5.1 hereto). 23.3 - Consent of David L. Feltner, Esq. (contained in Exhibit 5.2 hereto). 23.4 - Consent of Pillsbury Winthrop LLP. (contained in Exhibit 8.1 hereto). 24.1 - Power of Attorney (set forth on the signature pages of the Registration Statement). 25.1 - Statement of Eligibility of The Bank of New York, as trustee under the Subordinated Indenture. 25.2 - Statement of Eligibility of The Bank of New York, as trustee under the Amended and Restated Declaration of Trust of Cleveland Electric Financing Trust I. 25.3 - Statement of Eligibility of The Bank of New York, as trustee under the Guarantee of the Preferred Securities of Cleveland Electric Financing Trust I. - --------------- * To be filed by amendment. ** Incorporated by reference to indicated filing. Item 17. Undertakings. The undersigned registrants hereby undertake: (1) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the II-8 69 Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a registrant of expenses incurred or paid by a director, officer or controlling person of a registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, each registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (2) That for purposes of determining any liability under the Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this registration statement as of the time it was declared effective. (3) That for purposes of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (4) To provide the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt deliver to each purchaser. II-9 70 Each of the undersigned directors and officers of The Cleveland Electric Illuminating Company, one of the registrants, individually as such director and/or officer, hereby makes, constitutes and appoints H. P. Burg, N. C. Ashcom, J. H. Byington and L. F. Torres, and each of them severally, as his true and lawful attorney-in-fact and agent to execute in his name, place and stead, in any and all capacities, and to file with the Securities and Exchange Commission, this registration statement and any and all amendments, including post-effective amendments, to this registration statement pursuant to the above undertaking, which amendment may make such other changes in the registration statement as the registrant deems appropriate. SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, ONE OF THE REGISTRANTS, CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED, IN THE CITY OF AKRON AND STATE OF OHIO ON THE 9TH DAY OF JULY, 2001. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY By: /s/ H. P. Burg ------------------------------- H. P. Burg President PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
Name Title Date ---- ----- ---- /s/ H. P. Burg President and Director July 9, 2001 - -------------------------------------------- (Principal Executive Officer) (H. P. Burg) /s/ R. H. Marsh Vice President and Chief Financial July 9, 2001 - -------------------------------------------- Officer and Director (R. H. Marsh) (Principal Financial Officer) /s/ Harvey L. Wagner Controller July 9, 2001 - -------------------------------------------- (Principal Accounting Officer) (Harvey L. Wagner) /s/ A. J. Alexander Director July 9, 2001 - -------------------------------------------- (A. J. Alexander)
II-10 71 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, CLEVELAND ELECTRIC FINANCING TRUST I CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED, IN THE CITY OF AKRON AND STATE OF OHIO ON THE 9TH DAY OF JULY, 2001. CLEVELAND ELECTRIC FINANCING TRUST I (Registrant) By: The Cleveland Electric Illuminating Company, as Sponsor By: /s/ Thomas Navin --------------------------------------- Thomas Navin Treasurer II-11 72 EXHIBIT INDEX Exhibit Number Document - ------ -------- 1.1* - Form of Underwriting Agreement. 4.1 - Form of Subordinated Indenture between The Cleveland Electric Illuminating Company and The Bank of New York, as trustee, to be used in connection with issuance of Subordinated Debentures. 4.2 - Certificate of Trust of Cleveland Electric Financing Trust I. 4.3 - Declaration of Trust for Cleveland Electric Financing Trust I. 4.4 - Form of Amended and Restated Declaration of Trust of Cleveland Electric Financing Trust I to be used in connection with issuance of Preferred Securities. 4.5 - Form of Preferred Security Certificate for Cleveland Electric Financing Trust I (included in Exhibit 4.4). 4.6 - Form of Guarantee Agreement between The Cleveland Electric Illuminating Company and The Bank of New York to be used in connection with issuance of Preferred Securities. 4.7 - Form of Subordinated Debenture (included in Exhibit 4.1). 5.1 - Opinion of Richards, Layton & Finger, P.A. 5.2 - Opinion of David L. Feltner, Esq. 5.3 - Opinion of Pillsbury Winthrop LLP 8.1 - Opinion of Pillsbury Winthrop LLP as to certain United States federal income tax matters. 10.1** - Amendment No. 6A dated as of December 1, 1991, to the Bond Guaranty dated as of October 1, 1973, by The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company to National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-33.) 10.2** - Amendment No. 6B dated as of December 30, 1991, to the Bond Guaranty dated as of October 1, 1973 by The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company to National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-34.) 10.3** - Bond Guaranty dated as of December 1, 1991, by The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company to National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-35.) II-12 73 10.4** - Assignment, Assumption and Further Agreement dated as of March 16, 1987 among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Perry One Alpha Limited Partnership, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company and Toledo Edison Company. (1986 Form 10-K, Exhibit 28-9.) 10.5** - Assignment, Assumption and Further Agreement dated as of March 16, 1987 among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company and Toledo Edison Company. (1986 Form 10-K, Exhibit 28-20.) 10.6** - Assignment, Assumption and Further Agreement dated as of September 15, 1987, among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Beaver Valley Two Pi Limited Partnership, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company and Toledo Edison Company. (1987 Form 10-K, Exhibit 28-11.) 10.7** - Assignment, Assumption and Further Agreement dated as of September 15, 1987, among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Chrysler Consortium Corporation, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, and Toledo Edison Company. (1987 Form 10-K, Exhibit 28-22.) 10.8** - Form of First Supplemental Note Indenture between Cleveland Electric, Toledo Edison and The Chase Manhattan Bank, as Trustee dated as of June 13, 1997 (Exhibit 4(d), Form S-4 File No. 333-35931, filed by Cleveland Electric and Toledo Edison.) 10.9** - CAPCO Administration Agreement dated November 1, 1971, as of September 14, 1967, among the CAPCO Group members regarding the organization and procedures for implementing the objectives of the CAPCO Group (Exhibit 5(p), Amendment No. 1, File No. 2-42230, filed by Cleveland Electric). 10.10** - CAPCO Transmission Facilities Agreement dated November 1, 1971, as of September 14, 1967, among the CAPCO Group members regarding the installation, operation and maintenance of transmission facilities to carry out the objectives of the CAPCO Group (Exhibit 5(q), Amendment No. 1, File No. 2-42230, filed by Cleveland Electric). 10.11** - Contract, dated as of December 5, 1975, among the CAPCO Group members for the construction of Beaver Valley Unit No. 2 (Exhibit 5(g), File No. 2-52996, filed by Cleveland Electric). 10.12** - Form of Collateral Trust Indenture among CTC Beaver Valley Funding Corporation, Cleveland Electric, Toledo Edison and Irving Trust Company, as Trustee (Exhibit 4(a), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). II-13 74 10.13** - Form of Supplemental Indenture to Collateral Trust Indenture constituting Exhibit 10-14 above, including form of Secured Lease Obligation bond (Exhibit 4(b), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.14** - Form of Collateral Trust Indenture among Beaver Valley II Funding Corporation, The Cleveland Electric Illuminating Company and The Toledo Edison Company and The Bank of New York, as Trustee (Exhibit (4)(a), File No. 33-46665, filed by Cleveland Electric and Toledo Edison). 10.15** - Form of Supplemental Indenture to Collateral Trust Indenture constituting Exhibit 10-16 above, including form of Secured Lease Obligation Bond (Exhibit (4)(b), File No. 33-46665, filed by Cleveland Electric and Toledo Edison). 10.16** - Form of Collateral Trust Indenture among CTC Mansfield Funding Corporation, Cleveland Electric, Toledo Edison and IBJ Schroder Bank & Trust Company, as Trustee (Exhibit 4(a), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.17** - Form of Supplemental Indenture to Collateral Trust Indenture constituting Exhibit 10-18 above, including forms of Secured Lease Obligation bonds (Exhibit 4(b), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.18** - Form of Facility Lease dated as of September 15, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the limited partnership Owner Participant named therein, Lessor, and Cleveland Electric and Toledo Edison, Lessee (Exhibit 4(c), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.19** - Form of Amendment No. 1 to Facility Lease constituting Exhibit 10-20 above (Exhibit 4(e), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.20** - Form of Facility Lease dated as of September 15, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the corporate Owner Participant named therein, Lessor, and Cleveland Electric and Toledo Edison, Lessees (Exhibit 4(d), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.21** - Form of Amendment No. 1 to Facility Lease constituting Exhibit 10-22 above (Exhibit 4(f), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.22** - Form of Facility Lease dated as of September 30, 1987 between Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Lessor, and Cleveland Electric and Toledo Edison, Lessees (Exhibit 4(c), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.23** - Form of Amendment No. 1 to the Facility Lease constituting Exhibit 10-24 above (Exhibit 4(f), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). II-14 75 10.24** - Form of Participation Agreement dated as of September 15, 1987 among the limited partnership Owner Participant named therein, the Original Loan Participants listed in Schedule 1 thereto, as Original Loan Participants, CTC Beaver Valley Fund Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit 28(a), File No. 33-18755, filed by Cleveland Electric And Toledo Edison). 10.25** - Form of Amendment No. 1 to Participation Agreement constituting Exhibit 10-26 above (Exhibit 28(c), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.26** - Form of Participation Agreement dated as of September 15, 1987 among the corporate Owner Participant named therein, the Original Loan Participants listed in Schedule 1 thereto, as Owner Loan Participants, CTC Beaver Valley Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit 28(b), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.27** - Form of Amendment No. 1 to Participation Agreement constituting Exhibit 10-28 above (Exhibit 28(d), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.28** - Form of Participation Agreement dated as of September 30, 1987 among the Owner Participant named therein, the Original Loan Participants listed in Schedule II thereto, as Owner Loan Participants, CTC Mansfield Funding Corporation, Meridian Trust Company, as Owner Trustee, IBJ Schroder Bank & Trust Company, as Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit 28(a), File No. 33-0128, filed by Cleveland Electric and Toledo Edison). 10.29** - Form of Amendment No. 1 to the Participation Agreement constituting Exhibit 10-28 above (Exhibit 28(b), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.30** - Form of Ground Lease dated as of September 15, 1987 between Toledo Edison, Ground Lessor, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the Owner Participant named therein, Tenant (Exhibit 28(e), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.31** - Form of Site Lease dated as of September 30, 1987 between Toledo Edison, Lessor, and Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Tenant (Exhibit 28(c), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.32** - Form of Site Lease dated as of September 30, 1987 between Cleveland Electric, Lessor, and Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Tenant (Exhibit 28(d), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). II-15 76 10.33** - Form of Amendment No. 1 to the Site Leases constituting Exhibits 10-31 and 10-32 above (Exhibit 4(f), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.34** - Form of Assignment, Assumption and Further Agreement dated as of September 15, 1987 among The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the Owner Participant named therein, Cleveland Electric, Duquesne, Ohio Edison, Pennsylvania Power and Toledo Edison (Exhibit 28(f), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.35** - Form of Additional Support Agreement dated as of September 15, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the Owner Participant named therein, and Toledo Edison (Exhibit 28(g), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.36** - Form of Support Agreement dated as of September 30, 1987 between Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Toledo Edison, Cleveland Electric, Duquesne, Ohio Edison and Pennsylvania Power (Exhibit 28(e), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.37** - Form of Indenture, Bill of Sale, Instrument of Transfer and Severance Agreement dated as of September 30, 1987 between Toledo Edison, Seller, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the Owner Participant named therein, Buyer (Exhibit 28(h), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10.38** - Form of Bill of Sale, Instrument of Transfer and Severance Agreement dated as of September 30, 1987 between Toledo Edison, Seller, and Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Buyer (Exhibit 28(f), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.39** - Form of Bill of Sale, Instrument of Transfer and Severance Agreement dated as of September 30, 1987 between Cleveland Electric, Seller, and Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Buyer (Exhibit 28(g), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10.40** - Forms of Refinancing Agreement, including exhibits thereto, among the Owner Participant named therein, as Owner Participant, CTC Beaver Valley Funding Corporation, as Funding Corporation, Beaver Valley II Funding Corporation, as New Funding Corporation, The Bank of New York, as Indenture Trustee, The Bank of New York, as New Collateral Trust Trustee, and The Cleveland Electric Illuminating Company and The Toledo Edison Company, as Lessees (Exhibit (28)(e)(i), File No. 33-46665, filed by Cleveland Electric and Toledo Edison). II-16 77 10.41** - Form of Amendment No. 2 to Facility Lease among Citicorp Lescaman, Inc., Cleveland Electric and Toledo Edison (Exhibit 10(a), Form S-4 File No. 333-47651, filed by Cleveland Electric). 10.42** - Form of Amendment No. 3 to Facility Lease among Citicorp Lescaman, Inc., Cleveland Electric and Toledo Edison (Exhibit 10(b), Form S-4 File No. 333-47651, filed by Cleveland Electric). 10.43** - Form of Amendment No. 2 to Facility Lease among US West Financial Services, Inc., Cleveland Electric and Toledo Edison (Exhibit 10(c), Form S-4 File No. 333-47651, filed by Cleveland Electric). 10.44** - Form of Amendment No. 3 to Facility Lease among US West Financial Services, Inc., Cleveland Electric and Toledo Edison (Exhibit 10(d), Form S-4 File No. 333-47651, filed by Cleveland Electric). 10.45** - Form of Amendment No. 2 to Facility Lease among Midwest Power Company, Cleveland Electric and Toledo Edison (Exhibit 10(e), Form S-4 File No. 333-47651, filed by Cleveland Electric). 10.46** - Centerior Energy Corporation Equity Compensation Plan (Exhibit 99, Form S-8, File No. 33-59635). 10.47** - Administration Agreement between the CAPCO Group dated as of September 14, 1967. (Registration No. 2-43102, Exhibit 5(c)(2).) 10.48** - Amendment No. 1 dated January 4, 1974 to Administration Agreement between the CAPCO Group dated as of September 14, 1967. (Registration No. 2-68906, Exhibit 5(c)(3).) 10.50** - Transmission Facilities Agreement between the CAPCO Group dated as of September 14, 1967. (Registration No. 2-43102, Exhibit 5(c)(3).) 10.51** - Amendment No. 1 dated as of January 1, 1993 to Transmission Facilities Agreement between the CAPCO Group dated as of September 14, 1967. (1993 Form 10-K, Exhibit 10-4.) 10.52** - Agreement for the Termination or Construction of Certain Agreements effective September 1, 1980, October 15, 1997 (Exhibit 4(a), Form S-4 File No. 333-47651, filed by Cleveland Electric). 12.1 - Computation of consolidated ratios of earnings to fixed charges. 12.2 - Computation of consolidated ratios of earnings to fixed charges and preferred dividends. 15.1 - Letter of Arthur Andersen LLP regarding unaudited interim financial information. 23.1 - Consent of Arthur Andersen LLP. 23.2 - Consent of Richards, Layton & Finger, P.A. (contained in Exhibit 5.1 hereto). II-17 78 23.3 - Consent of David L. Feltner, Esq. (contained in Exhibit 5.2 hereto). 23.4 - Consent of Pillsbury Winthrop LLP. (contained in Exhibit 8.1 hereto). 24.1 - Power of Attorney (set forth on the signature pages of the Registration Statement). 25.1 - Statement of Eligibility of The Bank of New York, as trustee under the Subordinated Indenture. 25.2 - Statement of Eligibility of The Bank of New York, as trustee under the Amended and Restated Declaration of Trust of Cleveland Electric Financing Trust I. 25.3 - Statement of Eligibility of The Bank of New York, as trustee under the Guarantee of the Preferred Securities of Cleveland Electric Financing Trust I - -------------- * To be filed by amendment. ** Incorporated by reference to indicated filing. II-18 EX-4.1 2 l88526aex4-1.txt EXHIBIT 4.1 FORM OF INDENTURE 1 Exhibit 4.1 ================================================================================ THE CLEVELAND ELECTRIC ILLUMINATING COMPANY TO THE BANK OF NEW YORK TRUSTEE ----------------------------------- FORM OF INDENTURE DATED AS OF ___________, 2001 ----------------------------------- $------------- ___% JUNIOR SUBORDINATED DEBENTURES, SERIES [ ], DUE 2031 ================================================================================ 2 Certain Sections of this Indenture relating to Section 310 through 318 of the Trust Indenture Act of 1939:
Trust Indenture Indenture Act Section Section ----------- ------- Section 310(a)(1) .................................................... 6.09 (a)(2) .................................................... 6.09 (a)(3) .................................................... Not Applicable (a)(4) .................................................... Not Applicable (b) .................................................... 6.08, 6.10 Section 311(a) .................................................... 6.13 (b) .................................................... 6.13 Section 312(a) .................................................... 7.01 7.02(a)(b) .................................................... 7.02(b) (c) .................................................... 7.02(c) Section 313(a) .................................................... 7.03(a) (b) .................................................... 7.03(a) (c) .................................................... 7.03(a) (d) .................................................... 7.03(b) Section 314(a) .................................................... 7.04 (a)(4) .................................................... 1.01, 10.04(b) (b) .................................................... Not Applicable (c)(1) .................................................... 1.02 (c)(2) .................................................... 1.02 (c)(3) .................................................... Not Applicable (d) .................................................... Not Applicable (e) .................................................... 1.02 Section 315(a) .................................................... 6.01 (b) .................................................... 6.02 (c) .................................................... 6.01 (d) .................................................... 6.01 (e) .................................................... 5.14 Section 316(a) .................................................... 1.01, 5.02 (a)(1)(A) .................................................... 5.12 (a)(1)(B) .................................................... 5.13 (a)(2) .................................................... Not Applicable (b) .................................................... 5.08 (c) .................................................... 1.04(c) Section 317(a)(1) .................................................... 5.03 (a)(2) .................................................... 5.04 (b) .................................................... 10.03 Section 318(a) .................................................... 1.07
- ---------------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. 3 TABLE OF CONTENTS
Page ---- RECITALS OF THE COMPANY...........................................................................................1 ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.01 Definitions....................................................................................2 Section 1.02 Compliance Certificates and Opinions...........................................................7 Section 1.03 Form of Documents Delivered to Trustee.........................................................8 Section 1.04 Acts of Holders; Record Dates..................................................................8 Section 1.05 Notices, Etc., to Trustee and the Company......................................................9 Section 1.06 Notice to Holders; Waiver......................................................................9 Section 1.07 Conflict with Trust Indenture Act.............................................................10 Section 1.08 Effect of Headings and Table of Contents......................................................10 Section 1.09 Successors and Assigns........................................................................10 Section 1.10 Separability Clause...........................................................................10 Section 1.11 Benefits of Indenture.........................................................................10 Section 1.12 GOVERNING LAW.................................................................................10 Section 1.13 Legal Holidays................................................................................11 ARTICLE II SECURITY FORMS Section 2.01 Forms Generally...............................................................................11 Section 2.02 Form of Face of Security......................................................................11 Section 2.03 Form of Reverse of Security...................................................................14 Section 2.04 Form of Trustee's Certificate of Authentication...............................................17 ARTICLE III THE SECURITIES Section 3.01 Title and Terms...............................................................................17 Section 3.02 Denominations.................................................................................19 Section 3.03 Execution, Authentication, Delivery and Dating................................................19 Section 3.04 Temporary Securities..........................................................................19 Section 3.05 Registration of Transfer and Exchange.........................................................20 Section 3.06 Mutilated, Destroyed, Lost and Stolen Securities..............................................21 Section 3.07 Payment of Interest; Interest Rights Preserved................................................22
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Section 3.08 Persons Deemed Owners.........................................................................23 Section 3.09 Cancellation..................................................................................23 Section 3.10 Computation of Interest.......................................................................23 Section 3.11 Right of Set-off..............................................................................23 Section 3.12 CUSIP Numbers.................................................................................23 Section 3.13 Extended Maturity.............................................................................24 ARTICLE IV SATISFACTION AND DISCHARGE Section 4.01 Satisfaction and Discharge of Indenture.......................................................24 Section 4.02 Application of Trust Money....................................................................25 ARTICLE V REMEDIES Section 5.01 Events of Default.............................................................................26 Section 5.02 Acceleration of Maturity; Rescission and Annulment............................................27 Section 5.03 Collection of Indebtedness and Suits for Enforcement by Trustee...............................28 Section 5.04 Trustee May File Proofs of Claim..............................................................28 Section 5.05 Trustee May Enforce Claims Without Possession of Securities...................................29 Section 5.06 Application of Money Collected................................................................29 Section 5.07 Limitation on Suits...........................................................................29 Section 5.08 Unconditional Right of Holders to Receive Principal and Interest..............................30 Section 5.09 Restoration of Rights and Remedies............................................................30 Section 5.10 Rights and Remedies Cumulative................................................................30 Section 5.11 Delay or Omission Not Waiver..................................................................31 Section 5.12 Control by Holders............................................................................31 Section 5.13 Waiver of Past Defaults.......................................................................31 Section 5.14 Undertaking for Costs.........................................................................31 Section 5.15 Waiver of Stay or Extension Laws..............................................................32 ARTICLE VI THE TRUSTEE Section 6.01 Certain Duties and Responsibilities...........................................................32 Section 6.02 Notice of Defaults............................................................................33 Section 6.03 Certain Rights of Trustee.....................................................................33 Section 6.04 Not Responsible for Recitals or Issuance of Securities........................................35 Section 6.05 May Hold Securities...........................................................................35 Section 6.06 Money Held in Trust...........................................................................35 Section 6.07 Compensation and Reimbursement................................................................35 Section 6.08 Disqualification; Conflicting Interests.......................................................36
ii 5
Section 6.09 Corporate Trustee Required; Eligibility.......................................................36 Section 6.10 Resignation and Removal; Appointment of Successor.............................................36 Section 6.11 Acceptance of Appointment by Successor........................................................38 Section 6.12 Merger, Conversion, Consolidation or Succession to Business...................................38 Section 6.13 Preferential Collection of Claims Against Company.............................................38 ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 7.01 Company to Furnish Trustee Names and Addresses of Holders.....................................39 Section 7.02 Preservation of Information; Communications to Holders........................................39 Section 7.03 Reports by Trustee............................................................................39 Section 7.04 Reports by Company............................................................................40 ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 8.01 Company May Consolidate, Etc. Only on Certain Terms...........................................40 Section 8.02 Successor Substituted.........................................................................41 ARTICLE IX SUPPLEMENTAL INDENTURES Section 9.01 Supplemental Indentures Without Consent of Holders............................................41 Section 9.02 Supplemental Indentures with Consent of Holders...............................................42 Section 9.03 Execution of Supplemental Indentures..........................................................43 Section 9.04 Effect of Supplemental Indentures.............................................................43 Section 9.05 Conformity with Trust Indenture Act...........................................................43 Section 9.06 Reference in Securities to Supplemental Indentures............................................43 ARTICLE X COVENANTS; REPRESENTATIONS AND WARRANTIES Section 10.01 Payment of Principal and Interest.............................................................43 Section 10.02 Maintenance of Office or Agency...............................................................43 Section 10.03 Money for Security Payments to Be Held in Trust...............................................44 Section 10.04 Statement by Officers as to Default...........................................................45 Section 10.05 Additional Covenants..........................................................................45
iii 6
ARTICLE XI SUBORDINATION OF SECURITIES Section 11.01 Securities Subordinate to Senior Indebtedness.................................................46 Section 11.02 Default on Senior Indebtedness................................................................46 Section 11.03 Liquidation; Dissolution; Bankruptcy..........................................................47 Section 11.04 Subrogation...................................................................................48 Section 11.05 Trustee to Effectuate Subordination...........................................................49 Section 11.06 Notice by the Company.........................................................................49 Section 11.07 Rights of the Trustee; Holders of Senior Indebtedness.........................................50 Section 11.08 Subordination May Not Be Impaired.............................................................50 ARTICLE XII REDEMPTION OF SECURITIES Section 12.01 Optional and Special Event Redemption; Conditions to Optional Redemption......................51 Section 12.02 Applicability of Article......................................................................51 Section 12.03 Election to Redeem; Notice to Trustee.........................................................51 Section 12.04 Selection by Trustee of Securities to Be Redeemed.............................................51 Section 12.05 Notice of Redemption..........................................................................52 Section 12.06 Deposit of Redemption Price...................................................................52 Section 12.07 Securities Payable on Redemption Date.........................................................53 Section 12.08 Securities Redeemed in Part...................................................................53 TESTIMONIUM SIGNATURES AND SEALS ACKNOWLEDGMENTS
iv 7 INDENTURE, dated as of ___________, 2001, between The Cleveland Electric Illuminating Company, a corporation duly organized and existing under the laws of the State of Ohio (herein called the "Company"), having its principal office at 76 South Main Street, Akron, Ohio, and The Bank of New York, a New York banking corporation, as Trustee (herein called the "Trustee"). Unless otherwise defined herein, all capitalized items used herein shall have the meanings ascribed to them in the Amended and Restated Trust Agreement of Cleveland Electric Financing Trust I (the "Trust") among the Company, The Bank of New York, as trustee, The Bank of New York (Delaware), as trustee, ____________, an individual, as trustee, _____________, an individual, as trustee, and the several Holders, as therein defined, dated as of _____________, 2001 (the "Trust Agreement"), as in effect on the date hereof, the form of which is attached as Annex A hereto. RECITALS OF THE COMPANY WHEREAS, the Trust may pursuant to the Underwriting Agreement dated ___________, 2001, among the Company, the Trust and the Underwriters named therein (the "Underwriting Agreement") issue $___________ aggregate liquidation preference (or up to $______ aggregate liquidation preference in the event that underwriters exercise their over-allotment option granted pursuant to the Underwriting Agreement) of its ___% Cumulative Trust Preferred Securities, Series [ ], Due 2031, with a liquidation preference of $25 per Preferred Security representing undivided beneficial interests in the assets of the Trust (the "Preferred Securities"); WHEREAS, the Company is guaranteeing the payment of distributions on the Preferred Securities, and payment of the Redemption Price and payments on liquidation with respect to the Preferred Securities, to the extent provided in the Guarantee Agreement dated __________, 2001, by the Company and The Bank of New York, as guarantee trustee (the "Parent Guarantee") for the benefit of the holders of the Preferred Securities; WHEREAS, the Trust wishes to execute and deliver to the Company Common Securities certificates evidencing an ownership interest in the Trust, registered in the name of the Company, in an aggregate amount of _________ Common Securities (or up to ______Common Securities in the event that underwriters exercise their over-allotment option granted pursuant to the Underwriting Agreement) having an aggregate liquidation amount of $__________ (or up to $______in the event that underwriters exercise their over-allotment option granted pursuant to the Underwriting Agreement) and in satisfaction of the purchase price for such Common Securities the Company wishes to deliver to the Trust the sum of $_____________; WHEREAS, the Company wishes to sell to the Trust and the Trust wishes to purchase from the Company, Securities (as defined below) in an aggregate principal amount of $__________ (or up to $ ______ in the event that underwriters exercise their over-allotment option granted pursuant to the Underwriting Agreement), and in satisfaction of the purchase price for such Securities, the trustees of the Trust, on behalf of the Trust, wish to deliver to the Company the sum equal to the aggregate principal amount of Securities being purchased. 8 WHEREAS, the Company has duly authorized the creation of an issue of its ____% Junior Subordinated Debentures, Series [ ], Due 2031 (the "Securities"), of substantially the tenor and amount hereinafter set forth and to provide therefor the Company has duly authorized the execution and delivery of this Indenture; and WHEREAS, all things necessary to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done; NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION -------------------------------- Section 1.01 DEFINITIONS. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; and (4) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act," when used with respect to any Holder, has the meaning specified in Section 1.04. "Additional Interest" means, in the event that the Trust is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States or any other taxing authority, such amounts as shall be required so that the net amounts received and retained by the Trust after paying such taxes, duties, assessments or governmental charges shall not be less than the amounts the Trust would have received had no such taxes, duties, assessments or governmental charges been imposed. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified 2 9 Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means a day other than (x) a Saturday or a Sunday, (y) a day on which banks in New York, New York are authorized or obligated by law or executive order to remain closed or (z) a day on which the principal corporate trust office of the Property Trustee under the Trust Agreement or the Trustee is closed for business. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Securities" means the undivided beneficial interest in the assets of the Trust, having a liquidation amount of $25 per Common Security, and having the rights provided therefor in the Trust Agreement. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" means the principal office of the Trustee in New York, New York, at which at any particular time its corporate trust business is administered, which at the date of this Indenture is 101 Barclay Street, New York, New York 10286, Attention: Corporate Trust Administration. "Defaulted Interest" has the meaning specified in Section 3.07. "Event of Default" has the meaning specified in Section 5.01. "Extension Period" has the meaning specified in Section 3.01. "Holder" means a Person in whose name a Security is registered in the Security Register. 3 10 "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. "Interest Payment Date," when used with respect to any installment of interest on a Security, means the date specified in such Security as the fixed date on which an installment of interest with respect to the Securities is due and payable. "Investment Company Event" means the receipt by the Administrative Trustee (as defined in the Trust Agreement) of an Opinion of Counsel (as defined in the Trust Agreement) experienced in practice under the Investment Company Act of 1940, as amended (the "1940 Act"), to the effect that as a result of the occurrence of a change in law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of the issuance of the Preferred Securities. "Maturity," when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity (as it may be extended pursuant to Section 3.13 herein) or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice President, or the Comptroller and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 10.04 shall be the principal executive, financial or accounting officer of the Company. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant to Section 3.06, or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite amount of the Securities 4 11 Outstanding have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be Outstanding, except that, in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustees the pledgee's right so to act with respect to such Securities or any Affiliate of the Company. "Parent Guarantee" has the meaning specified in the Recitals to this instrument. "Paying Agent" means any Person authorized by the Company to pay the principal of or interest (including any Additional Interest) on any Securities on behalf of the Company. "Person" means any individual, corporation, company, limited liability company, association, joint stock company, partnership, joint venture, trust, business trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.06 in exchange for or in lieu of a mutilated, destroyed, lost or stolen security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Preferred Securities" has the meaning specified in the Recitals to this Indenture. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the Business Day next preceding such Interest Payment Date; provided, however, that in the event that the Securities are distributed to holders of Preferred Securities pursuant to a liquidation of the Trust in accordance with Section 9.04 of the Trust Agreement and that at any time thereafter the Securities no longer remain in book-entry-only form, the Regular Record Date shall be the date (whether or not a Business Day) 15 days prior to the relevant Interest Payment Date. "Responsible Officer," when used with respect to the Trustee, means any Vice President or any trust officer of the Trustee, which in each case is assigned by the Trustee to its Corporate Trust Department (or any successor department) and also means, with respect to a particular corporate trust matter, any other trust officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Securities" has the meaning specified in the Recitals to this instrument. 5 12 "Security Register" and "Security Registrar" have the respective meanings specified in Section 3.05. "Senior Indebtedness" means the principal of, premium, if any, interest on and any other payment due pursuant to any of the following, whether outstanding at the date hereof or hereafter incurred, created or assumed: (i) all indebtedness of the Company on a consolidated basis (other than any obligations to trade creditors) evidenced by notes, debentures, bonds, other securities or other instruments issued by the Company for money borrowed and capitalized lease obligations; (ii) all indebtedness of others of the kinds described in the preceding clause (i) assumed or guaranteed in any manner by the Company or in effect guaranteed by the Company; and (iii) all renewals, extensions or refundings of indebtedness of the kinds described in either of the preceding clauses (i) or (ii), unless, in the case of any particular indebtedness, renewal, extension or refunding, the instrument creating or evidencing the same or the assumption or guarantee of the same expressly provides that such indebtedness, renewal, extension or refunding is not superior in right of payment to or is pari passu with the Securities. "Special Event" means a Tax Event or an Investment Company Event. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.07. "Stated Maturity," when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal, together with any accrued and unpaid interest (including any Additional Interest), of such Security (as the same may be extended pursuant to Section 3.13 herein) or such installment of interest is due and payable. "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Tax Event" means the receipt by the Administrative Trustee (as defined in the Trust Agreement) of the Trust of an Opinion of Counsel (as defined in the Trust Agreement) from nationally recognized independent counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws or treaties (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation or the publication of any judicial decision or regulatory determination on or after the date of the issuance of the Preferred Securities), (c) any interpretation or pronouncement of any such body, court, agency or authority that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position, or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated or effective, or which 6 13 interpretation or pronouncement is issued or announced, or which action is taken, in each case on or after the date of the issuance of the Preferred Securities, there is more than an insubstantial risk that (i) the Trust is, or will be, subject to United States federal income tax with respect to income accrued or received on the Securities, (ii) interest payable on the Securities is not, or will not be, fully deductible by the Company for United States federal income tax purposes or (iii) the Trust is, or will be, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Trust Agreement" has the meaning specified in the first paragraph of this Indenture. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trustee" means the person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Vice President," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". Section 1.02 COMPLIANCE CERTIFICATES AND OPINIONS. Except as otherwise expressly provided by this Indenture, upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee (a) an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and (b) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and 7 14 (iv) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.03 FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 1.04 ACTS OF HOLDERS; RECORD DATES. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. 8 15 (c) The Company may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 7.01) prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Securities shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Section 1.05 NOTICES, ETC., TO TRUSTEE AND THE COMPANY. Except as otherwise expressly provided herein, any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. Section 1.06 NOTICE TO HOLDERS; WAIVER. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. 9 16 In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Section 1.07 CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Section 1.08 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. All references in this Indenture to Articles and Sections are to Articles and Sections of this Indenture unless otherwise specified. Section 1.09 SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture by the Company shall bind its respective successors and assigns, whether so expressed or not. Section 1.10 SEPARABILITY CLAUSE. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.11 BENEFITS OF INDENTURE. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Indebtedness, the holders of Preferred Securities (to the extent provided herein) and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.12 GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW OR ANY SUCCESSOR TO SUCH STATUTE). Section 1.13 LEGAL HOLIDAYS. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal of the Securities need not be made on such date, but may be made on the next succeeding Business Day (except that, if such Business Day is in the next succeeding calendar year, such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, shall be the immediately preceding Business Day) with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. 10 17 ARTICLE II SECURITY FORMS -------------- Section 2.01 FORMS GENERALLY. The Securities and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these or other methods, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 2.02 FORM OF FACE OF SECURITY. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY ____% JUNIOR SUBORDINATED DEBENTURE, SERIES [ ], DUE 2031 No.________________ $___________ CUSIP No. ___________ THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, a corporation duly organized and existing under the laws of the State of Ohio (herein called "the Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to __________, or registered assigns, the principal sum of __________ DOLLARS ($__________) on __________ (or on such later date on or before __________, if the Company elects to extend the maturity date pursuant to the Indenture) and to pay interest on said principal sum from _____________ or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to the extension of an interest payment period as set forth herein), in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing _____________, at the rate of ___% per annum plus Additional Interest, if any, until the principal hereof shall have become due and payable, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any interest installment in arrears for more than one quarter and on any interest on such overdue interest at the same rate per annum. The amount of interest payable for any period will be computed on the basis of twelve 30-day months and a 360-day year. In the event that any date on which interest is payable on this Security is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if 11 18 made on the date the payment was originally payable. A "Business Day" means a day other than (x) a Saturday or a Sunday, (y) a day on which banks in The City of New York are authorized or obligated by law or executive order to remain closed or (z) a day on which the principal corporate trust office of the Property Trustee under the Trust Agreement or the Trustee is closed for business. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Security (or one or more Predecessor Securities, as defined in the Indenture) is registered at the close of business on the Regular Record Date for such interest installment, which shall be the close of business on the Business Day next preceding such Interest Payment Date. [IF PURSUANT TO THE PROVISIONS OF THE INDENTURE THE NOTES ARE NO LONGER REPRESENTED BY A GLOBAL NOTE, shall be the date (whether or not a Business Day) 15 days prior to the relevant Interest Payment Date.] Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. The Company shall have the right at any time during the term of this Security, from time to time, to extend the interest payment period of such Security for up to 20 consecutive quarters (an "Extension Period"), during which Extension Period interest will accrue but not be paid. Interest will accrue quarterly on accrued but unpaid interest during any Extension Period. At the end of such Extension Period, the Company shall pay all interest then accrued and unpaid hereon (including interest accrued on unpaid interest as described above at the rate specified for this Security to the extent that payment of such interest is permitted by applicable law). During any such Extension Period, the Company shall not (a) declare or pay dividends on, or make a distribution with respect to, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of its capital stock, or (b) make any payment of interest, principal or premium, if any on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to this Security, or (c) make any guarantee payment with respect to the foregoing (other than payments under the Parent Guarantee); provided, however, that the foregoing restrictions do not apply to (A) dividends or distributions in common stock of the Company, (B) redemptions or purchases of any rights pursuant to any stockholder's rights plan, or the issuance of rights, stock or other property under any stockholder's rights plan, and the declaration of a dividend of such rights or the issuance of preferred stock under such plans in the future, (C) payments under the Parent Guarantee or under any similar guarantee by the Company with respect to any securities of its subsidiaries, provided the proceeds from the issuance of such securities were used to purchase junior subordinated deferrable interest debentures issued by such subsidiary, (D) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants; a dividend reinvestment or stockholder stock purchase plan; or the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the Event of Default or 12 19 Extension Period, (E) an exchange, redemption or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (F) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (G) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and (H) purchases of common stock required to prevent the loss or secure the renewal or reinstatement of any government license or franchise held by the Company or any of its subsidiaries. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that such Extension Period together with all such previous and further extensions thereof shall not exceed 20 consecutive quarters or extend beyond the Maturity of this Security. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may select a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. The Company shall give the Holder of this Security and the Trustee notice of its selection of an Extension Period at least one Business Day prior to the earlier of (i) the Interest Payment Date or (ii) the date the Trust is required to give notice to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Preferred Securities of the record date or the date such distributions are payable, but in any event not less than one Business Day prior to such record date. Payment of the principal of and interest on this Security will be made at the office or agency of the Company maintained for that purpose in The City of New York, which unless changed, shall be the Corporate Trust Office of the Trustee, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Security Register. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided, and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. 13 20 Reference is hereby made to the further provisions of the Indenture summarized on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, The Cleveland Electric Illuminating Company has caused this instrument to be duly executed under its corporate seal. Dated: __________, ____ THE CLEVELAND ELECTRIC ILLUMINATING COMPANY By: ----------------------------------------- Name: Title: Attest: - ------------------- Section 2.03 FORM OF REVERSE OF SECURITY. This Security is one of a duly authorized issue of Securities of the Company, designated as its ___% Junior Subordinated Debentures, Series [ ], Due 2031 (herein called the "Securities"), limited in aggregate principal amount to $_____________, issued under an Indenture, dated as of _____________, 2001 (as amended and supplemented from time to time herein, called the "Indenture"), between the Company and The Bank of New York, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security which are defined in the Indenture or in the Trust Agreement attached as Annex A thereto shall have the meanings assigned to them in the Indenture or the Trust Agreement, as the case may be. On or after _____________, the Company shall have the right, subject to the terms and conditions of Article Twelve of the Indenture, to redeem this Security at the option of the Company, without premium or penalty, in whole at any time or in part from time to time, at a Redemption Price equal to 100% of the principal amount to be redeemed together with any accrued but unpaid interest, including Additional Interest, if any, to the Redemption Date. If a Special Event as defined in Article One of the Indenture shall occur and be continuing, the Company shall have the right, subject to the terms and conditions of Article Twelve of the 14 21 Indenture, to redeem this Security at the option of the Company, without premium or penalty, at any time, in whole but not in part, at a Redemption Price equal to 100% of the principal amount thereof plus accrued but unpaid interest, including any Additional Interest, if any, to the Redemption Date fixed by the Company (the "Redemption Price"), which Redemption Date shall be within 90 days following the occurrence of such Special Event. Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice, at the Redemption Price. If the Securities are only partially redeemed by the Company, the Securities will be redeemed pro rata, by lot or in such other manner as the Trustee shall deem appropriate and fair in its discretion and that may provide for the selection of a portion or portions (equal to twenty-five U.S. dollars ($25) or any integral multiple thereof) of the principal amount of any Security. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default with respect to the Securities shall occur and be continuing, the principal of the Securities may be declared due and payable in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for satisfaction and discharge at any time of the entire indebtedness of this Security upon compliance by the Company with certain conditions set forth in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of Holders on not less than a majority in principal amount of the Outstanding Securities, to modify the Indenture in a manner affecting the rights of the Holders of the Securities; provided that no such modification may, without the consent of the Holder of each Outstanding Security, (i) extend the maturity of the Securities subject to the Company's right hereunder to extend the maturity of the Securities to a date before _____________, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon subject to the Company's right hereunder to extend the interest payment period of this Security for up to 20 consecutive quarters, or reduce any premium payable upon the redemption thereof, or (ii) reduce the percentage of principal amount of the Securities, the Holders of which are required to consent to any such modification of the Indenture. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities at the time Outstanding, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest (including any Additional Interest) on this Security at the times, place and rate, and in the coin or currency, herein prescribed. 15 22 As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in The City of New York maintained for such purpose, which, unless changed, shall be the Corporate Trust Office of the Trustee, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Securities are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW OR ANY SUCCESSOR TO SUCH STATUTE). . Section 2.04 FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. This is one of the Securities referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee 16 23 By: _____________________ Authorized Signatory ARTICLE III THE SECURITIES -------------- Section 3.01 TITLE AND TERMS. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $_____________(or up to $_______ aggregate principal amount of Securities in the event that the underwriters exercise their over-allotment option granted pursuant to the Underwriting Agreement), except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 3.04, 3.05, 3.06, 9.06 or 12.08. The Securities shall be known and designated as the "___% Junior Subordinated Debentures, Series [ ], Due 2031" of the Company. Their Stated Maturity shall be _____________ (or such later date on or before _____________ as the Company may elect pursuant to the provisions of Section 3.13(a) hereof) and they shall bear interest at the rate of ___% per annum, from _____________, 2001 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable quarterly (subject to the extension of an interest payment as set forth herein), in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing ________, 2001 until the principal thereof is paid or made available for payment. Interest will accrue quarterly at the rate of ___% per annum on any interest installment in arrears for more than one quarter and on any interest on such overdue interest. In the event that any date on which interest is payable on the Securities is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (except that, if such Business Day is in the next succeeding calendar year, such Interest Payment Date shall be the immediately preceding Business Day) (and without any interest or other payment in respect of any such delay). The Company shall have the right, at any time during the term of the Securities, from time to time to extend the interest payment period for up to 20 consecutive quarters (an "Extension Period") during which Extension Period interest will accrue but not be paid. Interest will accrue quarterly on accrued but unpaid interest during any Extension Period. At the end of such Extension Period the Company shall pay all interest then accrued and unpaid thereon (including interest accrued on unpaid interest as described above at the rate specified for the Securities to the extent that such payment of interest is permitted by applicable law). During any such Extension Period, the Company shall not (a) declare or pay dividends on, or make a distribution with respect to, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of its capital stock, or (b) make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to the Securities, or (c) make any guarantee payment with respect to the foregoing (other than payments under the Parent Guarantee); provided, however, that the foregoing restrictions do not apply to (A) dividends or distributions in common stock of the Company, (B) redemptions or purchases of any rights pursuant to any stockholder's rights plan, or the issuance of rights, stock or other property under any stockholder's rights plan, and the declaration of a dividend of such rights or the issuance of preferred stock under such plans in the 17 24 future, (C) payments under the Parent Guarantee or under any similar guarantee by the Company with respect to any securities of its subsidiaries, provided the proceeds from the issuance of such securities were used to purchase junior subordinated deferrable interest debentures issued by such subsidiary, (D) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants; a dividend reinvestment or stockholder stock purchase plan; or the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the Event of Default or Extension Period, (E) an exchange, redemption or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (F) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (G) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and (H) purchases of common stock required to prevent the loss or secure the renewal or reinstatement of any government license or franchise held by the Company or any of its subsidiaries. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that such Extension Period together with all such previous and further extensions thereof shall not exceed 20 consecutive quarters or extend beyond the Maturity of the Securities. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may select a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. The Company shall give the Holder and the Trustee notice of its selection of an Extension Period at least one Business Day prior to the earlier of (i) the Interest Payment Date or (ii) the date the Trust is required to give notice to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Preferred Securities of the record date or the date such distributions are payable, but in any event not less than one Business Day prior to such record date. The principal of and interest on the Securities shall be payable at the office or agency of the Company in The City of New York maintained for such purpose and at any other office or agency maintained by the Company for such purpose in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Security Register. The Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Eleven. The Securities shall be redeemable as provided in Article Twelve. 18 25 Section 3.02 DENOMINATIONS. The Securities shall be issuable only in registered form, without coupons, and only in denominations of $25 and any integral multiple thereof. Section 3.03 EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal affixed thereto or reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of then have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Section 3.04 TEMPORARY SECURITIES. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Company designated pursuant to Section 10.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. Section 3.05 REGISTRATION OF TRANSFER AND EXCHANGE. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office 19 26 and in any other office or agency designated pursuant to Section 10.02 being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 10.02 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 3.04 or 9.06 not involving any transfer. The Company shall not be required (i) to issue, to register the transfer of or to exchange Securities during a period of 15 days before the day of the mailing of a notice of redemption of Securities selected for redemption under Section 12.04 hereof and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or to exchange any Security selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. Section 3.06 MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously Outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in 20 27 the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously Outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 3.07 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more 21 28 than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and, if so listed, upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue (including in each such case any Additional Interest), which were carried by such other Security. Section 3.08 PERSONS DEEMED OWNERS. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee shall treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (subject to Section 3.07) interest (including any Additional Interest) on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Section 3.09 CANCELLATION. All Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and, if not theretofore canceled, shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section 3.09, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of as in accordance with the Trustee's then customary practice for disposing of Securities, unless otherwise directed by a Company Order; provided, however, that the Trustee shall not be required to destroy any of such canceled Securities. Section 3.10 COMPUTATION OF INTEREST. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. 22 29 Section 3.11 RIGHT OF SET-OFF. Notwithstanding anything to the contrary in this Indenture, the Company shall have the right to set-off any payment it is otherwise required to make hereunder to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Parent Guarantee. Section 3.12 CUSIP NUMBERS. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. Section 3.13 EXTENDED MATURITY. (a) The Company may, at any time before the day which is 90 days before the Stated Maturity set forth in Section 3.01 above, elect to extend such Stated Maturity once only to a date not later than ______, provided that the following conditions in this Section 3.13(a) are satisfied both at the date the Company gives notice in accordance with Section 3.13(b) of its election to extend the Maturity and at the Stated Maturity set forth in Section 3.01 above: (i) the Company is not in bankruptcy or otherwise insolvent; (ii) the Company is not in default on any Securities issued to the Trust or any trustee of the Trust in connection with the issuance of Preferred Securities; (iii) the Company has made timely payments on the Securities for the immediately preceding six quarters without deferrals; (iv) the Trust is not in arrears on payments of distributions on the Preferred Securities issued by it; and (v) the Securities are rated in any of the three highest rating categories or the equivalent by any one of Standard & Poor's Corporation or Moody's Investors or any other nationally recognized statistical rating organization; and (b) If the Company elects to extend the Stated Maturity in accordance with Section 3.13(a), the Company shall give notice to Holders of the Securities, the Property Trustee, the Trust and the Trustee of the new Stated Maturity at least 90 days before the Stated Maturity set forth in Section 3.01 above. In addition, the Company shall provide the Trustee with an Officers' Certificate and such documentation, if any, as the Trustee may reasonably request establishing that the conditions precedent contained in Section 3.13(a) have been complied with. 23 30 ARTICLE IV SATISFACTION AND DISCHARGE -------------------------- Section 4.01 SATISFACTION AND DISCHARGE OF INDENTURE. Except with respect to certain provisions as expressly provided herein, this Indenture shall cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.06 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.03) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and interest (including any Additional Interest) to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; or (C) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (2) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. 24 31 Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.07 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 4.02 and the last paragraph of Section 10.03 shall survive. Section 4.02 APPLICATION OF TRUST MONEY. Subject to the provisions of the last paragraph of Section 10.03, all money deposited with the Trustee pursuant to Section 4.01 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and interest for whose payment such money has been deposited with the Trustee. The Trustee shall not invest money deposited with it pending distribution of such amounts. ARTICLE V REMEDIES -------- Section 5.01 EVENTS OF DEFAULT. "Event of Default," wherever used herein, means any one of the following events that has occurred and is continuing (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article XI or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) failure for 30 days to pay any interest on the Securities, including any Additional Interest in respect thereof, when due (subject to the deferral of any due date in the case of an Extension Period); or (2) failure to pay any principal on the Securities when due whether at Maturity, upon redemption, by declaration or otherwise; or (3) failure to observe or perform in any material respect any other covenant herein for 90 days after written notice to the Company from the Trustee or to the Company and the Trustee from the holders of at least 25% in principal amount of the Outstanding Securities given by registered or certified mail, specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (4) entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of substantially all of the property of the Company, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order 25 32 for relief or any such other decree or order unstayed and in effect for a period of 90 consecutive days; or (5) the commencement by the Company of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Company or to the entry of a decree or order for relief in respect of itself in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by the Company to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of the property of the Company, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing of its inability to pay its debts generally, as they become due, or the taking of corporate action by the Company in furtherance of any such action. Section 5.02 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default described in clause (1), (2), (3) or (5) of Section 5.01 occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities shall have the right, by a notice in writing to the Company (and to the Trustee if given by Holders), to declare the principal of and the interest on all the Securities (including any Additional Interest) and any other amounts payable hereunder to be due and payable immediately, and upon any such declaration such principal and all accrued interest shall become immediately due and payable; provided, however, that if upon the occurrence and continuation of an Event of Default described in clause (1), (2), (3) or (5) of Section 5.01, the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Securities fail to declare the payment of all amounts on the Securities to be immediately due and payable, the holders of at least 25% in aggregate liquidation preference of Preferred Securities then outstanding shall have such right, by a notice in writing to the Company and to the Trustee, to enforce any and all other rights of Holders of Securities as creditors with respect to the Securities. If an Event of Default described in Section 5.01(4) occurs and is continuing, then and in every such case the principal of and the interest on all the Securities (including any Additional Interest) and any other amounts payable hereunder shall become immediately due and payable without any action on the part of the Trustee or the Holders of the Outstanding Securities. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of a majority in principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay 26 33 (A) all overdue interest (including any Additional Interest) on all Securities, (B) the principal of any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest (including any Additional Interest) at the rate borne by the Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13. No such rescission shall affect any subsequent default or impair any right consequent thereon. Section 5.03 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company covenants that if (1) default is made in the payment of any interest (including any Additional Interest) on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and interest (including any Additional Interest), and, to the extent that payment thereof shall be legally enforceable, interest on any overdue principal and on any overdue interest (including any Additional Interest), at the rate borne by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. 27 34 Section 5.04 TRUSTEE MAY FILE PROOFS OF CLAIM. In case of any judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act or otherwise in order to have claims of the Holders and the Trustee (including any claim for amounts due to the Trustee under Section 6.07) allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.07. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 5.05 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 5.06 APPLICATION OF MONEY COLLECTED. Subject to Article XI, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or interest (including any Additional Interest), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 6.07; SECOND: To the payment of the amounts then due and unpaid for principal of and interest (including any Additional Interest) on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and interest (including any Additional Interest), respectively; and THIRD: The balance, if any, to the Company or any other Persons entitled thereto. 28 35 Section 5.07 LIMITATION ON SUITS. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. Section 5.08 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and (subject to Section 3.07) interest (including any Additional Interest) on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 5.09 RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 5.10 RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 3.06, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and 29 36 remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 5.11 DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 5.12 CONTROL BY HOLDERS. The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture; (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and (3) the Trustee shall not determine that the action so directed would subject the Trustee to personal liability or expense for which the Trustee has not received a satisfactory indemnity. Section 5.13 WAIVER OF PAST DEFAULTS. Subject to Section 9.02 hereof, the Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default (1) in the payment of the principal of or interest (including any Additional Interest) on any Security (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Trustee); or (2) in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 5.14 UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking 30 37 to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Trustee or in any suit for the enforcement of the right to receive the principal of and interest (including any Additional Interest) on any Security. Section 5.15 WAIVER OF STAY OR EXTENSION LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which nay affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VI THE TRUSTEE ----------- Section 6.01 CERTAIN DUTIES AND RESPONSIBILITIES. (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (1) this subsection shall not be construed to limit the effect of subsection (a) of this Section 6.01; 31 38 (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.01. The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and it shall not be answerable for other than its own negligent action, its own negligent failure to act or its own willful misconduct. Section 6.02 NOTICE OF DEFAULTS. Within 90 days after the occurrence of any default hereunder, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders. For the purpose of this Section 6.02, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. Section 6.03 CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of Section 6.01: (a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action 32 39 hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate; (d) the Trustee may consult with counsel of its choice and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to expend or risk its own funds or to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses (including attorneys' fees and expenses) and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; (i) the Trustee shall not be charged with knowledge or deemed to have notice of any default or Event of Default with respect to the Securities unless either (1) a Responsible Officer of the Trustee shall have actual knowledge of the default or Event of Default, as the case may be, or (2) written notice of such default or Event of Default, as the case may be, shall have been received by a Responsible Officer of the Trustee at the Corporate Trust Office of the Trustee by the Company or by any Holder of the Securities, and such notice references the Securities or this Indenture; (j) no provision of this Indenture shall be deemed to impose any duty or obligation on the Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation; and no permissive power or authority available to the Trustee shall be construed to be a duty; and 33 40 (k) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. Section 6.04 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. Section 6.05 MAY HOLD SECURITIES. The Trustee, any Paying Agent, any Security Registrar, or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 6.08 and 6.13, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, or such other agent. Money held by the Trustee in trust hereunder shall not be invested by the Trustee pending distribution thereof to the holders of the Securities. Section 6.06 MONEY HELD IN TRUST. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. Section 6.07 COMPENSATION AND REIMBURSEMENT. The Company agrees (1) to pay to the Trustee from time to time such reasonable compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith, and (3) to indemnify the Trustee for, and to hold it harmless from and against, any and all loss, damage, claim, liability or expense, including taxes (other than taxes based on the income of the Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. As security for the performance of the obligations of the Company under this Section, the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by 34 41 the Trustee as such, except funds held in trust under Section 4.02. In addition to any of the rights of the Trustee herein and not by way of prejudice, should the Trustee incur expenses or render services in connection with an Event of Default specified in Section 5.01(4) or Section 5.01(5), those expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law. "Trustee" for purposes of this Section 6.07 shall include any predecessor Trustee; provided, however, that the negligence, willful misconduct or bad faith of any Trustee hereunder shall not affect the rights of any other Trustee hereunder. The provisions of this Section 6.07 shall survive the termination of this Indenture and the payment of the Securities. Section 6.08 DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such conflicting interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. The Trust Agreement and the Parent Guarantee shall be deemed to be specifically described in this Indenture for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. Section 6.09 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000 and has its Corporate Trust Office in New York, New York. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 6.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If at any time: 35 42 (1) the Trustee shall fail to comply with Section 6.08 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 6.09 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company if no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 1.06. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 6.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; provided that, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject, nevertheless, to the retiring Trustee's prior lien provided for in Section 6.07. Upon request of any such successor Trustee, the Company shall execute any and 36 43 all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 6.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 6.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). For purposes of Section 311(b) of the Trust Indenture Act: (a) the term "cash transaction" means any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; (b) the term "self-liquidating paper" means any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation. ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY ------------------------------------------------- Section 7.01 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS. The Company will furnish or cause to be furnished to the Trustee 37 44 (a) semiannually, not later than [February 15] and [August 15] in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more then 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. Section 7.02 PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.01 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.01 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. Section 7.03 REPORTS BY TRUSTEE. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. Such of those reports as are required to be transmitted by the Trustee pursuant to the provisions of Section 313(a) of the Trust Indenture Act shall be so transmitted within 60 days after [July 31] of each year, commencing with [July 31,] _____________. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when the Securities are listed on any stock exchange. Section 7.04 REPORTS BY COMPANY. The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information 38 45 contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE ---------------------------------------------------- Section 8.01 COMPANY MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS. The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (1) in case the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases the properties and assets of the Company substantially as an entirety shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and interest (including any Additional Interest) on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or a Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; (3) such consolidation or merger or conveyance, transfer or lease of properties or assets of the Company is permitted under, and does not give rise to any breach or violation of, the Trust Agreement or the Parent Guarantee; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 8.02 SUCCESSOR SUBSTITUTED. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 8.01, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same 39 46 effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE IX SUPPLEMENTAL INDENTURES ----------------------- Section 9.01 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (3) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided that such action pursuant to this clause (3) shall not adversely affect the interests of the Holders of the Securities or, so long as any of the Preferred Securities shall remain outstanding, the holders of the Preferred Securities; or (4) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act. Section 9.02 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the consent of the Holders of not less than 66 2/3% in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Maturity of the principal of, or the Stated Maturity of any installment of interest on (including any Additional Interest) any Security (subject to the Company's right to extend the Stated Maturity of the Security pursuant to Section 3.13(a)), or reduce the principal amount thereof or the rate of interest thereon, or change the place of payment where, or the coin or currency in which, any Security or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Maturity or, as the case may be, the Stated Maturity thereof (or, 40 47 in the case of redemption, on or after the Redemption Date), or modify the provisions of this Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section or Section 5.13, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided that, so long as any of the Preferred Securities remains outstanding, no such amendment shall be made that adversely affects the holders of the Preferred Securities, and no termination of this Agreement shall occur, and no waiver of any Event of Default or compliance with any covenant under this Agreement shall be effective, without the prior consent of the holders of at least 66 2/3% of the aggregate liquidation preference of the Preferred Securities at the time outstanding, calculated in the manner provided in the Trust Agreement, unless and until the Securities and all accrued and unpaid interest (including any Additional Interest) thereon have been paid in full. It shall not be necessary for any Act of Holders or any consent of holders of Preferred Securities under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 9.03 EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 9.04 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.05 CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. Section 9.06 REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this 41 48 Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE X COVENANTS; REPRESENTATIONS AND WARRANTIES ----------------------------------------- Section 10.01 PAYMENT OF PRINCIPAL AND INTEREST. The Company will duly and punctually pay the principal of and interest on the Securities in accordance with the terms of the Securities and this Indenture. Section 10.02 MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in The City of New York an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. The Company hereby establishes the Corporate Trust Office of the Trustee as the initial office for such purposes. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in the United States) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the United States for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 10.03 MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST. If the Company shall at any time act as its own Paying Agent, it will, on or at the option of the Company before each due date of the principal of or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. In such case the Company shall not invest the amount so segregated and held in trust pending the distribution thereof. The Company hereby appoints the Trustee as the initial Paying Agent of the Company for the payment of principal and interest (including any Additional Interest) on the Securities. 42 49 Whenever the Company shall have one or more Paying Agents, it will, prior to each due date of the principal of or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (i) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any default by the Company (or any other obligor upon the Securities) in the making of any payment in respect of the Securities, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent as such. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order, direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or interest on any Security and remaining unclaimed for two years after such principal or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease. Section 10.04 STATEMENT BY OFFICERS AS TO DEFAULT. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the material terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge, and otherwise complying with the requirements of Section 314(a)(4) of the Trust Indenture Act. Section 10.05 ADDITIONAL COVENANTS. The Company covenants and agrees that it will not (a) declare or pay dividends on, or make a distribution with respect to, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of its capital stock, or (b) make any payment of interest, principal or premium, if any on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to the Securities, or (c) make any guarantee payment with respect to the foregoing (other than payments under the Parent Guarantee) if at such time (i) there shall have occurred any event of which the Company has 43 50 actual knowledge that (x) with the giving of notice or the lapse of time or both, would constitute an Event of Default hereunder and (y) in respect of which the Company shall not have taken reasonable steps to cure, (ii) the Company shall be in default with respect to its payment of any obligations under the Parent Guarantee or (iii) the Company shall have given notice of its selection of an Extension Period as provided herein and such period, or any extension thereof, shall be continuing; provided, however, that the foregoing restrictions do not apply to (A) dividends or distributions in common stock of the Company, (B) redemptions or purchases of any rights pursuant to any stockholder's rights plan, or the issuance of rights, stock or other property under any stockholder's rights plan, and the declaration of a dividend of such rights or the issuance of preferred stock under such plans in the future, (C) payments under the Parent Guarantee or under any similar guarantee by the Company with respect to any securities of its subsidiaries, provided the proceeds from the issuance of such securities were used to purchase junior subordinated deferrable interest debentures issued by such subsidiary, (D) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more employees, officers, directors or consultants; a dividend reinvestment or stockholder stock purchase plan; or the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the Event of Default or Extension Period, (E) an exchange, redemption or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (F) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (G) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and (H) purchases of common stock required to prevent the loss or secure the renewal or reinstatement of any government license or franchise held by the Company or any of its subsidiaries. The Company also covenants (i) to maintain 100% ownership of the Common Securities of the Trust; provided, however, that any permitted successor of the Company hereunder may succeed to the Company's ownership of such Common Securities, and (ii) to use its reasonable efforts, consistent with the terms and provisions of the Trust Agreement, to cause the Trust to remain a business trust and otherwise continue to be treated as a grantor trust for United States federal income tax purposes; provided that the Company may permit the Trust to consolidate or merge with or into another business trust or other permitted successor under the Trust Agreement so long as the Company agrees to comply with this Section 10.05 with respect to such successor business trust or other permitted successor. 44 51 ARTICLE XI SUBORDINATION OF SECURITIES --------------------------- Section 11.01 SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article (subject to Article IV), the payment of the principal of and interest (including any Additional Interest) on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full in cash of all Senior Indebtedness. This Article XI shall constitute a continuing offer to all persons who become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness and such holders are made obligees hereunder and any one or more of them may enforce such provisions. Holders of Senior Indebtedness need not prove reliance on the subordination provisions hereof. Section 11.02 DEFAULT ON SENIOR INDEBTEDNESS. In the event and during the continuation of any default in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness (and any applicable grace period with respect to such default has ended and such default has not been cured or waived) or in the event that the maturity of any Senior Indebtedness has been accelerated because of a default, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption payments) of, or interest on, the Securities. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by the preceding paragraph of this Section 11.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. Section 11.03 LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made on account of the principal or interest on the Securities; and upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of substantially all of the assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee would be entitled, except for the provisions of this Article XI, shall be paid by the Company or by any 45 52 receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders; as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any payment or distribution is made to the Holders of Securities or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee or the Holders of the Securities before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness. For purposes of this Article XI, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XI with respect to the Securities to the payment of all Senior Indebtedness that may at the time be outstanding, provided, however, that (i) the Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of the Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article VIII hereof shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 11.03 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article VIII hereof. Nothing in this Article XI shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.07. Section 11.04 SUBROGATION. Subject to the payment in full of all Senior Indebtedness, the rights of the Holders of the Securities shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or 46 53 securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article XI, and no payment over pursuant to the provisions of this Article XI, to or for the benefit of the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment by the Company to or on account of the Senior Indebtedness. It is understood that the provisions of this Article XI are and are intended solely for the purposes of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Indebtedness on the other hand. Nothing contained in this Article XI or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XI of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article XI, the Trustee, subject to the provisions of Section 6.01 and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of the Securities, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XI. Section 11.05 TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of a Security by acceptance thereof authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XI and appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. Section 11.06 NOTICE BY THE COMPANY. The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article XI. Notwithstanding the provisions of this Article XI or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article XI, unless and until a Responsible Officer of the Trustee shall have received written notice thereof at the Corporate Trust Office of the Trustee from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject 47 54 to the provisions of Section 6.01, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 11.06 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. The Trustee, subject to the provisions of Section 6.01, shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article XI, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XI, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 11.07 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XI in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XI, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and the Trustee shall not be liable to any holder of Senior Indebtedness if it shall pay over or deliver to Holders of Securities, the Company or any other Person money or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article XI or otherwise. Section 11.08 SUBORDINATION MAY NOT BE IMPAIRED. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to 48 55 the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any Person liable in any manner for the collection of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. ARTICLE XII REDEMPTION OF SECURITIES ------------------------ Section 12.01 OPTIONAL AND SPECIAL EVENT REDEMPTION; CONDITIONS TO OPTIONAL REDEMPTION. On or after _____________, the Company shall have the right, subject to the last paragraph of this Section 12.01, to redeem the Securities at the option of the Company, in whole at any time or in part from time to time, at a Redemption Price equal to 100% of the principal amount of Securities to be redeemed together with any accrued but unpaid interest, including Additional Interest, if any, to the Redemption Date fixed by the Company. If a Special Event shall occur and be continuing, the Company shall have the right, upon not less than 30 nor more than 60 days' notice, to redeem the Securities, at any time, in whole but not in part, at a Redemption Price equal to 100% of the principal amount thereof plus accrued but unpaid interest, including any Additional Interest, if any, to the Redemption Date fixed by the Company, which Redemption Date shall be within 90 days following the occurrence of such Special Event. For so long as the Trust is the Holder of all Securities Outstanding, the proceeds of any redemption described in this Section 12.01 or payments at Maturity shall be used by the Trust to redeem Preferred Securities and Common Securities in accordance with their terms and the terms of the Trust Agreement. The Company shall not redeem the Securities in part unless all accrued and unpaid interest (including any Additional Interest) has been paid in full on all Securities Outstanding for all quarterly interest periods terminating on or prior to the Redemption Date. Section 12.02 APPLICABILITY OF ARTICLE. Redemption of Securities at the election of the Company, as permitted by Section 12.01, shall be made in accordance with the terms of the Securities and this Article. Section 12.03 ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the Company to redeem Securities pursuant to Section 12.01 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 15 days prior to the mailing of the notice of redemption to the Holders of Securities to be redeemed pursuant to Section 12.04 (unless a shorter period shall be acceptable to the Trustee), notify the Trustee of such Redemption, of the principal amount of Securities to be redeemed and of the Redemption 49 56 Date fixed by the Company therefor, and provide the Trustee with a copy of the notice of redemption to be given to Holders of Securities to be redeemed pursuant to Section 12.04. Section 12.04 SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED. If less than all the Securities are to be redeemed (unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, by such method (including pro rata or by lot) as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $25 or any integral multiple thereof) of the principal amount of the Securities. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption as aforesaid and, in case of any Securities selected for partial redemption as aforesaid, the principal amount thereof to be redeemed. The provisions of the two preceding paragraphs shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. Section 12.05 NOTICE OF REDEMPTION. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall identify the Securities to be redeemed (including CUSIP number, subject to Section 3.12 hereof) and shall state: (1) the Redemption Date; (2) the Redemption Price; (3) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date; and (4) the place or places where such Securities are to be surrendered for payment of the Redemption Price. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. 50 57 Section 12.06 DEPOSIT OF REDEMPTION PRICE. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.03) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest (including any Additional Interest) on, all the Securities which are to be redeemed on that date. Section 12.07 SECURITIES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest and Additional Interest, if any) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.07. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. Section 12.08 SECURITIES REDEEMED IN PART. Any Security which is to be redeemed only in part shall be surrendered at a place of payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 51 58 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY By: ------------------------------------------- Name: Title: Attest: - ----------------------------- THE BANK OF NEW YORK, as Trustee By: ------------------------------------------- Name: Title: Attest: - ----------------------------- Name: Title: 52 59 STATE OF OHIO ) : ss.: COUNTY OF SUMMIT ) On the __ day of ___________, 2001, before me personally came _____________, to me known, who, being by me duly sworn, did depose and say that he is the Senior Vice President of The Cleveland Electric Illuminating Company, one of the corporations described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the Board of Directors of such corporation. ----------------------------------- 60 STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the __ day of ___________, 2001, before me personally came _____________, to me known, who, being by me duly sworn, did depose and say that she is a _____________ of The Bank of New York, a corporation described in and which executed the foregoing instrument; and that she signed her name thereto by authority of the Board of Directors of such corporation. ----------------------------------- 61 ANNEX A Form of Amended and Restated Trust Agreement EX-4.2 3 l88526aex4-2.txt EXHIBIT 4.2 CERTIFICATE OF TRUST 1 Exhibit 4.2 CERTIFICATE OF TRUST OF CLEVELAND ELECTRIC FINANCING TRUST I THIS CERTIFICATE OF TRUST of Cleveland Electric Financing Trust I (the "Trust"), dated June 7, 2001, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. ss. 3801 et seq.). 1. NAME. The name of the business trust being created hereby is Cleveland Electric Financing Trust I. 2. DELAWARE TRUSTEE. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware is The Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711. 3. EFFECTIVE DATE. This Certificate of Trust shall be effective as of its filing with the Secretary of State of the State of Delaware. IN WITNESS WHEREOF, the undersigned, being the only trustees of the Trust, have executed this Certificate of Trust as of the date first above written. THE BANK OF NEW YORK, not in its individual capacity but solely as Property Trustee By: /s/ Terence T. Rawlins ----------------------- Terence T. Rawlins Vice President THE BANK OF NEW YORK (DELAWARE), not in its individual capacity but solely as Delaware Trustee By: /s/ Michael Santino ------------------- Michael Santino Senior Vice President /s/ Thomas Navin ---------------- Thomas Navin, not in his individual capacity but solely as Administrative Trustee /s/ Randy Scilla ---------------- Randy Scilla, not in his individual capacity but solely as Administrative Trustee EX-4.3 4 l88526aex4-3.txt EXHIBIT 4.3 DECLARATION OF TRUST 1 Exhibit 4.3 TRUST AGREEMENT, dated as of June 7, 2001, among (i) The Cleveland Electric Illuminating Company, an Ohio corporation (the "Depositor" or "Cleveland Electric"), (ii) The Bank of New York, a banking corporation duly organized and existing under the laws of New York, as trustee (the "Property Trustee"), (iii) The Bank of New York (Delaware), a banking corporation duly organized under the laws of Delaware, as Delaware trustee (the "Delaware Trustee"), and (iv) Thomas Navin, an individual, and Randy Scilla, an individual, each of whose address is c/o The Cleveland Electric Illuminating Company, 76 South Main Street, Akron, Ohio 44308, as trustees (each an "Administrative Trustee" and together the "Administrative Trustees") (the Property Trustee, the Delaware Trustee and the Administrative Trustees referred to collectively as the "Trustees"). The Depositor and the Trustees hereby agree as follows: 1. The trust created hereby shall be known as "Cleveland Electric Financing Trust I" (the "Trust"), in which name the Trustees, or the Depositor to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Depositor hereby assigns, transfers, conveys and sets over to the Trust the sum of $10. Such amount shall constitute the initial trust estate. The Trustees hereby declare that they will hold the trust estate in trust for the Depositor. It is the intention of the parties hereto that the Trust created hereby constitutes a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. ss. 3801 et seq. (the "Business Trust Act"), and that this document constitutes the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State substantially in the form attached hereto. 3. The Depositor and the Trustees will enter into an amended and restated Trust Agreement, satisfactory to each such party and substantially in the form included as Exhibit 4.2 to the 1933 Act Registration Statement referred to below, to provide for the contemplated operation of the Trust created hereby and the issuance of the Preferred Securities and the Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Trust Agreement, the Trustees shall not have any duty or obligation hereunder or with respect of the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery any licenses, consents or approvals required by applicable law or otherwise. 4. The Depositor and the Trustees hereby authorize and direct the Depositor, as the Depositor of the Trust, (i) to prepare and file with the Securities and Exchange Commission (the "Commission") and execute, in each case on behalf of the Trust, (a) the Registration Statement on Form S-2 (the "1933 Act Registration Statement") and any pre-effective or post-effective amendments to such Registration Statement, relating to the registration under the Securities Act of 1933, as amended, of the Preferred Securities of the Trust, and (b) a Registration Statement on Form 8-A (the "1934 Act Registration Statement") (including all pre-effective and post-effective amendments thereto) relating to the registration of the Preferred Securities of the Trust under Section 12(b) of the Securities Exchange Act of 1934, as amended; (ii) to file with the New York Stock Exchange and execute on behalf of the Trust a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed on the New York Stock Exchange; (iii) to 2 file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Preferred Securities under the securities or "Blue Sky" laws of such jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or desirable, (iv) to execute and deliver letters or documents to, or instruments for filing with a depository relating to the Preferred Securities of the Trust, and (v) to execute on behalf of the Trust an Underwriting Agreement among the Trust, the Depositor and the underwriters named therein, substantially in the form to be included as Exhibit 1(a) of the 1933 Act Registration Statement. In the event that any filing referred to in clauses (i), (ii) or (iii) above is required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or Blue Sky laws, to be executed on behalf of the Trust by the Trustees, Thomas Navin and Randy Scilla, in their capacities as Administrative Trustees of the Trust, are hereby authorized and directed to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that The Bank of New York and The Bank of New York (Delaware), in their capacities as Property Trustee and Delaware Trustee of the Trust, respectively, shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or Blue Sky laws. In connection with the filings referred to in clauses (i),(ii) or (iii) above, the Depositor and each Trustee, solely in its capacity as Trustee of the Trust and not in its individual capacity, hereby constitutes and appoints John H. Byington, Jr. and Lucas F. Torres, and each of them, as his, her or its, as the case may be, true and lawful attorneys-in-fact, and agents, with full power of substitution and resubstitution, for the Depositor or such Trustee or in the Depositor's or such Trustee's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to the 1933 Act Registration Statement and the 1934 Act Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Depositor or such Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, shall do or cause to be done by virtue hereof. 5. This Trust Agreement may be executed in one or more counterparts. 6. The number of Trustees initially shall be four (4) and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Depositor which may increase or decrease the number of Trustees; provided, however, that the number of Trustees shall in no event be less than four (4); and provided, further that to the extent required by the Business Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware. Subject to the foregoing, the Depositor is entitled to appoint or remove without cause any Trustee at any time. Any of the Trustees may resign upon thirty days prior notice to the Depositor. 7. The Trust may be dissolved and terminated before the issuance of the preferred securities of the Trust at the election of the Depositor. 2 3 8. This Trust Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without regard to conflict of laws principles). IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed as of the day and year first above written. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, as Depositor By: /s/ THOMAS C. NAVIN ------------------- Thomas C. Navin Treasurer THE BANK OF NEW YORK, not in its individual capacity but solely as Property Trustee By: /s/ TERENCE RAWLINS ------------------- Terence T. Rawlins Vice President THE BANK OF NEW YORK (DELAWARE), not in its individual capacity but solely as Delaware Trustee By: /s/ MICHAEL SANTINO ------------------- Michael Santino Senior Vice President /s/ THOMAS NAVIN ---------------- Thomas Navin, not in his individual capacity but solely as Administrative Trustee /s/ RANDY SCILLA ---------------- Randy Scilla, not in his individual capacity but solely as Administrative Trustee 3 EX-4.4 5 l88526aex4-4.txt EXHIBIT 4.4 FORM OF AMENDED AND RESTATED TR. AGRMT 1 Exhibit 4.4 ================================================================================ ------------------------ FORM OF AMENDED AND RESTATED TRUST AGREEMENT CLEVELAND ELECTRIC FINANCING TRUST I DATED AS OF _____________, 2001 ------------------------ ================================================================================ 2 Certain Sections of this Amended and Restated Trust Agreement relating to Section 310 through 315 of the Trust Indenture Act of 1939:
Amended and Restated Trust Indenture Trust Agreement Act Section Section ----------- ------- Section 310(b) .................................................... 8.08 Section 311(b) .................................................... 8.13 Section 313(a) .................................................... 8.14(a) Section 314(a)(4) .................................................... 8.15 (c) .................................................... 8.16 (c)(1) .................................................... 8.16 Section 315(a) .................................................... 8.01(a) (c) .................................................... 8.01(a) (d)(2) .................................................... 8.01(a)
- ---------------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Amended and Restated Trust Agreement. 3 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINED TERMS Section 1.01 Definitions....................................................................................1 ARTICLE II ESTABLISHMENT OF THE TRUST Section 2.01 Name..........................................................................................10 Section 2.02 Office of the Delaware Trustee; Principal Place of Business...................................10 Section 2.03 Initial Contribution of Trust Property; Organizational Expenses...............................10 Section 2.04 Issuance of the Preferred Securities..........................................................10 Section 2.05 Issuance of the Common Securities; Subscription and Purchase of Debentures....................11 Section 2.06 Declaration of Trust..........................................................................11 Section 2.07 Authorization to Enter into Certain Transactions..............................................12 Section 2.08 Assets of Trust...............................................................................15 Section 2.09 Title to Trust Property.......................................................................15 Section 2.10 Mergers.......................................................................................15 ARTICLE III PAYMENT ACCOUNT Section 3.01 Payment Account...............................................................................17 ARTICLE IV DISTRIBUTIONS; REDEMPTION Section 4.01 Distributions.................................................................................17 Section 4.02 Redemption....................................................................................18 Section 4.03 Subordination of Common Securities............................................................20 Section 4.04 Payment Procedures............................................................................21 Section 4.05 Tax Returns and Reports.......................................................................21
-i- 4 ARTICLE V TRUST SECURITIES CERTIFICATES Section 5.01 Initial Ownership.............................................................................21 Section 5.02 The Trust Securities Certificates.............................................................21 Section 5.03 Delivery of Trust Securities Certificates.....................................................22 Section 5.04 Registration of Transfer and Exchange of Preferred Securities Certificates....................22 Section 5.05 Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates............................23 Section 5.06 Persons Deemed Securityholders................................................................23 Section 5.07 Access to List of Securityholders' Names and Addresses........................................23 Section 5.08 Maintenance of Office or Agency...............................................................24 Section 5.09 Appointment of Paying Agent...................................................................24 Section 5.10 Ownership of Common Securities by Depositor...................................................24 Section 5.11 Book-entry Preferred Securities Certificates; Common Securities Certificate...................25 Section 5.12 Notices to Clearing Agency....................................................................26 Section 5.13 Definitive Preferred Securities Certificates..................................................26 Section 5.14 Rights of Securityholders.....................................................................26 ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING Section 6.01 Limitations on Voting Rights..................................................................27 Section 6.02 Notice of Meetings............................................................................28 Section 6.03 Meetings of Preferred Securityholders.........................................................29 Section 6.04 Voting Rights.................................................................................29 Section 6.05 Proxies, Etc..................................................................................29 Section 6.06 Securityholder Action by Written Consent......................................................30 Section 6.07 Record Date for Voting and Other Purposes.....................................................30 Section 6.08 Acts of Securityholders.......................................................................30 Section 6.09 Inspection of Records.........................................................................31 ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE AND THE DELAWARE TRUSTEE Section 7.01 Property Trustee..............................................................................31 Section 7.02 Delaware Trustee..............................................................................32
ii 5 ARTICLE VIII THE TRUSTEES Section 8.01 Certain Duties and Responsibilities...........................................................32 Section 8.02 Notice of Defaults............................................................................34 Section 8.03 Certain Rights of Property Trustee............................................................34 Section 8.04 Not Responsible For Recitals or Issuance of Securities........................................36 Section 8.05 May Hold Securities...........................................................................36 Section 8.06 Compensation; Fees; Indemnity.................................................................36 Section 8.07 Corporate Property Trustee Required; Eligibility Trustees.....................................37 Section 8.08 Conflicting Interests.........................................................................38 Section 8.09 Co-trustees and Separate Trustee..............................................................38 Section 8.10 Resignation and Removal; Appointment of Successor; Special Administrative Trustee.............39 Section 8.11 Acceptance of Appointment by Successor........................................................41 Section 8.12 Merger, Conversion, Consolidation Succession to Business......................................42 Section 8.13 Preferential Collection of Claims Against Depositor or Trust..................................42 Section 8.14 Reports by Property Trustee...................................................................42 Section 8.15 Reports to the Property Trustee...............................................................43 Section 8.16 Evidence of Compliance with Conditions Precedent..............................................43 Section 8.17 Number of Trustees............................................................................43 Section 8.18 Delegation of Power...........................................................................44 Section 8.19 Fiduciary Duty................................................................................44 ARTICLE IX DISSOLUTION AND LIQUIDATION Section 9.01 Dissolution upon Expiration Date..............................................................45 Section 9.02 Early Dissolution.............................................................................45 Section 9.03 Dissolution...................................................................................45 Section 9.04 Liquidation...................................................................................46 ARTICLE X MISCELLANEOUS PROVISIONS Section 10.01 Guarantee by the Depositor....................................................................47 Section 10.02 Limitation of Rights of Securityholders.......................................................47 Section 10.03 Amendment.....................................................................................48
iii 6 Section 10.04 Separability..................................................................................49 Section 10.05 Governing Law.................................................................................49 Section 10.06 Successors....................................................................................49 Section 10.07 Headings......................................................................................49 Section 10.08 Notice and Demand.............................................................................49 Section 10.09 Agreement not to Petition.....................................................................50 Section 10.10 Trust Indenture Act; Conflict with Trust Indenture Act........................................50 Section 10.11 Counterparts..................................................................................51 EXHIBIT A CERTIFICATE OF TRUST OF CLEVELAND ELECTRIC FINANCING TRUST EXHIBIT B CERTIFICATE DEPOSITORY AGREEMENT EXHIBIT C CERTIFICATE EVIDENCING COMMON SECURITIES OF CLEVELAND ELECTRIC FINANCING TRUST I EXHIBIT D AGREEMENT AS TO EXPENSES AND LIABILITIES EXHIBIT E ASSIGNMENT
iv 7 AMENDED AND RESTATED TRUST AGREEMENT, (this "Trust Agreement") dated as of _____________, 2001, among (i) The Cleveland Electric Illuminating Company, an Ohio corporation (the "Depositor" or "Cleveland Electric"), (ii) The Bank of New York, a banking corporation duly organized and existing under the laws of New York, as trustee (the "Property Trustee" and, in its individual capacity and not in its capacity as Property Trustee, the "Bank"), (iii) The Bank of New York (Delaware), a banking corporation duly organized under the laws of Delaware, as Delaware trustee (the "Delaware Trustee"), (iv), Thomas Navin and Randy Scilla, individuals, as trustees, each of whose address is c/o Cleveland Electric Illuminating Company, 76 South Main Street, Akron, Ohio (each an "Administrative Trustee" and together the "Administrative Trustees") (the Property Trustee, the Delaware Trustee and the Administrative Trustees referred to collectively as the "Trustees"), and (v) the several Holders, as hereinafter defined, W I T N E S S E T H: WHEREAS, the Depositor, the Property Trustee, the Delaware Trustee and the Administrative Trustees have heretofore duly declared and established a business trust pursuant to the Delaware Business Trust Act by the entering into of that certain Trust Agreement, dated as of June 7, 2001 (the "Original Trust Agreement"), and by the execution by the Property Trustee, the Delaware Trustee and the Administrative Trustees and filing with the Secretary of State of the State of Delaware of the Certificate of Trust, dated June 7, 2001, copies of which are attached as Exhibit A; and WHEREAS, the parties hereto desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the acquisition by the Trust from the Depositor of all of the right, title and interest in the Debentures, (ii) the issuance of the Common Securities by the Trust to the Depositor, and (iii) the issuance and sale of the Preferred Securities by the Trust pursuant to the Underwriting Agreement; NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, each party, for the benefit of the other parties and for the benefit of the Securityholders, hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows: ARTICLE I DEFINED TERMS ------------- Section 1.01 DEFINITIONS. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; -1- 8 (c) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Trust Agreement; and (d) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision. "ACT" has the meaning specified in Section 6.08. "ADDITIONAL AMOUNT" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the amount of Additional Interest (as defined in the Subordinated Indenture) paid by the Depositor on a Like Amount of Debentures for such period. "ADMINISTRATIVE TRUSTEE" means each of the individuals identified as an "Administrative Trustee" in the preamble to this Trust Agreement solely in their capacities as Administrative Trustees of the Trust and not in their individual capacities, or such trustee's successor in interest in such capacity, or any successor trustee or any Special Administrative Trustee appointed as herein provided. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "APPOINTMENT EVENT" has the meaning specified in Section 6.01(d). "BANK" has the meaning specified in the preamble to this Trust Agreement. "BANKRUPTCY EVENT" means, with respect to any Person: (i) the entry of a decree or order by a court having jurisdiction in the premises judging such Person a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjudication or composition of or in respect of such Person under Federal bankruptcy law or any other applicable Federal or State law, or appointing a receiver, liquidator, assignee, trustee, sequestrator or other similar official of such Person or of all or substantially all of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstated and in effect for a period of 60 consecutive days; or (ii) the institution by such Person of proceedings to be adjudicated a bankrupt or insolvent, or of the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under Federal bankruptcy law or any other applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or similar official of such Person or of all or substantially all of its property, or the making by it of an 2 9 assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of action by such Person in furtherance of any such action. "BANKRUPTCY LAWS" has the meaning specified in Section 10.09. "BOARD RESOLUTION" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Depositor to have been duly adopted by the Depositor's Board of Directors or a duly authorized committee thereof and to be in full force and effect on the date of such certification, and delivered to the Trustees. "BOOK ENTRY PREFERRED SECURITIES CERTIFICATES" means a beneficial interest in the Preferred Securities Certificates, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 5.11. "BUSINESS DAY" means a day other than (x) a Saturday or a Sunday, (y) a day on which banks in New York, New York are authorized or obligated by law or executive order to remain closed or (z) a day on which the principal corporate trust office of the Property Trustee or the Debenture Trustee is closed for business. "CERTIFICATE DEPOSITORY AGREEMENT" means the agreement among the Trust and The Depository Trust Company, as the initial Clearing Agency, dated as of the Closing Date, relating to the Trust Securities Certificates, substantially in the form attached as Exhibit B, as the same may be amended and supplemented from time to time. "CLEARING AGENCY" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934. The Depository Trust Company will be the initial Clearing Agency. "CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "CLOSING DATE" means the Time of Delivery as defined in the Underwriting Agreement, which date is also the date of execution and delivery of this Trust Agreement. "CODE" means the Internal Revenue Code of 1986, as amended. "COMMISSION" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "COMMON SECURITY" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $25 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. 3 10 "COMMON SECURITIES CERTIFICATE" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit C. "CORPORATE TRUST OFFICE" means the principal corporate office of the Property Trustee located in New York, New York. "COVERED PERSON" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of the Trust or the Trust's Affiliates; and (b) any Holder of Trust Securities. "DEBENTURE EVENT OF DEFAULT" means an "EVENT OF DEFAULT" as defined in the Subordinated Indenture. "DEBENTURE ISSUER" means The Cleveland Electric Illuminating Company, an Ohio corporation, in its capacity as issuer of the Debentures. "DEBENTURE REDEMPTION DATE" means a "Redemption Date" as defined in the Subordinated Indenture. "DEBENTURE TRUSTEE" means The Bank of New York, a banking corporation duly organized and existing under the laws of New York, as trustee under the Subordinated Indenture. "DEBENTURES" means the $_____________ aggregate principal amount (or $______aggregate principal amount if the underwriters exercise their over-allotment option granted pursuant to the Underwriting Agreement) of the Debenture Issuer's ___% Junior Subordinated Debentures, Series [ ], Due 2031, issued pursuant to the Subordinated Indenture. "DEFINITIVE PREFERRED SECURITIES CERTIFICATES" means either or both (as the context requires) of (i) Preferred Securities Certificates issued in certificated, fully registered form as provided in Section 5.11(a) and (ii) Preferred Securities Certificates issued in certificated, fully registered form as provided in Section 5.13. "DELAWARE BUSINESS TRUST ACT" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.ss.3801, et seq., as it may be amended from time to time. "DELAWARE TRUSTEE" means the banking corporation identified as the "Delaware Trustee" in the preamble to this Trust Agreement solely in its capacity as Delaware Trustee of the Trust and not in its individual capacity, or its successor in interest in such capacity, or any successor trustee appointed as herein provided. "DEPOSITOR" has the meaning specified in the preamble to this Trust Agreement and includes The Cleveland Electric Illuminating Company, an Ohio Corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as Holder of the Common Securities. "DISTRIBUTION DATE" has the meaning specified in Section 4.01(a). 4 11 "DISTRIBUTIONS" means amounts payable in respect of the Trust Securities as provided in Section 4.01. "EVENT OF DEFAULT" means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) the occurrence of a Debenture Event of Default; or (ii) default by the Trust in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days; or (iii) default by the Trust in the payment of any Redemption Price of any Trust Security when it becomes due and payable; or (iv) default in the performance, or breach, in any material respect, of any covenant or warranty of the Trustees in this Trust Agreement (other than a covenant or warranty a default in whose performance or breach is dealt with in clause (ii) or (iii), above) and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the defaulting Trustee or Trustees by the Holders of at least 10% in Liquidation Amount of the Outstanding Preferred Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (v) the occurrence of a Bankruptcy Event with respect to the Trust. "EXPENSE AGREEMENT" means the Agreement as to Expenses and Liabilities, dated as of _____________, 2001, between Cleveland Electric and the Trust, substantially in the form attached as Exhibit D, as amended from time to time. "EXTENSION PERIOD" has the meaning specified in the Subordinated Indenture. "GLOBAL CERTIFICATE" has the meaning specified in Section 5.11. "GUARANTEE" means the Guarantee Agreement, dated as of _____________, 2001, executed and delivered by the Depositor and The Bank of New York, a New York banking corporation, as trustee, contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the Preferred Securityholders, as amended from time to time. "INDEMNIFIED PERSON" means any Trustee, any Affiliate of any Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of any Trustee, or any employee or agent of the Trust or its Affiliates. "INVESTMENT COMPANY EVENT" means the receipt by the Administrative Trustees of an Opinion of Counsel experienced in practice under the Investment Company Act of 1940, as amended (the "1940 Act"), to the effect that as a result of the occurrence of a change in law or regulation by any legislative body, court, governmental agency or regulatory authority (a 5 12 "Change in 1940 Act Law"), the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of the issuance of the Preferred Securities. "LIEN" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "LIKE AMOUNT" means (i) Trust Securities having a Liquidation Amount equal to the principal amount of Debentures to be contemporaneously redeemed in accordance with the Subordinated Indenture and the proceeds of which will be used to pay the Redemption Price of such Trust Securities, or (ii) Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Debentures are distributed, as the case may be. "LIQUIDATION AMOUNT" means the stated amount of $25 per Trust Security. "LIQUIDATION DATE" means the date on which Debentures are to be distributed to Holders of Trust Securities in connection with a dissolution and liquidation of the Trust pursuant to Section 9.04(a). "LIQUIDATION DISTRIBUTION" has the meaning specified in Section 9.04(d). "OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President, a Vice President or the Comptroller, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Depositor, and delivered to the appropriate Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 8.16 shall be the principal executive, financial or accounting officer of the Depositor. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer upon which the statements or opinions of such officer contained in such Officers' Certificate are based; (c) a statement that, in each such officer's opinion, such officer has made such examination or investigation as is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel for the Trust, any of the Trustees or the Depositor, but not an employee of the Trust or any of the Trustees, and who shall be reasonably acceptable to the Trustees. 6 13 "OPTION CLOSING DATE" has the meaning specified in the Underwriting Agreement. "ORIGINAL TRUST AGREEMENT" has the meaning specified in the recitals to this Trust Agreement. "OUTSTANDING," when used with respect to Preferred Securities, means, as of the date of determination, all Preferred Securities theretofore delivered under this Trust Agreement, except: (i) Preferred Securities theretofore cancelled by the Administrative Trustees or delivered to the Administrative Trustees for cancellation; (ii) Preferred Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent for the Holders of such Preferred Securities; provided that, if such Preferred Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; and (iii) Preferred Securities which have been exchanged for or in lieu of which other Preferred Securities have been delivered pursuant to Section 5.05 of this Trust Agreement; provided, however, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Preferred Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Preferred Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Preferred Securities which such Trustee knows to be so owned shall be so disregarded and (b) the foregoing shall not apply at any time when all of the Outstanding Preferred Securities are owned by the Depositor, one or more of the Trustees and/or any such Affiliate. Preferred Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustees the pledgee's right so to act with respect to such Preferred Securities and that the pledgee is not the Depositor or any Affiliate of the Depositor. "OWNER" means each Person who is the beneficial owner of a Book Entry Preferred Securities Certificate as reflected in the records of the Clearing Agency or, if a Clearing Agency Participant is not the Owner, then as reflected in the records of a Person maintaining an account with such Clearing Agency (directly or indirectly, in accordance with the rules of such Clearing Agency). "PAYING AGENT" means any paying agent or co-paying agent appointed pursuant to Section 5.09 and shall initially be The Bank of New York. "PAYMENT ACCOUNT" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee in its trust department for the benefit of the Securityholders in which all amounts paid in respect of the Debentures will be held and from which the Property Trustee shall make payments to the Securityholders in accordance with Sections 4.01 and 4.02. 7 14 "PERSON" means any individual, corporation, company, limited liability company, association, joint stock company, partnership, joint venture, trust, business trust, unincorporated organization or government or any agency or political subdivision thereof. "PREFERRED SECURITY" means an undivided beneficial interest in assets of the Trust, having a Liquidation Amount of $25 and having rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "PREFERRED SECURITIES CERTIFICATE" means a certificate evidencing ownership of Preferred Securities, substantially in the form attached as Exhibit E. "PROPERTY TRUSTEE" means the commercial bank or trust company identified as the "Property Trustee" in the preamble to this Trust Agreement solely in its capacity as Property Trustee of the Trust and not in its individual capacity, or its successor in interest in such capacity, or any successor trustee appointed as herein provided. "REDEMPTION DATE" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided that each Debenture Redemption Date shall be a Redemption Date for a Like Amount of Trust Securities. "REDEMPTION PRICE" means, with respect to any date fixed for redemption of any Trust Security, the Liquidation Amount of such Trust Security, plus accumulated and unpaid Distributions to such date. "RELEVANT TRUSTEE" shall have the meaning specified in Section 8.10. "RESPONSIBLE OFFICER", when used with respect to the Property Trustee, means any Vice President or any trust officer of the Property Trustee, which in each case is assigned by the Property Trustee to its Corporate Trust Office (or any successor department), and also means, with respect to a particular corporate trust matter, any other trust officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "SECURITIES REGISTER" and "TRANSFER AGENT AND REGISTRAR" have the respective meanings specified in Section 5.04. "SECURITYHOLDER" or "HOLDER" means a Person in whose name a Trust Security or Securities is registered in the Securities Register; any such Person shall be deemed to be a beneficial owner within the meaning of the Delaware Business Trust Act. "SPECIAL ADMINISTRATIVE TRUSTEE" shall have the meaning specified in Section 8.10. "SPECIAL EVENT" means a Tax Event or an Investment Company Event. "STATED MATURITY" has the meaning specified in the Subordinated Indenture. "SUBORDINATED INDENTURE" means the Indenture, dated as of _____________, 2001, between the Debenture Issuer and the Debenture Trustee, as trustee, as amended or supplemented from time to time. 8 15 "TAX EVENT" means the receipt by the Administrative Trustees of an Opinion of Counsel from nationally recognized independent counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws or treaties (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of the issuance of the Preferred Securities), (c) any interpretation or pronouncement of any such body, court, agency or authority, that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position, or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated or effective, or which interpretation or pronouncement is issued or announced, or which action is taken, in each case on or after the date of the issuance of the Preferred Securities, there is more than an insubstantial risk that (i) the Trust is, or will be, subject to United States federal income tax with respect to income accrued or received on the Debentures, (ii) interest payable on the Debentures is not, or will not be, fully deductible by Cleveland Electric for United States federal income tax purposes or (iii) the Trust is, or will be, subject to more than a de minimus amount of other taxes, duties or other governmental charges. "TRUST" means the Delaware business trust created and continued hereby and identified on the cover page to this Trust Agreement. "TRUST AGREEMENT" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including all exhibits hereto, including, for all purposes of this Trust Agreement and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Trust Agreement and any such modification, amendment or supplement, respectively. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "TRUST PROPERTY" means (i) the Debentures, (ii) any cash on deposit in, or owing to, the Payment Account and (iii) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held by the Property Trustee pursuant to the trusts of this Trust Agreement. "TRUST SECURITY" means any one of the Common Securities or the Preferred Securities. "TRUST SECURITIES CERTIFICATE" means any one of the Common Securities Certificates or the Preferred Securities Certificates. "UNDERWRITING AGREEMENT" means the Underwriting Agreement, dated as of _____________, 2001, among the Trust, Cleveland Electric and the underwriters named therein. 9 16 ARTICLE II ESTABLISHMENT OF THE TRUST -------------------------- Section 2.01 NAME. The Trust created and continued hereby shall be known as Cleveland Electric Financing Trust I. Such name may be modified from time to time by the Administrative Trustees following written notice to the Holders of Trust Securities, in which name the Trustees may conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. Section 2.02 OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS. The office of the Delaware Trustee in the State of Delaware is White Clay Center, Route 273, Newark, Delaware 19711, or at such other address in Delaware as the Delaware Trustee may designate by written notice to the Securityholders and the Depositor. The principal place of business of the Trust is c/o The Cleveland Electric Illuminating Company, 76 South Main Street, Akron, Ohio 44308. Section 2.03 INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL EXPENSES. The Property Trustee acknowledges receipt in trust from the Depositor in connection with the Original Trust Agreement of the sum of $10, which constituted the initial Trust Property. The Depositor shall pay organizational expenses of the Trust as they arise or shall, upon request of any Trustee, promptly reimburse such Trustee for any such expenses paid by such Trustee. The Depositor shall make no claim upon the Trust Property for the payment of such expenses. Section 2.04 ISSUANCE OF THE PREFERRED SECURITIES. On _____________, 2001, the Depositor, on behalf of the Trust and pursuant to the Original Trust Agreement, executed and delivered the Underwriting Agreement. Contemporaneously with the execution and delivery of this Trust Agreement, the Administrative Trustees or any one of them, on behalf of the Trust, shall execute and deliver to the underwriters named therein Preferred Securities Certificates, registered in the name of the nominee of the initial Clearing Agency, in an aggregate amount of _____________ Preferred Securities having an aggregate Liquidation Amount of $_____________ against receipt of the aggregate purchase price of such Preferred Securities of $_____________ ($_____ per Preferred Security) which amount the Administrative Trustees shall promptly deliver to or to the order of the Property Trustee. In the event and to the extent the over-allotment option granted by the Trust and the Depositor pursuant to the Underwriting Agreement is exercised by such underwriters, on the Option Closing Date, the Administrative Trustees or any one of them, on behalf of the Trust, shall execute and deliver to the underwriters named therein Preferred Securities Certificates, registered in the name of the nominee of the initial Clearing Agency, in an aggregate amount up to ______ Preferred Securities having an aggregate Liquidation Amount of up to $_______ against receipt of the aggregate purchase price of such Preferred Securities of up to $______ ($_____ per Preferred Security), which amount the Administrative Trustees shall promptly deliver to or to the order of the Property Trustee. Section 2.05 ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE OF DEBENTURES. Contemporaneously with the execution and delivery of this Trust Agreement, (a) the Administrative Trustees or any one of them, on behalf of the Trust, shall execute and deliver to the Depositor Common Securities Certificates, registered in the name of the Depositor, in an 10 17 aggregate amount of _____________ Common Securities having an aggregate Liquidation Amount of $_____________, and in payment of the purchase price for such Common Securities, the Depositor shall deliver to the Trust the sum of $_____________; and (b) the Administrative Trustees, on behalf of the Trust, shall subscribe to and purchase from the Depositor Debentures, registered in the name of the Property Trustee on behalf of the Holders of the Trust Securities and having an aggregate principal amount equal to $_____________, and, in payment of the purchase price for such Debentures the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of $_____________. In the event and to the extent the over-allotment option granted by the Trust and the Depositor pursuant to the Underwriting Agreement is exercised by such underwriters, on the Option Closing Date, (a) the Administrative Trustees or any one of them, on behalf of the Trust, shall execute and deliver to the Depositor Common Securities Certificates, registered in the name of the Depositor, in an aggregate amount of up to _______ Common Securities having an aggregate Liquidation Amount of up to $_______ against payment by the Depositor of such amount; and (b) the Administrative Trustees or any one of them, on behalf of the Trust, shall subscribe to and purchase from the Depositor additional Debentures, registered in the name of the Property Trustee on behalf of the Holders of the Trust Securities and having an aggregate principal amount of up to $______, and, in payment of the purchase price for such additional Debentures the Property Trustee, on behalf of the Trust, shall deliver to the Depositor an amount equal to the aggregate principal amount of the additional Debentures being purchased. Section 2.06 DECLARATION OF TRUST. The exclusive purposes and functions of the Trust are (a) to issue and sell Trust Securities and use the proceeds from such sale to acquire the Debentures, and (b) to engage in those activities necessary, convenient or incidental thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to have all the rights, powers and duties to the extent set forth herein. The Property Trustee hereby declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Securityholders. The Trustees shall have all rights, powers and duties set forth herein and in accordance with applicable law with respect to accomplishing the purposes of the Trust. The Delaware Trustee shall be one of the Trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Business Trust Act, and, notwithstanding the foregoing or any other provision of this Trust Agreement, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Property Trustee or the Administrative Trustees set forth herein. Section 2.07 AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS. (a) The Trustees shall conduct the affairs of the Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in paragraph (b) of this Section and Article VIII of this Trust Agreement, and in accordance with the following provisions (ii) and (iii), the Trustees shall have the authority to enter into all transactions and agreements determined by the Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Trustees under this Trust Agreement, and to perform all acts in furtherance thereof, including without limitation, the following: 11 18 (i) As among the Trustees, the Administrative Trustees, acting singly or collectively, shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters: (A) the issuance and sale of the Trust Securities; (B) to cause the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Expense Agreement and the Certificate Depository Agreement and such other agreements as may be necessary or desirable in connection with the consummation hereof; (C) assisting in the registration of the Preferred Securities under the Securities Act of 1933, and under state securities or blue sky laws, and the qualification of this Trust Agreement as a trust indenture under the Trust Indenture Act; (D) assisting in the listing of the Preferred Securities upon such securities exchange or exchanges as shall be determined by the Depositor and the registration of the Preferred Securities under the Securities Exchange Act of 1934, and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing; (E) the sending of notices (other than notices of default) and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement; (F) the appointment of a Paying Agent, authenticating agent and Transfer Agent and Registrar in accordance with this Trust Agreement; (G) registering transfers of the Trust Securities in accordance with this Trust Agreement in their capacity as initial Transfer Agent and Registrar; (H) to the extent provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Delaware; (I) unless otherwise determined by the Depositor or the Property Trustee, or as otherwise required by the Delaware Business Trust Act or the Trust Indenture Act, to execute and deliver on behalf of the Trust (either acting alone or together with any or all of the Administrative Trustees) any documents that the Administrative Trustees have the power to execute and deliver pursuant to this Trust Agreement; and (J) the taking of any action incidental to the foregoing as the Administrative Trustees may from time to time determine is necessary or advisable to protect and conserve the Trust Property for the benefit of the 12 19 Securityholders (without consideration of the effect of any such action on any particular Securityholder). The Administrative Trustee shall give notice to the Securityholders of any Extension Period or any extension on the Stated Maturity in accordance with this Trust Agreement. (ii) As among the Trustees, the Property Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following ministerial matters: (A) the establishment of the Payment Account; (B) the receipt of the Debentures; (C) the deposit of interest, principal and any other payments made in respect of the Debentures in the Payment Account; (D) the distribution of amounts owed to the Securityholders in respect of the Trust Securities in accordance with the terms of this Trust Agreement; (E) the sending of notices of default and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with the terms of this Trust Agreement; (F) the distribution of the Trust Property in accordance with the terms of this Trust Agreement; (G) to cause the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Certificate Depository Agreement; (H) as provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Trust and the execution of the certificate of cancellation to be prepared and filed by the Administrative Trustees with the Secretary of State of the State of Delaware; and (I) the taking of any ministerial action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to protect and conserve the Trust Property for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder). Subject to this Section 2.07(a)(ii), the Property Trustee shall have none of the duties, powers or authority of the Administrative Trustees set forth in Sections 2.07(a)(i) and 2.07(d) or the Depositor set forth in Sections 2.07(c) and 2.07(d). The Property Trustee shall have the power and authority to exercise all of the rights, powers and privileges of a holder of Debentures under the Subordinated Indenture and, if an Event of Default occurs and is continuing, the Property Trustee may, for the benefit of Holders of the Trust Securities, in its discretion, proceed to 13 20 protect and enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of such Trust Securities. (b) So long as this Trust Agreement remains in effect, the Trust (or the Trustees acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Trustees shall not (i) acquire any investments or engage in any activities not authorized by this Trust Agreement, (ii) sell, assign, transfer, exchange, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Securityholders, except as expressly provided herein, (iii) take any action that would cause the Trust to be treated as an association taxable as a corporation for United States Federal income tax purposes, (iv) incur any indebtedness for borrowed money or (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Trustees shall defend all claims and demands of all Persons at any time claiming any Lien on any of the Trust Property adverse to the interest of the Trust or the Securityholders in their capacity as Securityholders. (c) In connection with the issue and sale of the Preferred Securities, the Depositor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) to prepare for filing, execute and file with the Commission on behalf of the Trust a registration statement on Form S-2 in relation to the Preferred Securities and the Debentures, including any amendments thereto; (ii) to determine the states in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and to do any and all such acts, other than actions which must be taken by or on behalf of the Trust, and advise the Trustees of actions they must take on behalf of the Trust, and prepare for execution and filing any documents to be executed and filed by the Trust or on behalf of the Trust, as the Depositor deems necessary or advisable in order to comply with the applicable laws of any such states; (iii) to prepare for filing, execute and file with the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market on behalf of the Trust an application for listing upon notice of issuance of any Preferred Securities; (iv) to prepare for filing, execute and file with the Commission on behalf of the Trust a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, including any amendments thereto; (v) to negotiate the terms of, and execute and deliver, the Underwriting Agreement providing for the sale of the Preferred Securities; and (vi) any other actions necessary or desirable to carry out any of the foregoing activities. 14 21 (d) Notwithstanding anything herein to the contrary, the Administrative Trustees are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not be deemed to be an "investment company" required to be registered under the Investment Company Act of 1940, as amended, or treated as an association taxable as a corporation for United States Federal income tax purposes and so that the Debentures will be treated as indebtedness of the Depositor for United States Federal income tax purposes. In this connection, the Depositor and the Administrative Trustees are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust or this Trust Agreement, that each of the Depositor and the Administrative Trustees determines in its discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect the interests of the Holders of the Preferred Securities. Section 2.08 ASSETS OF TRUST. The assets of the Trust shall consist of the Trust Property. Section 2.09 TITLE TO TRUST PROPERTY. Legal title to all Trust Property shall be vested at all times in the Property Trustee (in its capacity as such) and shall be held and administered by the Property Trustee for the benefit of the Securityholders and the Trust in accordance with this Trust Agreement. Section 2.10 MERGERS. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any Person, except as provided by (b) and (c) of this Section 2.10 or by Section 9.04. (b) The Trust may, with the consent of the Administrative Trustees or, if there are more than two, a majority of the Administrative Trustees and without the consent of the Holders of the Securities, the Delaware Trustee or the Property Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; provided that: (i) such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank with respect to Distributions and payments upon liquidation, redemption and otherwise; (ii) the Debenture Issuer expressly acknowledges a trustee of the Successor Entity that possesses the same powers and duties as the Property Trustee as the Holder of the Debentures; (iii) the Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or with any other organization on which the Preferred Securities are then listed or quoted; 15 22 (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization; (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of such Holders' interests in the Successor Entity as a result of such merger, consolidation, amalgamation or replacement); (vi) such Successor Entity has a purpose substantially identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation or replacement, the Trust has received an Opinion of Counsel of nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the Successor Entity); (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; (C) following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will not be classified as an association taxable as corporation for United States federal income tax purposes; and (viii) the Depositor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Preferred Securities Guarantee. (c) Notwithstanding Section 2.10(b), the Trust shall not, without the consent of Holders of 100% in Liquidation Amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it, unless the Trustees shall have received an Opinion of Counsel from nationally recognized independent counsel experienced in such matters, to the effect that such consolidation, amalgamation, merger or replacement would not cause the Trust or Successor Entity to be classified as an association taxable as a corporation for United States federal income tax purposes. 16 23 ARTICLE III PAYMENT ACCOUNT --------------- Section 3.01 PAYMENT ACCOUNT. (a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and any agent of the Property Trustee shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits in and withdrawals from the Payment Account in accordance with this Trust Agreement. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee in the Payment Account for the exclusive benefit of the Securityholders and for distribution as herein provided, including (and subject to) any priority of payments provided for herein. (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments or proceeds with respect to, the Debentures. Amounts held in the Payment Account shall not be invested by the Property Trustee pending distribution thereof. ARTICLE IV DISTRIBUTIONS; REDEMPTION ------------------------- Section 4.01 DISTRIBUTIONS. (a) Distributions on the Trust Securities shall be cumulative, and will accumulate whether or not there are funds of the Trust available for the payment of Distributions. Distributions shall accrue from _____________, 2001, and, except in the event that Cleveland Electric exercises its right to extend the interest payment period for the Debentures pursuant to Section 3.01 of the Subordinated Indenture, shall be payable quarterly in arrears on March 31, June 30, September 30 or December 31 of each year, commencing on _____________, 2001. If any date on which Distributions are otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, payment of such Distribution shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date (each date on which distributions are payable in accordance with this Section 4.01(a), a "Distribution Date"). (b) Distributions payable on the Trust Securities shall be fixed at a rate of ___% per annum of the Liquidation Amount of the Trust Securities. Distributions that are in arrears for more than one quarter (whether due to an extension of the interest payment period for the Debentures under Section 3.01 of the Subordinated Indenture or otherwise) will accrue interest at the rate per annum set forth above and the interest so accrued at the end of each quarter and remaining unpaid will itself bear interest thereafter (at the rate specified in the Trust Securities to the extent permitted by applicable law) until paid on the same basis. The term "Distributions" as used herein includes any such interest payable, unless otherwise stated. The amount of Distributions payable (and the amount, if any, of interest payable, including interest on overdue interest) for any full quarterly period shall be computed on the basis of twelve 30-day months and a 360-day year. 17 24 (c) Distributions on the Trust Securities shall be made and shall be deemed payable on each Distribution Date only to the extent that the Trust has funds legally available in the Payment Account for the payment of such Distributions. (d) Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be one Business Day prior to such Distribution Date; provided, however, that in the event that the Preferred Securities do not remain in book-entry-only form, the relevant record date shall be the date (whether or not a Business Day) 15 days prior to the relevant Distribution Date. Section 4.02 REDEMPTION. (a) On each Debenture Redemption Date and at Maturity (as defined in the Subordinated Indenture), the Trust will be required to redeem a Like Amount of Trust Securities at the Redemption Price. (b) Notice of redemption shall be given by the Administrative Trustees by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Security Register. All notices of redemption or liquidation shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) the CUSIP number; (iv) if less than all the Outstanding Trust Securities are to be redeemed, the identification and the total Liquidation Amount of the particular Trust Securities to be redeemed; and (v) that on the Redemption Date the Redemption Price will become due and payable upon each such Trust Security to be redeemed and that Distributions thereon will cease to accrue on and after said date. (c) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption of the Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be deemed payable on each Redemption Date only to the extent that the Trust has funds immediately available in the Payment Account for the payment of such Redemption Price. (d) If the Administrative Trustees give a notice of redemption in respect of any Preferred Securities, then, by 12:00 noon, New York time, on the Redemption Date, subject to Section 4.02(c), the Property Trustee will, so long as the Preferred Securities are in book-entry-only form, irrevocably deposit with the Clearing Agency for the Preferred Securities funds sufficient to pay the applicable Redemption Price with respect to the Preferred Securities and shall give such Clearing Agency irrevocable instructions and authority to pay the Redemption Price to the holders thereof. If the Preferred Securities are no longer in book-entry-only form, the Property Trustee, subject to Section 4.02(c), shall irrevocably deposit with the Paying Agent 18 25 funds sufficient to pay the applicable Redemption Price with respect to the Preferred Securities and will give the Paying Agent irrevocable instructions to pay the Redemption Price to the holders thereof. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Securities Register for the Trust Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of Securityholders holding Trust Securities so called for redemption will cease, except the right of such Securityholders to receive the Redemption Price, but without interest, and such Trust Securities will cease to be outstanding. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, payment of such distribution shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Trust or by the Depositor pursuant to the Guarantee, Distributions on such Trust Securities will continue to accrue, at the then applicable rate, from the Redemption Date originally established by the Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. (e) Payment of the Redemption Price on the Trust Securities shall be made to the Securityholders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be one Business Day prior to the relevant Redemption Date; provided, however, that in the event that the Preferred Securities do not remain in book-entry-only form, the relevant record date shall be the fifteenth day (whether or not a Business Day) prior to the Redemption Date. (f) If less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated pro rata to the Common Securities and the Preferred Securities based on the relative liquidation amounts of such classes. The particular Preferred Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Property Trustee from the Outstanding Preferred Securities not previously called for redemption, by such method as the Property Trustee shall deem fair and appropriate and which may provide for the selection for a redemption of portions (equal to $25 or integral multiple thereof) of the Liquidation Amount of Preferred Securities of a denomination larger than $25. The Property Trustee shall promptly notify the Security Registrar in writing of the Preferred Securities selected for redemption and, in the case of any Preferred Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Preferred Securities shall relate, in the case of any Preferred Securities redeemed or to be redeemed only in part, to the portion of the Liquidation Amount of Preferred Securities which has been or is to be redeemed. 19 26 Section 4.03 SUBORDINATION OF COMMON SECURITIES. (a) Payment of Distributions (including Additional Amounts, if applicable) on, and the Redemption Price of, the Trust Securities, as applicable, shall be made pro rata based on the Liquidation Amount of the Trust Securities; provided, however, that if on any Distribution Date or Redemption Date a Debenture Event of Default shall have occurred and be continuing, no payment of any Distribution (including Additional Amounts, if applicable) on, or Redemption Price of, any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including Additional Amounts, if applicable) on all Outstanding Preferred Securities for all distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all Outstanding Preferred Securities, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions (including Additional Amounts, if applicable) on, or Redemption Price of, Preferred Securities then due and payable. The existence of an Event of Default does not entitle the Holders of Trust Securities to accelerate the maturity thereof. (b) In the case of the occurrence of any Debenture Event of Default, the Holder of Common Securities will be deemed to have waived any right to act with respect to any Event of Default under this Trust Agreement until the effect of all such Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated. Until any such Events of Default under this Trust Agreement with respect to the Preferred Securities have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Preferred Securities and not the Holder of the Common Securities, and only the Holders of the Preferred Securities will have the right to direct the Property Trustee to act on their behalf. Section 4.04 PAYMENT PROCEDURES. Payments in respect of the Preferred Securities shall be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or, if the Preferred Securities are held by a Clearing Agency, such Distributions shall be made to the Clearing Agency, which shall credit the relevant Persons' accounts at such Clearing Agency on the applicable distribution dates. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Common Securityholder. Section 4.05 TAX RETURNS AND REPORTS. The Administrative Trustees shall prepare (or cause to be prepared), and file, on behalf of the Trust, all applicable United States Federal, state and local tax returns and tax information reports that are required to be filed with respect to the Trust. The Administrative Trustees shall provide the Depositor and the Property Trustee with a copy of all such returns, reports and schedules promptly after such filing or furnishing. The Trustees shall comply with United States Federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Securityholders under the Trust Securities. 20 27 ARTICLE V TRUST SECURITIES CERTIFICATES ----------------------------- Section 5.01 INITIAL OWNERSHIP. Upon the formation of the Trust and the contribution by the Depositor pursuant to Section 2.03 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are outstanding, the Depositor shall be the sole beneficial owner of the Trust. Section 5.02 THE TRUST SECURITIES CERTIFICATES. Subject to Section 5.11, the Preferred Securities Certificates shall be issued in minimum denominations of $1,000 Liquidation Amount and integral multiples of $25 in excess thereof, and the Common Securities Certificates shall be issued in denominations of $25 Liquidation Amount and integral multiples thereof. The Trust Securities Certificates shall be executed on behalf of the Trust by manual or facsimile signature of at least one Administrative Trustee. Trust Securities Certificates bearing the signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Securityholder, and shall be entitled to the rights and subject to the obligations of a Securityholder hereunder, upon due registration of such Trust Securities Certificate in such transferee's name pursuant to Section 5.04. Section 5.03 DELIVERY OF TRUST SECURITIES CERTIFICATES. On the Closing Date and the Option Closing Date, the Administrative Trustees shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 2.04 and 2.05, to be executed on behalf of the Trust and delivered to or upon the written order of the Depositor signed by its chairman of the board, its president or any vice president, without further corporate action by the Depositor, in authorized denominations. Section 5.04 REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED SECURITIES CERTIFICATES. The Transfer Agent and Registrar shall keep or cause to be kept, at the office or agency maintained pursuant to Section 5.08, a Securities Register in which, subject to such reasonable regulations as it may prescribe, the Transfer Agent and Registrar shall provide for the registration of Preferred Securities Certificates and the Common Securities Certificates (subject to Section 5.10 in the case of the Common Securities Certificates) and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. Until such time as they have appointed a Transfer Agent and Registrar under Section 2.07(a)(i)(F) hereof, the Administrative Trustees, acting together, shall be the initial Transfer Agent and Registrar. Upon surrender for registration of transfer of any Preferred Securities Certificate at the office or agency maintained pursuant to Section 5.08, the Administrative Trustees or any one of them on behalf of the Trust shall execute and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities Certificates in authorized denominations of a like aggregate Liquidation Amount dated the date of execution by the Administrative Trustee or Trustees. The Transfer Agent and Registrar shall not be required to register the transfer of or 21 28 exchange (i) Preferred Securities during a period of 15 days immediately preceding the date on which notice identifying the serial numbers for the Preferred Securities called for redemption is mailed, or (ii) any Preferred Securities that have been called for redemption. At the option of a Holder, Preferred Securities Certificates may be exchanged for other Preferred Securities Certificates in authorized denominations of the same class and of a like aggregate Liquidation Amount upon surrender of the Preferred Securities Certificates to be exchanged at the office or agency maintained pursuant to Section 5.08. Every Preferred Securities Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Administrative Trustees and the Transfer Agent and Registrar duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Preferred Securities Certificate surrendered for registration of transfer or exchange shall be cancelled and subsequently disposed of by the Administrative Trustees in accordance with customary practice by trustees generally. No service charge shall be made for any registration of transfer or exchange of Preferred Securities Certificates, but the Transfer Agent and Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities Certificates. Section 5.05 MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES CERTIFICATES. If (a) any mutilated Trust Securities Certificate shall be surrendered to the Transfer Agent and Registrar, or if the Transfer Agent and Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate and (b) there shall be delivered to the Transfer Agent and Registrar and the Administrative Trustees such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Administrative Trustees or any one of them on behalf of the Trust shall execute and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like class, tenor and denomination. In connection with the issuance of any new Trust Securities Certificate under this Section, the Administrative Trustees or the Transfer Agent and Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any Trust Securities Certificate issued pursuant to this Section shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. Section 5.06 PERSONS DEEMED SECURITYHOLDERS. Prior to due presentation of a Trust Securities Certificate for registration of transfer, the Trustees or the Transfer Agent and Registrar shall treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner of such Trust Securities Certificate for the purpose of receiving distributions and for all other purposes whatsoever, and neither the Trustees nor the Transfer Agent and Registrar shall be bound by any notice to the contrary. Section 5.07 ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES. The Administrative Trustees shall furnish or cause to be furnished a list (x) to the Depositor, within 22 29 15 days after receipt by any Administrative Trustee of a request therefor in such form as such Administrative Trustees may reasonably require, of the names and addresses of the Securityholders as of the most recent Record Date and (y) to the Property Trustee, promptly after receipt by any Administrative Trustee of a request therefor from the Property Trustee in order to enable the Property Trustee to discharge its obligations under this Trust Agreement. If three or more Securityholders or one or more Holders of Trust Securities Certificates evidencing not less than 25% in outstanding Liquidation Amount apply in writing to any Administrative Trustee, and such application states that the applicants desire to communicate with other Securityholders with respect to their rights under this Trust Agreement or under the Trust Securities Certificates and such application is accompanied by a copy of the communication that such applicants propose to transmit, then the Administrative Trustees shall, within five Business Days after the receipt of such application, afford such applicants access during normal business hours to the current list of Securityholders. Each Holder, by receiving and holding a Trust Securities Certificate, shall be deemed to have agreed not to hold either the Depositor or the Trustees accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. Section 5.08 MAINTENANCE OF OFFICE OR AGENCY. The Administrative Trustees shall maintain in the Borough of Manhattan, The City of New York, an office or offices or agency or agencies where Preferred Securities Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Trustees in respect of the Trust Securities Certificates may be served. The Administrative Trustees initially designate the Bank, 101 Barclay Street, Floor 21 West, New York, New York 10286 as their principal trust office for such purposes. The Administrative Trustees shall give prompt written notice to the Depositor, the Property Trustee and the Securityholders of any change in the location of the Securities Register or any such office or agency. Section 5.09 APPOINTMENT OF PAYING AGENT. The Paying Agent shall make distributions to Securityholders from the Payment Account and shall report the amounts of such distributions to the Property Trustee and the Administrative Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making the distributions referred to above. The Administrative Trustees may revoke such power and remove the Paying Agent if such Trustees determine in their sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement in any material respect. The Paying Agent shall initially be the Bank, and it may choose any co-paying agent that is acceptable to the Administrative Trustees and the Depositor. Any Person acting as a Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Administrative Trustees, the Property Trustee and the Depositor. In the event that the Bank shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrative Trustees shall appoint a successor that is acceptable to the Property Trustee and the Depositor to act as Paying Agent (which shall be a bank or trust company). The Administrative Trustees shall cause such successor Paying Agent or any additional Paying Agent appointed by the Administrative Trustees to execute and deliver to the Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Securityholders in trust for the benefit of the Securityholders entitled thereto until such sums shall be paid to such Securityholders. The Paying Agent shall 23 30 return all unclaimed funds to the Property Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Sections 8.01, 8.03 and 8.06 shall apply to the Bank also in its role as Paying Agent, for so long as the Bank shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. Section 5.10 OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR. On the Closing Date and on each other date provided for in Section 2.05, the Depositor shall acquire, and thereafter retain, beneficial and record ownership of the Common Securities. Except in connection with a transaction involving the Depositor that would be permitted under Article VIII of the Subordinated Indenture, to the fullest extent permitted by law, any attempted transfer of the Common Securities shall be void. The Administrative Trustees shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS PROVIDED IN THE TRUST AGREEMENT." Section 5.11 BOOK-ENTRY PREFERRED SECURITIES CERTIFICATES; COMMON SECURITIES CERTIFICATE. (a) The Preferred Securities Certificates, upon original issuance, will be issued in the form of one or more typewritten Global Preferred Securities Certificate or Certificates representing Book-Entry Preferred Securities Certificates (each a "Global Certificate"), to be delivered to The Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the Trust. Such Preferred Securities Certificate or Certificates shall initially be registered on the Securities Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Owner will receive a definitive Preferred Securities Certificate representing such Owner's interest in such Preferred Securities, except as provided in Section 5.13. Unless and until Definitive Preferred Securities Certificates have been issued to Owners pursuant to Section 5.13: (i) the provisions of this Section 5.11(a) shall be in full force and effect; (ii) the Transfer Agent and Registrar and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Trust Agreement relating to the Book-Entry Preferred Securities Certificates (including the payment of Distributions on the Book-Entry Preferred Securities and the giving of instructions or directions to Owners of Book-Entry Preferred Securities) as the sole Holder of Book-Entry Preferred Securities and shall have no obligations to the Owners thereof; (iii) to the extent that the provisions of this Section 5.11 conflict with any other provisions of this Trust Agreement, the provisions of this Section 5.11 shall control; (iv) the rights of the Owners of the Book-Entry Preferred Securities Certificates shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Owners and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Certificate Depository Agreement, unless and until Definitive Preferred Securities Certificates are issued pursuant to Section 5.13, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit payments on the Preferred Securities to such Clearing Agency Participants; and 24 31 (v) whenever this Trust Agreement requires or permits actions to be taken based upon instructions or directions of Holders of Trust Certificates evidencing a specified percentage of the aggregate Liquidation Amount, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Owners and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the applicable class of Trust Certificates and has delivered such instructions to the Administrative Trustees. (b) Common Securities Certificates representing the Common Securities shall be issued to the Depositor in the form of a typewritten or definitive Common Securities Certificate. Section 5.12 NOTICES TO CLEARING AGENCY. To the extent a notice or other communication to the Owners is required under this Trust Agreement, unless and until Definitive Preferred Securities Certificates shall have been issued to Owners pursuant to Section 5.13, the Trustees shall give all such notices and communications specified herein to be given to Owners to the Clearing Agency, and shall have no obligations to the Owners. Section 5.13 DEFINITIVE PREFERRED SECURITIES CERTIFICATES. If (i) the Depositor elects and advises the Trustees in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Preferred Securities Certificates, and the Depositor is unable to locate a qualified successor, (ii) the Depositor at its option advises the Trustees in writing that it elects to terminate the book-entry system through the Clearing Agency or (iii) after the occurrence of a Debenture Event of Default, Owners of Preferred Securities Certificates representing beneficial interests aggregating at least a majority of the Liquidation Amount of Preferred Securities advise the Clearing Agency in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interest of the Owners of Preferred Securities Certificates, then the Clearing Agency shall notify all Owners of Preferred Securities Certificates and the Trustees of the occurrence of any such event and of the availability of the Definitive Preferred Securities Certificates to such Owners requesting the same. Upon surrender to the Administrative Trustees of the typewritten Preferred Securities Certificate or Certificates representing the Book Entry Preferred Securities Certificates by the Clearing Agency, accompanied by registration instructions, the Administrative Trustees, or any one of them, shall execute the Definitive Preferred Securities Certificates in accordance with the instructions of the Clearing Agency. Neither the Transfer Agent and Registrar nor the Trustees shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Preferred Securities Certificates, the Trustees shall recognize the Holders of the Definitive Preferred Securities Certificates as Securityholders. The Definitive Preferred Securities Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrative Trustees, as evidenced by the execution thereof by the Administrative Trustees or any one of them. Section 5.14 RIGHTS OF SECURITYHOLDERS. The legal title to the Trust Property is vested exclusively in the Property Trustee (in its capacity as such) in accordance with Section 2.09, and the Securityholders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Trust Securities, and they shall have no right 25 32 to call for any partition or division of property, profits or rights of the Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Trust Securities shall have no preemptive or similar rights and when issued and delivered to Securityholders against payment of the purchase price therefor will be fully paid and nonassessable by the Trust. Except as otherwise provided in the Expense Agreement and Section 10.01 hereof, the Holders of the Trust Securities, in their capacities as such, shall 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. ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING ----------------------------------------- Section 6.01 LIMITATIONS ON VOTING RIGHTS. (a) Except as provided in this Section, in Sections 10.03 and 8.10 hereof, and in the Subordinated Indenture and the Guarantee, and as otherwise required by law, no Holder of Preferred Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Securityholders from time to time as partners or members of an association. (b) The Holders of a majority in aggregate Liquidation Amount of the Outstanding Preferred Securities will have the right to (i) direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee or to direct the exercise of any trust or power conferred upon the Property Trustee under this Trust Agreement, including the right to direct the Property Trustee to exercise the remedies available to it as a holder of the Debentures under the Subordinated Indenture; (ii) on behalf of the Holders, waive any past Debenture Event of Default that is waivable under the Subordinated Indenture; or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided, however, that where a consent under the Subordinated Indenture requires the consent of all holders of the Debentures affected thereby, the Property Trustee may only give such consent at the direction of all Holders of the Preferred Securities. If the Property Trustee fails to enforce its rights under the Debentures, to the fullest extent permitted by law, a Holder of Preferred Securities may, after such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against the Debenture Issuer to enforce the Property Trustee's rights under the Debentures without first instituting any legal proceeding against the Property Trustee or any other Person. The Property Trustee shall notify all Holders of the Preferred Securities of any notice of default received from the Debenture Trustee with respect to the Debentures. Except with respect to directing the time, method and place of conducting a proceeding for a remedy under the Subordinated Indenture, the Property Trustee shall not take any of the actions described in clauses (i), (ii) or (iii), unless it shall receive an Opinion of Counsel from nationally recognized independent counsel experienced in such matters, to the effect that the Issuer will not be classified as an association taxable as a corporation for United States Federal income tax purposes on account of such action. 26 33 (c) If any proposed amendment to this Trust Agreement provides for, or the Trustees otherwise propose to effect, other than pursuant to the terms of this Trust Agreement, (i) any action that would adversely affect the powers, preferences or special rights of the Holders of the Preferred Securities, whether by way of amendment to this Trust Agreement or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, then the Holders of Outstanding Preferred Securities will be entitled to vote as a class on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least 66-2/3% in Liquidation Amount of the Outstanding Preferred Securities. No amendment to this Trust Agreement may be made if, as a result of such amendment, the Trust would be classified as an association taxable as a corporation for United States Federal income tax purposes, and the Trustees shall be entitled to receive and shall be fully protected in relying upon an Opinion of Counsel from nationally recognized independent counsel experienced in such matters to such effect. (d) If (i) the Trust fails to make Distributions in full on the Preferred Securities for six (6) consecutive quarterly Distribution periods, or (ii) an Event of Default occurs and is continuing (each of (i) and (ii) being an "Appointment Event"), then the Holders of the Preferred Securities, acting as a single class, will be entitled by the vote of a majority in Liquidation Amount of the Outstanding Preferred Securities to appoint a Special Administrative Trustee in accordance with Section 8.10 of this Trust Agreement. Any Holder of Preferred Securities (other than the Depositor, or any entity directly or indirectly controlling or controlled, by or under direct or indirect common control with the Depositor) will be entitled to nominate any person to be appointed as Special Administrative Trustee. For purposes of determining whether the Trust has failed to make Distributions in full on the Preferred Securities for six (6) consecutive quarterly Distribution periods, Distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative Distributions have been or are contemporaneously are paid with respect to all quarterly Distribution periods terminating on or prior to the date of payment of such cumulative Distributions. Not later than 30 days after such right to appoint a Special Administrative Trustee arises, the Administrative Trustees will convene a meeting of the Holders of the Preferred Securities for the purpose of appointing a Special Administrative Trustee. If the Administrative Trustees fail to convene such meeting within such 30-day period, the Holders of 10% in Liquidation Amount of the Outstanding Preferred Securities will be entitled to convene such a meeting in accordance with Section 6.03 of this Trust Agreement. Notwithstanding the appointment of a Special Administrative Trustee, Cleveland Electric as issuer of the Debentures shall retain all rights under the Indenture, including the right to extend the interest payment period on the Debentures. Section 6.02 NOTICE OF MEETINGS. Notice of all meetings of the Preferred Securityholders, stating the time, place and purpose of the meeting, shall be given by the Administrative Trustees pursuant to Section 10.08 to each Preferred Securityholder of record, at his registered address, at least 15 days and not more than 90 days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. Any and all notices to which any Preferred Securityholder hereunder may be entitled and any and all communications shall be deemed duly served or given if mailed, postage prepaid, 27 34 addressed to any Preferred Securityholder of record at his last known address as recorded on the Securities Register. Section 6.03 MEETINGS OF PREFERRED SECURITYHOLDERS. No annual meeting of Securityholders is required to be held. The Administrative Trustees, however, shall call a meeting of Securityholders if directed to do so in writing by the Holders of at least 25% in Liquidation Amount of the Outstanding Preferred Securities, and the Administrative Trustees or the Property Trustee may, at any time in their discretion, call a meeting of Preferred Securityholders to vote on any matters as to which the Preferred Securityholders are entitled to vote. Holders of at least 50% in Liquidation Amount of the Preferred Securities, present in person or by proxy, shall constitute a quorum at any meeting of Securityholders. If a quorum is present at a meeting, an affirmative vote by the Holders of the lesser of (i) 66-2/3% in Liquidation Amount of Preferred Securities present, either in person or by proxy, at such meeting and (ii) a majority in Liquidation Amount of the Outstanding Preferred Securities shall constitute the action of the Securityholders, unless this Trust Agreement requires a greater number of affirmative votes. Section 6.04 VOTING RIGHTS. Securityholders shall be entitled to one vote for each $25 of Liquidation Amount represented by their Trust Securities in respect of any matter as to which such Securityholders are entitled to vote. Section 6.05 PROXIES, ETC. At any meeting of Securityholders, any Securityholder entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustees, or with such other officer or agent of the Trust as the Administrative Trustees may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of the Property Trustee, proxies may be solicited in the name of the Property Trustee or one or more officers of the Property Trustee. Only Securityholders of record shall be entitled to vote. When Trust Securities are held jointly by several Persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Securityholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. Section 6.06 SECURITYHOLDER ACTION BY WRITTEN CONSENT. Any action which may be taken by Securityholders at a meeting may be taken without a meeting and without prior notice if the Holders of a majority in Liquidation Amount of all Outstanding Trust Securities entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any express provision of this Trust Agreement) shall consent to the action in writing. Section 6.07 RECORD DATE FOR VOTING AND OTHER PURPOSES. For the purposes of determining the Securityholders who are entitled to notice of and to vote at any meeting or by written consent, or to participate in any distribution on the Trust Securities in respect of which a 28 35 record date is not otherwise provided for in this Trust Agreement, or for the purpose of any other action, the Administrative Trustees may from time to time fix a date, not more than 90 days prior to the date of any meeting of Securityholders or the payment of distribution or other action, as the case may be, as a record date for the determination of the identity of the Securityholders of record for such purposes. Section 6.08 ACTS OF SECURITYHOLDERS. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Securityholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Securityholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Trust Agreement and (subject to Section 8.01) conclusive in favor of the Trustees, if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgements of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which any Trustee receiving the same deems sufficient. The ownership of Preferred Securities shall be proved by the Securities Register. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Securityholder of any Trust Security shall bind every future Securityholder of the same Trust Security and the Securityholder of every Trust Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. Without limiting the foregoing, a Securityholder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such liquidation amount. If any dispute shall arise between the Securityholders of Trust Securities and the Administrative Trustees or among such Securityholders or Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, consent, waiver or other Act of such Securityholder or Trustee under this Article VI, then the 29 36 determination of such matter by the Property Trustee shall be conclusive with respect to such matter. Section 6.09 INSPECTION OF RECORDS. Subject to Section 5.07 concerning access to the list of Securityholders, upon reasonable notice to the Administrative Trustees and the Property Trustee, the other records of the Trust shall be open to inspection by Securityholders during normal business hours for any purpose reasonably related to such Securityholder's interest as a Securityholder. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE AND THE DELAWARE TRUSTEE ----------------------------------------- Section 7.01 PROPERTY TRUSTEE. The Property Trustee hereby represents and warrants for the benefit of the Depositor and the Securityholders that: (a) the Property Trustee is a banking corporation or trust company duly organized, validly existing and in good standing under the laws of the State of New York; (b) the Property Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) this Trust Agreement has been duly authorized, executed and delivered by the Property Trustee and constitutes the valid and legally binding agreement of the Property Trustee enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (d) the execution, delivery and performance by the Property Trustee of this Trust Agreement will not violate, conflict with or constitute a breach of the Property Trustee's charter or by-laws; and (e) neither the authorization, execution or delivery by the Property Trustee of this Trust Agreement nor the consummation of any of the transactions by the Property Trustee contemplated herein require the consent or approval of, the giving of notice to, the registration with any Federal or New York banking authority. Section 7.02 DELAWARE TRUSTEE. The Delaware Trustee represents and warrants for the benefit of the Depositor and the Securityholders that: (a) the Delaware Trustee is a banking corporation or trust company duly organized, validly existing and in good standing under the laws of the State of Delaware; 30 37 (b) the Delaware Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) this Trust Agreement has been duly authorized, executed and delivered by the Delaware Trustee and constitutes the valid and legally binding agreement of the Delaware Trustee enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (d) the execution, delivery and performance by the Delaware Trustee of this Trust Agreement will not violate the Delaware Trustee's charter or by-laws; and (e) neither the authorization, execution or delivery by the Delaware Trustee of this Trust Agreement nor the consummation of any of the transactions by the Delaware Trustee contemplated herein require the consent or approval of, the giving of notice to, the registration with any Federal or Delaware banking authority. ARTICLE VIII THE TRUSTEES ------------ Section 8.01 CERTAIN DUTIES AND RESPONSIBILITIES. (a) The duties and responsibilities of the Trustees shall be restricted to those set forth in the express provisions of this Trust Agreement and, in the case of the Property Trustee, as provided in the Trust Indenture Act in respect of an indenture trustee under that Act, and no implied covenants or obligations shall be read into this Trust Agreement against any of the Trustees. For purposes of Sections 315(a) and 315(c) of the Trust Indenture Act, the term "default" is hereby defined as an Event of Default which has occurred and is continuing. Notwithstanding the foregoing, no provision of this Trust Agreement shall require any of the Trustees to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding anything contained in this Trust Agreement to the contrary, the duties and responsibilities of the Property Trustee under this Trust Agreement shall be subject to the protections, exculpations and limitations on liability afforded to the Property Trustee under this Trust Agreement, the Delaware Business Trust Act, to the extent applicable, Rule 3a-7 under the Investment Company Act or any successor rule thereunder, and to an indenture trustee under the Trust Indenture Act. For the purposes of Section 315(d)(2) of the Trust Indenture Act, the term "responsible officer" is hereby defined as a Responsible Officer and the chairman or vice-chairman of the board of directors, the chairman or vice-chairman of the executive committee of the board of directors, the president, any vice president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller and any assistant controller of the Property Trustee, or any other officer of the Property Trustee customarily performing functions similar to those performed by a Responsible Officer or any of the above designated officers and 31 38 also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Trustees shall be subject to the provisions of this Section 8.01. (b) All payments made by the Property Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the income and proceeds from the Trust Property and only to the extent that there shall be sufficient income or proceeds from the Trust Property to enable the Property Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Securityholder, by its acceptance of a Trust Security, agrees that it will look solely to the income and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 8.01(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act. (c) All duties and responsibilities of the Property Trustee contained in this Trust Agreement are subject to the following: (i) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Trust Property and the Property Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Trust Agreement, as an indenture trustee under the Trust Indenture Act, the Delaware Business Trust Act and, to the extent applicable, Rule 3a-7 under the Investment Company Act or any successor rule thereunder; (ii) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Trust Property or the payment of any taxes or assessments levied thereon or in connection therewith; (iii) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Depositor. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Property Trustee pursuant to Section 2.07(a)(ii)(A) and except to the extent otherwise required by law; (iv) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for the default or misconduct of the Administrative Trustees or the Depositor. Section 8.02 NOTICE OF DEFAULTS. Within five Business Days after the occurrence of any Event of Default known to the Property Trustee, the Property Trustee shall transmit, in the 32 39 manner and to the extent provided in Section 10.08, notice of any default known to the Property Trustee to the Securityholders, the Administrative Trustees and the Depositor, unless such default shall have been cured or waived. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. Section 8.03 CERTAIN RIGHTS OF PROPERTY TRUSTEE. Subject to the provisions of Section 8.01 and except as provided by law: (a) the Property Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any direction or act of the Depositor or the Administrative Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers' Certificate or an instrument signed by the requisite number of Administrative Trustees, as the case may be; and any resolution of the Board of Directors mentioned herein may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Depositor or the Administrative Trustees; (d) the Property Trustee may consult with counsel of its choice and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Property Trustee shall be under no obligation to expend or risk its own funds or to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Holders pursuant to this Trust Agreement, unless such Holders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses (including attorneys' fees and expenses) and liabilities which might be incurred by it in compliance with such request or direction; (f) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Property Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Depositor personally or by agent or attorney; 33 40 (g) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the Property Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Trust Agreement; (i) the Property Trustee shall not be charged with knowledge or deemed to have notice of any default, Event of Default, Appointment Event or Special Event with respect to the Trust Securities unless either (1) a Responsible Officer of the Property Trustee shall have actual knowledge of the default, Event of Default, Appointment Event or Special Event, as the case may be, or (2) written notice of such default, Event of Default, Appointment Event or Special Event, as the case may be, shall have been received by a Responsible Officer of the Property Trustee at the Corporate Trust Office of the Trustee by the Depositor, the Administrative Trustees or by any Holder of the Trust Securities, and such notice references the Trust Securities or this Trust Agreement; (j) no provision of this Trust Agreement shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation; and no permissive or discretionary power or authority available to the Property Trustee shall be construed to be a duty; (k) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any tax or securities) (or any re-recording, refiling or registration thereof); (l) the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Agreement from any court of competent jurisdiction; (m) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (i) may request instructions from the Holders of the Securities, which instructions may only be given by the Holders of the same Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under the terms of this Trust Agreement in respect of such remedies, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be fully protected in acting in accordance with such instructions; and (n) the rights, privileges, protections, immunities and benefits given to the Property Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Property Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. 34 41 Section 8.04 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Trust, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof, nor as to the validity or sufficiency of this Trust Agreement or the Trust Securities. The Trustees shall not be accountable for the use or application by the Trust of the proceeds of the Trust Securities in accordance with Section 2.05. Section 8.05 MAY HOLD SECURITIES. Any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and except as provided in the definitions of the term "Outstanding" in Article I, may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent. Section 8.06 COMPENSATION; FEES; INDEMNITY. The Depositor agrees: (a) to pay to the Trustees from time to time reasonable compensation for all services rendered by the Trustees hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustees for, and to hold the Trustees harmless from and against, any and all loss, damage, claims, liability or expense incurred without negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of this Trust Agreement, including the costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties hereunder. As security for the performance of the obligations of the Depositor under this Section, each of the Trustees shall have a lien prior to the Trust Securities upon all property and funds held or collected by such Trustee as such, except funds held in trust for the payment of Distributions on the Trust Securities. "Trustee" for purposes of this Section shall include any predecessor Trustee; provided, however, that the negligence, willful misconduct or bad faith of any Trustee hereunder shall not affect the rights of any other Trustee hereunder. In addition to the rights provided to each Trustee herein and not by way of prejudice, when a Trustee incurs expenses or renders services in connection with an Event of Default resulting from a Bankruptcy Event with respect to the Trust, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or State bankruptcy, insolvency or other similar law. 35 42 The provisions of this Section 8.06 shall survive the termination of this Trust Agreement and the payment of the Trust Securities. Section 8.07 CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY TRUSTEES. (a) There shall at all times be a Property Trustee hereunder with respect to the Trust Securities. The Property Trustee shall be a Person that has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Property Trustee with respect to the Trust Securities shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. (b) There shall at all times be one or more Administrative Trustees hereunder with respect to the Trust Securities. Each Administrative Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind such entity. (c) There shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware or (ii) a legal entity with its principal place of business in the State of Delaware that otherwise meets the requirements of applicable Delaware law and that shall act through one or more persons authorized to bind such entity. Section 8.08 CONFLICTING INTERESTS. If the Property Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property Trustee shall either eliminate such conflicting interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. The Subordinated Indenture and the Guarantee shall be deemed to be specifically described in this Trust Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. Section 8.09 CO-TRUSTEES AND SEPARATE TRUSTEE. Unless an Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Holder of the Common Securities and the Administrative Trustees shall, by agreed action of the majority of such Trustees, have power to appoint, and upon the written request of the Administrative Trustees, the Depositor shall for such purpose join with the Administrative Trustees in the execution, delivery, and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Property Trustee either to act as co-trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. If the Depositor does not join in such appointment within 15 days after the receipt by it of a request so to do, or in case an Event of 36 43 Default under the Subordinated Indenture has occurred and is continuing, the Administrative Trustees alone shall have power to make such appointment. Any co-trustee or separate trustee appointed pursuant to this Section shall satisfy the requirements of Section 8.07. Should any written instrument from the Depositor be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged, and delivered by the Depositor. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely: (a) The Trust Securities shall be executed and delivered and all rights, powers, duties, and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustees specified hereunder, shall be exercised, solely by such Trustees. (b) The rights, powers, duties, and obligations hereby conferred or imposed upon the Property Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Property Trustee or by the Property Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Property Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties, and obligations shall be exercised and performed by such co-trustee or separate trustee. (c) The Property Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Depositor, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, in case an Event of Default under the Subordinated Indenture has occurred and is continuing, the Property Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Depositor. Upon the written request of the Property Trustee, the Depositor shall join with the Property Trustee in the execution, delivery, and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section. (d) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Property Trustee, or any other Trustee hereunder. (e) The Property Trustee shall not be liable by reason of any act of a co-trustee or separate trustee. (f) Any Act of Holders delivered to the Property Trustee shall be deemed to have been delivered to each such co-trustee or separate trustee. Section 8.10 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR; SPECIAL ADMINISTRATIVE TRUSTEE. No resignation or removal of any Trustee (the "Relevant Trustee") and 37 44 no appointment of a successor Relevant Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Relevant Trustee in accordance with the applicable requirements of Section 8.11. The Relevant Trustee may resign at any time with respect to the Trust Securities by giving written notice thereof to the Trust. If the instrument of acceptance by a successor Relevant Trustee required by Section 8.11 shall not have been delivered to the Relevant Trustee within 30 days after the giving of such notice of resignation, the resigning Relevant Trustee may petition any court of competent jurisdiction for the appointment of a successor Relevant Trustee with respect to the Trust Securities. Unless an Event of Default shall have occurred and be continuing, the Relevant Trustee may be removed at any time by Act of the Common Securityholder. If an Event of Default shall have occurred and be continuing, the Relevant Trustee may be removed at such time by Act of the Securityholders of a majority in Liquidation Amount of the Outstanding Preferred Securities delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust). If the Relevant Trustee shall resign, be removed or become incapable of continuing to act as Relevant Trustee at a time when no Event of Default shall have occurred and be continuing, the Common Securityholder, by Act of the Common Securityholder delivered to the retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees with respect to the Trust Securities and the Trust, and the retiring Relevant Trustee shall comply with the applicable requirements of Section 8.11. If the Relevant Trustee shall resign, be removed or become incapable of continuing to act as the Relevant Trustee at a time when an Event of Default shall have occurred and be continuing, the Preferred Securityholders, by Act of the Securityholders of a majority in Liquidation Amount of the Outstanding Preferred Securities delivered to the retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees with respect to the Trust Securities and the Trust, and the Relevant Trustee shall comply with the applicable requirements of Section 8.11. If no successor Relevant Trustee with respect to the Trust Securities shall have been so appointed by the Common Securityholder or the Preferred Securityholders and accepted appointment in the manner required by Section 8.11, any Securityholder who has been a Securityholder of Trust Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Relevant Trustee with respect to the Trust Securities. The Property Trustee on behalf of the Trust and the Relevant Trustee shall give notice of each resignation and each removal of the Relevant Trustee with respect to the Trust Securities and the Trust and each appointment of a successor Trustee with respect to the Trust Securities and the Trust to all Securityholders in the manner provided in Section 10.08 and shall give notice to the Depositor. Each notice shall include the name of the successor Relevant Trustee with respect to the Trust Securities and the Trust and the address of its Corporate Trust Office. Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee who is a natural person dies or becomes incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (i) the unanimous act of remaining Administrative Trustees if there are at least two of them or (ii) otherwise by the Depositor (with the successor in each case being an individual who satisfies the eligibility requirement for Administrative Trustees or Delaware Trustee, as the case may be, set forth in Section 8.07). Additionally, notwithstanding the 38 45 foregoing or any other provision of this Trust Agreement, in the event the Depositor reasonably believes that any Administrative Trustee who is a natural person has become incompetent or incapacitated, the Depositor, by notice to the remaining Trustees, may terminate the status of such Person as an Administrative Trustee (in which case the vacancy so created will be filled in accordance with the preceding sentence). Notwithstanding the foregoing, if an Appointment Event has occurred and is continuing, one (1) additional Administrative Trustee (the "Special Administrative Trustee") may be appointed by vote of the Holders of a majority in Liquidation Amount of the Outstanding Preferred Securities, voting as a class at a meeting of the Holders of the Preferred Securities, and such Special Administrative Trustee may only be removed (otherwise than as set forth in the next sentence) by vote of the Holders of a majority in Liquidation Amount of the Outstanding Preferred Securities, voting as a class at a meeting of the Holders of the Preferred Securities. A Special Administrative Trustee shall only hold office while an Appointment Event is continuing and shall cease to hold office immediately after the Appointment Event pursuant to which the Special Administrative Trustee was appointed and all other Appointment Events cease to be continuing. Any Special Administrative Trustee may resign from office (without need for a prior or subsequent accounting) by an instrument in writing signed by the Special Administrative Trustee and delivered to the Depositor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that no such resignation of a Special Administrative Trustee shall be effective until the 60th day following delivery of the instrument of resignation of the Special Administrative Trustee to the Depositor and the Trust or such later date specified in such instrument during which period the Holders of the Preferred Securities shall have the right to appoint a successor Special Administrative Trustee as provided in this Section. Section 8.11 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. In case of the appointment hereunder of a successor Relevant Trustee with respect to all Trust Securities and the Trust, every such successor Relevant Trustee so appointed shall execute, acknowledge and deliver to the Trust and to the retiring Relevant Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Relevant Trustee shall become effective and such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee; but, on the request of the Depositor or the successor Relevant Trustee, such retiring Relevant Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Relevant Trustee all the rights, powers and trusts of the retiring Relevant Trustee and shall duly assign, transfer and deliver to such successor Relevant Trustee all property and money held by such retiring Relevant Trustee hereunder, subject, nevertheless, to the retiring Trustee's prior lien provided for in Section 8.06. In case of the appointment hereunder of a successor Relevant Trustee with respect to the Trust Securities and the Trust, the retiring Relevant Trustee (if required by the Depositor) and each successor Trustee with respect to the Trust Securities shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust and (2) shall add to or 39 46 change any of the provisions of this Trust Agreement as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Relevant Trustee, it being understood that nothing herein or in such amendment shall constitute such Relevant Trustees co-trustees of the same trust and that each such Relevant Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Relevant Trustee and upon the execution and delivery of such amendment the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust; but, on request of the Trust or any successor Relevant Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver to such successor Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Trust Securities and the Trust. Upon request of any such successor Relevant Trustee, such retiring Relevant Trustee shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Relevant Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be. No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance such successor Relevant Trustee shall be qualified and eligible under this Article. Section 8.12 MERGER, CONVERSION, CONSOLIDATION SUCCESSION TO BUSINESS. Any corporation into which the Property Trustee, Delaware Trustee or any Administrative Trustee which is not a natural person may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Relevant Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. Section 8.13 PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST. If and when the Property Trustee or the Delaware Trustee shall be or become a creditor of the Depositor or the Trust (or any other obligor upon the Debentures or the Trust Securities), the Property Trustee or the Delaware Trustee, as the case may be, shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Depositor or Trust (or any such other obligor). For purposes of Section 311(b) of the Trust Indenture Act: (a) the term "cash transaction" means any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; (b) the term "self-liquidating paper" means any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Depositor for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession 40 47 of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Property Trustee or Delaware Trustee simultaneously with the creation of the creditor relationship with the Depositor arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation. Section 8.14 REPORTS BY PROPERTY TRUSTEE. (a) The Property Trustee shall transmit to Securityholders such reports concerning the Property Trustee and its actions under this Trust Agreement as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. Such of those reports as are required to be transmitted by the Property Trustee pursuant to Section 313(a) of the Trust Indenture Act shall be so transmitted within 60 days after [July 31] of each year, commencing [July 31], _____. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with each stock exchange upon which the Trust Securities are listed, with the Commission and with the Depositor. The Depositor will notify the Property Trustee when any Trust Securities are listed on any stock exchange or of any delisting thereof. Section 8.15 REPORTS TO THE PROPERTY TRUSTEE. The Depositor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information (if any) as required by Section 314 and the compliance certificate required by Section 314(a)(4) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Delivery of such reports, information and documents by the Depositor to the Property Trustee is for informational purposes only and the Property Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Depositor's compliance with any of its covenants hereunder (as to which the Property Trustee is entitled to rely exclusively on Officers' Certificates). Section 8.16 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each of the Depositor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Trust Agreement (including any covenants compliance with which constitutes a condition precedent) that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act may be given in the form of an Officers' Certificate. Section 8.17 NUMBER OF TRUSTEES. (a) The number of Trustees (exclusive of any Special Administrative Trustee) shall be four (4), provided that Depositor, by written instrument may increase or decrease the number of Administrative Trustees. (b) If a Trustee ceases to hold office for any reason and the number of Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall occur. The vacancy shall be filled with a Trustee appointed in accordance with Section 8.10. 41 48 (c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to dissolve, terminate or annul the Trust. Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with Section 8.10, the Administrative Trustees in office, regardless of their number (and notwithstanding any other provision of this Agreement), shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. Section 8.18 DELEGATION OF POWER. (a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 2.07(a), including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) the Administrative Trustees shall have power to delegate from time to time to such of their number the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. Section 8.19 FIDUCIARY DUTY. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Trust Agreement shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person; (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between an Indemnified Person and any Covered Person; or (ii) whenever this Trust Agreement or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Trust Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not 42 49 constitute a breach of this Trust Agreement or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise; and (c) Whenever in this Trust Agreement an Indemnified Person is permitted or required to make a decision (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Trust Agreement or by applicable law. ARTICLE IX DISSOLUTION AND LIQUIDATION --------------------------- Section 9.01 DISSOLUTION UPON EXPIRATION DATE. The Trust shall automatically dissolve on _____________ (the "Expiration Date"). Following such dissolution, the Trust Property shall be distributed in accordance with Section 9.04. Section 9.02 EARLY DISSOLUTION. Upon the first to occur of any of the following events (such first occurrence, an "Early Termination Event"): (i) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor; (ii) the election by the Depositor to dissolve the Trust and, after satisfaction of liabilities to creditors of the Trust, distribute the Debentures to Holders of the Trust Securities in liquidation of the Trust; (iii) the redemption of all of the Preferred Securities in connection with the redemption of all of the Debentures; and (iv) an order for judicial dissolution of the Trust having been entered by a court of competent jurisdiction; the Trust shall terminate and the Trustees shall take such action as is required by Section 9.04. Section 9.03 DISSOLUTION. The respective obligations and responsibilities of the Trustees and the Trust shall terminate upon the latest to occur of the following: (i) the distribution by the Property Trustee to Securityholders upon the liquidation of the Trust pursuant to Section 9.04, or upon the redemption of all of the Trust Securities pursuant to Section 4.02, of all amounts required to be distributed hereunder upon the final payment of the Trust Securities; (ii) the payment of any expenses or other liabilities owed by the Trust; and (iii) the discharge of 43 50 all administrative duties of the Administrative Trustees, including the performance of any tax reporting obligations with respect to the Trust or the Securityholders. Section 9.04 LIQUIDATION. (a) If an Early Termination Event specified in Section 9.02 occurs, the Trust shall be liquidated by the Trustees as expeditiously as the Trustees determine to be appropriate by causing the Property Trustee to, in the case of subsections (i), (ii) or (iv) of said Section 9.02, distribute to each Securityholder a Like Amount of Debentures, subject to Section 9.04(d), and in the case of subsection (iii) of said Section 9.02, redeem the Preferred Securities pursuant to Section 4.02. In the case of subsections (i), (ii) and (iv) of Section 9.02, notice of liquidation shall be given by the Administrative Trustees by first-class mail, postage prepaid, mailed not later than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All notices of liquidation shall: (i) state the Liquidation Date; (ii) state that from and after the Liquidation Date, the Trust Securities will no longer be deemed to be outstanding and any Trust Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Debentures; and (iii) provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for Debentures, or if Section 9.04(d) applies receive a Liquidation Distribution, as the Administrative Trustee or the Property Trustee shall deem appropriate. (b) Except where Section 9.02(iii) or 9.04(d) applies, in order to effect the liquidation of the Trust and distribution of the Debentures to Securityholders, the Property Trustee shall establish a record date for such distribution (which shall be not more than 45 days prior to the Liquidation Date) and, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as it shall deem appropriate to effect the distribution of Debentures in exchange for the Outstanding Trust Securities Certificates. (c) Except where Section 9.02(iii) or 9.04(d) applies, after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) certificates representing a Like Amount of Debentures will be issued to Holders of Trust Securities Certificates, upon surrender of such certificates to the Administrative Trustees or their agent for exchange, (iii) any Trust Securities Certificates not so surrendered for exchange will be deemed to represent a Like Amount of Debentures, accruing interest at the rate provided for in the Debentures from the last Distribution Date on which a Distribution was made on such Trust Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments or interest or principal will be made to Holders of Trust Securities Certificates with respect to such Debentures) and (iv) all rights of Securityholders holding Trust Securities will cease, except the right of such Securityholders to receive Debentures upon surrender of Trust Securities Certificates. 44 51 (d) In the event that, notwithstanding the other provisions of this Section 9.04, whether because of an order for dissolution entered by a court of competent jurisdiction or otherwise, distribution of the Debentures in the manner provided herein is determined by the Property Trustee not to be practical, the Trust Property shall be liquidated, and the Trust shall be wound-up or terminated, by the Property Trustee in such manner as the Property Trustee determines. In such event, Securityholders will be entitled to receive out of the assets of the Trust available for distribution to Securityholders, after satisfaction of liabilities to creditors, an amount equal to the Liquidation Amount per Trust Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such winding up or termination, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, subject to the next succeeding sentence, the amounts payable by the Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holder of the Common Securities will be entitled to receive Liquidation Distributions upon any such winding-up or termination pro rata (determined as aforesaid) with Holders of Preferred Securities, except that, if an Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities. (e) If the Debentures are distributed to the Holders of the Preferred Securities, the Debenture Issuer will use its best efforts to cause the Debentures to be listed on the New York Stock Exchange or on such other exchange, if any, as the Preferred Securities are then listed. ARTICLE X MISCELLANEOUS PROVISIONS ------------------------ Section 10.01 GUARANTEE BY THE DEPOSITOR. Subject to the terms and conditions hereof, the Depositor irrevocably and unconditionally guarantees to each Person to whom the Trust is now or hereafter becomes indebted or liable (the "Guarantee Beneficiaries") the full payment, when and as due, of any and all Obligations (as hereinafter defined) to such Guarantee Beneficiaries. As used in this Section, "Obligations" means any indebtedness, expenses or liabilities of the Trust, other than obligations of the Trust to pay to Holders of the Preferred Securities or other similar interests in the Trust the amounts due such Holders pursuant to the terms of the Preferred Securities or such other similar interests, as the case may be. This guarantee is intended to be for the benefit of, and to be enforceable by, all such Guarantee Beneficiaries, whether or not such Guarantee Beneficiaries have received notice hereof. Section 10.02 LIMITATION OF RIGHTS OF SECURITYHOLDERS. The death, bankruptcy, dissolution, termination or incapacity of any Person having an interest, beneficial or otherwise, in a Trust Security shall not operate to terminate this Trust Agreement, nor dissolve, terminate or annul the Trust, nor entitle the legal representatives or heirs of such Person or any Securityholder for such Person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. 45 52 Section 10.03 AMENDMENT. (a) This Trust Agreement may be amended from time to time by the Depositor, without the consent of any Securityholders or any of the Trustees, (i) to cure any ambiguity, correct or supplement any provision herein or therein which may be inconsistent with any other provision herein or therein, or to make any other provisions with respect to matters or questions arising under this Trust Agreement, which shall not be inconsistent with the other provisions of this Trust Agreement or (ii) to modify, eliminate or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the Trust will not be classified for United States federal income tax purposes as an association taxable as a corporation at any time that any Trust Securities are outstanding; provided, however, that, except in the case of clause (ii), such amendment or action shall not adversely affect in any material respect the interests of any Securityholder and, in the case of clause (i), any such amendments of this Trust Agreement shall become effective when notice thereof is given to the Securityholders. (b) Except as provided in Section 10.03(c) hereof, any provision of this Trust Agreement may be amended by the Trustees and the Depositor with (i) the consent of Trust Securityholders representing not less than 66-2/3% in Liquidation Amount of the Trust Securities then Outstanding and (ii) receipt by the Trustees of an Opinion of Counsel from nationally recognized independent counsel experienced in such matters to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not cause the Trust to be classified as an association taxable as a corporation for United States federal income tax purposes or affect the Trust's exemption from status of an "investment company" under the Investment Company Act of 1940, as amended. (c) In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Securityholder, this Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date or (ii) restrict the right of a Securityholder to institute suit for the enforcement of any such payment on or after such date; notwithstanding any other provision herein without the unanimous consent of the Securityholders, paragraph (b) of this Section 10.03 may not be amended. (d) Notwithstanding any other provisions of this Trust Agreement, no Trustee shall enter into or consent to any amendment to this Trust Agreement which would cause the Trust to fail or cease to qualify for the exemption from status of an "investment company" under the Investment Company Act of 1940, as amended, afforded by Rule 3a-5 thereunder. (e) Notwithstanding anything in this Trust Agreement to the contrary, without the consent of the Depositor or a Trustee, as the case may be, this Trust Agreement may not be amended in a manner which imposes any additional obligation on the Depositor or such Trustee, or, in the case of the Trustees, without the consent of each Trustee whose rights, duties or immunities hereunder would be affected thereby. (f) In the event that any amendment to this Trust Agreement is made, the Administrative Trustees shall promptly provide to the Depositor a copy of such amendment. 46 53 (g) The Property Trustee and the Delaware Trustee may join in the execution of or consent to any amendment to the Trust Agreement in which case they shall be entitled to receive and rely upon an Opinion of Counsel as conclusive evidence that such amendment to this Trust Agreement is authorized or permitted by, and conforms to, the terms of this Section 10.03, has been duly authorized by and lawfully executed and delivered on behalf of the other requisite parties, and that it is proper for the Property Trustee under the provisions of this Section 10.03 to accept the additional trusts created thereby and, if so requested, for the Property Trustee or the Delaware Trustee to join in the execution thereof or consent thereto. Section 10.04 SEPARABILITY. In case any provision in this Trust Agreement or in the Trust Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 10.05 GOVERNING LAW. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. Section 10.06 SUCCESSORS. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Trust or a Relevant Trustee or both, including any successor by operation of law. Section 10.07 HEADINGS. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement. All references in this Trust Agreement to Articles and Sections are to Articles and Sections of this Trust Agreement unless otherwise specified. Section 10.08 NOTICE AND DEMAND. Any notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Securityholder or the Depositor may be given or served in writing by deposit thereof, postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (i) in the case of a Preferred Securityholder, to such Preferred Securityholder as such Securityholder's name and address may appear on the Securities Register and (ii) in the case of the Common Securityholder or the Depositor, to The Cleveland Electric Illuminating Company, 76 South Main Street, Akron, Ohio 44308, Attention: Treasurer, facsimile no. (330) 384-3772. Such notice, demand or other communication to or upon a Securityholder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission. Any notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Trust, the Property Trustee or the Administrative Trustees shall be given in writing addressed (until another address is published by the Trust) as follows: (i) with respect to the Property Trustee and the Delaware Trustee, The Bank of New York, 101 Barclay Street, Floor 21 West, New York, NY 10286, Attention: Corporate Trust Department with a copy to: The Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711, Attention: Corporate Trust 47 54 Department; and (ii) with respect to the Administrative Trustees, to them at the address above for notices to the Depositor, marked "Attention: Administrative Trustees of Cleveland Electric Financing Trust I c/o Treasury Department". Such notice, demand or other communication to or upon the Trust or the Property Trustee shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust or the Property Trustee. Section 10.09 AGREEMENT NOT TO PETITION. Each of the Trustees and the Depositor agree for the benefit of the Securityholders that, until at least one year and one day after the Trust has been terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Trust under any bankruptcy, reorganization, arrangement, insolvency, liquidation or other similar law (including, without limitation, the United States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in the commencement of any proceeding against the Trust under any Bankruptcy Law. In the event the Depositor takes action in violation of this Section 10.09, the Property Trustee agrees, for the benefit of Securityholders, that it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by the Depositor against the Trust or the commencement of such action and raise the defense that the Depositor has agreed in writing not to take such action and should be stopped and precluded therefrom and such other defenses, if any, as counsel for the Property Trustee or the Trust may assert. The provisions of this Section 10.09 shall survive the termination of this Trust Agreement. Section 10.10 TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT. (a) This Trust Agreement is subject to the provisions of the Trust Indenture Act that are required or deemed to be part of this Trust Agreement and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act. (c) If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Trust Agreement by any of the provisions of the Trust Indenture Act, such required provision shall control. (d) THE APPLICATION OF THE TRUST INDENTURE ACT TO THIS TRUST AGREEMENT SHALL NOT AFFECT THE NATURE OF THE TRUST SECURITIES AS EQUITY SECURITIES REPRESENTING UNDIVIDED BENEFICIAL INTERESTS IN THE ASSETS OF THE TRUST. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THOSE TERMS AND PROVISIONS SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS. 48 55 Section 10.11 COUNTERPARTS. This Trust Agreement may contain more than one counterpart of the signature page and this Trust Agreement may be executed by the affixing of the signature of each of the Trustees of one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 49 56 IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY By: ---------------------------------------- Name: Title: THE BANK OF NEW YORK, as Property Trustee By: ---------------------------------------- Name: Title: THE BANK OF NEW YORK (DELAWARE), as Delaware Trustee By: ---------------------------------------- Name: Title: ----------------------------------------------- __________________ as Administrative Trustee ----------------------------------------------- __________________ as Administrative Trustee 57 CERTIFICATE OF TRUST OF CLEVELAND ELECTRIC FINANCING TRUST I THIS CERTIFICATE OF TRUST of Cleveland Electric Financing Trust I (the "Trust"), dated June 7, 2001, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. ss. 3801 et seq.). 1. NAME. The name of the business trust being created hereby is Cleveland Electric Financing Trust I. 2. DELAWARE TRUSTEE. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware is The Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711. 3. EFFECTIVE DATE. This Certificate of Trust shall be effective as of its filing with the Secretary of State of the State of Delaware. IN WITNESS WHEREOF, the undersigned, being the only trustees of the Trust, have executed this Certificate of Trust as of the date first above written. THE BANK OF NEW YORK, not in its individual capacity but solely as Property Trustee By: /s/ Terence T. Rawlins ---------------------------------- Terence T. Rawlins Vice President THE BANK OF NEW YORK (DELAWARE), not in its individual capacity but solely as Delaware Trustee By: /s/ Michael Santino ---------------------------------- Michael Santino Senior Vice President /s/ Thomas Navin ----------------------------------------- Thomas Navin, not in his individual capacity but solely as Administrative Trustee /s/ Randy Scilla ----------------------------------------- Randy Scilla, not in his individual capacity but solely as Administrative Trustee A-1 58 TRUST AGREEMENT, dated as of June 7, 2001, among (i) The Cleveland Electric Illuminating Company, an Ohio corporation (the "Depositor" or "Cleveland Electric"), (ii) The Bank of New York, a banking corporation duly organized and existing under the laws of New York, as trustee (the "Property Trustee"), (iii) The Bank of New York (Delaware), a banking corporation duly organized under the laws of Delaware, as Delaware trustee (the "Delaware Trustee"), and (iv) Thomas Navin, an individual, and Randy Scilla, an individual, each of whose address is c/o The Cleveland Electric Illuminating Company, 76 South Main Street, Akron, Ohio 44308, as trustees (each an "Administrative Trustee" and together the "Administrative Trustees") (the Property Trustee, the Delaware Trustee and the Administrative Trustees referred to collectively as the "Trustees"). The Depositor and the Trustees hereby agree as follows: 1. The trust created hereby shall be known as "Cleveland Electric Financing Trust I" (the "Trust"), in which name the Trustees, or the Depositor to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Depositor hereby assigns, transfers, conveys and sets over to the Trust the sum of $10. Such amount shall constitute the initial trust estate. The Trustees hereby declare that they will hold the trust estate in trust for the Depositor. It is the intention of the parties hereto that the Trust created hereby constitutes a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. ss. 3801 et seq. (the "Business Trust Act"), and that this document constitutes the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State substantially in the form attached hereto. 3. The Depositor and the Trustees will enter into an amended and restated Trust Agreement, satisfactory to each such party and substantially in the form included as Exhibit 4.2 to the 1933 Act Registration Statement referred to below, to provide for the contemplated operation of the Trust created hereby and the issuance of the Preferred Securities and the Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Trust Agreement, the Trustees shall not have any duty or obligation hereunder or with respect of the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery any licenses, consents or approvals required by applicable law or otherwise. 4. The Depositor and the Trustees hereby authorize and direct the Depositor, as the Depositor of the Trust, (i) to prepare and file with the Securities and Exchange Commission (the "Commission") and execute, in each case on behalf of the Trust, (a) the Registration Statement on Form S-2 (the "1933 Act Registration Statement") and any pre-effective or post-effective amendments to such Registration Statement, relating to the registration under the Securities Act of 1933, as amended, of the Preferred Securities of the Trust, and (b) a Registration Statement on Form 8-A (the "1934 Act Registration Statement") (including all pre-effective and post-effective amendments thereto) relating to the registration of the Preferred Securities of the Trust under Section 12(b) of the Securities Exchange Act of 1934, as amended; (ii) to file with the New York Stock Exchange and execute on behalf of the Trust a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed on the New York Stock Exchange; (iii) to A-2 59 file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Preferred Securities under the securities or "Blue Sky" laws of such jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or desirable, (iv) to execute and deliver letters or documents to, or instruments for filing with a depository relating to the Preferred Securities of the Trust, and (v) to execute on behalf of the Trust an Underwriting Agreement among the Trust, the Depositor and the underwriters named therein, substantially in the form to be included as Exhibit 1(a) of the 1933 Act Registration Statement. In the event that any filing referred to in clauses (i), (ii) or (iii) above is required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or Blue Sky laws, to be executed on behalf of the Trust by the Trustees, Thomas Navin and Randy Scilla, in their capacities as Administrative Trustees of the Trust, are hereby authorized and directed to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that The Bank of New York and The Bank of New York (Delaware), in their capacities as Property Trustee and Delaware Trustee of the Trust, respectively, shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or Blue Sky laws. In connection with the filings referred to in clauses (i),(ii) or (iii) above, the Depositor and each Trustee, solely in its capacity as Trustee of the Trust and not in its individual capacity, hereby constitutes and appoints John H. Byington, Jr. and Lucas F. Torres, and each of them, as his, her or its, as the case may be, true and lawful attorneys-in-fact, and agents, with full power of substitution and resubstitution, for the Depositor or such Trustee or in the Depositor's or such Trustee's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to the 1933 Act Registration Statement and the 1934 Act Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Depositor or such Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, shall do or cause to be done by virtue hereof. 5. This Trust Agreement may be executed in one or more counterparts. 6. The number of Trustees initially shall be four (4) and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Depositor which may increase or decrease the number of Trustees; provided, however, that the number of Trustees shall in no event be less than four (4); and provided, further that to the extent required by the Business Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware. Subject to the foregoing, the Depositor is entitled to appoint or remove without cause any Trustee at any time. Any of the Trustees may resign upon thirty days prior notice to the Depositor. 7. The Trust may be dissolved and terminated before the issuance of the preferred securities of the Trust at the election of the Depositor. A-3 60 8. This Trust Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without regard to conflict of laws principles). IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed as of the day and year first above written. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, as Depositor By: /s/ Thomas C. Navin ------------------- Thomas C. Navin Treasurer THE BANK OF NEW YORK, not in its individual capacity but solely as Property Trustee By: /s/ Terence T. Rawlins ---------------------- Terence T. Rawlins Vice President THE BANK OF NEW YORK (DELAWARE), not in its individual capacity but solely as Delaware Trustee By: /s/ Michael Santino -------------------------------------- Michael Santino Senior Vice President /s/ Thomas Navin --------------------------------------------- Thomas Navin, not in his individual capacity but solely as Administrative Trustee /s/ Randy Scilla --------------------------------------------- Randy Scilla, not in his individual capacity but solely as Administrative Trustee A-4 61 EXHIBIT B Certificate Depository Agreement ------------- The Depository Trust Company 55 Water Street 49th Floor New York, NY 10041-0099 Attention: General Counsel's Office Re: Cleveland Electric Financing Trust I ___% Cumulative Trust Preferred Securities Ladies and Gentlemen: The purpose of this letter is to set out certain matters relating to the above-referenced Preferred Securities (CUSIP No. _____________) (the "Securities") of Cleveland Electric Financing Trust I, a Delaware business trust (the "Trust" or the "Issuer"). The Securities are guaranteed as to the payment of distributions and as to payments on liquidation or redemption by The Cleveland Electric Illuminating Company ("Cleveland Electric"), as described in the Guarantee Agreement dated _____________, 2001, by Cleveland Electric and The Bank of New York as guarantee trustee with respect to the Securities. The Trust is selling the Securities to Underwriters (the "Underwriters") pursuant to an Underwriting Agreement dated _____________, 2001, and the Underwriters wish to take delivery of the Securities through The Depository Trust Company ("DTC"). The Bank of New York is acting as transfer agent and registrar with respect to the Securities (the "Transfer Agent and Registrar" or the "Agent"). To induce DTC to accept the Securities as eligible for deposit at DTC, and to act in accordance with its rules with respect to the Securities, the Trust and the Transfer Agent and Registrar agree as follows: (a) Prior to the closing of the sale of the Securities to the Underwriters, which is expected to occur on or about _____________, there shall be deposited with, or held by the Transfer Agent and Registrar as custodian for, DTC one or more global certificates (the "Global Certificate") registered in the name of DTC's nominee, Cede & Co., representing an aggregate of _____________ Securities. Each Global Certificate shall bear the following legend: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of CEDE & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co., or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. B-1 62 (b) The Amended and Restated Trust Agreement of the Trust relating to the Securities provides for the voting by holders of the Securities under certain circumstances. The Trust shall establish a record date for such purposes and shall, to the extent possible, give DTC notice of such record date not less than fifteen (15) calendar days in advance of such record date. (c) In the event of a stock split, conversion, recapitalization, reorganization or any other similar transaction resulting in the cancellation of all or any part of the Securities outstanding, the Trust or the Transfer Agent and Registrar shall send DTC a notice of such event five (5) business days prior to the effective date of such event. (d) In the event of a cash dividend payment or other distribution, or an offering or issuance of rights, with respect to the Securities outstanding, the Trust or the Transfer Agent and Registrar shall send DTC a notice specifying: (a) the amount of and conditions, if any, applicable to such payment, distribution or rights offering or issuance; (b) any applicable expiration or deadline date, or any date by which an action on the part of the holders of Securities is required; and (c) the date any required notice is to be mailed to holders of Securities or published (the "Publication Date"). Such notice shall be sent to DTC by a secure means (e.g., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before the Publication Date. The Trust or the Transfer Agent and Registrar will forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission of multiple CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP number submitted in that transaction. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.) The Publication Date shall be not less than thirty (30) days nor more than sixty (60) days prior to such cash dividend payment, distribution or offering or issuance of rights with respect to the Securities. After establishing the amount of payment to be made on the Securities, the Transfer Agent and Registrar will notify DTC's Dividend Department of such payment five (5) business days prior to the payment date. (e) In the event of a redemption by the Trust of the Securities, notice to holders of the Securities by the Trust or the Transfer Agent and Registrar specifying the terms of the redemption and the Publication Date of such notice shall be sent to DTC not less than thirty (30) days prior to such event by a secure means in the manner set forth in the preceding paragraph. Such redemption notice shall be sent to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190, and receipt of such notice shall be confirmed by telephoning (516) 227-4070. Notice by mail or by any other means shall be sent to: Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City, NY 11530-4719 (f) In the event of any invitation to tender the Securities, notice by the Trust to holders of the Securities specifying the terms of the tender and the Publication Date of such notice shall be sent to DTC by a secure means and in a timely manner as described in Paragraph 4. Notices to DTC pursuant to this paragraph and notices of other corporate actions (including mandatory B-2 63 tenders, exchanges and capital changes) shall be sent by telecopy to DTC's Reorganization Department at (212) 709-1094 and receipt of such notice shall be confirmed by telephoning (212) 709-6884, or by mail or any other means to: Manager, Reorganization Department Reorganization Window The Depository Trust Company 7 Hanover Square, 23rd Floor New York, NY 10004-2695 (g) All notices and payment advice sent to DTC shall contain the CUSIP number of the Securities and the accompanying description of the Securities, which, as of the date of this letter, is "Cleveland Electric Financing Trust __% Cumulative Trust Preferred Capital Securities, Series [ ]." (h) Notices to DTC's Dividend Department by telecopy shall be sent to (212) 709-1723. Such notices by mail or by any other means shall be sent to: Manager, Announcements Dividend Department The Depository Trust Company 7 Hanover Square, 23rd Floor New York, NY 10004 The Trust or the Transfer Agent and Registrar shall confirm DTC's receipt of such telecopy by telephoning the Dividend Department at (212) 709-1270. (i) Payments of dividends or other cash distributions with respect to the Securities evidenced by the Global Certificate shall be received by Cede & Co., as nominee of DTC, or its registered assigns in same day funds on each payment date (or in accordance with existing arrangements between the Trust or the Transfer Agent and Registrar and DTC). Such payments shall be made payable to the order of Cede & Co. and shall be addressed as in paragraph 10 below. (j) Other cash payments shall be received by Cede & Co., as nominee of DTC, or its registered assigns in next day funds on each payment date (or in accordance with existing arrangements between the Trust or the Transfer Agent and Registrar and DTC). Such payments shall be made payable to the order of Cede & Co., and shall be addressed as follows: NDFS Redemption Department The Depository Trust Company 7 Hanover Square 23rd Floor New York, NY 10004-2695 (k) DTC may by prior written notice direct the Trust or the Transfer Agent and Registrar to use any other telecopy number or address of DTC as the number or address to which notices or payments may be sent. B-3 64 (l) In the event of a conversion, redemption, or any other similar transaction (e.g., tender made and accepted in response to the Trust's or the Transfer Agent and Registrar's invitation) necessitating a reduction in the aggregate number of Securities outstanding evidenced by the Global Certificate, DTC, in its discretion: (a) may request the Trust or the Transfer Agent and Registrar to issue and countersign a new Global Certificate; or (b) may make an appropriate notation on the Global Certificate indicating the date and amount of such reduction. (m) DTC may discontinue its services as a securities depository with respect to the Global Certificate at any time by giving reasonable notice to the Trust or the Transfer Agent and Registrar (at which time DTC will confirm with the Trust or the Transfer Agent and Registrar the aggregate number of Securities deposited with, or held in custody for, it) and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, at DTC's request the Trust and the Transfer Agent and Registrar shall cooperate fully with DTC by taking prompt appropriate action to make alternative arrangements for book-entry settlement for the Securities or to make available one or more separate global certificates evidencing Securities to any participant having Securities credited to its DTC account, or issue Securities in certificated form to the beneficial holders thereof, and in any such case, DTC agrees to cooperate fully with the Trust and the Transfer Agent and Registrar and to return the Global Certificate, duly endorsed for transfer as directed by the Trust or the Transfer Agent and Registrar, together with any other documents of transfer reasonably requested by the Trust or the Transfer Agent and Registrar. (n) In the event that the Trust determines that beneficial owners of Securities shall be able to obtain certificated Securities, the Trust or the Transfer Agent and Registrar shall notify DTC of the availability of certificates. In such event, the Trust or the Transfer Agent and Registrar shall issue, transfer and exchange certificates in appropriate amounts, as required by DTC and others, and DTC agrees to cooperate fully with the Trust and the Transfer Agent and Registrar and to return the Global Certificate, duly endorsed for transfer as directed by the Trust or the Transfer Agent and Registrar, together with any other documents of transfer reasonably requested by the Trust or the Transfer Agent and Registrar. (o) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This letter may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. B-4 65 Nothing herein shall be deemed to require the Transfer Agent and Registrar to advance funds on behalf of the Trust. Very truly yours, CLEVELAND ELECTRIC FINANCING TRUST I (As Issuer) By: ------------------------------------- ------------- Administrative Trustee By: THE BANK OF NEW YORK (As Transfer Agent and Registrar) By: ------------------------------------- Name: Title: RECEIVED AND ACCEPTED: THE DEPOSITORY TRUST COMPANY By: ----------------------------- Authorized Officer B-5 66 EXHIBIT C THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS PROVIDED IN THE TRUST AGREEMENT (AS DEFINED BELOW) Certificate No. Number of Common Securities: _________ Certificate Evidencing Common Securities of Cleveland Electric Financing Trust I Common Securities (liquidation amount $25 per Common Security) Cleveland Electric Financing Trust I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that The Cleveland Electric Illuminating Company (the "Holder") is the registered owner of _____________ (_________) common securities of the Trust representing undivided beneficial interests in the assets of the Trust and designated the Common Securities (liquidation amount $25 per Common Security) (the "Common Securities"). Except as provided in Section 5.10 of the Trust Agreement (as defined below) the Common Securities are not transferable and, to the fullest extent permitted by law, any attempted transfer hereof shall be void. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of _____________, 2001, among The Cleveland Electric Illuminating Company, an Ohio corporation, The Bank of New York, a New York banking corporation, as trustee, The Bank of New York (Delaware), a Delaware banking corporation, as trustee, and Thomas Navin, an individual, as trustee, and Randy Scilla, an individual, as trustee (collectively, the "Administrative Trustees of the Trust"), and the holders, from time to time, of undivided beneficial interests in the assets of the Trust, as the same may be amended from time to time (the "Trust Agreement"), including the designation of the terms of the Common Securities as set forth therein. The Trust will furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt and acceptance of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, the undersigned Administrative Trustee of the Trust has executed this certificate this ___ day of _____________, 2001. Cleveland Electric Financing Trust I By: ------------------------------- (as Administrative Trustee) C-1 67 EXHIBIT D AGREEMENT AS TO EXPENSES AND LIABILITIES AGREEMENT dated as of _____________, 2001, between The Cleveland Electric Illuminating Company, an Ohio corporation ("Cleveland Electric"), and Cleveland Electric Financing Trust I, a Delaware business trust (the "Trust"). WHEREAS, the Trust intends to issue its Common Securities (the "Common Securities") to and receive Debentures from Cleveland Electric and to issue and sell its ___% Cumulative Trust Preferred Securities, Series [ ], Due 2031 (the "Preferred Securities") with such powers, preferences and special rights and restrictions as are set forth in the Amended and Restated Trust Agreement of the Trust dated as of _____________, 2001 as the same may be amended from time to time (the "Trust Agreement"); WHEREAS, Cleveland Electric is the issuer of the Debentures; NOW, THEREFORE, in consideration of the purchase by each holder of the Preferred Securities, which purchase Cleveland Electric hereby agrees shall benefit Cleveland Electric and which purchase Cleveland Electric acknowledges will be made in reliance upon the execution and delivery of this Agreement, Cleveland Electric (including in its capacity as holder of the Common Securities) and the Trust hereby agree as follows: ARTICLE I. Section 1.01 GUARANTEE BY CLEVELAND ELECTRIC. Subject to the terms and conditions hereof, Cleveland Electric hereby irrevocably and unconditionally guarantees to each person or entity to whom the Trust is now or hereafter becomes indebted or liable (the "Creditors") the full payment, when and as due, of any and all Obligations (as hereinafter defined) to such Creditors. As used herein, "Obligations" means any indebtedness, expenses or liabilities of the Trust, other than obligations of the Trust to pay to holders of any Preferred Securities or other similar interests in the Trust the amounts due such holders pursuant to the terms of the Preferred Securities or such other similar interests, as the case may be. This Agreement is intended to be for the benefit of, and to be enforceable by, all such Creditors, whether or not such Creditors have received notice hereof. Section 1.02 TERM OF AGREEMENT. This Agreement shall terminate and be of no further force and effect upon the date on which there are no Creditors remaining; provided, however, that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any holder of Preferred Securities or any Creditor must restore payment of any sums paid under the Preferred Securities, under any Obligation, under the Guarantee Agreement dated the date hereof by Cleveland Electric and The Bank of New York, as guarantee trustee, or under this Agreement for any reason whatsoever. This Agreement is continuing, irrevocable, unconditional and absolute. Section 1.03 WAIVER OF NOTICE. Cleveland Electric hereby waives notice of acceptance of this Agreement and of any Obligation to which it applies or may apply, and Cleveland Electric hereby waives presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. D-1 68 Section 1.04 NO IMPAIRMENT. The obligations, covenants, agreements and duties of Cleveland Electric under this Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the extension of time for the payment by the Trust of all or any portion of the Obligations or for the performance of any other obligation under, arising out of, or in connection with, the Obligations; (b) any failure, omission, delay or lack of diligence on the part of the Creditors to enforce, assert or exercise any right, privilege, power or remedy conferred on the Creditors with respect to the Obligations or any action on the part of the Trust granting indulgence or extension of any kind; or (c) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt or, or other similar proceedings affecting, the Trust or any of the assets of the Trust. There shall be no obligation of the Creditors to give notice to, or obtain the consent of, Cleveland Electric with respect to the happening of any of the foregoing. Section 1.05 ENFORCEMENT. A Creditor may enforce this Agreement directly against Cleveland Electric, and Cleveland Electric waives any right or remedy to require that any action be brought against the Trust or any other person or entity before proceeding against Cleveland Electric. ARTICLE II. Section 2.01 BINDING EFFECT. All guarantees and agreements contained in this Agreement shall bind the successors, assigns, receivers, trustees and representatives of Cleveland Electric and shall inure to the benefit of the Creditors. Section 2.02 AMENDMENT. So long as there remains any Creditor or any Preferred Securities of any series are outstanding, this Agreement shall not be modified or amended in any manner adverse to such Creditor or to the holders of the Preferred Securities but, in any event, without the prior written consent of the Property Trust (as defined in the Trust Agreement). Section 2.03 NOTICES. Any notice, request or other communication required or permitted to be given hereunder shall be given in writing by delivering the same against receipt therefor by facsimile transmission (confirmed by mail), telex or by registered or certified mail, addressed as follows (and if so given, shall be deemed given when mailed or upon receipt of an answer-back, if sent by telex), to wit: D-2 69 Cleveland Electric Financing Trust I c/o The Bank of New York 101 Barclay Street, Floor 21 West New York, NY 10286 Facsimile No.: (212) 815-5915 Attention: Corporate Trust Department with a copy to: The Bank of New York (Delaware) White Clay Center, Route 273 Newark, Delaware 19711 Facsimile No.: ___________. Attention: Corporate Trust Department.) The Cleveland Electric Illuminating Company 76 South Main Street Akron, Ohio Attention: Treasurer Facsimile No.: (330) 384-3772. Section 2.04 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THIS AGREEMENT is executed as of the day and year first above written. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY By: ------------------------------------- Name: Title: CLEVELAND ELECTRIC FINANCING TRUST I By: ------------------------------------- Name: Title: (as Administrative Trustees) D-3 70 EXHIBIT E [IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT -] This Preferred Security is a Global Certificate within the meaning of the Trust Agreement hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depository") or a nominee of the Depository. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Trust Agreement and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances. Unless this Preferred Security is presented by an authorized representative of The Depository Trust Company, a New York corporation, to Cleveland Electric Financing Trust or its agent for registration of transfer, exchange or payment, and any Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of The Depository Trust Company), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. Certificate No. Number of Preferred Securities: ____________ CUSIP NO.: _______________ Certificate Evidencing Preferred Securities of Cleveland Electric Financing Trust I ___% Cumulative Trust Preferred Securities, Series [ ], Due 2031 (liquidation amount $25 per Preferred Security) Cleveland Electric Financing Trust I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that ____________ (the "Holder") is the registered owner of _____ (_____) preferred securities of the Trust representing an undivided beneficial interest in the assets of the Trust and designated the Cleveland Electric Financing Trust I ___% Cumulative Trust Preferred Securities, Series [ ], Due 2031 (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.04 of the Trust Agreement (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of _____________, 2001, among The Cleveland Electric Illuminating Company, an Ohio corporation, The Bank of New York, a New York banking corporation, as trustee, The Bank of New York (Delaware), a Delaware banking corporation, as trustee, and E-1 71 Thomas Navin, an individual, as trustee, and Randy Scilla, an individual, as trustee (collectively, the "Administrative Trustees of the Trust"), and the holders, from time to time, of undivided beneficial interests in the assets of the Trust, as the same may be amended from time to time (the "Trust Agreement") including the designation of the terms of Preferred Securities as set forth therein. The holder of this certificate is entitled to the benefits of the Guarantee Agreement entered into by The Cleveland Electric Illuminating Company, an Ohio corporation, and The Bank of New York, as guarantee trustee, dated as of _____________, 2001, as the same may be amended from time to time (the "Guarantee"), to the extent provided therein. The Trust will furnish a copy of the Trust Agreement and the Guarantee to the holder of this certificate without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the holder of this certificate is bound by the Trust Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, an Administrative Trustee of the Trust has executed this certificate this __ day of _______________, 2001. Cleveland Electric Financing Trust I By: ------------------------------- (as Administrative Trustee) E-2 72 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security to: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert assignee's social security or tax identification number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert address and zip code of assignee) and irrevocably appoints - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date:__________________ Signature:________________________ (Sign exactly as your name appears on the other side of this Preferred Security Certificate) E-3 EX-4.6 6 l88526aex4-6.txt EXHIBIT 4.6 FORM OF GUARANTEE AGRMT. 1 Exhibit 4.6 FORM OF GUARANTEE AGREEMENT Between THE CLEVELAND ELECTRIC ILLUMINATING COMPANY (as Guarantor) and THE BANK OF NEW YORK (as Trustee) dated as of [ ], 2001 2 CROSS-REFERENCE TABLE*
Section of Section of Trust Indenture Act Guarantee of 1939, as amended Agreement 310(a)......................................................................................................4.01(a) 310(b).................................................................................................4.01(c),2.08 310(c).................................................................................................Inapplicable 311(a)......................................................................................................2.02(b) 311(b)......................................................................................................2.02(b) 311(c).................................................................................................Inapplicable 312(a)......................................................................................................2.02(a) 312(b)......................................................................................................2.02(b) 313............................................................................................................2.03 314(a).........................................................................................................2.04 314(b).................................................................................................Inapplicable 314(c).........................................................................................................2.05 314(d).................................................................................................Inapplicable 314(e)...............................................................................................1.01,2.05,3.02 314(f)....................................................................................................2.01,3.02 315(a)......................................................................................................3.01(d) 315(b).........................................................................................................2.07 315(c).........................................................................................................3.01 315(d)......................................................................................................3.01(d) 316(a).................................................................................................5.04(a),2.06 316(b).........................................................................................................5.03 316(c).........................................................................................................2.02 317(a).................................................................................................Inapplicable 317(b).................................................................................................Inapplicable 318(a)......................................................................................................2.01(b) 318(b).........................................................................................................2.01 318(c)......................................................................................................2.01(a)
- ---------- * This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. 3 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS Section 1.01 Definitions....................................................................................1 Section 1.02 Interpretation.................................................................................4 ARTICLE II TRUST INDENTURE ACT Section 2.01 Trust Indenture Act; Application...............................................................4 Section 2.02 Lists of Holders of Securities.................................................................5 Section 2.03 Reports by the Trustee.........................................................................5 Section 2.04 Periodic Reports to Trustee....................................................................5 Section 2.05 Evidence of Compliance with Conditions Precedent...............................................5 Section 2.06 Events of Default; Waiver......................................................................5 Section 2.07 Event of Default; Notice.......................................................................6 Section 2.08 Conflicting Interests..........................................................................6 ARTICLE III POWERS, DUTIES AND RIGHTS OF TRUSTEE Section 3.01 Powers and Duties of the Trustee...............................................................6 Section 3.02 Certain Rights of Trustee......................................................................7 Section 3.03 Not Responsible for Recitals or Issuance of Guarantee Agreement................................9 ARTICLE IV TRUSTEE Section 4.01 Trustee; Eligibility...........................................................................9 Section 4.02 Compensation and Reimbursement................................................................10 Section 4.03 Appointment, Removal and Resignation of Trustee...............................................10
i 4 ARTICLE V GUARANTEE Section 5.01 Guarantee.....................................................................................11 Section 5.02 Waiver of Notice and Demand...................................................................11 Section 5.03 Obligations Not Affected......................................................................11 Section 5.04 Rights of Holders.............................................................................12 Section 5.05 Guarantee of Payment..........................................................................13 Section 5.06 Subrogation...................................................................................13 Section 5.07 Independent Obligations.......................................................................13 ARTICLE VI SUBORDINATION Section 6.01 Subordination.................................................................................13 ARTICLE VII TERMINATION Section 7.01 Termination...................................................................................13 ARTICLE VIII MISCELLANEOUS Section 8.01 Successors and Assigns........................................................................14 Section 8.02 Amendments....................................................................................14 Section 8.03 Notices.......................................................................................14 Section 8.04 Benefit.......................................................................................15 Section 8.05 Governing Law.................................................................................15
ii 5 GUARANTEE AGREEMENT This GUARANTEE AGREEMENT, dated as of [ ], 2001, is executed and delivered by The Cleveland Electric Illuminating Company, an Ohio corporation (the "Guarantor"), and The Bank of New York, as trustee (the "Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of Cleveland Electric Financing Trust I, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust Agreement"), dated as of [ ], 2001, among the Trustees of the Issuer named therein, The Cleveland Electric Illuminating Company, as Depositor, and the Holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing as of the date hereof [____________] aggregate liquidation amount (or up to ______ aggregate liquidation amount in the event that the underwriters exercise their over-allotment option granted pursuant to the Underwriting Agreement) of its [ ]% Cumulative Trust Preferred Securities Due 2031 (the "Preferred Securities") representing undivided beneficial interests in the assets of the Issuer and having the terms set forth in the Trust Agreement; WHEREAS, the Preferred Securities will be issued by the Issuer and the proceeds thereof will be used to purchase the Debentures (as defined in the Trust Agreement) of the Guarantor as trust assets; and WHEREAS, as incentive for the Holders to purchase the Preferred Securities the Guarantor desires to irrevocably and unconditionally agree, to the extent set forth herein, to pay to the Holders the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the payment for the Preferred Securities by each Holder thereof, which payment the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders from time to time of the Preferred Securities. ARTICLE I DEFINITIONS ----------- Section 1.01 DEFINITIONS. As used in this Guarantee Agreement, the terms set forth below shall, unless the context otherwise requires, have the following meanings. Capitalized or otherwise defined terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Trust Agreement as in effect on the date hereof. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or 6 indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Common Securities" means an undivided beneficial interest in the assets of the Issuer, having a liquidation amount of $25 per Common Security and having the rights provided therefor in the Trust Agreement. "Corporate Trust Office" means the principal office of the Trustee in New York, New York, at which at any particular time its corporate trust business is administered, which at the date of this Guarantee is 101 Barclay Street, New York, New York 10286, Attention: Corporate Trust Administration. "Event of Default" means a default by the Guarantor on any of its payment obligations under this Guarantee Agreement. "Guarantee Agreement" means this Guarantee Agreement as originally executed or as it may from time to time be amended pursuant to the applicable provisions hereof, including, for all purposes of this Guarantee Agreement and any such amendment, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Guarantee Agreement and any such amendment. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by or on behalf of the Issuer: (i) any accumulated and unpaid Distributions that are required to be paid on such Preferred Securities but if and only to the extent the Property Trustee has available in the Payment Account funds sufficient to make such payment, (ii) the redemption price, including all accumulated and unpaid Distributions to the date of redemption (the "Redemption Price"), with respect to the Preferred Securities called for redemption by the Issuer but if and only to the extent that the Property Trustee has available in the Payment Account funds sufficient to make such payment, (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than with a distribution of the Debentures to the Holders in connection with a redemption of all of the Preferred Securities), the lesser of (a) the aggregate of the liquidation amount and all accumulated and unpaid Distributions on the Preferred Securities to the date of payment, to the extent the Issuer has funds legally available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). "Holder" means any holder, as registered on the books and records of the Issuer, of any Preferred Securities; provided, however, that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Indenture" means the Indenture, dated as of [ ], 2001, among the Guarantor (the "Debenture Issuer") and The Bank of New York, as trustee. "Majority in liquidation amount of the Securities" means, except as provided by the Trust Indenture Act, a vote by Holder(s) of Preferred Securities, voting separately as a class, of more than 50% of the liquidation amount of all Preferred Securities. 2 7 "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice President, and by the Comptroller, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. Each Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement that each Person signing such certificate has read the covenant or condition and the definitions herein relating thereto; (b) a brief statement of the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate are based; (c) a statement that, in the opinion of each such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such Person, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Guarantor, and who shall be acceptable to the Trustee. Each Opinion of Counsel delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement that each Person signing such opinion has read the covenant or condition and the definitions herein relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer upon which the statements or opinions of each such Person contained in such opinion are based; (c) a statement that, in the opinion of each such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such Person, such condition or covenant has been complied with. "Person" means any individual, corporation, company, limited liability company, association, joint stock company, partnership, joint venture, trust, business trust, unincorporated organization or government or any agency or political subdivision thereof. "Responsible Officer", when used with respect to the Trustee, means any Vice President or any trust officer of the Trustee, which in each case is assigned by the Trustee to its Corporate Trust Department (or any successor department), and also means, with respect to a particular corporate trust matter, any other trust officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. 3 8 "Successor Trustee" means a successor Trustee possessing the qualifications to act as Trustee under Section 4.01. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trustee" means The Bank of New York until a Successor Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Trustee. "Underwriting Agreement" means the Underwriting Agreement, dated as of _________, 2001, among the Issuer, the Trust and the underwriters named therein. Section 1.02 INTERPRETATION. In this Guarantee Agreement, unless the context otherwise requires: (a) Capitalized terms used in this Guarantee Agreement but not defined in the preamble hereto have the respective meanings assigned to them in Section 1.01; (b) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (c) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (d) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; (f) a reference to the singular includes the plural and vice versa; and (g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. ARTICLE II TRUST INDENTURE ACT Section 2.01 TRUST INDENTURE ACT; APPLICATION. (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required or deemed to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions; and 4 9 (b) if and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. Section 2.02 LISTS OF HOLDERS OF SECURITIES. (a) The Guarantor shall furnish or cause to be furnished to the Trustee (a) semiannually, not later than [February 15] and [August 15] in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a List of Holders as of a date not more than 15 days prior to the time such list is furnished; provided that, the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Trustee by the Guarantor. The Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Trustee shall comply with its obligations under Section 311(a) of the Trust Indenture Act, subject to the provisions of 311(b) of the Trust Indenture Act, and Section 312(b) of the Trust Indenture Act. Section 2.03 REPORTS BY THE TRUSTEE. Within 60 days after [________] of each year, commencing with [__________], 2001, the Trustee shall provide to the Holders such reports, if any, as are required by Section 313(a) of the Trust Indenture Act in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Trustee shall also comply with the requirements of Section 313(b), (c) and (d) of the Trust Indenture Act. Section 2.04 PERIODIC REPORTS TO TRUSTEE. The Guarantor shall provide to the Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314(a)(4) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Guarantee Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Guarantor's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer's Certificates). Section 2.05 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The Guarantor shall provide to the Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Guarantee Agreement (including any covenants compliance with which constitutes a condition precedent) that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) shall be given in the form of an Officers' Certificate. Any opinion of counsel required to be given by counsel pursuant to Section 314(c)(2) of the Trust Indenture Act shall be given in the form of an Opinion of Counsel. Section 2.06 EVENTS OF DEFAULT; WAIVER. The Holders of a Majority in liquidation amount of Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of 5 10 Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Section 2.07 EVENT OF DEFAULT; NOTICE. (a) The Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders, notices of all Events of Default known to the Trustee, unless such defaults have been cured or waived before the giving of such notice, provided that the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. (b) The Trustee shall not be deemed to have knowledge of any Event of Default unless a Responsible Officer of the Trustee charged with the administration of this Trust Agreement shall have received written notice of such Event of Default at the Corporate Trust Office of the Trustee and such notice references this Guarantee Agreement. Section 2.08 CONFLICTING INTERESTS. The Trust Agreement and the Indenture shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF TRUSTEE ------------------------------------ Section 3.01 POWERS AND DUTIES OF THE TRUSTEE. (a) This Guarantee Agreement shall be held by the Trustee for the benefit of the Holders from time to time of the Preferred Securities, and the Trustee shall not transfer this Guarantee Agreement to any Person except a Holder of Preferred Securities exercising his or her rights pursuant to Section 5.04(d) or to a Successor Trustee on acceptance by such Successor Trustee of its appointment to act as Successor Trustee. The right, title and interest of the Trustee shall automatically vest in any Successor Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Trustee. If an Event of Default has occurred and is continuing, the Trustee shall enforce this Guarantee Agreement for the benefit of the Holders subject to the second sentence of (b) below. (b) The Trustee, prior to the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform such duties and only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants or obligations shall be read into this Guarantee Agreement against the Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.06), and is actually known to a Responsible Officer of the Trustee, the Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care 6 11 and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (c) No provision of this Guarantee Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement; and (B) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a Majority in liquidation amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Trustee shall have reasonable grounds for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Guarantee Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of Sections 3.01(b) and 3.01(c). Section 3.02 CERTAIN RIGHTS OF TRUSTEE. (a) Subject to the provisions of Section 3.01: 7 12 (i) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Guarantor contemplated by this Guarantee Agreement shall be sufficiently evidenced by an Officers' Certificate; (iii) whenever, in the administration of this Guarantee Agreement, the Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor; (iv) the Trustee may consult with counsel of its choice, and the written advice of such counsel with respect to legal matters or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion; the counsel providing such advice or Opinion of Counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees; the Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction; (v) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Trustee such adequate security and indemnity as would satisfy a reasonable person in the position of the Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Trustee; (vi) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (vii) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (viii) whenever in the administration of this Guarantee Agreement the Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Trustee (A) may request instructions from 8 13 the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (C) shall be protected in acting in accordance with such instructions; (ix) the Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any tax or securities form) (or any rerecording, refiling or reregistration thereof); and (x) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Guarantee; (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Trustee shall be construed to be a duty to act in respect of such power or authority. Section 3.03 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE AGREEMENT. The recitals contained in this Guarantee Agreement shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee Agreement. ARTICLE IV TRUSTEE ------- Section 4.01 TRUSTEE; ELIGIBILITY. (a) There shall at all times be a Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), its Corporate Trust Office in New York, New York, and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.01(a)(ii), the combined capital and 9 14 surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Trustee shall cease to be eligible to so act under Section 4.01(a), the Trustee shall immediately resign in the manner and with the effect set out in Section 4.03(c). (c) If the Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. Section 4.02 COMPENSATION AND REIMBURSEMENT. The Guarantor agrees: (a) to pay the Trustee from time to time such reasonable compensation as the Guarantor and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with the provisions of this Guarantee (including the reasonable compensation and expenses of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify each of the Trustee and any predecessor Trustee for, and to hold it harmless from and against, any and all loss, damage, claim, liability or expense, including taxes (other than taxes based upon the income of the Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance of the administration of this Guarantee Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any its powers or duties hereunder. As security for the performance of the obligations of the Guarantor under this Section, the Trustee shall have a lien prior to the Securities upon all the property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of, and premium (if any) or interest on, particular obligations of the Guarantor under this Guarantee Agreement. In addition to the rights provided to the Trustee herein and not by way of prejudice, when the Guarantee Trustee incurs expenses or renders services in connection with the enforcement of this Guarantee Agreement, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or State bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the termination of this Guarantee Agreement and the payment of any Guarantee Payment. Section 4.03 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEE. 10 15 (a) Subject to Section 4.03(b), unless an Event of Default shall have occurred and be continuing, the Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Trustee shall not be removed until a Successor Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Trustee and delivered to the Guarantor. (c) The Trustee appointed to office shall hold office until a Successor Trustee shall have been appointed or until its removal or resignation. The Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Trustee and delivered to the Guarantor and the resigning Trustee. (d) If no Successor Trustee shall have been appointed and accepted appointment as provided in this Section 4.03 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Trustee may petition any court of competent jurisdiction for appointment of a Successor Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Trustee. (e) The Guarantor shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 8.03 hereof. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. ARTICLE V GUARANTEE --------- Section 5.01 GUARANTEE. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense (other than the defense of payment), right of set-off or counterclaim which the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. Section 5.02 WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Section 5.03 OBLIGATIONS NOT AFFECTED. The obligation of the Guarantor to make the Guarantee Payments under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: 11 16 (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.03 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Trustee, the Property Trustee or the Holders to give notice to, or obtain consent of, the Guarantor or any other Person with respect to the happening of any of the foregoing. Section 5.04 RIGHTS OF HOLDERS. The Guarantor expressly acknowledges that: (a) this Guarantee Agreement will be deposited with the Trustee to be held for the benefit of the Holders; (b) if an Event of Default has occurred and is continuing, the Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (c) the Holders of a Majority in liquidation amount of the Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee in respect of this Guarantee Agreement or exercising any trust or power conferred upon the Trustee under this Guarantee Agreement; and (d) if the Trustee fails to enforce this Guarantee Agreement as above provided, any Holder may institute a legal proceeding directly against the Guarantor to enforce the Trustee's rights under this Guarantee Agreement, without first instituting a legal proceeding against the Issuer, the Trustee or any other person or entity. 12 17 Section 5.05 GUARANTEE OF PAYMENT. This Guarantee Agreement creates a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication). Section 5.06 SUBROGATION. The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts of Guarantee Payments are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. Section 5.07 INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof. ARTICLE VI SUBORDINATION ------------- Section 6.01 SUBORDINATION. This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank (a) subordinate and junior in right of payment to all other liabilities of the Guarantor, including the Debentures, except those made pari passu or subordinate by their terms, (b) pari passu with the most senior preferred or preference stock now or hereafter issued by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor, and (c) senior to all common stock of the Guarantor. Nothing in this Section 6.01 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 4.02 hereof. ARTICLE VII TERMINATION ----------- Section 7.01 TERMINATION. Except with respect to certain provisions as expressly provided herein, this Guarantee Agreement shall terminate and be of no further force and effect upon: (a) full payment of the Redemption Price of all Preferred Securities, (b) the distribution of Debentures to Holders in exchange for all of the Preferred Securities or (c) upon full payment of the amounts payable in accordance with the Trust Agreement upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be 13 18 reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid with respect to Preferred Securities or under this Guarantee Agreement. ARTICLE VIII MISCELLANEOUS ------------- Section 8.01 SUCCESSORS AND ASSIGNS. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. Except in connection with a consolidation, merger or sale involving the Guarantor that is permitted under Article VIII of the Indenture, the Guarantor shall not assign its obligations hereunder. Section 8.02 AMENDMENTS. This Guarantee Agreement may be amended only by an instrument in writing entered into by the Guarantor and the Trustee. Except with respect to any changes which do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of not less than 66 2/3% in liquidation amount of all the outstanding Preferred Securities. The provisions of Article VI of the Trust Agreement concerning meetings of Holders shall apply to the giving of such approval. Section 8.03 NOTICES. Any notice, request or other communication required or permitted to be given hereunder shall be in writing, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows: (a) if given to the Guarantor, to the address set forth below or such other address as the Guarantor may give notice of to the Holders: The Cleveland Electric Illuminating Company 76 South Main Street Akron, Ohio Attention: Treasurer Facsimile no.: (330) 384-5318 (b) if given to the Issuer, in care of the Trustee, at the Issuer's (and the Trustee's) address set forth below or such other address as the Trustee on behalf of the Issuer may give notice to the Holders: Cleveland Electric Financing Trust I c/o The Bank of New York 101 Barclay Street, Floor 21 West New York, NY 10286 Facsimile No.: (212) 815-5915. Attention: Corporate Trust Department 14 19 with copy to: The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Facsimile No: (212) 815-5915. Attention: Corporate Trust Department (c) if given to the Guarantee Trustee, to the address set forth below or such other address as the Guarantee Trustee may give notice of to the Guarantor and the Holders: The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Facsimile: (212) 815-5915 Attention: Corporate Trust Department (d) if given to any Holder of Preferred Securities, at the address set forth on the books and records of the Issuer. All notices hereunder shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. Section 8.04 BENEFIT. This Guarantee Agreement is solely for the benefit of the Holders and, subject to Section 3.01(a), is not separately transferable from the Preferred Securities. Section 8.05 GOVERNING LAW. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. THE CLEVELAND ELECTRIC ILLUMINATING COMPANY By:___________________________ Name: 15 20 Title: THE BANK OF NEW YORK, as Trustee By:___________________________ Name: Title: 16 EX-5.1 7 l88526aex5-1.txt EXHIBIT 5.1 OPINION OF RICHARDS, LAYTON & FINGER 1 Exhibit 5.1 [LETTERHEAD OF RICHARDS, LAYTON & FINGER, P.A.] July 9, 2001 Cleveland Electric Financing Trust I 76 South Main Street Akron, Ohio 44308 Re: CLEVELAND ELECTRIC FINANCING TRUST I Ladies and Gentlemen: We have acted as special Delaware counsel for The Cleveland Electric Illuminating Company, an Ohio corporation (the "Company"), and Cleveland Electric Financing Trust I, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust, dated June 7, 2001 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on June 8, 2001; (b) The Trust Agreement of the Trust, dated as of June 7, 2001, among the Company and the trustees of the Trust named therein; (c) A form of Amended and Restated Trust Agreement of the Trust (including Exhibits A, C and E thereto) (the "Trust Agreement"), to be entered into among the Company, the trustees of the Trust named therein, and the holders, from time to time, of undivided beneficial interests in the assets of the Trust, attached as an exhibit to the Registration Statement (as defined below); 2 (d) The Registration Statement on Form S-2 (the "Registration Statement"), including a prospectus (the "Prospectus"), relating to the preferred securities of the Trust, representing undivided beneficial interests in the assets of the Trust (each, a "Preferred Security" and collectively, the "Preferred Securities"), as proposed to be filed by the Company and the Trust with the Securities and Exchange Commission on or about July 9, 2001; and (e) A Certificate of Good Standing for the Trust obtained from the Secretary of State on June 21, 2001. Capitalized terms used herein and not otherwise defined are used as defined in the Trust Agreement. For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (e) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (e) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Trust Agreement and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in paragraph 1 below, that each of the parties to the documents examined by us has been duly created, organized or formed, as the case may be, and is validly existing in good standing under the laws of the jurisdiction governing its creation, organization or formation, (iii) the legal capacity of natural persons who are signatories to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) that each of the parties to the documents examined by us has duly authorized, executed and delivered such documents, (vi) the receipt by each Person to whom a Preferred Security is to be issued by the Trust (collectively, the "Preferred Security Holders") of a Preferred Securities Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Trust Agreement and the Registration Statement, and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the Trust Agreement and the Registration Statement. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered 2 3 only with respect to Delaware laws and rules, regulations and orders thereunder that are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: (1) The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Business Trust Act. (2) The Preferred Securities will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. (3) The Preferred Security Holders, 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. We note that the Preferred Security Holders may be obligated to make payments as set forth in the Trust Agreement. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. In addition, we hereby consent to the use of our name under the heading "Legal Opinions" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, /s/ Richards, Layton & Finger BJK/KLM/njs 3 EX-5.2 8 l88526aex5-2.txt EXHIBIT 5.2 OPINION OF DAVID L. FELTNER 1 Exhibit 5.2 July 9, 2001 Cleveland Electric Illuminating Company 76 South Main Street Akron, Ohio 44308 and Cleveland Electric Financing Trust I 76 South Main Street Akron, Ohio 44308 Re: REGISTRATION STATEMENT ON FORM S-2 Dear Ladies and Gentlemen: I am Counsel for The Cleveland Electric Illuminating Company, an Ohio corporation (the "COMPANY"). In connection with the preparation and filing by the Company and Cleveland Electric Financing Trust I, a Delaware statutory business trust sponsored by the Company (the "TRUST"), with the Securities Exchange Commission (the "COMMISSION") as of the date hereof of the registration statement on Form S-2 (the "REGISTRATION STATEMENT") to register under the Securities Act of 1933, as amended (the "ACT"), up to $245,000,000 aggregate amount of preferred securities (the "PREFERRED SECURITIES") to be issued by the Trust pursuant to a trust agreement dated as of June 7, 2001 (the "ORIGINAL TRUST AGREEMENT") which is to be amended and restated by an amended and restated trust agreement (together with the Original Trust Agreement, the "TRUST AGREEMENT"), the Company's subordinated debentures (the "SUBORDINATED DEBENTURES") to be issued under the indenture (the "Indenture") to be entered into between the Company and The Bank of New York, as Trustee, and the related guarantee to be delivered concurrently therewith by the Company and The Bank of New York, as Trustee under the guarantee agreement (the "GUARANTEE AGREEMENT"), I have examined (i) the Company's Articles of Incorporation and Code of Regulations, both as amended; (ii) documents issued by public officials as to the existence of the Company and the Trust under the laws of the States of Ohio and Delaware; (iii) the Registration Statement and exhibits thereto, including the prospectus comprising a part thereof (the "PROSPECTUS"), the form of Trust Agreement filed as Exhibit 4.4, the form of Indenture filed as Exhibit 4.1 and the form of Guarantee Agreement filed as Exhibit 4.6; and (iv) such other documents and records of the Company and the Trust, and such matters of law, as I have deemed necessary to enable me to render this opinion. I have not participated in the preparation of the Registration Statement or the Prospectus and assume no responsibility for their contents. 2 Based on the foregoing, I am of the opinion that: 1. The Company is a corporation duly incorporated and validly existing in good standing under the laws of the State of Ohio. 2. When (i) the Guarantee Agreement and the Indenture have been duly authorized by the Board of Directors of the Company (or by the committee or person to whom the Board delegates the authority to grant such authorization), (ii) the Guarantee Agreement and the Indenture have been validly executed and delivered by the Company in accordance with such authorization and by the respective trustees thereunder and (iii) the Preferred Securities have been executed, issued, delivered and paid for in accordance with the terms and provisions of the Trust Agreement and as contemplated in the Registration Statement and the Prospectus, the Guarantee and the Indenture will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the enforcement of creditors' rights generally, general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and an implied covenant of good faith, fair dealing and reasonableness. 3. When (i) the terms of the issuance and sale of the Subordinated Debentures have been duly approved by all necessary action of the Board of Directors of the Company (or by the committee or person to whom the Board delegates the authority to grant such authorization) so as not to violate any applicable law or result in a default under or a breach of any agreement or instrument binding upon the Company and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Company, (ii) the Indenture has been duly executed and delivered by the Company and the trustee thereunder and (iii) the Subordinated Debentures have been duly executed, authenticated, issued, delivered and paid for as contemplated by the Registration Statement and the Prospectus and in accordance with the Indenture, the Subordinated Debentures will be validly issued and will constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the enforcement of creditors' rights generally, general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and an implied covenant of good faith, fair dealing and reasonableness. Paragraphs 2 and 3 of this opinion are subject to the Registration Statement's becoming effective with no stop order with respect thereto having been issued by the Commission, and to the order which has been issued by The Public Utilities Commission of Ohio remaining in effect, authorizing the issuance of the Preferred Securities, the Subordinated Debentures and the Guarantee Agreement on the terms contemplated in the Registration Statement and the Prospectus. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of my name under the caption "Legal Opinions" in the Prospectus. In giving such 2 3 consent, I do not thereby admit that I am in the category of persons whose consent is required under Section 7 of the Act. I am a member of the bar of the State of Ohio, and this opinion is limited to the laws of the State of Ohio. Insofar as the opinion expressed herein relates to matters which are governed by the laws of the State of New York or the Federal laws of the United States, I have relied upon the opinion of Pillsbury Winthrop LLP, special counsel for the Company, which is being filed as an exhibit to the Registration Statement. Very truly yours, /s/ David L. Feltner David L. Feltner, Esq. Counsel for The Cleveland Electric Illuminating Company 3 EX-5.3 9 l88526aex5-3.txt EXHIBIT 5.3 OPINION OF PILLSBURY WINTHROP 1 Exhibit 5.3 [Letterhead of Pillsbury Winthrop LLP] July 9, 2001 The Cleveland Electric Illuminating Company Cleveland Electric Financing Trust I 76 South Main Street Akron, Ohio 44308 Dear Ladies and Gentlemen: We have acted as special counsel for The Cleveland Electric Illuminating Company, an Ohio corporation (the "COMPANY"), and Cleveland Electric Financing Trust I, a Delaware business trust (the "Trust"), in connection with the preparation and filing with the Securities Exchange Commission (the "COMMISSION") on the date hereof of the registration statement on Form S-2 (the "REGISTRATION STATEMENT") to register under the Securities Act of 1933, as amended (the "ACT"), up to $245,000,000 aggregate amount of the Trust's preferred securities (the "PREFERRED SECURITIES") to be issued by the Trust pursuant to a trust agreement dated as of June 7, 2001 (the "ORIGINAL TRUST AGREEMENT") which is to be amended and restated by an amended and restated trust agreement (together with the Original Trust Agreement, the "TRUST AGREEMENT"), the Company's subordinated debentures (the "SUBORDINATED DEBENTURES") to be issued under an indenture (the "INDENTURE") to be entered into between the Company and The Bank of New York, as trustee, and the related guarantee of the Company pursuant to a guarantee agreement (the "Guarantee Agreement") to be entered into between the Company and The Bank of New York, as trustee thereunder. In our capacity as such counsel, we have either participated in the preparation of or have reviewed and are familiar with the Registration Statement and exhibits thereto, including the prospectus comprising a part thereof (the "PROSPECTUS"), the form of Trust Agreement filed as Exhibit 4.4, the form of Indenture filed as Exhibit 4.1 and the form of Guarantee Agreement filed as Exhibit 4.6. We have also reviewed such other documents and have satisfied ourselves as to such other matters as we have deemed necessary in order to render this opinion. Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion that: 2 1. When (i) the Guarantee Agreement and the Indenture have been duly authorized by the Board of Directors of the Company (or by the committee or person to whom the Board delegates the authority to grant such authorization), (ii) the Guarantee Agreement and the Indenture have been validly executed and delivered by the Company in accordance with such authorization and by the respective trustees thereunder and (iii) the Preferred Securities have been executed, issued, delivered and paid for in accordance with the terms and provisions of the Trust Agreement and as contemplated in the Registration Statement and the Prospectus, the Guarantee and the Indenture will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the enforcement of creditors' rights generally, general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and an implied covenant of good faith, fair dealing and reasonableness. 2. When (i) the terms of the issuance and sale of the Subordinated Debentures have been duly approved by all necessary action of the Board of Directors of the Company (or by the committee or person to whom the Board delegates the authority to grant such authorization) so as not to violate any applicable law or result in a default under or a breach of any agreement or instrument binding upon the Company and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Company, (ii) the Indenture has been duly executed and delivered by the Company and the trustee thereunder and (iii) the Subordinated Debentures have been duly executed, authenticated, issued, delivered and paid for as contemplated by the Registration Statement and the Prospectus and in accordance with the Indenture, the Subordinated Debentures will be validly issued and will constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the enforcement of creditors' rights generally, general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and an implied covenant of good faith, fair dealing and reasonableness. The foregoing is subject to the Registration Statement's becoming effective with no stop order with respect thereto having been issued by the Commission, and to the order which has been issued by The Public Utilities Commission of Ohio remaining in effect, authorizing the issuance of the Preferred Securities, the Subordinated Debentures and the Guarantee Agreement on the terms contemplated in the Registration Statement and the Prospectus. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption "Legal Opinions" in the Prospectus. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act. We are members of the Bar of the State of New York and for purposes of this opinion, we do not hold ourselves out as experts on the laws of any jurisdiction other than the State of New York and the United States of America. Insofar as this opinion relates to matters which are governed by the laws of the State of Ohio, we have relied upon the opinion of David L. Feltner, 2 3 Counsel for the Company, which is being filed as an exhibit to the Registration Statement. Very truly yours, /s/ Pillsbury Winthrop LLP 3 EX-8.1 10 l88526aex8-1.txt EXHIBIT 8.1 OPINION OF P.WINTHROP AS TO INCOME TAX 1 Exhibit 8.1 [LETTERHEAD OF PILLSBURY WINTHROP LLP] July 9, 2001 The Cleveland Electric Illuminating Company 76 South Main Street Akron, Ohio 44308-1890 Cleveland Electric Financing Trust I c/o The Cleveland Electric Illuminating Company 76 South Main Street Akron, Ohio 44308-1890 Re: Cleveland Electric Financing Trust I Cumulative Trust Preferred Securities ------------------------------------- Ladies and Gentlemen: As special tax counsel to The Cleveland Electric Illuminating Company (the "Company") and Cleveland Electric Financing Trust I (the "Issuer"), we have assisted in the preparation of the prospectus (the "Prospectus") that forms a part of the registration statement on Form S-2 (the "Registration Statement") to be filed with the Securities and Exchange Commission on the date hereof to register under the Securities Act of 1933 (the "Act") up to $245,000,000 aggregate liquidation amount of the Issuer's cumulative trust preferred securities, the Company's subordinated debentures and the Company's related guarantee. Unless otherwise defined herein, all terms used herein shall have the meanings ascribed to them in the Prospectus. We have examined and relied upon the Registration Statement and, in each case as filed as an exhibit to the Registration Statement, (i) the form of Amended and Restated Trust Agreement among the Company, as Depositor, and the several trustees named therein, (ii) the form of Indenture between the Company and The Bank of New York, as Trustee, and (iii) the form of Guarantee Agreement between the Company, as Guarantor, and The Bank of New York, as Trustee. On the basis of the foregoing and upon consideration of applicable law, we hereby confirm, subject to the qualifications contained therein, our opinion as set forth in the Prospectus under the caption "United States Taxation." 2 We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the heading "United States Taxation" in the Prospectus. In giving such consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, /s/ Pillsbury Winthrop LLP 2 EX-12.1 11 l88526aex12-1.txt EXHIBIT 12.1 COMPUTATION-CONSOL.RATIO OF EARNINGS 1 Exhibit 12.1 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
Twelve Months Year Ended December 31, Ended ------------------------------------------------------------------------ --------- March 31, 1996 1997 1998 1999 2000 2001 -------- ------------- -------------- -------- -------- -------- --------- Jan. 1-Nov. 7 Nov. 8-Dec. 31 (Dollars in Thousands) ------------- -------------- EARNINGS AS DEFINED IN REGULATION S-K: Income before extraordinary items............ $116,553 $ 95,191 $ 19,290 $164,891 $194,089 $202,950 $175,873 Interest and other charges, before reduction for amounts capitalized...................... 244,940 212,957 35,472 232,727 211,960 202,752 198,141 Provision for income taxes................... 69,120 78,940 14,029 110,611 123,869 126,701 112,376 Interest element of rentals charged to income (a)................................... 79,503 59,078 10,008 68,314 66,680 65,616 65,134 -------- -------- -------- -------- -------- -------- -------- Earnings as defined............... $509,965 $446,166 $ 78,799 $576,543 $596,598 $598,019 $551,524 ======== ======== ======== ======== ======== ======== ======== FIXED CHARGES AS DEFINED IN REGULATION S-K: Interest expense............................. $244,789 $212,957 $ 35,472 $232,727 $211,960 $202,752 $198,141 Interest element of rentals charged to income (a)................................... 79,503 59,078 10,008 68,314 66,680 65,616 65,134 -------- -------- -------- -------- -------- -------- -------- Fixed charges as defined.......... $324,292 $272,035 $ 45,480 $301,041 $278,640 $268,368 $263,275 ======== ======== ======== ======== ======== ======== ======== CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES 1.57 1.64 1.73 1.92 2.14 2.23 2.09 ==== ==== ==== ==== ==== ==== ====
- --------- (a) Includes the interest component of Bruce Mansfield sale and leaseback rentals, leased nuclear fuel in the reactor, and other miscellaneous rentals. EX-12.2 12 l88526aex12-2.txt EXHIBIT 12.2 COMPUTATION-CONSOL.RATIO OF EARNINGS 1 Exhibit 12.2 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS (PRE-INCOME TAX BASIS)
Twelve Months Year Ended December 31, Ended ------------------------------------------------------------------------ --------- March 31, 1996 1997 1998 1999 2000 2001 -------- ------------- -------------- -------- -------- -------- --------- Jan. 1-Nov. 7 Nov. 8-Dec. 31 (Dollars in Thousands) ------------- -------------- EARNINGS AS DEFINED IN REGULATION S-K: Income before extraordinary items............ $116,553 $ 95,191 $ 19,290 $164,891 $194,089 $202,950 $175,873 Interest and other charges, before reduction for amounts capitalized...................... 244,789 212,957 35,472 232,727 211,960 202,752 198,141 Provision for income taxes................... 69,120 78,940 14,029 110,611 123,869 126,701 112,376 Interest element of rentals charged to income (a)................................... 79,503 59,078 10,008 68,314 66,680 65,616 65,134 -------- -------- -------- -------- -------- -------- -------- Earnings as defined............... $509,965 $446,166 $ 78,799 $576,543 $596,598 $598,019 $551,524 ======== ======== ======== ======== ======== ======== ======== FIXED CHARGES AS DEFINED IN REGULATION S-K PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS (PRE- INCOME TAX BASIS): Interest expense............................. $244,789 $212,957 $ 35,472 $232,727 $211,960 $202,752 $198,141 Preferred stock dividend requirements........ 38,743 45,029 0 24,794 33,524 20,843 19,615 Adjustments to preferred stock dividends to state on pre-income tax basis................ 22,976 36,568 0 16,632 21,395 13,012 12,372 Interest element of rentals charged to income (a)................................... 79,503 59,078 10,008 68,314 66,680 65,616 65,134 -------- -------- -------- -------- -------- -------- -------- Fixed charges as defined plus preferred stock dividend requirements...................... $386,011 $353,632 $ 45,480 $342,467 $333,559 $302,223 $295,262 ======== ======== ======== ======== ======== ======== ======== CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS (PRE-INCOME TAX BASIS): 1.32 1.26 1.73 1.68 1.79 1.98 1.87 ==== ==== ==== ==== ==== ==== ====
- --------- (a) Includes the interest component of Bruce Mansfield sale and leaseback rentals, leased nuclear fuel in the reactor, and other miscellaneous rentals. EX-15.1 13 l88526aex15-1.txt EXHIBIT 15.1 LETTER OF ARTHUR ANDERSON 1 Exhibit 15.1 July 9, 2001 The Cleveland Electric Illuminating Company 76 South Main Street Akron, Ohio 44308 Gentlemen: We are aware that The Cleveland Electric Illuminating Company has incorporated by reference in this Registration Statement on Form S-2 its Form 10-Q for the quarter ended March 31, 2001, which includes our report dated May 14, 2001, covering the unaudited interim consolidated financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statement prepared or certified by our Firm or a report prepared or certified by our Firm within the meaning of Sections 7 and 11 of that Act. Very truly yours, ARTHUR ANDERSEN LLP EX-23.1 14 l88526aex23-1.txt EXHIBIT 23.1 CONSENT OF ARTHUR ANDERSON 1 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our reports dated February 16, 2001, included or incorporated by reference in The Cleveland Electric Illuminating Company's Form 10-K for the year ended December 31, 2000 and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN LLP Cleveland, Ohio, July 9, 2001. EX-25.1 15 l88526aex25-1.txt EXHIBIT 25.1 FORM T-1 1 Exhibit 25.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ____________ ----------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (Jurisdiction of incorporation (I.R.S. Employer if not a U.S. national bank) Identification No.) One Wall Street, New York, New York 10286 (Address of principal executive offices) (Zip code) ----------------- THE CLEVELAND ELECTRIC ILLUMINATING COMPANY (Exact name of obligor as specified in its charter) Ohio 34-0150020 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) c/o FirstEnergy Corp. 76 South Main Street Akron, Ohio 44308 (Address of principal executive offices) (Zip code) ----------------- SUBORDINATED DEBENTURES* (Title of the indenture securities) - -------- * Specific title to be determined in connection with issuance of Subordinated Debentures. 2 ITEM 1. GENERAL INFORMATION.* Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006 State of New York and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington, D.C. 20429 New York Clearing House Association New York, N.Y.
(b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note on page 2.) ITEM 16. LIST OF EXHIBITS. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. - A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. - A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. - The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. - A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. - -------- * Pursuant to General Instruction B, the Trustee has responded only to Items 1, 2 and 16 of this form since to the best of the knowledge of the Trustee the obligor is not in default under any indenture under which the Trustee is a trustee. 3 NOTE Inasmuch as this Form T-1 is being filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 9th day of July 2001. THE BANK OF NEW YORK By: Terence T. Rawlins ----------------------------- Terence T. Rawlins Vice President -2- 4 EXHIBIT 7 (Page 1 of 3) Consolidated Report of Condition of THE BANK OF NEW YORK of One Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business December 31, 2000, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Thousands - ------ --------------- Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin .................................. $ 3,083,720 Interest-bearing balances ................................ 4,949,333 Securities: Held-to-maturity securities .............................. 740,315 Available-for-sale securities ............................ 5,328,981 Federal funds sold and Securities purchased under agreements to resell ................... 5,695,708 Loans and lease financing receivables: Loans and leases, net of unearned income ................................................. 36,590,456 LESS: Allowance for loan and lease losses ........................................... 598,536 LESS: Allocated transfer risk reserve ................................................ 12,575 Loans and leases, net of unearned income, allowance, and reserve ......................... 35,979,345 Trading Assets ............................................. 11,912,448 Premises and fixed assets (including capitalized leases) ...................................... 763,241 Other real estate owned .................................... 2,925 Investments in unconsolidated subsid- iaries and associated companies .......................... 183,836 Customers' liability to this bank on acceptances outstanding .................................. 424,303 Intangible assets .......................................... 1,378,477 Other assets ............................................... 3,823,797 ----------- Total assets ............................................... $74,266,429 =========== 5 EXHIBIT 7 (Page 2 of 3)
LIABILITIES - ----------- Deposits: In domestic offices ...................................... $ 28,328,548 Noninterest-bearing ...................................... 12,637,384 Interest-bearing ......................................... 15,691,164 In foreign offices, Edge and Agreement subsidiaries, and IBFs ......................... 27,920,690 Noninterest-bearing ...................................... 470,130 Interest-bearing ......................................... 27,450,560 Federal funds purchased and Securities sold under agreements to repurchase ...................... 1,437,916 Demand notes issued to the U.S. Treasury ................................................. 100,000 Trading liabilities ........................................ 2,049,818 Other borrowed money: With remaining maturity of one year or less .............. 1,279,125 With remaining maturity of more than one year through three years ........................... 0 With remaining maturity of more than three years .......................................... 31,080 Bank's liability on acceptances executed and outstanding ................................. 427,110 Subordinated notes and debentures .......................... 1,646,000 Other liabilities .......................................... 4,604,478 ------------ Total liabilities .......................................... 67,824,765 ------------ EQUITY CAPITAL - -------------- Common stock ............................................... 1,135,285 Surplus .................................................... 1,008,775 Undivided profits and capital reserves ................................................. 4,308,492 Net unrealized holding gains (losses) on available-for-sale securities ......................... (27,768) Accumulated net gains (losses) on cash flow hedges ......................................... 0 Cumulative foreign currency translation adjustments .................................. (38,656) ------------ Total equity capital ....................................... 6,441,664 ------------ Total liabilities and equity capital ....................... $ 74,266,429 ============
6 EXHIBIT 7 (Page 3 of 3) I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Thomas J. Mastro We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Thomas A. Renyi ) Alan R. Griffith ) Directors Gerald L. Hassell ) EX-25.2 16 l88526aex25-2.txt EXHIBIT 25.2 FORM T-1 1 Exhibit 25.2 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ____________ ----------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (Jurisdiction of incorporation (I.R.S. Employer if not a U.S. national bank) Identification No.) One Wall Street, New York, New York 10286 (Address of principal executive offices) (Zip code) ----------------- CLEVELAND ELECTRIC FINANCING TRUST I (Exact name of obligor as specified in its charter) Delaware To Be Applied For (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) c/o FirstEnergy Corp. 76 South Main Street Akron, Ohio 44308 (Address of principal executive offices) (Zip code) ----------------- ___% CUMULATIVE TRUST PREFERRED SECURITIES* (Title of the indenture securities) - -------- * Specific title to be determined in connection with issuance of % Cumulative Trust Preferred Securities. -- 2 ITEM 1. GENERAL INFORMATION.* Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006 State of New York and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington, D.C. 20429 New York Clearing House Association New York, N.Y.
(b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note on page 2.) ITEM 16. LIST OF EXHIBITS. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. - A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. - A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. - The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. - A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. - -------- * Pursuant to General Instruction B, the Trustee has responded only to Items 1, 2 and 16 of this form since to the best of the knowledge of the Trustee the obligor is not in default under any indenture under which the Trustee is a trustee. 3 NOTE Inasmuch as this Form T-1 is being filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 9th day of July, 2001. THE BANK OF NEW YORK By: /s/ Terence T. Rawlins ---------------------------- Terence T. Rawlins Vice President -2- 4 EXHIBIT 7 (Page 1 of 3) Consolidated Report of Condition of THE BANK OF NEW YORK of One Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business December 31, 2000, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS in Thousands - ------ ---------------- Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin .................................. $ 3,083,720 Interest-bearing balances ................................ 4,949,333 Securities: Held-to-maturity securities .............................. 740,315 Available-for-sale securities ............................ 5,328,981 Federal funds sold and Securities purchased under agreements to resell ................... 5,695,708 Loans and lease financing receivables: Loans and leases, net of unearned income ................................................. 36,590,456 LESS: Allowance for loan and lease losses ........................................... 598,536 LESS: Allocated transfer risk reserve ................................................ 12,575 Loans and leases, net of unearned income, allowance, and reserve ......................... 35,979,345 Trading Assets ............................................. 11,912,448 Premises and fixed assets (including capitalized leases) ...................................... 763,241 Other real estate owned .................................... 2,925 Investments in unconsolidated subsid- iaries and associated companies .......................... 183,836 Customers' liability to this bank on acceptances outstanding .................................. 424,303 Intangible assets .......................................... 1,378,477 Other assets ............................................... 3,823,797 ----------- Total assets ............................................... $74,266,429 ===========
5 EXHIBIT 7 (Page 2 of 3)
LIABILITIES - ----------- Deposits: In domestic offices ...................................... $ 28,328,548 Noninterest-bearing ...................................... 12,637,384 Interest-bearing ......................................... 15,691,164 In foreign offices, Edge and Agreement subsidiaries, and IBFs ......................... 27,920,690 Noninterest-bearing ...................................... 470,130 Interest-bearing ......................................... 27,450,560 Federal funds purchased and Securities sold under agreements to repurchase ...................... 1,437,916 Demand notes issued to the U.S. Treasury ................................................. 100,000 Trading liabilities ........................................ 2,049,818 Other borrowed money: With remaining maturity of one year or less .............. 1,279,125 With remaining maturity of more than one year through three years ........................... 0 With remaining maturity of more than three years .......................................... 31,080 Bank's liability on acceptances executed and outstanding ................................. 427,110 Subordinated notes and debentures .......................... 1,646,000 Other liabilities .......................................... 4,604,478 ------------ Total liabilities .......................................... 67,824,765 ------------ EQUITY CAPITAL - -------------- Common stock ............................................... 1,135,285 Surplus .................................................... 1,008,775 Undivided profits and capital reserves ................................................. 4,308,492 Net unrealized holding gains (losses) on available-for-sale securities ......................... (27,768) Accumulated net gains (losses) on cash flow hedges ......................................... 0 Cumulative foreign currency translation adjustments .................................. (38,656) ------------ Total equity capital ....................................... 6,441,664 ------------ Total liabilities and equity capital ....................... $ 74,266,429 ============
6 EXHIBIT 7 (Page 3 of 3) I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Thomas J. Mastro We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Thomas A. Renyi ) Alan R. Griffith ) Directors Gerald L. Hassell ) EX-25.3 17 l88526aex25-3.txt EXHIBIT 25.3 1 Exhibit 25.3 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ____________ ----------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (Jurisdiction of incorporation (I.R.S. Employer if not a U.S. national bank) Identification No.) One Wall Street, New York, New York 10286 (Address of principal executive offices) (Zip code) ----------------- THE CLEVELAND ELECTRIC ILLUMINATING COMPANY (Exact name of obligor as specified in its charter) Ohio 34-0150020 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) c/o FirstEnergy Corp. 76 South Main Street Akron, Ohio 44308 (Address of principal executive offices) (Zip code) ----------------- GUARANTEE OF CLEVELAND ELECTRIC FINANCING TRUST I % CUMULATIVE TRUST PREFERRED SECURITIES* -- (Title of the indenture securities) - -------- * Specific title to be determined in connection with issuance of Cleveland Electric Financing Trust I % Cumulative Trust Preferred Securities. -- 2 ITEM 1. GENERAL INFORMATION.* Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006 State of New York and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington, D.C. 20429 New York Clearing House Association New York, N.Y.
(b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note on page 2.) ITEM 16. LIST OF EXHIBITS. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. - A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. - A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. - The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. - A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. - -------- * Pursuant to General Instruction B, the Trustee has responded only to Items 1, 2 and 16 of this form since to the best of the knowledge of the Trustee the obligor is not in default under any indenture under which the Trustee is a trustee. 3 NOTE Inasmuch as this Form T-1 is being filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 9th day of July, 2001. THE BANK OF NEW YORK By: /s/ Terence T. Rawlins -------------------------- Terence T. Rawlins Vice President -2- 4 EXHIBIT 7 (Page 1 of 3) Consolidated Report of Condition of THE BANK OF NEW YORK of One Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business December 31, 2000, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS in Thousands - ------ -------------- Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin .................................. $ 3,083,720 Interest-bearing balances ................................ 4,949,333 Securities: Held-to-maturity securities .............................. 740,315 Available-for-sale securities ............................ 5,328,981 Federal funds sold and Securities purchased under agreements to resell ................... 5,695,708 Loans and lease financing receivables: Loans and leases, net of unearned income ................................................. 36,590,456 LESS: Allowance for loan and lease losses ........................................... 598,536 LESS: Allocated transfer risk reserve ................................................ 12,575 Loans and leases, net of unearned income, allowance, and reserve ......................... 35,979,345 Trading Assets ............................................. 11,912,448 Premises and fixed assets (including capitalized leases) ...................................... 763,241 Other real estate owned .................................... 2,925 Investments in unconsolidated subsid- iaries and associated companies .......................... 183,836 Customers' liability to this bank on acceptances outstanding .................................. 424,303 Intangible assets .......................................... 1,378,477 Other assets ............................................... 3,823,797 ----------- Total assets ............................................... $74,266,429 ===========
5 EXHIBIT 7 (Page 2 of 3)
LIABILITIES - ----------- Deposits: In domestic offices ...................................... $ 28,328,548 Noninterest-bearing ...................................... 12,637,384 Interest-bearing ......................................... 15,691,164 In foreign offices, Edge and Agreement subsidiaries, and IBFs ......................... 27,920,690 Noninterest-bearing ...................................... 470,130 Interest-bearing ......................................... 27,450,560 Federal funds purchased and Securities sold under agreements to repurchase ...................... 1,437,916 Demand notes issued to the U.S. Treasury ................................................. 100,000 Trading liabilities ........................................ 2,049,818 Other borrowed money: With remaining maturity of one year or less .............. 1,279,125 With remaining maturity of more than one year through three years ........................... 0 With remaining maturity of more than three years .......................................... 31,080 Bank's liability on acceptances executed and outstanding ................................. 427,110 Subordinated notes and debentures .......................... 1,646,000 Other liabilities .......................................... 4,604,478 ------------ Total liabilities .......................................... 67,824,765 ------------ EQUITY CAPITAL - -------------- Common stock ............................................... 1,135,285 Surplus .................................................... 1,008,775 Undivided profits and capital reserves ................................................. 4,308,492 Net unrealized holding gains (losses) on available-for-sale securities ......................... (27,768) Accumulated net gains (losses) on cash flow hedges ......................................... 0 Cumulative foreign currency translation adjustments .................................. (38,656) ------------ Total equity capital ....................................... 6,441,664 ------------ Total liabilities and equity capital ....................... $ 74,266,429 ============
6 EXHIBIT 7 (Page 3 of 3) I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Thomas J. Mastro We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Thomas A. Renyi ) Alan R. Griffith ) Directors Gerald L. Hassell ) -----END PRIVACY-ENHANCED MESSAGE-----