<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
File Number: 333-21149-03
333-21149-01
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 14, 1997
6,000,000 PREFERRED SECURITIES
CPL CAPITAL I
8.00% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES, SERIES A
(QUIPS(SM))*
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
CENTRAL POWER AND LIGHT COMPANY
---------------------
The 8.00% Cumulative Quarterly Income Preferred Securities, Series A (the
"Series A Preferred Securities"), offered hereby represent undivided beneficial
interests in the assets of CPL Capital I, a trust created under the laws of the
State of Delaware ("CPL Capital I"). Central Power and Light Company, a Texas
corporation ("CPL"), will be the owner of all of the beneficial interests
represented by common securities of CPL Capital I ("Series A Common
Securities"). The Bank of New York is the Property Trustee of CPL Capital I. CPL
Capital I exists for the sole purpose of issuing the Series A Preferred
Securities and the Series A Common Securities and investing the proceeds thereof
in 8.00% Junior Subordinated Deferrable Interest Debentures, Series A (the
"Series A Debentures") to be issued by CPL. The Series A Debentures will mature
on April 30, 2037, which date may be shortened to a date not earlier than April
30, 2002. The Series A Debentures are redeemable prior to maturity at the option
of CPL as described below. The Series A Preferred Securities will have a
preference under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise over the Series A Common
Securities. See "Description of Preferred Securities -- Subordination of Common
Securities" in the accompanying Prospectus.
--------------------- (Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE SERIES A PREFERRED SECURITIES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING CPL
OFFERING PRICE COMMISSION(1) CAPITAL I(2)(3)
-------------- ------------- ---------------
<S> <C> <C> <C>
Per Series A Preferred Security......................... $25.00 (2) $25.00
Total................................................... $150,000,000 (2) $150,000,000
</TABLE>
- - - ---------------
(1) CPL Capital I and CPL have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will be used to purchase the Series A Debentures, the
Underwriting Agreement provides that CPL will pay to the Underwriters, as
compensation ("Underwriters' Compensation") for their arranging the
investment therein of such proceeds, $0.7875 per Series A Preferred
Security; provided, that such compensation will be $0.50 per Series A
Preferred Security sold to certain institutions. Accordingly, the maximum
aggregate amount of Underwriters' Compensation will be $4,725,000, but the
actual amount of Underwriters' Compensation will be less than such amount to
the extent that Series A Preferred Securities are sold to such institutions.
See "Underwriting."
(3) Expenses of the offering, which are payable by CPL, are estimated to be
$250,000.
---------------------
The Series A Preferred Securities offered hereby are offered severally by
the Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that the Series A Preferred Securities will be ready for delivery in
book-entry form only through the facilities of The Depository Trust Company in
New York, New York, on or about May 14, 1997, against payment therefor in
immediately available funds.
- - - ---------------
* QUIPS is a servicemark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SMITH BARNEY INC.
---------------------
The date of this Prospectus Supplement is May 8, 1997.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SERIES A PREFERRED
SECURITIES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".
IT IS EXPECTED THAT DELIVERY OF THE SERIES A PREFERRED SECURITIES WILL BE
MADE AGAINST PAYMENT THEREFOR ON OR ABOUT THE DATE SPECIFIED IN THE LAST
PARAGRAPH OF THE COVER PAGE, WHICH IS THE FOURTH BUSINESS DAY FOLLOWING THE DATE
HEREOF (SUCH SETTLEMENT CYCLE BEING HEREIN REFERRED TO AS "T + 4"). PURCHASERS
OF THE SERIES A PREFERRED SECURITIES SHOULD NOTE THAT THE ABILITY TO SETTLE
SECONDARY MARKET TRADES OF THE SERIES A PREFERRED SECURITIES EFFECTED ON THE
DATE HEREOF MAY BE AFFECTED BY THE T + 4 SETTLEMENT. SEE "UNDERWRITING."
---------------------
(Continued from previous page)
Holders of the Series A Preferred Securities will be entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year, commencing June 30, 1997, at the annual rate of 8.00%
of the liquidation preference of $25 per Series A Preferred Security
("Distributions"). CPL has the right to defer the payment of interest on the
Series A Debentures at any time or from time to time for one or more periods
(each, an "Extension Period"), provided that such Extension Period, together
with all previous and further extensions thereof prior to its termination, does
not exceed 20 consecutive quarters and does not extend beyond the maturity of
the Series A Debentures. Upon the termination of any such Extension Period and
the payment of all amounts then due on any Interest Payment Date (as defined
herein), CPL may elect to begin a new Extension Period subject to the
requirements set forth herein. If interest payments on the Series A Debentures
are so deferred, Distributions on the Series A Preferred Securities will also be
deferred and CPL will not be permitted, subject to certain exceptions set forth
herein, to declare or pay any cash distributions with respect to CPL's capital
stock or debt securities that rank pari passu with or junior to the Series A
Debentures. During an Extension Period, interest on the Series A Debentures will
continue to accrue (and the amount of Distributions to which holders of the
Series A Preferred Securities are entitled will accumulate at the rate of 8.00%
per annum, compounded quarterly) and holders of Series A Preferred Securities
will be required to accrue interest income for United States federal income tax
purposes in advance of receipt of cash related to such interest income. See
"Certain Terms of the Series A Debentures -- Option to Extend Interest Payment
Period" and "Certain Federal Income Tax Considerations -- Potential Extension of
Interest Payment Period and Original Issue Discount."
CPL has, through the Series A Guarantee, the Trust Agreement, the Series A
Debentures, the Indenture and the Expense Agreement (each as defined herein),
taken together, fully, irrevocably and unconditionally guaranteed all of CPL
Capital I's obligations under the Series A Preferred Securities. The Series A
Guarantee guarantees the payment of Distributions and payments on liquidation or
redemption of the Series A Preferred Securities, but only in each case to the
extent of funds held by CPL Capital I, as described herein (the "Series A
Guarantee"). See "Description of Guarantees" in the accompanying Prospectus. If
CPL does not make interest payments on the Series A Debentures held by CPL
Capital I, CPL Capital I will have insufficient funds to pay Distributions on
the Series A Preferred Securities. The Series A Guarantee does not cover payment
of Distributions when CPL Capital I does not have sufficient funds to pay such
Distributions. In such event, a holder of Series A Preferred Securities may have
the right to institute a legal proceeding directly against CPL to enforce
payment to such holder of the principal of or interest on the Corresponding
Junior Subordinated Debentures as described in "Description of Preferred Securi-
S-2
<PAGE> 3
ties -- Enforcement of Certain Rights by Holders of Preferred Securities" in the
accompanying Prospectus. The obligations of CPL under the Series A Guarantee and
the Series A Debentures are subordinate and junior in right of payment to all
Senior Indebtedness (as defined in "Description of Junior Subordinated
Debentures -- Subordination" in the accompanying Prospectus) of CPL.
The Series A Preferred Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Series A Debentures at maturity or their
earlier redemption in an amount equal to the amount of related Series A
Debentures maturing or being redeemed at a redemption price equal to the
aggregate liquidation preference of such Series A Preferred Securities plus
accumulated and unpaid Distributions thereon to the date of redemption. The
Series A Debentures are redeemable prior to maturity at the option of CPL (i) on
or after April 30, 2002 in whole at any time or in part from time to time, at a
redemption price equal to the accrued and unpaid interest on the Series A
Debentures so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof, or (ii) at any time, in whole (but not in part),
within 90 days of the occurrence of a Special Event (as defined herein), at a
redemption price equal to the accrued and unpaid interest on the Series A
Debentures so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof, in each case subject to the further conditions
described under "Description of Junior Subordinated Debentures -- Redemption"
and "Description of Corresponding Junior Subordinated Debentures -- Optional
Redemption" in the accompanying Prospectus.
At any time, CPL will have the right to terminate CPL Capital I and, after
satisfaction of liabilities to creditors of CPL Capital I as required by
applicable law, cause the Series A Debentures to be distributed to the holders
of the Series A Preferred Securities in liquidation of CPL Capital I. See
"Certain Terms of the Series A Preferred Securities -- Distribution of Series A
Debentures."
The Series A Debentures are subordinate and junior in right of payment to
all Senior Indebtedness of CPL. As of March 31, 1997, CPL had approximately
$1,733 million aggregate principal amount of Senior Indebtedness outstanding.
The terms of the Series A Debentures place no limitation on the amount of Senior
Indebtedness that may be incurred by CPL. In addition, the Series A Debentures
will be effectively subordinated to all existing and future liabilities of CPL's
subsidiaries, if any, and holders of Series A Debentures should look only to the
assets of CPL for payments on Series A Debentures. See "Description of Junior
Subordinated Debentures -- Subordination" in the accompanying Prospectus and
"Recent Developments."
In the event of the termination of CPL Capital I, after satisfaction of
creditors of CPL Capital I as provided by applicable law, the holders of the
Series A Preferred Securities will be entitled to receive a liquidation
preference of $25 per Series A Preferred Security plus accumulated and unpaid
Distributions thereon to the date of payment, which may be in the form of a
distribution of such Like Amount in Series A Debentures, subject to certain
exceptions. See "Description of Preferred Securities -- Liquidation Distribution
Upon Termination" in the accompanying Prospectus.
The NYSE has authorized the listing of the Series A Preferred Securities
under the symbol "CPZ PrA," subject to official notice of issuance. Trading of
the Series A Preferred Securities on the NYSE is expected to commence within
thirty days after the initial delivery of the Series A Preferred Securities. If
the Series A Debentures are distributed to the holders of Series A Preferred
Securities upon the liquidation of CPL Capital I, CPL will use its best efforts
to list the Series A Debentures on the NYSE or such other stock exchanges or
other organizations, if any, on which the Series A Preferred Securities are then
listed.
The Series A Preferred Securities will be represented by one or more global
certificates registered in the name of The Depository Trust Company ("DTC") or
its nominee. Beneficial interests in the Series A Preferred Securities will be
shown on, and transfers thereof will be effected only through, records
maintained by participants in DTC. Except as described in the accompanying
Prospectus, Series A Preferred Securities in certificated form will not be
issued in exchange for the global certificates. See "Description of Preferred
Securities -- Book-entry Issuance" in the accompanying Prospectus.
S-3
<PAGE> 4
The following information supplements and should be read in conjunction
with the information contained in the accompanying Prospectus. As used herein,
(i) the "Indenture" means the Indenture, as amended and supplemented from time
to time, including the First Supplemental Indenture relating to the Series A
Debentures, between CPL and The Bank of New York, as trustee (the "Debenture
Trustee"), and (ii) the "Trust Agreement" means the Amended and Restated Trust
Agreement among CPL, as Depositor, The Bank of New York, as Property Trustee
(the "Property Trustee"), The Bank of New York (Delaware), as Delaware Trustee
(the "Delaware Trustee"), and the Administrative Trustees named therein
(collectively, with the Property Trustee and the Delaware Trustee, the "Issuer
Trustees"). Each of the other capitalized terms used in this Prospectus
Supplement and not otherwise defined in this Prospectus Supplement has the
meaning set forth in this Prospectus Supplement or in the accompanying
Prospectus.
RISK FACTORS
Prospective purchasers of the Series A Preferred Securities should
carefully review the information contained elsewhere in this Prospectus
Supplement and in the accompanying Prospectus and should particularly consider
the following matters.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE SERIES A GUARANTEE AND THE SERIES
A DEBENTURES
The obligations of CPL under the Series A Guarantee issued by CPL for the
benefit of the holders of Series A Preferred Securities are unsecured and rank
subordinate and junior in right of payment to all Senior Indebtedness of CPL.
The obligations of CPL under the Series A Debentures are subordinate and junior
in right of payment to all such Senior Indebtedness. At March 31, 1997, the
Senior Indebtedness of CPL aggregated approximately $1,733 million. In addition,
the Series A Debentures will be effectively subordinated to all existing and
future liabilities of CPL's subsidiaries, if any, and holders of Series A
Debentures should look only to the assets of CPL for payments on the Series A
Debentures. None of the Indenture, the Series A Guarantee or the Trust Agreement
places any limitation on the amount of secured or unsecured debt, including
Senior Indebtedness, that may be incurred by CPL. See "Description of
Guarantees -- Status of the Guarantees" and "Description of Junior Subordinated
Debentures -- Subordination" in the accompanying Prospectus and "Recent
Developments."
The ability of CPL Capital I to pay amounts due on the Series A Preferred
Securities is solely dependent upon CPL making payments on the Series A
Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; POTENTIAL MARKET
VOLATILITY DURING EXTENSION PERIOD
CPL has the right under the Indenture to defer the payment of interest on
the Series A Debentures at any time or from time to time for one or more
Extension Periods, each of which, together with all previous and further
extensions of such Extension Period prior to its termination, may not exceed 20
consecutive quarters and may not extend beyond the maturity of the Series A
Debentures. As a consequence of any such election, quarterly Distributions on
the Series A Preferred Securities by CPL Capital I will be deferred (and the
amount of Distributions to which holders of the Series A Preferred Securities
are entitled will continue to accumulate at the rate of 8.00% per annum,
compounded quarterly) during any such Extension Period. During any such
Extension Period, CPL may not, and may not permit any subsidiary of CPL to, (i)
declare, set aside or pay any dividend or distribution on, or repurchase,
redeem, or otherwise acquire or make any sinking fund payment with respect to,
any shares of CPL's capital stock or (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities (including other Junior Subordinated Debentures) that rank pari passu
with or junior in interest to the Series A Debentures or make any guarantee
payments with respect to the foregoing (other than (a) dividends or
distributions in shares of its capital stock or in rights to acquire shares of
its capital stock, (b) conversions into or exchanges for shares of its capital
stock, (c) redemptions,
S-4
<PAGE> 5
purchases or other acquisitions of shares of its capital stock made for the
purpose of an employee incentive plan or benefit plan of CPL or any of its
subsidiaries and mandatory redemptions or sinking fund payments with respect to
any series of Preferred Stock of CPL that are subject to mandatory redemption or
sinking fund requirements, provided that the aggregate stated value of all such
series outstanding at the time of any such payment does not exceed five percent
of the aggregate of (1) the total principal amount of all bonds or other
securities representing secured indebtedness issued or assumed by CPL and then
outstanding and (2) the capital and surplus of CPL to be stated on the books of
account of CPL after giving effect to such payment, provided, however, that any
moneys deposited in any sinking fund and not in violation of this provision may
thereafter be applied to the purchase or redemption of such Preferred Stock in
accordance with the terms of such sinking fund without regard to the
restrictions contained in this provision, and (d) payments under any guarantee
by CPL with respect to any securities of a subsidiary of CPL, provided that the
proceeds from the issuance of such securities were used to purchase Junior
Subordinated Debentures of any series under the Indenture). Upon the termination
of any Extension Period and the payment of all amounts then due on any Interest
Payment Date, CPL may elect to begin a new Extension Period subject to the above
requirements. Consequently, there could be multiple Extension Periods of varying
lengths throughout the term of the Series A Debentures. See "Certain Terms of
the Series A Preferred Securities -- Distributions" and "Certain Terms of the
Series A Debentures -- Option to Extend Interest Payment Period."
Should an Extension Period occur, a holder of Series A Preferred Securities
must accrue interest income (as original issue discount) on an economic accrual
basis in respect of its pro rata share of the Series A Debentures held by CPL
Capital I for United States federal income tax purposes. As a result, a holder
of Series A Preferred Securities will include such interest in gross income for
United States federal income tax purposes in advance of the receipt of cash, and
will not receive the cash related to such income from CPL Capital I if the
holder disposes of the Series A Preferred Securities prior to the record date
for the payment of Distributions. See "Certain Federal Income Tax
Considerations -- Potential Extension of Interest Payment Period and Original
Issue Discount" and "-- Sale or Redemption of Series A Preferred Securities."
CPL has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Series A Debentures.
However, should CPL elect to exercise such right in the future, the market price
of the Series A Preferred Securities is likely to be affected. A holder that
disposes of its Series A Preferred Securities during an Extension Period,
therefore, might not receive the same return on its investment as a holder that
continues to hold its Series A Preferred Securities.
SPECIAL EVENT REDEMPTION
Upon the occurrence of a Special Event, as described in "Description of
Preferred Securities -- Redemption or Exchange -- Special Event Redemption or
Distribution of Corresponding Junior Subordinated Debentures" in the
accompanying Prospectus, CPL has the right to redeem the Series A Debentures in
whole (but not in part) within 90 days following the occurrence of such Special
Event and thereby cause a mandatory redemption of the Series A Preferred
Securities at the applicable redemption price. See "Description of Preferred
Securities -- Redemption or Exchange -- Special Event Redemption or Distribution
of Corresponding Junior Subordinated Debentures" in the accompanying Prospectus.
Under current United States federal income tax law, such a redemption of
the Series A Preferred Securities would constitute a taxable event to the
holders thereof. See "Certain Federal Income Tax Considerations -- Sale or
Redemption of Series A Preferred Securities."
S-5
<PAGE> 6
EXCHANGE OF SERIES A PREFERRED SECURITIES FOR SERIES A DEBENTURES
CPL will have the right at any time to terminate CPL Capital I and, after
satisfaction of liabilities to creditors of CPL Capital I as required by
applicable law, cause the Series A Debentures to be distributed to the holders
of the Series A Preferred Securities in liquidation of CPL Capital I. See
"Certain Terms of Series A Preferred Securities -- Distribution of Series A
Debentures."
Under current United States federal income tax law, provided CPL Capital I
is treated as a "grantor trust" at the time of the distribution, a distribution
of the Series A Debentures upon liquidation of CPL Capital I should not be a
taxable event to holders of the Series A Preferred Securities. However, if at
the time of the distribution, CPL Capital I were subject to United States
federal income tax with respect to income received or accrued on the Series A
Debentures, a distribution of the Series A Debentures by CPL Capital I would be
a taxable event to CPL Capital I and the holders of the Series A Preferred
Securities. See "Certain Federal Income Tax Considerations -- Distribution of
Series A Debentures to Holders of Series A Preferred Securities."
There can be no assurance as to the market prices for Series A Preferred
Securities or Series A Debentures that may be distributed in exchange for Series
A Preferred Securities if a liquidation of CPL Capital I occurs. Accordingly,
the Series A Preferred Securities that an investor may purchase, whether
pursuant to the offer made hereby or in the secondary market, or the Series A
Debentures that a holder of Series A Preferred Securities may receive on
liquidation of CPL Capital I, may trade at a discount to the price that the
investor paid to purchase the Series A Preferred Securities offered hereby.
Holders of Series A Preferred Securities may receive Series A Debentures upon
liquidation of CPL Capital I and prospective purchasers of Series A Preferred
Securities are also making an investment decision with regard to the Series A
Debentures and should carefully review all the information regarding the Series
A Debentures contained herein. See "Description of the Preferred
Securities -- Redemption or Exchange -- Special Event Redemption or Distribution
of Corresponding Junior Subordinated Debentures" and "Description of the
Corresponding Junior Subordinated Debentures -- General" in the accompanying
Prospectus.
SHORTENING OF STATED MATURITY OF SERIES A DEBENTURES; MARKET PRICE
CPL will have the right at any time and from time to time to shorten the
maturity of the Series A Debentures to a date not earlier than April 30, 2002
and thereby cause the Series A Preferred Securities to be redeemed on such
earlier date. If CPL does exercise such right, there can be no assurance that
the shortening of the maturity of the Series A Debentures will not have an
effect on the market price of the Series A Preferred Securities or Series A
Debentures that may be distributed in exchange for Series A Preferred
Securities.
POSSIBLE TAX LAW CHANGES
On February 6, 1997, President Clinton introduced to Congress his budget
proposal for fiscal year 1998. Included in President Clinton's budget proposal
is a tax provision, which if enacted, generally would treat as equity, for
federal income tax purposes, an instrument issued by a corporation if the
instrument has a maximum term of more than 15 years and is not shown as
indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. The above-described
provision is proposed to be effective generally for instruments issued on or
after the date of first action by Congressional committee. As of the date
hereof, no such Congressional action has occurred. If the proposed provision
applied to the Series A Debentures, CPL would be unable to deduct interest on
the Series A Debentures. A similar tax provision was contained in President
Clinton's budget proposal for fiscal year 1997, which provision was not enacted
before the 104th Congress adjourned. Under current law, CPL believes and intends
to take the position that it is able to deduct interest on the Series A
Debentures. There can be no assurance
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<PAGE> 7
that current or future legislative proposals or final legislation will not
affect the ability of CPL to deduct interest on the Series A Debentures. Such a
change could give rise to a Tax Event, which would permit CPL to cause a
redemption of the Series A Preferred Securities before April 30, 2002. See
"Certain Terms of Series A Subordinated Debentures -- Redemption" in this
Prospectus Supplement and "Description of Preferred Securities -- Redemption or
Exchange -- Special Event Redemption or Distribution of Corresponding Junior
Subordinated Debentures" in the accompanying Prospectus. See also "Certain
Federal Income Tax Considerations -- Possible Tax Law Changes."
RIGHTS UNDER THE SERIES A GUARANTEE
The Series A Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Bank of New
York will act as the indenture trustee under the Series A Guarantee (the
"Guarantee Trustee") for the purposes of compliance with the Trust Indenture Act
and will hold the Series A Guarantee for the benefit of the holders of the
Series A Preferred Securities. The Bank of New York also will act as Debenture
Trustee for the Series A Debentures and as Property Trustee under the Trust
Agreement. The Series A Guarantee guarantees to the holders of the Series A
Preferred Securities the following payments, to the extent not paid by CPL
Capital I: (i) any accumulated and unpaid Distributions required to be paid on
the Series A Preferred Securities, to the extent that CPL Capital I has funds on
hand available therefor, (ii) the redemption price with respect to any Series A
Preferred Securities called for redemption to the extent that CPL Capital I has
funds on hand available therefor at the date of redemption, and (iii) upon a
voluntary or involuntary termination, winding up or liquidation of CPL Capital I
(unless the Series A Debentures are distributed to holders of the Series A
Preferred Securities), the lesser of (a) the aggregate of the liquidation
preference and all accumulated and unpaid Distributions to the date of payment
to the extent CPL Capital I has funds on hand available therefor and (b) the
amount of assets of CPL Capital I remaining available for distribution to
holders of the Series A Preferred Securities. If CPL were to default on its
obligation to pay amounts payable under the Series A Debentures, CPL Capital I
would lack funds for the payment of Distributions or amounts payable on
redemption of the Series A Preferred Securities or otherwise, and, in such
event, holders of the Series A Preferred Securities would not be able to rely
upon the Series A Guarantee for payment of such amounts. Instead, holders of the
Series A Preferred Securities would have the limited enforcement rights
described under "Description of Preferred Securities -- Events of Default;
Notice" and "-- Enforcement of Certain Rights by Holders of Preferred
Securities" in the accompanying Prospectus. See "Description of Guarantees" and
"Description of Corresponding Junior Subordinated Debentures" in the
accompanying Prospectus. The Trust Agreement provides that each holder of Series
A Preferred Securities by acceptance thereof agrees to the provisions of the
Series A Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Series A Preferred Securities will generally have limited voting
rights relating only to the modification of the Series A Preferred Securities
and the dissolution, winding-up or liquidation of CPL Capital I. Holders of
Series A Preferred Securities will not be entitled to vote to appoint, remove or
replace the Property Trustee or the Delaware Trustee, which voting rights are
vested exclusively in the holder of the Series A Common Securities except upon
the occurrence of certain events. The Issuer Trustees and CPL may amend the
Trust Agreement without the consent of holders of Series A Preferred Securities
to ensure that CPL Capital I will be classified for United States federal income
tax purposes as a "grantor trust," even if such action adversely affects the
interests of such holders in a material respect. See "Description of Preferred
Securities -- Voting Rights; Amendment of Trust Agreement" and "-- Removal of
Issuer Trustees" in the accompanying Prospectus.
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<PAGE> 8
TRADING CHARACTERISTICS OF SERIES A PREFERRED SECURITIES
CPL Capital I intends to list the Series A Preferred Securities on the
NYSE. The Series A Preferred Securities may trade at prices that do not fully
reflect the value of accrued but unpaid interest with respect to the underlying
Series A Debentures. A holder of Series A Preferred Securities that disposes of
its Series A Preferred Securities between record dates for payments of
Distributions (and consequently does not receive a Distribution from CPL Capital
I for the period prior to such disposition) will nevertheless be required to
include as ordinary income, accrued but unpaid interest on the Series A
Debentures through the date of disposition. Such holder will recognize a capital
loss to the extent the amount realized with respect to the Series A Preferred
Securities is less than its adjusted tax basis. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes. See "Certain Federal Income Tax
Considerations -- Sale or Redemption of Series A Preferred Securities."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Subsequent to the date of the accompanying Prospectus, CPL filed on May 5,
1997 with the Securities and Exchange Commission a Current Report on Form 8-K
dated April 7, 1997, which document is incorporated by reference in this
Prospectus Supplement.
CPL CAPITAL I
CPL Capital I is a statutory business trust created under Delaware law
pursuant to (i) a trust agreement executed by CPL, as Depositor, The Bank of New
York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee,
and the Administrative Trustee named therein (which trust agreement was later
amended and restated in the form of the Trust Agreement) and (ii) the filing of
a certificate of trust with the Delaware Secretary of State on January 24, 1997.
CPL Capital I's business and affairs are conducted by the Issuer Trustees: The
Bank of New York, as Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee, and two individual Administrative Trustees who are employees
or officers of or affiliated with CPL. CPL Capital I exists for the exclusive
purposes of (i) issuing and selling the Series A Preferred Securities and Series
A Common Securities, (ii) using the proceeds from the sale of Series A Preferred
Securities and the Series A Common Securities to acquire Series A Debentures
issued by CPL and (iii) engaging in only those other activities necessary,
convenient or incidental thereto. Accordingly, the Series A Debentures will be
the sole assets of CPL Capital I, and payments under the Series A Debentures
will be the sole revenue of CPL Capital I. All of the Series A Common Securities
will be owned by CPL. The Series A Common Securities will rank pari passu, and
payments will be made thereon pro rata, with the Series A Preferred Securities,
except that upon the occurrence and continuance of an event of default under the
Trust Agreement resulting from an Event of Default under the Indenture, the
rights of CPL as holder of the Series A Common Securities to payment in respect
of Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Series A Preferred Securities.
See "Description of Preferred Securities -- Subordination of Common Securities"
in the accompanying Prospectus. CPL will acquire Series A Common Securities
having an aggregate liquidation amount equal to 3% of the total capital of CPL
Capital I. CPL Capital I has a term of 45 years, but may terminate earlier as
provided in the Trust Agreement. The principal executive office of CPL Capital I
is c/o Central and South West Corporation, 1616 Woodall Rodgers Freeway, Dallas,
Texas 75202, Attention: Director, Finance, and its telephone number is (214)
777-1000. See "The Issuer Trusts" in the accompanying Prospectus.
It is anticipated that CPL Capital I will not be subject to the reporting
requirements of the Exchange Act.
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<PAGE> 9
CENTRAL POWER AND LIGHT COMPANY
Central Power and Light Company, a Texas corporation ("CPL"), is a public
utility company engaged in the production, purchase, transmission, distribution
and sale of electricity in South Texas. CPL serves approximately 631,000 retail
customers in the South Texas area. Central and South West Corporation ("CSW"), a
Dallas-based registered public utility holding company under the Public Utility
Holding Company Act of 1935, as amended (the "1935 Act"), owns all of the issued
and outstanding common stock of CPL. CPL's executive offices are located at 539
North Carancahua Street, Corpus Christi, Texas 78401-2802, telephone number
(512) 881-5300.
The foregoing information relating to CPL does not purport to be
comprehensive and should be read together with the financial statements and
other information contained in the Incorporated Documents. See "Incorporation of
Certain Documents by Reference" in the accompanying Prospectus.
RECENT DEVELOPMENTS
RESULTS OF OPERATIONS
Net income for common stock decreased from $13.2 million for the first
quarter of 1996 to a loss of $6.6 million during the first quarter of 1997. The
major factor causing the decrease was the financial impact of the final order
(the "Final Order") issued by the Public Utility Commission of Texas (the "Texas
Commission") in CPL's current rate case. See "Rate Case Final Order" below for
further information regarding the Final Order. The preliminary estimated
financial impact of the Final Order, which was recorded in March 1997, is an
aggregate loss of $25.1 million including a retroactive loss of $20.3 million
for CPL's 1996 operations and an additional $4.8 million loss for CPL's first
quarter of 1997 operations. These decreases were partially offset by an increase
in non-fuel electric operating revenues resulting from a 6.6% increase in retail
kilowatt-hour electric sales. The absence in 1997 of the $4.1 million negative
impact of a 1996 fuel settlement also offset a portion of the overall decreases.
RATE CASE FINAL ORDER
As previously reported, in November 1995, CPL filed with the Texas
Commission a request to increase its retail base rates by $71 million, and in
May 1996, CPL placed a $70 million base rate increase into effect under bond.
The bonded rates are subject to refund based on the receipt of a final order of
the Texas Commission. On March 31, 1997, the Texas Commission issued its Final
Order in CPL's Rate Review Docket No. 14965. The Final Order lowers the annual
retail base rates of CPL by approximately $27 million, or approximately 3.5% in
1997, from CPL's existing rate level prior to CPL's May 1996 implementation of
bonded rates. The Texas Commission also introduced a "Glide Path" rate
methodology whereby CPL's rates will be reduced by an additional $16 million in
1998 and another $16 million in 1999.
CPL has filed a motion for a rehearing of the Final Order requesting
reconsideration by the Texas Commission of numerous issues in the rate case. CPL
has also requested that the Texas Commission revise its Final Order on other
technical issues. The Texas Commission has until May 15, 1997 to consider
motions for rehearing unless it extends this statutory deadline by up to 45
days. Management of CPL expects that the Texas Commission will grant motions for
rehearing on some issues in order to make technical corrections in its Final
Order. However, management believes that the Texas Commission is unlikely to
revise its order on rehearing in a manner which would substantially mitigate the
adverse financial impact of the Final Order on CPL. After the rehearing process
has concluded, CPL will likely appeal the Final Order in State District Court.
CPL is unable to predict how the final resolution of the issues raised in the
Final Order will ultimately affect CPL's results of operations and financial
condition. However, if the Final Order is ultimately
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<PAGE> 10
upheld after the rehearings and appeals process, it would have a material
adverse effect on the results of operations and financial condition of CPL.
STATE LEGISLATIVE ACTIVITIES
Utility restructuring and retail competition legislation has been
introduced in Texas during the current legislative session which ends on June 2,
1997. Also, on May 5, 1997, Texas Governor George W. Bush announced his support
for a legislative proposal that would bring retail competition to the Texas
electric utility industry after September 1, 2001. Under the proposal, Texas
investor-owned electric utilities ("IOU's") can elect into the plan's stranded
cost recovery provisions which permit such IOU's to use methodologies, including
securitization, to recover their stranded costs. Such electing utilities must
also agree to a series of rate discounts for residential and small commercial
customers over a three-year period. If ultimately enacted, the plan could have
an impact on the Texas Commission's Final Order in CPL's rate case. CPL is
unable to predict whether any restructuring and retail competition legislation
will be enacted by the Texas Legislature, and if enacted, the ultimate form,
timing and effects of such legislation.
The Texas House of Representatives has passed a bill that would
significantly increase the amount of taxes paid by IOU's in Texas. The bill
includes a reduction of property taxes, an increase in existing sales and gross
receipts taxes and a new tax on coal. The bill would allow the IOU's to flow the
impact of these proposed tax increases through to their customers. The Texas
Senate is currently reviewing the bill. CPL is currently unable to predict
whether this bill will be enacted, and if enacted, the ultimate form, timing and
effects of such legislation.
CREDIT RATINGS
On April 28, 1997, Moody's Investors Service ("Moody's") announced that it
had downgraded CPL's first mortgage bond rating to A3 from A2, its senior
unsecured debt rating to Baa1 from A3 and its preferred stock rating to baa1
from a3. Moody's has assigned a rating of baa1 to the Series A Preferred
Securities and a Baa2 subordinated debt rating to the Series A Debentures.
Such ratings reflect only the view of the rating agency at the time the
rating was issued, and any explanation of the significance of such rating may
only be obtained from such rating agency. There is no assurance that any such
credit rating will remain in effect for any given period of time or that such
rating will not be lowered, suspended or withdrawn entirely by the rating
agency, if, in such rating agency's judgment, circumstances so warrant. Any such
lowering, suspension or withdrawal of any rating may have an adverse effect on
the market price or marketability of the Series A Preferred Securities.
TENDER OFFER/PROXY SOLICITATION
On April 28, 1997, CPL's parent holding company, CSW, successfully
completed a tender offer for any and all shares of CPL's 4.20% and 4.00% Series
of cumulative preferred stock, acquiring 57,524 preferred shares of CPL's 4.20%
Series and 57,924 preferred shares of CPL's 4.00% Series (or approximately 66%
of CPL's outstanding preferred stock subject to the offer). CPL has repurchased
these preferred shares from CSW and intends to retire and cancel the shares. The
total consideration expected to be paid by CPL for the repurchased preferred
shares is approximately $7.7 million. Additionally, at a special meeting of
stockholders held on April 7, 1997, CPL's preferred and common shareholders
approved and adopted an amendment to CPL's Restated Articles of Incorporation to
eliminate a provision limiting the amount of unsecured debt that CPL can issue.
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<PAGE> 11
USE OF PROCEEDS
All of the proceeds from the sale of Series A Preferred Securities will be
invested by CPL Capital I in Series A Debentures. The proceeds from the sale of
such Series A Debentures will initially become part of the general funds of CPL
and will be used principally to reimburse the treasury for (i) the redemption of
$76 million aggregate par value of its 8.72% Series and 7.12% Series preferred
stock for a total consideration of $76.3 million and (ii) the reacquisition of
approximately $11.5 million aggregate par value of its 4.20% Series and 4.00%
Series preferred stock for approximately $7.7 million. The balance of the
proceeds will be used to repay short-term debt, to provide working capital and
for other general corporate purposes, subject to applicable regulatory
requirements. At March 31, 1997, CPL had outstanding approximately $114.1
million of short-term debt with a weighted average interest cost of
approximately 5.62%.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
The following table sets forth CPL's ratios of earnings to fixed charges
and ratios of earnings to combined fixed charges and preferred stock dividend
requirements for the years indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings to Fixed Charges............... 2.86 2.63 3.24 2.69 3.23
Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements
(unaudited)........................... 2.44 2.36 2.82 2.31 2.77
</TABLE>
For computation of the ratios: (i) earnings consist of operating income
plus federal income taxes, deferred income taxes and investment tax credits,
other income and deductions, allowance for funds (both borrowed and equity) used
during construction and mirror construction work in progress amortization, and
(ii) fixed charges consist of interest on long-term debt and short-term debt,
and other interest charges. Pretax earnings required for preferred stock
dividends were computed using the effective tax rate for the applicable year.
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<PAGE> 12
SELECTED FINANCIAL INFORMATION
(DOLLAR AMOUNTS IN THOUSANDS)
The selected financial data of CPL for the years ended December 31, 1996,
1995 and 1994 set forth below were derived from and should be read in
conjunction with the financial statements and related notes of CPL incorporated
by reference in the accompanying Prospectus. The financial statements for the
three-year period ended December 31, 1996 have been audited by Arthur Andersen
LLP, independent auditors, and the reports of Arthur Andersen LLP thereon are
incorporated by reference in the accompanying Prospectus
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Operating Revenues................................... $1,300,688 $1,073,469 $1,217,979
Operating Income..................................... 285,647 282,184 256,251
Net Income Before Preferred Dividends................ 147,051 206,447 205,439
Net Utility Plant.................................... 3,419,018 3,469,945 3,469,826
</TABLE>
<TABLE>
<CAPTION>
CAPITALIZATION AT
DECEMBER 31, 1996
----------------------------------------
(UNAUDITED)
AMOUNT
AMOUNT AS
ACTUAL % ADJUSTED(1) %
---------- ----- ----------- -----
<S> <C> <C> <C> <C>
Long-Term Debt.................................... $1,323,054 43.9% $1,323,054 42.9%
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust Holding Solely
Parent Junior Subordinated Debentures(2)........ -- -- 149,750 4.9
Preferred Stock(3)................................ 250,351 8.3 163,261 5.3
Common Equity(4).................................. 1,442,820 47.8 $1,442,365 46.9
---------- ----- ---------- -----
Total................................... $3,016,225 100.0% $3,078,430 100.0%
========== ===== ========== =====
Short-Term Debt................................... $ 52,525 -- $ 0 --
Long-Term Debt Currently Maturing................. $ 200,000 -- $ 200,000 --
</TABLE>
- - - ---------------
(1) Adjusted to give effect to the consummation of the offering of 6,000,000
Preferred Securities, the redemption of CPL's 8.72% Series and 7.12% Series
preferred stock, the reacquisition of CPL's 4.20% Series and 4.00% Series
preferred stock and the repayment of short-term debt. See "Use of Proceeds."
(2) As described herein, the sole assets of CPL Capital I will consist solely of
approximately $154.6 million of Series A Debentures, issued by CPL to CPL
Capital I, and certain rights under the Series A Guarantee. The Series A
Debentures will bear interest at the annual rate of 8.00% of the principal
amount thereof and will mature on April 30, 2037 which date may be shortened
to a date not earlier than April 30, 2002. CPL owns all of the Series A
Common Securities of CPL Capital I.
(3) As discussed under "Recent Developments" above, CPL has repurchased from
CSW, and intends to retire and cancel, preferred shares acquired by CSW in
its tender offer for CPL's 4.20% Series and 4.00% Series preferred stock. On
April 10, 1997 CPL redeemed its 8.72% Series and 7.12% Series preferred
stock.
(4) Adjusted for capitalized costs associated with the repurchase of preferred
stock.
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<PAGE> 13
ACCOUNTING TREATMENT
For financial reporting purposes, CPL Capital I will be treated as a
subsidiary of CPL and, accordingly, the accounts of CPL Capital I will be
included in the financial statements of CPL. The Series A Preferred Securities
will be presented as a separate line item in the balance sheet of CPL and
appropriate disclosures about the Series A Preferred Securities, the Series A
Guarantee and the Series A Debentures will be included in the notes to the
financial statements. For financial reporting purposes, CPL will record
Distributions payable on the Series A Preferred Securities as an expense.
CERTAIN TERMS OF THE SERIES A PREFERRED SECURITIES
GENERAL
The following summary of certain terms and provisions of the Series A
Preferred Securities supplements the description of the terms and provisions of
the Preferred Securities set forth in the accompanying Prospectus under the
heading "Description of Preferred Securities," to which description reference is
hereby made. This summary of certain terms and provisions of the Series A
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Trust Agreement. The form of the
Trust Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus Supplement and accompanying Prospectus is a part.
DISTRIBUTIONS
The Series A Preferred Securities represent undivided beneficial interests
in the assets of CPL Capital I, and Distributions on each Series A Preferred
Security will be payable at the annual rate of 8.00% of the stated liquidation
preference of $25, payable quarterly in arrears on March 31, June 30, September
30 and December 31 of each year. Distributions will accumulate from May 14,
1997, the date of original issuance. The first Distribution payment date for the
Series A Preferred Securities will be June 30, 1997. The amount of Distributions
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months and, for any period shorter than a full calendar month, on the
basis of the actual number of days elapsed in such period. In the event that any
date on which Distributions are payable on the Series A Preferred Securities is
not a Business Day, then payment of the Distributions payable on such date will
be made on the next succeeding day that is a Business Day (and without any
additional Distributions 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 such case with the same force and effect as if made on the date such
payment was originally payable. Accrued and unpaid distributions will accumulate
additional Distributions thereon ("Additional Amounts") after the payment date
therefor in an amount equal to the additional interest accrued on interest in
arrears on the Series A Debentures. See "Certain Terms of the Series A
Debentures -- General." The term "Distributions" as used herein shall include
any such Additional Amounts. See "Description of Preferred
Securities -- Distributions" in the accompanying Prospectus.
So long as no Event of Default under the Indenture has occurred and is
continuing, CPL has the right under the Indenture to defer the payment of
interest on the Series A Debentures at any time or from time to time for one or
more Extension Periods, each of which, together with all previous and further
extensions of such Extension Period prior to its termination, may not exceed 20
consecutive quarters and may not extend beyond the maturity of the Series A
Debentures. As a consequence of any such election, quarterly Distributions on
the Series A Preferred Securities will be deferred by CPL Capital I during any
such Extension Period. Distributions to which holders of the Series A Preferred
Securities are entitled will accumulate additional Distributions thereon at the
rate of 8.00% per annum thereof, compounded quarterly from the relevant payment
date for such Distributions.
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<PAGE> 14
During any such Extension Period, CPL may not, and may not permit any subsidiary
of CPL to, (i) declare, set aside or pay any dividend or distribution on, or
repurchase, redeem, or otherwise acquire or make any sinking fund payment with
respect to, any shares of CPL's capital stock or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities (including other Junior Subordinated Debentures) that rank pari
passu with or junior in interest to the Series A Debentures or make any
guarantee payments with respect to the foregoing (other than (a) dividends or
distributions in shares of its capital stock or in rights to acquire shares of
its capital stock, (b) conversions into or exchanges for shares of its capital
stock, (c) redemptions, purchases or other acquisitions of shares of its capital
stock made for the purpose of an employee incentive plan or benefit plan of CPL
or any of its subsidiaries and mandatory redemptions or sinking fund payments
with respect to any series of Preferred Stock of CPL that are subject to
mandatory redemption or sinking fund requirements, provided that the aggregate
stated value of all such series outstanding at the time of any such payment does
not exceed five percent of the aggregate of (1) the total principal amount of
all bonds or other securities representing secured indebtedness issued or
assumed by CPL and then outstanding and (2) the capital and surplus of CPL to be
stated on the books of account of CPL after giving effect to such payment,
provided, however, that any moneys deposited in any sinking fund and not in
violation of this provision may thereafter be applied to the purchase or
redemption of such Preferred Stock in accordance with the terms of such sinking
fund without regard to the restrictions contained in this provision, and (d)
payments under any guarantee by CPL with respect to any securities of a
subsidiary of CPL, provided that the proceeds from the issuance of such
securities were used to purchase Junior Subordinated Debentures of any series
under the Indenture). Upon the termination of any such Extension Period and the
payment of all amounts then due on any Interest Payment Date, CPL may elect to
begin a new Extension Period, subject to the above requirements. See "Certain
Terms of the Series A Debentures -- Option to Extend Interest Payment Period"
and "Certain Federal Income Tax Considerations -- Potential Extension of
Interest Payment Period and Original Issue Discount."
CPL has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Series A Debentures.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Series A
Debentures, whether at maturity or upon earlier redemption as provided in the
Indenture, the proceeds from such repayment or redemption shall be applied by
the Property Trustee to redeem a Like Amount of the Series A Preferred
Securities, upon not less than 30 nor more than 60 days notice prior to the date
fixed for repayment or redemption (the "Redemption Date"), at a redemption price
equal to the aggregate liquidation preference of such Series A Preferred
Securities plus accumulated and unpaid Distributions thereon to the Redemption
Date (the "Redemption Price"). See "Description of Preferred
Securities -- Redemption or Exchange" in the accompanying Prospectus and
"Certain Terms of the Series A Debentures -- Redemption."
CPL will have the right to redeem the Series A Debentures (i) on or after
April 30, 2002 in whole at any time or in part from time to time, at a
redemption price equal to the accrued and unpaid interest on the Series A
Debentures so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof or (ii) in whole (but not in part), within 90 days
following the occurrence of a Tax Event or an Investment Company Event (each as
defined in the accompanying Prospectus, and as so collectively defined, a
"Special Event"), at a redemption price equal to the accrued and unpaid interest
on the Series A Debentures so redeemed to the date fixed for redemption, plus
100% of the principal amount thereof, in each case subject to conditions
described under "Description of Junior Subordinated Debentures -- Redemption or
Exchange" and "Description of Corresponding Junior Subordinated
Debentures -- Optional Redemption" in the accompanying Prospectus.
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<PAGE> 15
DISTRIBUTION OF SERIES A DEBENTURES
At any time, CPL will have the right to terminate CPL Capital I and, after
satisfaction of the liabilities of creditors of CPL Capital I as provided by
applicable law, cause the Series A Debentures to be distributed to the holders
of the Series A Preferred Securities in liquidation of CPL Capital I. See
"Certain Terms of the Series A Debentures -- Distribution of Series A
Debentures." If such a distribution should occur, CPL would continue to have the
right to shorten the maturity of the Series A Debentures, subject to certain
conditions as described under "Certain Terms of the Series A
Debentures -- General." Under current United States federal income tax law,
provided CPL Capital I is treated as a "grantor trust" at the time of such
distribution, such distribution should not be a taxable event to CPL Capital I
or to holders of the Series A Preferred Securities. If there were an occurrence
of a Special Event pursuant to which CPL Capital I was determined to be an
association taxable as a corporation, however, such a distribution would be a
taxable event to CPL Capital I and to such holders. See "Certain Federal Income
Tax Considerations -- Distribution of Series A Debentures to Holders of Series A
Preferred Securities." If CPL does not elect to redeem or distribute the Series
A Debentures as described above, the Series A Preferred Securities will remain
outstanding until the repayment of the Series A Debentures.
LIQUIDATION VALUE
The amount payable on the Series A Preferred Securities in the event of any
liquidation of CPL Capital I is $25 per Series A Preferred Security plus
accumulated and unpaid Distributions, which may be in the form of a distribution
of a Like Amount in Series A Debentures, subject to certain exceptions. See
"Description of Preferred Securities -- Liquidation Distribution Upon
Termination" in the accompanying Prospectus.
CERTAIN TERMS OF THE SERIES A DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Series A
Debentures supplements the description of the terms and provisions of the
Corresponding Junior Subordinated Debentures set forth in the accompanying
Prospectus under the headings "Description of Junior Subordinated Debentures"
and "Description of Corresponding Junior Subordinated Debentures," to which
description reference is hereby made. The summary of certain terms and
provisions of the Series A Debentures set forth below does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
Indenture. The Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and accompanying Prospectus is a
part.
Concurrently with the issuance of the Series A Preferred Securities, CPL
Capital I will invest the proceeds thereof and the consideration paid by CPL for
the Series A Common Securities in the Series A Debentures issued by CPL. The
Series A Debentures will bear interest at the annual rate of 8.00% of the
principal amount thereof, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (each, an "Interest Payment Date"),
commencing June 30, 1997, to the person in whose name each Series A Debenture is
registered, subject to certain exceptions, at the close of business on the
fifteenth day of the month immediately preceding the Interest Payment Date.
It is anticipated that, until the liquidation, if any, of CPL Capital I,
each Series A Debenture will be held in the name of the Property Trustee in
trust for the benefit of the holders of the Series A Preferred Securities. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months and, for any period shorter than a full
calendar month, on the basis of the actual number of days elapsed in such
period. In the event that any date on which interest is payable on the Series A
Debentures is not a Business Day, then payment of the interest
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<PAGE> 16
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay)
except that, if such Business Day is in the next succeeding calendar year,
payment of such Distribution shall be made on the immediately preceding Business
Day, in each such case with the same force and effect as if made on the date
such payment was originally payable. Accrued interest that is not paid on the
applicable Interest Payment Date will bear additional interest on the amount
thereof (to the extent permitted by law) at the rate per annum of 8.00% thereof,
compounded quarterly. The term "interest" as used herein shall include quarterly
interest payments, interest on quarterly interest payments not paid on the
applicable Interest Payment Date and Additional Sums (as defined below), as
applicable.
The Series A Debentures will be issued as a series of Junior Subordinated
Debentures under the Indenture. The Series A Debentures will mature on April 30,
2037, which date may be shortened at any time and from time to time at the
election of CPL, but in no event to a date earlier than April 30, 2002 (such
date, as it may be shortened, the "Maturity Date"), provided, however, that, if
CPL exercises its right to liquidate CPL Capital I and distribute the Series A
Debentures to holders in exchange for the Series A Preferred Securities,
effective upon such exercise the Maturity Date of the Series A Debentures may be
changed to any date elected by CPL that is (i) no earlier than the date five
years after the initial issuance of the Series A Preferred Securities and (ii)
no later than April 30, 2037. The Series A Debentures will be unsecured and will
rank junior and be subordinate in right of payment to all Senior Indebtedness of
CPL. In addition, the Series A Debentures will be effectively subordinated to
all existing and future liabilities of CPL's subsidiaries, and holders of Series
A Debentures should look only to the assets of CPL for payments on the Series A
Debentures. CPL currently has no subsidiaries. The Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of CPL, whether under
the Indenture, any other existing or other indenture that CPL may enter into in
the future or otherwise. See "Description of Junior Subordinated
Debentures -- Subordination" in the accompanying Prospectus. At a special
meeting of shareholders held on April 7, 1997, the preferred and common
shareholders of CPL approved and adopted an amendment to CPL's Restated Articles
of Incorporation which eliminated the provision that limited the amount of
unsecured debt that CPL could issue to (i) the equivalent of 20% of the total of
all unsecured indebtedness and total equity or (ii) as to unsecured debt
maturing in less than ten years, the equivalent of 10% of such aggregate. See
"Recent Developments -- Tender Offer/Proxy Solicitation" and "Description of
Junior Subordinated Debentures -- General" in the accompanying Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Event of Default under the Indenture has occurred and is
continuing, CPL has the right under the Indenture at any time during the term of
the Series A Debentures to defer the payment of interest at any time or from
time to time for one or more Extension Periods, each of which, together with all
previous and further extensions of such Extension Period prior to its
termination, may not exceed 20 consecutive quarters and may not extend beyond
the maturity of the Series A Debentures. At the end of such Extension Period,
CPL must pay all interest then accrued and unpaid (together with interest
thereon at the annual rate of 8.00%, compounded quarterly, to the extent
permitted by applicable law). During an Extension Period, interest will continue
to accrue and holders of Series A Debentures (or holders of Series A Preferred
Securities while such series is outstanding) will be required to accrue interest
income (as original issue discount) on an economic accrual basis for United
States federal income tax purposes. See "Certain Federal Income Tax
Considerations -- Potential Extension of Interest Payment Period and Original
Issue Discount."
During any such Extension Period, CPL may not, and may not permit any
subsidiary of CPL to, (i) declare, set aside or pay any dividend or distribution
on, or repurchase, redeem, or otherwise acquire or make any sinking fund payment
with respect to, any shares of CPL's capital stock or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities (including other Junior Subordinated Debentures) that rank pari
passu with or
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<PAGE> 17
junior in interest to the Series A Debentures or make any guarantee payments
with respect to the foregoing (other than (a) dividends or distributions in
shares of its capital stock or in rights to acquire shares of its capital stock,
(b) conversions into or exchanges for shares of its capital stock, (c)
redemptions, purchases or other acquisitions of shares of its capital stock made
for the purpose of an employee incentive plan or benefit plan of CPL or any of
its subsidiaries and mandatory redemptions or sinking fund payments with respect
to any series of Preferred Stock of CPL that are subject to mandatory redemption
or sinking fund requirements, provided that the aggregate stated value of all
such series outstanding at the time of any such payment does not exceed five
percent of the aggregate of (1) the total principal amount of all bonds or other
securities representing secured indebtedness issued or assumed by CPL and then
outstanding and (2) the capital and surplus of CPL to be stated on the books of
account of CPL after giving effect to such payment, provided, however, that any
moneys deposited in any sinking fund and not in violation of this provision may
thereafter be applied to the purchase or redemption of such Preferred Stock in
accordance with the terms of such sinking fund without regard to the
restrictions contained in this provision, and (d) payments under any guarantee
by CPL with respect to any securities of a subsidiary of CPL, provided that the
proceeds from the issuance of such securities were used to purchase Junior
Subordinated Debentures of any series under the Indenture). Upon the termination
of any such Extension Period and the payment of all amounts then due on any
Interest Payment Date, CPL may elect to begin 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. CPL must give the Administrative Trustees and
the Debenture Trustee notice of its election of such Extension Period at least
one Business Day prior to the earlier of (i) the date the Distributions on the
Series A Preferred Securities would have been payable except for the election to
begin such Extension Period and (ii) the date the Administrative Trustees are
required to give notice to the NYSE or other applicable self-regulatory
organization or to holders of such Series A 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 Administrative Trustees shall
give notice of CPL's election to begin a new Extension Period to the holders of
the Series A Preferred Securities within five Business Days of the receipt of
notice thereof. See "Description of Junior Subordinated Debentures -- Option to
Extend Interest Payment Date" in the accompanying Prospectus.
ADDITIONAL SUMS
If CPL Capital I is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, CPL will pay as additional
amounts on the Series A Debentures such amounts ("Additional Sums") as shall be
required so that the Distributions payable by CPL Capital I shall not be reduced
as a result of any such additional taxes, duties or other governmental charges,
subject to the conditions described under "Description of Preferred
Securities -- Redemption or Exchange -- Special Event Redemption or Distribution
of Corresponding Junior Subordinated Debentures" in the accompanying Prospectus.
REDEMPTION
The Series A Debentures are redeemable prior to maturity at the option of
CPL (i) on or after April 30, 2002, in whole at any time or in part from time to
time, at a redemption price equal to the accrued and unpaid interest on the
Series A Debentures so redeemed to the date fixed for redemption plus 100% of
the principal amount thereof or (ii) in whole (but not in part), within 90 days
of the occurrence of a Special Event, at a redemption price equal to the accrued
and unpaid interest on the Series A Debentures so redeemed to the date fixed for
redemption, plus 100% of the principal amount thereof, in each case subject to
the further conditions described under "Description of Junior Subordinated
Debentures -- Redemption" and "Description of Corresponding Junior Subordinated
Debentures -- Optional Redemption" in the accompanying Prospectus.
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<PAGE> 18
DISTRIBUTION OF SERIES A DEBENTURES
Under certain circumstances involving the termination of CPL Capital I,
Series A Debentures may be distributed to the holders of the Series A Preferred
Securities in liquidation of CPL Capital I after satisfaction of liabilities to
creditors of CPL Capital I as provided by applicable law. If distributed to
holders of Series A Preferred Securities in liquidation, the Series A Debentures
will initially be issued in the form of one or more global securities and DTC,
or any successor depositary for the Series A Preferred Securities, will act as
depositary for the Series A Debentures. It is anticipated that the depositary
arrangements for the Series A Debentures would be substantially identical to
those in effect for the Series A Preferred Securities. If the Series A
Debentures are distributed to the holders of Series A Preferred Securities upon
the liquidation of CPL Capital I, CPL will use its best efforts to list the
Series A Debentures on the NYSE or such other stock exchanges or other
organizations, if any, on which the Series A Preferred Securities are then
listed. There can be no assurance as to the market price of any Series A
Debentures that may be distributed to the holders of Series A Preferred
Securities. For a description of DTC and the terms of the depositary
arrangements relating to payments, transfers, voting rights, redemption and
other notices and other matters, see "Description of Preferred
Securities -- Book-entry Issuance" in the accompanying Prospectus.
REGISTRATION OF SERIES A DEBENTURES
A global security shall be exchangeable for Series A Debentures registered
in the names of persons other than DTC or its nominee only if (i) DTC notifies
CPL that it is unwilling or unable to continue as a depositary for such global
security and no successor depositary shall have been appointed, or if at any
time DTC ceases to be a clearing agency registered under the Exchange Act, at a
time when DTC is required to be so registered to act as such depositary, (ii)
CPL in its sole discretion determines that such global security shall be so
exchangeable or (iii) the global security was issued pursuant to a liquidation
of CPL Capital I as provided in the Trust Agreement and there shall have
occurred and be continuing a Debenture Event of Default with respect to such
global security and the holders of at least a majority of the beneficial
interests in such global security advise the Property Trustee in writing that
the continuation of a book-entry system through DTC is no longer in their best
interest. Any global security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for definitive certificates registered in such
names as DTC shall direct. It is expected that such instructions will be based
upon directions received by DTC from its Participants with respect to ownership
of beneficial interests in such global security. In the event that Series A
Debentures are issued in definitive form, such Series A Debentures will be in
denominations of $25 and integral multiples thereof and may be transferred or
exchanged at the offices described below.
Payments on Series A Debentures represented by a global security will be
made to DTC, as the depositary for the Series A Debentures. In the event Series
A Debentures are issued in definitive form, principal and interest will be
payable, the transfer of the Series A Debentures will be registrable, and Series
A Debentures will be exchangeable for Series A Debentures of other denominations
of a like aggregate principal amount, at the corporate office of the Debenture
Trustee in New York, New York, or at the offices of any paying agent or transfer
agent appointed by CPL, provided that payment of interest may be made at the
option of CPL by check mailed to the address of the persons entitled thereto or
by wire transfer as provided under "Description of Junior Subordinated
Debentures -- Payment and Paying Agents" in the accompanying Prospectus. In
addition, if the Series A Debentures are issued in certificated form, the record
dates for payment of interest will be the 15th day of the month in which the
relevant Interest Payment Date occurs. For a description of DTC and the terms of
the depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Description of Preferred
Securities -- Book-entry Issuance" in the accompanying Prospectus.
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<PAGE> 19
ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an investment
in the Series A Preferred Securities. Accordingly, among other factors, the
fiduciary should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and would be consistent with the documents
and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986,
as amended (the "Code") prohibit Plans, as well as individual retirement
accounts and Keogh plans subject to Section 4975 of the Code (also "Plans"),
from engaging in certain transactions involving "plan assets" with persons who
are "parties in interest" under ERISA or "disqualified persons" under the Code
("Parties in Interest") with respect to such Plan. A violation of these
"prohibited transaction" rules may result in an excise tax or other liabilities
under ERISA and/or Section 4975 of the Code for such persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
Employee benefit plans that are governmental plans (as defined in Section 3(32)
of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and
foreign plans (as described in Section 4(b)(5) of ERISA) are not subject to the
requirements of ERISA or Section 4975 of the Code.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of CPL Capital I would be deemed to
be "plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if
"plan assets" of the Plan were used to acquire an equity interest in CPL Capital
I and no exception were applicable under the Plan Assets Regulation. An "equity
interest" is defined under the Plan Assets Regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features and
specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the
assets of CPL Capital I would not be deemed to be "plan assets" of investing
Plans if, immediately after the most recent acquisition of any equity interest
in CPL Capital I, less than 25% of the value of each class of equity interests
in CPL Capital I were held by Plans, other employee benefit plans not subject to
ERISA or Section 4975 of the Code (such as governmental, church and foreign
plans), and entities holding assets deemed to be "plan assets" of any Plan
(collectively, "Benefit Plan Investors"), or if the Series A Preferred
Securities were "publicly-offered securities" for purposes of the Plan Assets
Regulation. No assurance can be given that the value of the Series A Preferred
Securities held by Benefit Plan Investors will be less than 25% of the total
value of such Series A Preferred Securities at the completion of the initial
offering or thereafter, and no monitoring or other measures will be taken with
respect to the satisfaction of the conditions to this exception. In addition, no
assurance can be given that the Series A Preferred Securities would be
considered to be "publicly-offered securities" under the Plan Assets Regulation.
All of the Series A Common Securities will be purchased and initially held by
CPL.
Certain transactions involving CPL Capital I could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the Series A Preferred Securities were acquired
with "plan assets" of such Plan and the assets of CPL Capital I were deemed to
be "plan assets" of Plans investing in CPL Capital I. For example, if CPL is a
Party in Interest with respect to an investing Plan, extensions of credit
between CPL Capital I and CPL (as represented by the Series A Debentures and the
Guarantee) would likely be prohibited by Section 406(a)(1)(B) of ERISA and
Section 4975(c)(1)(B) of the Code, unless exemptive relief were available under
an applicable administrative exemption (see below). In addition, if CPL were
considered to be a fiduciary with respect to CPL Capital I as a result of
certain powers it holds (such as the powers to remove and replace the Property
Trustee and the
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<PAGE> 20
Administrative Trustees), certain operations of CPL Capital I, including the
optional redemption or acceleration of the Series A Debentures, could be
considered to be prohibited transactions under Section 406(b) of ERISA and
Section 4975(c)(1)(E) of the Code. In order to avoid such potential prohibited
transactions, each investing plan, by purchasing the Series A Preferred
Securities, will be deemed to have directed CPL Capital I to invest in the
Series A Debentures and to have appointed the Property Trustee.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief if required for direct or indirect prohibited
transactions that may arise from the purchase or holding of the Series A
Preferred Securities if assets of CPL Capital I were deemed to be "plan assets"
of Plans investing in CPL Capital I as described above. Those class exemptions
are PTCE 96-23 (for certain transactions determined by in-house asset managers),
PTCE 95-60 (for certain transactions involving insurance company general
accounts), PTCE 91-38 (for certain transactions involving bank collective
investment funds), PTCE 90-1 (for certain transactions involving insurance
company pooled separate accounts), and PTCE 84-14 (for certain transactions
determined by independent qualified asset managers).
Because the Series A Preferred Securities may be deemed to be equity
interests in CPL Capital I for purposes of applying ERISA and Section 4975 of
the Code, the Series A Preferred Securities may not be purchased or held by any
Plan, any entity whose underlying assets include "plan assets" by reason of any
Plan's investment in the entity or any person investing "plan assets" of any
Plan (each a "Plan Asset Entity"), unless such purchaser or holder is eligible
for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14
or another applicable exemption. Any purchaser or holder of the Series A
Preferred Securities or any interest therein will be deemed to have represented
by its purchase and holding thereof that it either (a) is not a Plan or a Plan
Asset Entity or (b) is eligible for the exemptive relief available under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption with respect
to such purchase or holding. If a purchaser or holder of the Series A Preferred
Securities that is a Plan or a Plan Asset Entity elects to rely on an exemption
other than PTCE 96-23, 95-60, 91-38, 90-1 or 84-14, CPL and CPL Capital I may
require a satisfactory opinion of counsel or other evidence with respect to the
availability of such exemption for such purchase and holding.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in nonexempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the Series A
Preferred Securities on behalf of or with "plan assets" of any Plan consult with
their counsel regarding the potential consequences if the assets of CPL Capital
I were deemed to be "plan assets" and the availability of exemptive relief under
PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or any other applicable exemption.
Government plans, as defined in Section 3(32) of ERISA, are not subject to
ERISA, and are also not subject to the prohibited transaction requirements
similar to those under ERISA and the Code discussed above. Accordingly,
fiduciaries of governmental plans, in consultation with their advisors, should
consider the impact of their respective state pension codes on investments in
the Series A Preferred Securities and the considerations discussed above, to the
extent applicable.
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<PAGE> 21
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain United States federal income
tax consequences of the purchase, ownership and disposition of Series A
Preferred Securities. This summary only addresses the tax consequences to a
person acquiring Series A Preferred Securities on their original issue at their
original offering price and that is a "United States Person" within the meaning
of the Code, which includes (i) an individual citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any state thereof or the District of Columbia or (iii) an
estate or trust specified as being a United States Person in the Code. This
summary does not address all tax consequences that may be applicable to a United
States Person that is a beneficial owner of the Series A Preferred Securities,
nor does it address the tax consequences to (i) persons that are not United
States Persons, (ii) persons subject to special treatment under United States
federal income tax law, such as banks, insurance companies, thrift institutions,
regulated investment companies, real estate investment trusts, tax-exempt
organizations and dealers in securities or currencies, (iii) persons that will
hold Preferred Securities as part of a position in a "straddle" or as part of a
"hedging," "conversion" or other integrated investment transaction for United
States federal income tax purposes, (iv) persons whose "functional currency" is
not the United States dollar or (v) persons that do not hold the Series A
Preferred Securities as capital assets.
The statements of law or legal conclusion set forth in this summary
constitute the opinion of Christy & Viener, special tax counsel to CPL and CPL
Capital I. This summary is based upon the Code, Treasury Regulations, Internal
Revenue Service rulings and pronouncements and judicial decisions now in effect,
all of which are subject to change at any time. Such changes may be applied
retroactively in a manner that could cause the tax consequences to vary
substantially from the consequences described below, possibly adversely
affecting a beneficial owner of a Series A Preferred Security. In particular,
legislation has been proposed that could adversely affect CPL's ability to
deduct interest on the Series A Debentures, which would in turn permit CPL to
cause a redemption of the Series A Preferred Securities. See "-- Possible Tax
Law Changes." The authorities on which this summary is based are subject to
various interpretations and it is therefore possible that the United States
federal income tax treatment of the Series A Preferred Securities may differ
from the treatment described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE UNITED STATES FEDERAL TAX
CONSEQUENCES OF PURCHASE, OWNERSHIP AND DISPOSITION OF SERIES A PREFERRED
SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF CPL CAPITAL I
In connection with the issuance of the Series A Preferred Securities,
Christy & Viener will render its opinion to the effect that, under then current
law and assuming compliance with the terms of the Trust Agreement and certain
other documents, and based on certain facts and assumptions contained in such
opinion, CPL Capital I will be classified as a "grantor trust" and not as an
association taxable as a corporation for United States federal income tax
purposes. As a result, each beneficial owner of a Series A Preferred Security (a
"Securityholder") will be treated as owning an undivided beneficial interest in
the Series A Debentures.
CLASSIFICATION OF THE SERIES A DEBENTURES
Based on the advice of its counsel, CPL believes and intends to take the
position that the Series A Debentures will constitute indebtedness for United
States federal income tax purposes. No assurance can be given that such position
will not be challenged by the Internal Revenue Service or, if challenged, that
such challenge will not be successful. By purchasing and accepting Series A
S-21
<PAGE> 22
Preferred Securities, each Securityholder agrees to treat the Series A
Debentures as indebtedness and the Series A Preferred Securities as evidence of
an indirect beneficial ownership in the Series A Debentures. The remainder of
this discussion assumes that the Series A Debentures will be classified as
indebtedness of CPL for United States federal income tax purposes.
INCOME FROM SERIES A PREFERRED SECURITIES
Each Securityholder will be required to include in gross income its pro
rata share of the interest income paid or accrued with respect to the Series A
Debentures. Such income inclusion will be in accordance with the
Securityholder's regular method of accounting except as set forth below under
"--Potential Extension of Interest Payment Period and Original Issue Discount."
Because income on the Series A Preferred Securities will constitute interest (or
original issue discount), no amount included in income with respect to the
Series A Preferred Securities will be eligible for the dividends-received
deduction.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations"), a
contingency that stated interest will not be timely paid that is "remote"
because of the terms of the relevant debt instrument will be ignored in
determining whether such debt instrument is issued with original issue discount
("OID"). As a result of terms and conditions of the Series A Debentures that
prohibit certain payments with respect to CPL's capital stock and indebtedness
if CPL elects to extend interest payment periods (see "Certain Terms of the
Series A Debentures -- Option to Extend Interest Payment Period"), CPL believes
that the likelihood of its exercising its option to defer payments is remote.
Based on the foregoing, CPL believes that the Series A Debentures will not be
considered to be issued with OID at the time of their original issuance and,
accordingly, a Securityholder should include in gross income such holder's
allocable share of interest on the Series A Debentures in accordance with such
holder's regular method of tax accounting.
Under the Regulations, if CPL exercises its option to defer any payment of
interest, the Series A Debentures would at that time be treated as issued with
OID, and all stated interest on the Series A Debentures would thereafter be
treated as OID for so long as the Series A Debentures remained outstanding. In
such event, all of a Securityholder's taxable interest income with respect to
the Series A Debentures would be accounted for as OID on an economic-accrual
basis regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
Consequently, a Securityholder would be required to include OID in gross income
even though CPL would not make any actual cash payments during an Extension
Period.
The Regulations have not been addressed in any rulings or other
interpretations by the Internal Revenue Service (the "IRS"), and it is possible
that the IRS could take a position contrary to the interpretation herein.
DISTRIBUTION OF SERIES A DEBENTURES TO HOLDERS OF SERIES A PREFERRED SECURITIES
As described under the caption "Certain Terms of the Series A Preferred
Securities -- Distribution of Series A Debentures," CPL will have the right, at
any time, to liquidate CPL Capital I and cause the Series A Debentures to be
distributed to the holders of the Series A Preferred Securities. Under current
United States federal income tax law, provided CPL Capital I is treated as a
"grantor trust" at the time of such distribution, such distribution would not be
a taxable event to Securityholders. Such a distribution would result in a
Securityholder receiving directly such Securityholder's pro rata share of the
Series A Debentures previously held indirectly through CPL Capital I, with a
holding period and aggregate tax basis equal to the holding period and aggregate
tax basis such Securityholder had in such Securityholder's Series A Preferred
Securities before such distribution.
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<PAGE> 23
If, however, CPL Capital I were subject to United States federal income tax
as a corporation with respect to income accrued or received on the Series A
Debentures at the time of liquidation, the distribution of Series A Debentures
to Securityholders by CPL Capital I would be a taxable event to CPL Capital I
and each Securityholder, and each Securityholder would recognize gain or loss as
if the Securityholder had exchanged its Series A Preferred Securities for the
Series A Debentures it received upon the liquidation of CPL Capital I.
A Securityholder would accrue interest in respect of Series A Debentures
received from CPL Capital I in the manner described above under "-- Income from
Series A Preferred Securities" and "-- Potential Extension of Interest Payment
Period and Original Issue Discount."
SALE OR REDEMPTION OF SERIES A PREFERRED SECURITIES
A Securityholder that sells (including a redemption for cash) Series A
Preferred Securities will recognize gain or loss equal to the difference between
its adjusted tax basis in the Series A Preferred Securities and the amount of
consideration paid for such Series A Preferred Securities (excluding the portion
that represents accrued and unpaid interest that has not yet been included in
income, which portion will constitute ordinary income). Assuming that CPL does
not exercise its option to defer payment of interest on the Series A Debentures
and the Series A Debentures are not considered issued with OID, a
Securityholder's adjusted tax basis in the Series A Preferred Securities
generally will be its initial purchase price. If CPL does exercise its option to
defer payment of interest or the Series A Debentures are otherwise deemed to
have been issued with OID, a Securityholder's adjusted tax basis in the Series A
Preferred Securities generally will be its initial purchase price, increased by
OID previously includible in such Securityholder's gross income to the date of
disposition and decreased by Distributions or other payments received on the
Series A Preferred Securities in respect of OID. Gain or loss on the sale of the
Series A Preferred Securities generally will be a capital gain or loss and
generally will be a long-term capital gain or loss if the Series A Preferred
Securities have been held for more than one year.
The Series A Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest with respect to the underlying
Series A Debentures. A Securityholder that disposes of such Securityholder's
Series A Preferred Securities between record dates for payments of Distributions
(and consequently does not receive a Distribution from CPL Capital I for the
period prior to such disposition) will nevertheless be required to include as
ordinary income accrued but unpaid interest on the Series A Debentures through
the date of disposition. Such Securityholder will recognize a capital loss on
the disposition of Series A Preferred Securities to the extent the amount
realized with respect to the Series A Preferred Securities is less than the
Securityholder's adjusted tax basis in the Series A Preferred Securities.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest income paid and OID accrued on the Series A
Preferred Securities will be reported to Securityholders and to the Internal
Revenue Service except in the case of corporations and other exempt
Securityholders. "Backup" withholding at a rate of 31% will apply to payments of
interest to non-exempt Securityholders unless the Securityholder furnishes its
taxpayer identification number in the manner prescribed in applicable Treasury
Regulations, certifies that such number is correct and meets certain other
conditions.
Payment of proceeds from disposition of Series A Preferred Securities to or
through the United States office of a broker is subject to information reporting
and backup withholding unless the Securityholder establishes an exemption from
information reporting and backup withholding.
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<PAGE> 24
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information is
furnished to the IRS.
POSSIBLE TAX LAW CHANGES
On February 6, 1997, President Clinton introduced to Congress his budget
proposal for fiscal year 1998. Included in President Clinton's budget proposal
is a tax provision, which if enacted, generally would treat as equity, for
federal income tax purposes, an instrument issued by a corporation if the
instrument has a maximum term of more than 15 years and is not shown as
indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. The above-described
provision is proposed to be effective generally for instruments issued on or
after the date of first action by Congressional committee. As of the date
hereof, no such Congressional action has occurred. If the proposed provision
applied to the Series A Debentures, CPL would be unable to deduct interest on
the Series A Debentures. A similar tax provision was contained in President
Clinton's budget proposal for fiscal year 1997, which provision was not enacted
before the 104th Congress adjourned. Under current law, CPL believes and intends
to take the position that it is able to deduct interest on the Series A
Debentures. There can be no assurance that current or future legislative
proposals or final legislation will not affect the ability of CPL to deduct
interest on the Series A Debentures. Such a change could give rise to a Tax
Event, which would permit CPL to cause a redemption of the Series A Preferred
Securities as described more fully under "Description of Preferred
Securities -- Redemption or Exchange -- Special Event Redemption or Distribution
of Corresponding Junior Subordinated Debentures" in the accompanying Prospectus.
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<PAGE> 25
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, CPL and
CPL Capital I have agreed that CPL Capital I will sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs
& Co., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Smith Barney Inc. are acting as representatives (the "Representatives"), has
severally agreed to purchase from CPL Capital I the respective number of Series
A Preferred Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SERIES A
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Goldman, Sachs & Co. ....................................... 1,090,000
Lehman Brothers Inc. ....................................... 1,090,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .................................. 1,090,000
Smith Barney Inc. .......................................... 1,090,000
Advest, Inc. ............................................... 40,000
Robert W. Baird & Co. Incorporated.......................... 40,000
Bear, Stearns & Co. Inc. ................................... 75,000
J.C. Bradford & Co. ........................................ 40,000
Alex. Brown & Sons Incorporated............................. 75,000
Cowen & Company............................................. 40,000
Dain Bosworth Incorporated.................................. 40,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 75,000
A.G. Edwards & Sons, Inc. .................................. 75,000
EVEREN Securities, Inc. .................................... 75,000
Fahnestock & Co. Inc. ...................................... 40,000
Interstate/Johnson Lane Corporation......................... 40,000
Janney Montgomery Scott Inc. ............................... 40,000
Legg Mason Wood Walker, Incorporated........................ 40,000
McDonald & Company Securities, Inc. ........................ 40,000
McGinn, Smith & Co., Inc. .................................. 40,000
J.P. Morgan Securities Inc. ................................ 75,000
Morgan Keegan & Company, Inc. .............................. 40,000
The Ohio Company............................................ 40,000
Olde Discount Corporation................................... 40,000
Oppenheimer & Co., Inc. .................................... 75,000
Piper Jaffray Inc. ......................................... 40,000
Principal Financial Securities, Inc. ....................... 40,000
Prudential Securities Incorporated.......................... 75,000
Rauscher Pierce Refsnes, Inc. .............................. 40,000
Raymond James & Associates, Inc. ........................... 40,000
The Robinson-Humphrey Company, Inc. ........................ 40,000
Roney & Co., L.L.C. ........................................ 40,000
Southwest Securities, Inc. ................................. 40,000
Stephens Inc. .............................................. 40,000
Trilon International Inc. .................................. 40,000
Tucker Anthony Incorporated................................. 40,000
U.S. Clearing Corp. ........................................ 40,000
Wheat, First Securities, Inc. .............................. 40,000
---------
Total............................................. 6,000,000
=========
</TABLE>
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriters are committed to take and pay for all such Series A
Preferred Securities offered hereby, if any are taken.
S-25
<PAGE> 26
The Underwriters propose to offer the Series A Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement and in part to certain securities
dealers at such price less a concession of $0.50 per Series A Preferred
Security. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $0.40 per Series A Preferred Security to certain brokers and
dealers. After the Series A Preferred Securities are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the Representatives.
In view of the fact that the proceeds from the sale of the Series A
Preferred Securities will be used to purchase the Series A Debentures issued by
CPL, the Underwriting Agreement provides that CPL will pay as Underwriters'
Compensation for the Underwriters arranging the investment therein of such
proceeds an amount of $0.7875 per Series A Preferred Security ($0.50 per Series
A Preferred Security sold to certain institutions) for the accounts of the
several Underwriters.
In connection with the offering, the Underwriters may purchase and sell the
Series A Preferred Securities in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Series A Preferred Securities;
and syndicate short positions involve the sale by the Underwriters of a greater
number of Series A Preferred Securities than they are required to purchase from
CPL Capital I in the offering. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-dealers
in respect of the securities sold in the offering for their account may be
reclaimed by the syndicate if such Series A Preferred Securities are repurchased
by the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Series A
Preferred Securities, which may be higher than the price that might otherwise
prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on the New York
Stock Exchange, in the over-the-counter market or otherwise.
It is expected that delivery of the Series A Preferred Securities will be
made against payment therefor on or about the date specified in the last
paragraph of the cover page hereof, which is the fourth business day following
the date hereof. Under Rule 15c6-1 of the Exchange Act, trades in the secondary
market generally are required to settle in three business days, unless the
parties to any such trade expressly agree otherwise. Accordingly, purchasers who
wish to trade Series A Preferred Securities on the date hereof will be required,
by virtue of the fact that the Series A Preferred Securities initially will
settle in T+4, to specify alternate settlement arrangements to prevent a failed
settlement.
CPL and CPL Capital I have agreed that, during the period beginning from
the date of the Underwriting Agreement and continuing to and including the
earlier of (i) the termination of trading restrictions on the Series A Preferred
Securities, as determined by the Underwriters, and (ii) 30 days after the
closing date, they will not offer, sell, contract to sell or otherwise dispose
of any Preferred Securities, any other beneficial interests in the assets of CPL
Capital I, or any preferred securities or any other securities of CPL Capital I
or CPL which are substantially similar to the Series A Preferred Securities,
including any guarantee of such securities, or any securities convertible into
or exchangeable for or that represent the right to receive securities, preferred
securities or any such substantially similar securities of either CPL Capital I
or CPL, without the prior written consent of the Representatives, except for the
Series A Preferred Securities and the Series A Guarantee offered in connection
with the offering.
Prior to this offering, there has been no public market for the Series A
Preferred Securities. The NYSE has authorized the listing of the Series A
Preferred Securities under the symbol "CPZ PrA," subject to notice of issuance.
Trading of the Series A Preferred Securities on the NYSE is expected to commence
within thirty days after the initial delivery of the Series A Preferred
Securities. In order
S-26
<PAGE> 27
to meet one of the requirements for listing the Series A Preferred Securities on
the NYSE, the Underwriters will undertake to sell Series A Preferred Securities
to a minimum of 400 beneficial holders. Trading of the Series A Preferred
Securities on the NYSE is expected to commence within a thirty-day period after
the initial delivery of the Series A Preferred Securities. The Representatives
have advised CPL that they intend to make a market in the Series A Preferred
Securities prior to commencement of trading on the NYSE, but are not obligated
to do so and may discontinue market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the Series
A Preferred Securities.
CPL and CPL Capital I have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to CPL and its affiliates, for which such Underwriters or their
affiliates have received or will receive customary fees and commissions.
LEGAL OPINIONS
Certain matters of Delaware law relating to the validity of the Series A
Preferred Securities, the enforceability of the Trust Agreement and the creation
of CPL Capital I will be passed upon by Richards, Layton & Finger, special
Delaware counsel to CPL and CPL Capital I. The validity of the Series A
Guarantee and the Series A Debentures will be passed upon for CPL by Milbank,
Tweed, Hadley & McCloy, New York, New York, and for the Underwriters by Sidley &
Austin, Chicago, Illinois. Sidley & Austin has from time to time represented CSW
and certain of its affiliates, including CPL, in connection with certain
matters. All matters of Texas law will be passed upon by Vinson & Elkins L.L.P.,
Dallas, Texas. Certain matters relating to United States federal income tax
considerations will be passed upon by Christy & Viener, New York, New York,
special tax counsel to CPL and CPL Capital I.
S-27
<PAGE> 28
$150,000,000
<TABLE>
<S> <C>
CENTRAL POWER AND LIGHT COMPANY CPL CAPITAL I
CPL CAPITAL II
JUNIOR SUBORDINATED DEBENTURES PREFERRED SECURITIES
GUARANTEED, AS DESCRIBED HEREIN, BY
CENTRAL POWER AND LIGHT COMPANY
</TABLE>
Central Power and Light Company, a Texas corporation ("CPL"), may from time
to time offer in one or more series or issuances its junior subordinated
deferrable interest debentures (the "Junior Subordinated Debentures"). The
Junior Subordinated Debentures will be unsecured and subordinate and junior in
right of payment to Senior Indebtedness (as defined herein) of CPL. See
"Description of the Junior Subordinated Debentures -- Subordination." If
provided in a related prospectus supplement accompanying this Prospectus (the
"Prospectus Supplement"), CPL will have the right to defer payments of interest
on any series of Junior Subordinated Debentures at any time or from time to time
for such number of consecutive interest payment periods (which shall not extend
beyond the maturity of the Junior Subordinated Debentures) with respect to each
deferral period as may be specified in the Prospectus Supplement (each, an
"Extension Period"). See "Description of Junior Subordinated
Debentures -- Option to Extend Interest Payments" and "-- Certain Covenants of
CPL."
CPL Capital I and CPL Capital II, each a statutory business trust created
under the laws of the State of Delaware (each, an "Issuer Trust," and
collectively, the "Issuer Trusts"), may severally offer, from time to time,
their respective preferred securities (the "Preferred Securities") representing
preferred undivided beneficial interests in the assets of each Issuer Trust. CPL
will be the owner of the common securities (the "Common Securities")
representing common undivided beneficial interests in the assets of each Issuer
Trust. The payment of periodic cash distributions ("Distributions") with respect
to Preferred Securities of each Issuer Trust, and payments on liquidation or
redemption with respect to such Preferred Securities are each guaranteed by CPL
as described herein (each, a "Guarantee," and collectively, the "Guarantees").
See "Description of Guarantees." CPL's obligations under each Guarantee will be
subordinate and junior in right of payment to all Senior Indebtedness of CPL.
Concurrently with the issuance by an Issuer Trust of its Preferred Securities,
such Issuer Trust will invest the proceeds thereof and any contributions made by
CPL in respect of CPL's purchase of the Common Securities in a corresponding
series of Junior Subordinated Debentures (the "Corresponding Junior Subordinated
Debentures") with terms corresponding to the terms of such Issuer Trust's
Preferred Securities. The Corresponding Junior Subordinated Debentures will be
the sole assets of each Issuer Trust, and payments under the Corresponding
Junior Subordinated Debentures and the related Expense Agreement (as defined
herein) will be the only revenue of each Issuer Trust. CPL may redeem the
Corresponding Junior Subordinated Debentures (and cause the redemption of the
related Preferred Securities) or may terminate each Issuer Trust at any time and
cause the Corresponding Junior Subordinated Debentures to be distributed to the
holders of Preferred Securities in liquidation of their interests in such Issuer
Trust. See "Description of Preferred Securities -- Liquidation Distribution Upon
Termination."
(Continued on next page)
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
THE DATE OF THIS PROSPECTUS IS APRIL 14, 1997
<PAGE> 29
(Continued from previous page)
Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash Distributions accumulating from the date of
original issuance and payable periodically as specified in the related
Prospectus Supplement. If provided in the related Prospectus Supplement, CPL
will have the right to defer payments of interest on any series of Junior
Subordinated Debentures at any time or from time to time for one or more
Extension Periods (which shall not extend beyond the maturity of such Junior
Subordinated Debentures). If Corresponding Junior Subordinated Debentures are
issued and interest payments on such Corresponding Junior Subordinated
Debentures are so deferred, Distributions on the related series of Preferred
Securities will also be deferred and CPL will not be permitted, subject to
certain exceptions set forth herein, to declare, set aside or pay any cash
distributions with respect to CPL's capital stock or debt securities that rank
PARI PASSU with or junior to the Corresponding Junior Subordinated Debentures.
During an Extension Period, interest on the Corresponding Junior Subordinated
Debentures will continue to accrue (and the amount of Distributions to which
holders of Preferred Securities are entitled will accumulate) at the rate per
annum set forth in the related Prospectus Supplement. See "Description of Junior
Subordinated Debentures -- Option to Extend Interest Payment Date" and
"-- Certain Covenants of CPL" and "Description of Preferred
Securities -- Distributions."
The Junior Subordinated Debentures and the Preferred Securities (the
"Offered Securities") may be offered in amounts, at prices and on terms to be
determined at the time of offering, provided that the aggregate initial public
offering price of all Junior Subordinated Debentures (other than Corresponding
Junior Subordinated Debentures) and Preferred Securities shall not exceed
$150,000,000. Certain specific terms of the Offered Securities will be described
in the Prospectus Supplement, including, without limitation and where applicable
and to the extent not set forth herein: (i) in the case of Junior Subordinated
Debentures, the specific designation, aggregate principal amount, denominations,
maturity (including any provision for shortening thereof), interest payment
dates, interest rate (which may be fixed or variable) or method of calculating
interest, if any, applicable Extension Period or interest deferral terms, if
any, place or places where principal, premium, if any, and interest, if any,
will be payable, terms of redemption, if any, sinking fund provisions, if any,
terms for conversion or exchange, if any, into other securities, the initial
offering or purchase price, methods of distribution and any other special terms;
and (ii) in the case of Preferred Securities, the identity of the Issuer Trust,
specific title, aggregate amount, stated liquidation preference, distribution
rate or the method of calculating such rate, applicable Extension Period or
Distribution deferral terms, if any, dates on which and place or places where
Distributions will be payable, voting rights, any redemption provisions, terms
for any conversion or exchange into other securities, initial offering or
purchase price, methods of distribution, and any other special terms.
The Prospectus Supplement will also contain information, as applicable,
concerning certain United States federal income tax considerations relating to
the Offered Securities.
The Offered Securities may be sold directly by CPL, CPL Capital I and/or
CPL Capital II, as the case may be (each, an "Issuer"), through agents
designated from time to time or through underwriters or dealers. See "Plan of
Distribution." If any agents of an Issuer or underwriters are involved in the
sale of any Offered Securities in respect of which this Prospectus is being
delivered, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in a Prospectus Supplement. The net
proceeds to an Issuer or Issuers, as the case may be, from such sale also will
be set forth in a Prospectus Supplement or Prospectus Supplements. The
Prospectus Supplement will state whether the Offered Securities will be listed
on any national securities exchange or the Nasdaq National Market. If the
Offered Securities are not listed on any national securities exchange or the
Nasdaq National Market, there can be no assurance that there will be a liquid
secondary market for such Offered Securities.
This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement relating to such Offered
Securities.
ii
<PAGE> 30
AVAILABLE INFORMATION
CPL is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information (including proxy and
information statements) filed by CPL can be inspected and copied at public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, 7 World Trade Center, 13th Floor, New
York, New York 10048, and Chicago Regional Office, Citicorp Center, 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of the prescribed rates. The
Commission also maintains a web site (http://www.sec.gov.) that contains
reports, proxy statements and other information regarding CPL.
CPL and the Issuer Trusts have filed with the Commission a joint
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in such
Registration Statement and the exhibits thereto, certain portions of which have
been omitted as permitted by the rules and regulations of the Commission. For
further information with respect to CPL, the Issuer Trusts and the Offered
Securities, reference is hereby made to such Registration Statement, including
the exhibits thereto, which may be examined at the Commission's principal
office, 450 Fifth Street, N.W., Washington, D.C. 20549 or through the
Commission's home page on the Internet, or copies of which may be obtained from
the Commission at such office upon payment of the fees prescribed by the
Commission. Statements made in this Prospectus concerning the contents of any
documents referred to herein are not necessarily complete, and in each instance
are qualified in all respects by reference to the copy of such document filed as
an exhibit to the Registration Statement.
No separate financial statements of the Issuer Trusts have been included
herein. CPL and the Issuer Trusts do not consider that such financial statements
would be material to holders of Preferred Securities offered hereby because each
Issuer Trust is a newly formed special purpose entity, has no operating history,
has no independent operations and is not engaged in, and does not propose to
engage in, any activity other than as set forth below. Furthermore, taken
together, CPL's obligations under each series of Corresponding Junior
Subordinated Debentures, the Indenture, the related Trust Agreement, the related
Expense Agreement and the related Guarantee, provide in the aggregate, a
guarantee of Distributions and other amounts due on the related Preferred
Securities of the Issuer Trusts. See "The Issuer Trusts," "Description of the
Preferred Securities," "Description of Guarantees" and "Description of
Corresponding Junior Subordinated Debentures." In addition, CPL does not expect
that any of the Issuer Trusts will be filing reports under the Exchange Act with
the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
CPL's Annual Report on Form 10-K for the year ended December 31, 1996 filed
by CPL with the Commission pursuant to the Exchange Act and CPL's current
reports on Form 8-K dated January 7, 1997, March 31, 1997, March 31, 1997 and
March 31, 1997 as filed with the Commission on January 31, 1997, April 3, 1997,
April 4, 1994 and April 10, 1997 respectively are incorporated in this
Prospectus by reference.
All documents filed by CPL pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the termination
of this offering shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents
(such documents, and the documents enumerated above, being hereinafter referred
to as "Incorporated Documents"; provided, however, that all documents
subsequently filed by CPL
1
<PAGE> 31
pursuant to Section 13 or 14 of the Exchange Act in each year during which the
offering made by this Prospectus is in effect prior to the filing with the
Commission of CPL's Annual Report on Form 10-K covering such year shall not be
Incorporated Documents or be incorporated by reference in this Prospectus or be
a part hereof from and after such filing of such Annual Report on Form 10-K).
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed Incorporated
Document modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
CPL hereby undertakes to provide without charge to each person to whom a
copy of this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the Incorporated Documents, other than exhibits
to such documents, unless such exhibits are specifically incorporated by
reference therein. Requests should be directed to Central and South West
Corporation, 1616 Woodall Rodgers Freeway, Dallas, Texas 75202, Attention:
Director, Finance, telephone number (214) 777-1000. The information relating to
CPL contained in this Prospectus does not purport to be comprehensive and should
be read together with the information contained in the Incorporated Documents.
No person has been authorized to give any information or to make any
representation not contained in this Prospectus or in any Prospectus Supplement,
and, if given or made, such information or representation should not be relied
upon as having been authorized. This Prospectus and any Prospectus Supplement do
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby or thereby in any jurisdiction to any person to whom
it is unlawful to make such offer in such jurisdiction.
Neither the delivery of this Prospectus and the Prospectus Supplement nor
any sale made hereunder or thereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of CPL or its
subsidiaries since the date of this Prospectus or the date of the latest
Prospectus Supplement, as the case may be.
CENTRAL POWER AND LIGHT COMPANY
Central Power and Light Company, a Texas corporation ("CPL"), is a public
utility company engaged in the production, purchase, transmission, distribution
and sale of electricity in South Texas. Central and South West Corporation
("CSW"), a registered public utility holding company under the Public Utility
Holding Company Act of 1935, as amended (the "1935 Act"), owns all of the issued
and outstanding common stock of CPL. CPL's executive offices are located at 539
North Carancahua Street, Corpus Christi, Texas 78401-2802, telephone number
(512) 881-5300.
The foregoing information relating to CPL does not purport to be
comprehensive and should be read together with the financial statements and
other information contained in the Incorporated Documents.
THE ISSUER TRUSTS
Each Issuer Trust is a statutory business trust created under Delaware law
pursuant to (i) a trust agreement executed by CPL, as depositor of such Issuer
Trust, the Delaware Trustee (as defined herein) of such Issuer Trust, the
Property Trustee (as defined herein) of such Issuer Trust and the Administrative
Trustees (as defined herein) of such Issuer Trust and (ii) the filing of a
certificate of trust with the Delaware Secretary of State. Each trust agreement
will be amended and restated in its entirety (each, as so amended and restated,
a "Trust Agreement") substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. Each Trust
Agreement will be qualified as an indenture under the Trust Indenture Act of
1939, as
2
<PAGE> 32
amended (the "Trust Indenture Act"). Each Issuer Trust exists for the exclusive
purposes of (i) issuing and selling its Preferred Securities and Common
Securities, (ii) using the proceeds from the sale of such Preferred Securities
and Common Securities to acquire a corresponding series of Corresponding Junior
Subordinated Debentures issued by CPL and (iii) engaging in only those other
activities necessary, convenient or incidental thereto. Accordingly, such
Corresponding Junior Subordinated Debentures will be the sole assets of such
Issuer Trust, and payments under such Corresponding Junior Subordinated
Debentures and the related Expense Agreement (as defined herein) will be the
sole source of revenue of such Issuer Trust.
All of the Common Securities of each Issuer Trust will be owned by CPL. The
Common Securities of an Issuer Trust will rank pari passu, and payments will be
made thereon pro rata, with the Preferred Securities of such Issuer Trust,
except that upon the occurrence and continuance of an event of default under a
Trust Agreement resulting from a Debenture Event of Default (as defined herein),
the rights of CPL as holder of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Preferred Securities of such
Issuer Trust. See "Description of Preferred Securities -- Subordination of
Common Securities." CPL will acquire Common Securities having an aggregate
Liquidation Amount (as defined herein) equal to not less than 3% of the total
capital of each Issuer Trust.
Unless otherwise specified in the applicable Prospectus Supplement, each
Issuer Trust has a term of up to 45 years, but may terminate earlier as provided
in the applicable Trust Agreement. Each Issuer Trust's business and affairs are
conducted by its trustees, which will be appointed by CPL as holder of the
Common Securities.
Unless otherwise specified in the applicable Prospectus Supplement, the
trustees will be The Bank of New York, as Property Trustee, (the "Property
Trustee"), The Bank of New York (Delaware), as the Delaware Trustee (the
"Delaware Trustee"), and two individual trustees (the "Administrative Trustees")
who are employees or officers of or affiliated with CPL (collectively, the
"Issuer Trustees"). The Bank of New York, as Property Trustee, will act as sole
indenture trustee under each Trust Agreement for purposes of compliance with the
Trust Indenture Act. The Bank of New York will also act as trustee under the
Guarantee and the Indenture (each as defined herein). See "Description of
Guarantees" and "Description of Junior Subordinated Debentures." The holder of
the Common Securities, or the holders of a majority in liquidation preference of
the Preferred Securities if a Debenture Event of Default under the Trust
Agreement has occurred and is continuing, will be entitled to appoint, remove or
replace the Property Trustee and/or the Delaware Trustee. In no event will the
holders of the Preferred Securities have the right to vote to appoint, remove or
replace the Administrative Trustees; such voting rights are vested exclusively
in the holder of the Common Securities. The duties and obligations of each
Issuer Trustee are governed by the applicable Trust Agreement. CPL will pay all
fees and expenses related to each Issuer Trust and the offering of the Preferred
Securities and will pay, directly or indirectly, all ongoing costs, expenses and
liabilities of each Issuer Trust. The principal executive office of each Issuer
Trust is 539 North Carancahua Street, Corpus Christi, Texas 78401-2802;
telephone number (512) 881-5300.
USE OF PROCEEDS
Unless otherwise indicated in the Prospectus Supplement, the net proceeds
to be received by CPL from the issuance and sale of the Junior Subordinated
Debentures (including Corresponding Junior Subordinated Debentures issued to the
Issuer Trusts in connection with the investment by the Issuer Trusts of all of
the proceeds from the sale of Preferred Securities) will initially become part
of the general funds of CPL and will be used to replace or retire, through
redemption, repurchase or otherwise, one or more series of outstanding first
mortgage bonds or preferred stock, or any combination thereof, to repay all or a
portion of CPL's short-term borrowings outstanding at
3
<PAGE> 33
the time of issuance of the Offered Securities and for other general corporate
purposes, subject to applicable regulatory requirements. Reference is made to
the Incorporated Documents with respect to CPL's capital requirements and its
general financing plans. Each Issuer Trust will invest all proceeds received
from the sale of Preferred Securities in Corresponding Junior Subordinated
Debentures.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
STOCK DIVIDEND REQUIREMENTS
The following table sets forth CPL's ratio of earnings to fixed charges and
ratio of earnings to combined fixed charges and preferred stock dividend
requirements for the years indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings to Fixed Charges............... 2.86 2.63 3.24 2.69 3.23
Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements
(unaudited)........................... 2.44 2.36 2.82 2.31 2.77
</TABLE>
For computation of the ratios: (i) earnings consist of operating income
plus federal income taxes, deferred income taxes and investment tax credits,
other income and deductions, allowance for funds (both borrowed and equity) used
during construction and mirror construction work in progress amortization, and
(ii) fixed charges consist of interest on long-term debt and short-term debt,
and other interest charges. Pretax earnings required for preferred stock
dividends were computed using the effective tax rate for the applicable year.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures may be issued from time to time in one
or more series under an Indenture, as supplemented and amended from time to time
(the "Indenture"), between CPL and The Bank of New York, as trustee (the
"Debenture Trustee"). The Corresponding Junior Subordinated Debentures may be
issued from time to time in one or more series of Corresponding Junior
Subordinated Debentures under the Indenture between CPL and the Debenture
Trustee. CPL may issue Junior Subordinated Debentures to the public or to
institutional investors as described under "Plan of Distribution" or
Corresponding Junior Subordinated Debentures to the Issuer Trusts in connection
with the issuance of Preferred Securities. The following summary is subject to
the provisions of and is qualified by reference to the Indenture, which is filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part, and to the Trust Indenture Act. Whenever particular provisions or defined
terms in the Indenture are referred to herein or in a Prospectus Supplement,
such provisions or defined terms are incorporated herein or therein by
reference. Section and Article references used herein are references to
provisions of the Indenture unless otherwise noted. Except as otherwise provided
herein, this summary of certain terms and provisions of Junior Subordinated
Debentures is also applicable to the Corresponding Junior Subordinated
Debentures. For additional terms and provisions applicable only to the
Corresponding Junior Subordinated Debentures, see "Description of Corresponding
Junior Subordinated Debentures."
GENERAL
Each series of Junior Subordinated Debentures will rank pari passu with all
other series of Junior Subordinated Debentures, will be unsecured and will be
subordinated and junior in right of payment to the extent and in the manner set
forth in the Indenture to all Senior Indebtedness (as defined below) of CPL. See
"-- Subordination." As the Junior Subordinated Debentures will be
4
<PAGE> 34
issued by CPL, the Junior Subordinated Debentures effectively will be
subordinate to all obligations of any CPL subsidiaries, and the rights of CPL's
creditors, including holders of Junior Subordinated Debentures, to participate
in the assets of such subsidiaries upon liquidation or reorganization will be
junior to the rights of the holders of all preferred stock, indebtedness and
other liabilities of such subsidiaries, which may include trade payables,
obligations to banks under credit facilities, guarantees, pledges, support
arrangements, bonds, capital leases, notes and other obligations. CPL currently
has no subsidiaries. Except as otherwise provided in the applicable Prospectus
Supplement, the Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of CPL, whether under the Indenture, any other
indenture that CPL may enter into in the future or otherwise. See
"-- Subordination" and the Prospectus Supplement relating to any offering of
Preferred Securities or Junior Subordinated Debentures.
The Indenture provides that Junior Subordinated Debentures may be issued
from time to time in one or more series pursuant to an indenture supplemental to
the Indenture or a resolution of CPL's Board of Directors or an Officer's
Certificate (each, a "Supplemental Indenture"). (Section 2.01) The Indenture
does not limit the aggregate principal amount of Junior Subordinated Debentures
that may be issued thereunder. CPL's Restated Articles of Incorporation, as
amended (the "Articles"), currently limit the amount of unsecured debt that CPL
may issue to (i) the equivalent of 20% of the total of all secured indebtedness
and total equity or (ii) as to unsecured debt maturing in less than ten years,
the equivalent of 10% of such aggregate. CPL is currently seeking to amend its
Articles to eliminate such limitations. The Indenture does not contain any
provisions that would limit the ability of CPL to incur indebtedness or that
would afford holders of Junior Subordinated Debentures protection in the event
of a highly leveraged or similar transaction involving CPL or in the event of a
change of control.
Reference is made to the Prospectus Supplement for the following terms of
the series of Junior Subordinated Debentures being offered thereby: (i) the
specific title of such Junior Subordinated Debentures; (ii) any limit on the
aggregate principal amount of such Junior Subordinated Debentures; (iii) the
date or dates on which the principal of such Junior Subordinated Debentures is
payable or the method of determination thereof (including any provision for the
shortening thereof); (iv) the rate or rates at which such Junior Subordinated
Debentures will bear interest, if any, or the manner of calculation of such rate
or rates; (v) the date or dates from which such interest shall accrue, the
interest payment dates on which such interest will be payable or the manner of
determination of such interest payment dates and the record dates for the
determination of holders to whom interest is payable on any such interest
payment dates; (vi) the right, if any, of CPL to extend or defer the interest
payment periods and the duration of such extension or deferral; (vii) the period
or periods within which, the price or prices at which and the terms and
conditions upon which such Junior Subordinated Debentures may be redeemed, in
whole or in part, at the option of CPL; (viii) the obligation, if any, of CPL to
redeem or purchase such Junior Subordinated Debentures pursuant to any sinking
fund or analogous provisions or at the option of a holder thereof and the period
or periods during which, the price or prices at which and the terms and
conditions upon which such Junior Subordinated Debentures shall be redeemed or
purchased, in whole or part, pursuant to such obligation; (ix) the form of such
Junior Subordinated Debentures; (x) if other than denominations of $25 or any
integral multiple thereof, the denominations in which such Junior Subordinated
Debentures shall be issuable; (xi) whether such Junior Subordinated Debentures
are issuable as a global security, and in such case, the identity of the
depositary; and (xii) any and all other terms with respect to such series not
inconsistent with the provisions of the Indenture. (Section 2.01)
SUBORDINATION
The Indenture provides that Junior Subordinated Debentures are subordinate
and junior in right of payment to the prior payment in full of all Senior
Indebtedness of CPL, whether outstanding on the date of such issuance of Junior
Subordinated Debentures or thereafter incurred, as provided in the Indenture. No
payment of principal of (including redemption and sinking fund payments), or
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premium, if any, or interest on, the Junior Subordinated Debentures may be made
if any Senior Indebtedness is not paid when due, any applicable grace period
with respect to such default has ended and such default has not been cured or
waived, or if the maturity of any Senior Indebtedness has been accelerated
because of a default. Upon any payment or distribution of assets to creditors
upon any dissolution, winding-up, liquidation or reorganization of CPL, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all amounts due or to become due on all Senior Indebtedness must be
paid in full before the holders of the Junior Subordinated Debentures are
entitled to receive or retain any payment. The rights of the holders of the
Junior 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 Junior Subordinated Debentures are
paid in full. (Sections 14.01 to 14.04) The Junior Subordinated Debentures
effectively will also be subordinate to all obligations of CPL's subsidiaries,
if any. See "-- General."
The term "Senior Indebtedness" is defined in the Indenture to mean the
principal of and premium, if any, and interest on and any other payment due
pursuant to any of the following, whether outstanding at the date of execution
of the Indenture or thereafter incurred, created or assumed:
(a) all indebtedness of CPL evidenced by notes, debentures, bonds or
other securities sold by CPL for money;
(b) all indebtedness of others of the kinds described in paragraph (a)
above assumed by or guaranteed in any manner by CPL or in effect guaranteed
by CPL through an agreement to purchase, contingent or otherwise;
(c) all renewals, extensions or refundings of indebtedness of the
kinds described in either of paragraphs (a) and (b) above; and
(d) all payments of money relating to any lease which is capitalized
on the balance sheet or consolidated balance sheet, as the case may be, of
CPL or its subsidiaries, if any, in accordance with generally accepted
accounting principles as in effect from time to time;
unless, in the case of any particular indebtedness, renewal, extension,
refunding or lease payment, the instrument creating or evidencing the same or
the assumption or guarantee of the same expressly provides that such
indebtedness, renewal, extension, refunding or lease payment is not superior in
right of payment to or is pari passu with the Junior Subordinated Debentures.
Such Senior Indebtedness shall continue to be Senior Indebtedness and entitled
to the benefits of the subordination provisions contained in the Indenture
irrespective of any amendment, modification or waiver of any term of such Senior
Indebtedness. (Section 1.01)
The Indenture does not limit the aggregate amount of Senior Indebtedness
which may be issued. As of December 31, 1996, Senior Indebtedness of CPL
aggregated approximately $1,671 million. CPL expects from time to time to incur
additional indebtedness constituting Senior Indebtedness.
CERTAIN COVENANTS OF CPL
If there shall have occurred any event that would, with the giving of
notice or the passage of time, or both, constitute a Debenture Event of Default
under the Indenture, as described under "-- Debenture Events of Default" below,
or CPL exercises its option to extend or defer the interest payment period
described in clause (vi) under "-- General" above, CPL will not, until all
defaulted interest on the Junior Subordinated Debentures and all interest
accrued on the Junior Subordinated Debentures during any such extended or
deferred interest payment period and all principal and premium, if any, then due
and payable on the Junior Subordinated Debentures shall have been paid in full,
(i) declare, set aside or pay any dividend or distribution on any capital stock
of CPL, except
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for dividends or distributions in shares of its capital stock or in rights to
acquire shares of its capital stock, or (ii) repurchase, redeem or otherwise
acquire, or make any sinking fund payment for the purchase or redemption of, any
shares of its capital stock (except by conversion into or exchange for shares of
its capital stock and except for a redemption, purchase or other acquisition of
shares of its capital stock made for the purpose of an employee incentive plan
or benefit plan of CPL or any of its subsidiaries and except for mandatory
redemption or sinking fund payments with respect to any series of Preferred
Stock of CPL that are subject to mandatory redemption or sinking fund
requirements, provided that the aggregate stated value of all such series
outstanding at the time of any such payment does not exceed five percent of the
aggregate of (1) the total principal amount of all bonds or other securities
representing secured indebtedness issued or assumed by CPL and then outstanding
and (2) the capital and surplus of CPL to be stated on the books of account of
CPL after giving effect to such payment); provided, however, that any moneys
deposited in any sinking fund and not in violation of this provision may
thereafter be applied to the purchase or redemption of such Preferred Stock in
accordance with the terms of such sinking fund without regard to the
restrictions contained in this provision. (Section 4.06) As of October 31, 1996,
CPL had no such series of Preferred Stock outstanding. With respect to any
issuance of Corresponding Junior Subordinated Debentures in connection with the
issuance of Preferred Securities, CPL will make certain additional covenants as
described under "Description of Corresponding Junior Subordinated Debentures."
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Each series of Junior Subordinated Debentures will be issued in registered
form and in certificated form or will be represented by one or more global
securities. If not represented by one or more global securities, Junior
Subordinated Debentures may be presented for registration of transfer (with the
form of transfer endorsed thereon duly executed) or exchange, at the office of
the Registrar or at the office of any transfer agent designated by CPL for such
purpose with respect to any series of Junior Subordinated Debentures and
referred to in an applicable Prospectus Supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
Indenture. Such transfer or exchange will be effected upon the Registrar or such
transfer agent, as the case may be, being satisfied with the documents of title
and identity of the person making the request. (Section 2.05) If a Prospectus
Supplement refers to any transfer agent (in addition to the Registrar) initially
designated by CPL with respect to any series of Junior Subordinated Debentures,
CPL may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts,
except that CPL will be required to maintain a transfer agent in each Place of
Payment for such series. (Section 4.02) CPL may at any time designate additional
transfer agents with respect to any series of Junior Subordinated Debentures.
The Junior Subordinated Debentures may be transferred or exchanged without
service charge, other than any tax or governmental charge imposed in connection
therewith. (Section 2.05)
In the event of any redemption in part, CPL shall not be required to (i)
issue, register the transfer of or exchange any Junior Subordinated Debenture
during a period beginning at the opening of business 15 days before any
selection for redemption of Junior Subordinated Debentures of like tenor and of
the series of which such Junior Subordinated Debenture is a part, and ending at
the close of business on the earliest date on which the relevant notice of
redemption is deemed to have been given to all holders of Junior Subordinated
Debentures of like tenor and of such series to be redeemed and (ii) register the
transfer of or exchange any Junior Subordinated Debentures so selected for
redemption, in whole or in part, except the unredeemed portion of any Junior
Subordinated Debenture being redeemed in part. (Section 2.05)
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PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the Prospectus Supplement, payment of
principal of and premium, if any, on any Junior Subordinated Debenture will be
made only against surrender to the Paying Agent of such Junior Subordinated
Debenture. Unless otherwise indicated in the Prospectus Supplement, principal of
and premium, if any, and interest on Junior Subordinated Debentures will be
payable, subject to any applicable laws and regulations, at the office of such
Paying Agent or Paying Agents as CPL may designate from time to time, except
that at the option of CPL payments on the Junior Subordinated Debentures may be
made (i) by checks mailed by the Debenture Trustee to the holders entitled
thereto at their registered addresses as specified in the Register for such
Junior Subordinated Debentures or (ii) to a holder of $1,000,000 or more in
aggregate principal amount of such Junior Subordinated Debentures who has
delivered a written request to the Debenture Trustee at least 14 days prior to
the relevant Interest Payment Date electing to have payments made by wire
transfer to a designated account in the United States, by wire transfer of
immediately available funds to such designated account; provided that, in either
case, the payment of principal with respect to any Junior Subordinated Debenture
will be made only upon surrender of such Junior Subordinated Debenture to the
Debenture Trustee. Unless otherwise indicated in the Prospectus Supplement,
payment of interest on a Junior Subordinated Debenture on any Interest Payment
Date will be made to the person in whose name such Junior Subordinated Debenture
(or Predecessor Junior Subordinated Debenture) is registered at the close of
business on the record date for such interest payment. (Sections 2.03 and 4.03)
The Debenture Trustee will initially act as Paying Agent with respect to
the Junior Subordinated Debentures. CPL may at any time designate additional
Paying Agents or rescind the designation of any Paying Agents or approve a
change in the office through which any Paying Agent acts, except that CPL will
be required to maintain a Paying Agent in each Place of Payment for each series
of the Junior Subordinated Debentures. (Sections 4.02 and 4.03)
All moneys paid by CPL to a Paying Agent for the payment of the principal
of or premium, if any, or interest on any Junior Subordinated Debenture of any
series that remain unclaimed at the end of two years after such principal,
premium, if any, or interest shall have become due and payable will be repaid to
CPL and the holder of such Junior Subordinated Debenture will thereafter look
only to CPL for payment thereof. (Section 11.06)
GLOBAL DEBENTURES
The Junior Subordinated Debentures of a series may be issued in whole or in
part in the form of one or more global securities ("Global Junior Subordinated
Debentures") that will be deposited with, or on behalf of, a depositary (the
"Depositary") identified in the Prospectus Supplement relating to such series.
Global Junior Subordinated Debentures may be issued only in fully registered
form and in either temporary or permanent form. Unless and until it is exchanged
in whole or in part for the individual Junior Subordinated Debentures
represented thereby, a Global Junior Subordinated Debenture may not be
transferred except as a whole by the Depositary for such Global Junior
Subordinated Debenture to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such
successor Depositary. (Section 2.11)
The specific terms of the depositary arrangement with respect to any
portion of a series of Junior Subordinated Debentures to be represented by a
Global Junior Subordinated Debenture will be described in the Prospectus
Supplement relating to such series. CPL anticipates that the following
provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, and the
deposit of such Global Junior Subordinated Debenture with or on behalf of the
Depositary, the Depositary for such Global Junior Subordinated Debenture or its
nominee will credit on its book-entry registration and transfer system, the
respective principal amounts of the individual Junior Subordinated Debentures
repre-
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sented by such Global Junior Subordinated Debenture to the accounts of persons
that have accounts with such Depositary ("Participants"). Such accounts shall be
designated by the dealers, underwriters or agents with respect to such Junior
Subordinated Debentures or by CPL if such Junior Subordinated Debentures are
offered and sold directly by CPL. Ownership of beneficial interests in a Global
Junior Subordinated Debenture will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
such Global Junior Subordinated Debenture will be shown on, and the transfer of
that ownership will be effected only through, records maintained by the
applicable Depositary or its nominee (with respect to interests of Participants)
and the records of Participants (with respect to interests of persons who hold
through Participants). The laws of some states may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to transfer beneficial
interests in a Global Junior Subordinated Debenture.
So long as the Depositary for a Global Junior Subordinated Debenture, or
its nominee, is the registered owner of such Global Junior Subordinated
Debenture, such Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture for all purposes under
the Indenture governing such Junior Subordinated Debentures. Except as provided
below, owners of beneficial interests in a Global Junior Subordinated Debenture
will not be entitled to have any of the individual Junior Subordinated
Debentures of the series represented by such Global Junior Subordinated
Debenture registered in their names, will not receive or be entitled to receive
physical delivery of any such Junior Subordinated Debentures of such series in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Payments of principal of, premium, if any, and interest on individual
Junior Subordinated Debentures represented by a Global Junior Subordinated
Debenture registered in the name of a Depositary or its nominee will be made to
the Depositary or its nominee, as the case may be, as the registered owner of
the Global Junior Subordinated Debenture representing such Junior Subordinated
Debentures. None of CPL, the Debenture Trustee, any Paying Agent, or the
Registrar for such Junior Subordinated Debentures will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Global Junior Subordinated
Debentures representing such Junior Subordinated Debentures or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
CPL expects that the Depositary for a series of Junior Subordinated
Debentures or its nominee, upon receipt of any payment of principal, premium, if
any, or interest in respect of a permanent Global Junior Subordinated Debenture
representing any of such Junior Subordinated Debentures, immediately will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Junior
Subordinated Debenture representing such Junior Subordinated Debentures as shown
on the records of such Depositary or its nominee. CPL also expects that payments
by Participants to owners of beneficial interests in such Global Junior
Subordinated Debenture held through such Participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name." Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Junior Subordinated Debentures is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by CPL within 90 days, CPL will issue individual
Junior Subordinated Debentures of such series in exchange for the Global Junior
Subordinated Debenture representing such series of Junior Subordinated
Debentures. In addition, CPL may at any time and in its sole discretion, subject
to any limitations described in the Prospectus Supplement relating to such
Junior Subordinated Debentures, determine not to have any Junior Subordinated
Debentures of such series represented by one or more Global Junior Subordinated
Debentures and, in such event, will issue individual Junior Subordinated
Debentures of such series
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in exchange for the Global Junior Subordinated Debenture representing such
series of Junior Subordinated Debentures. Further, if CPL so specifies with
respect to the Junior Subordinated Debentures of a series, an owner of a
beneficial interest in a Global Junior Subordinated Debenture representing
Junior Subordinated Debentures of such series may, on terms acceptable to CPL,
the Debenture Trustee and the Depositary for such Global Junior Subordinated
Debenture, receive individual Junior Subordinated Debentures of such series in
exchange for such beneficial interest, subject to any limitations described in
the Prospectus Supplement relating to such Junior Subordinated Debentures. In
any such instance, an owner of a beneficial interest in a Global Junior
Subordinated Debenture will be entitled to physical delivery of individual
Junior Subordinated Debentures of the series represented by such Global Junior
Subordinated Debenture equal in principal amount to such beneficial interest and
to have such Junior Subordinated Debentures registered in its name. Individual
Junior Subordinated Debentures of such series so issued will be issued in
denominations, unless otherwise specified by CPL, of $25 and integral multiples
thereof. (Section 2.11)
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, Junior
Subordinated Debentures will not be subject to any sinking fund.
The applicable Prospectus Supplement will specify the period or periods
within which, the price or prices at which and the terms and conditions upon
which the Junior Subordinated Debentures of any series may be redeemed, in whole
or in part, at the option of CPL. Junior Subordinated Debentures in
denominations larger than $25 may be redeemed in part but only in integral
multiples of $25. Except as otherwise specified in the applicable Prospectus
Supplement, the redemption price for any Junior Subordinated Debenture so
redeemed shall equal any accrued and unpaid interest thereon to the redemption
date, plus 100% of the principal amount thereof.
Except as otherwise specified in the applicable Prospectus Supplement, if a
Debenture Tax Event (as defined below) in respect of a series of Junior
Subordinated Debentures shall occur and be continuing, CPL may, at its option,
redeem such series of Junior Subordinated Debentures in whole (but not in part)
at any time within 90 days of the occurrence of such Debenture Tax Event, at a
redemption price equal to 100% of the principal amount of such Junior
Subordinated Debentures then outstanding plus accrued and unpaid interest to the
date fixed for redemption.
"Debenture Tax Event" means the receipt by CPL of an opinion of counsel,
rendered by a law firm having a recognized national tax and securities practice,
to the effect that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such pronouncement or decision is announced on or after
the date of issuance of the applicable series of Junior Subordinated Debentures
under the Indenture, there is more than an insubstantial risk that interest
payable by CPL on such series of Junior Subordinated Debentures is not, or
within 90 days of the date of such opinion, will not be, deductible by CPL, in
whole or in part, for United States federal income tax purposes.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at its registered address (Section 3.02). Unless CPL
defaults in payment of the redemption price, on and after the redemption date
interest will cease to accrue on such Junior Subordinated Debentures or portions
thereof called for redemption.
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OPTION TO EXTEND INTEREST PAYMENT DATE
If provided in the applicable Prospectus Supplement, CPL shall have the
right at any time or from time to time during the term of any series of Junior
Subordinated Debentures to defer the payment of interest for such number of
consecutive interest payment periods with respect to each deferred period as may
be specified in the applicable Prospectus Supplement (each, an "Extension
Period"), subject to the terms, conditions and covenants, if any, specified in
such Prospectus Supplement, provided that such Extension Period may not extend
beyond the maturity of such series of Junior Subordinated Debentures. Certain
United States federal income tax consequences and special considerations
applicable to any such Junior Subordinated Debentures will be described in the
applicable Prospectus Supplement. In the event that CPL exercises this right,
certain restrictions will be applicable to CPL as described under "-- Certain
Covenants of CPL."
AGREED TAX TREATMENT
The Indenture provides that each holder of a Junior Subordinated Debenture,
each person that acquires a beneficial ownership interest in a Junior
Subordinated Debenture and CPL agree that for United States federal, state and
local tax purposes it is intended that such Junior Subordinated Debenture
constitute indebtedness. (Section 13.12)
MODIFICATION OF INDENTURE
The Indenture contains provisions permitting CPL and the Debenture Trustee,
with the consent of the holders of not less than a majority in principal amount
of the Junior Subordinated Debentures of each series which are affected by the
modification, to modify the Indenture or any supplemental indenture affecting
that series or the rights of the holders of that series of Junior Subordinated
Debentures; provided that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Debenture affected thereby, (i)
extend the fixed maturity of any Junior Subordinated Debentures of any series,
or reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any premium payable upon the redemption
thereof or (ii) reduce the percentage of Junior Subordinated Debentures, the
holders of which are required to consent to any such supplemental indenture.
(Section 9.02) In the case of Corresponding Junior Subordinated Debentures, so
long as any of the related series of Preferred Securities remain outstanding,
CPL will covenant in the applicable Supplemental Indenture that no such
modification may be made that adversely affects the holders of such Preferred
Securities in any material respect, and no termination of the Indenture may
occur, and no waiver of any Debenture Event of Default or non-compliance with
any covenant under the Indenture may be effective, without the prior consent of
the holders of at least a majority of the aggregate liquidation preference of
such Preferred Securities unless and until the principal of the Corresponding
Junior Subordinated Debentures and all accrued and unpaid interest thereon have
been paid in full and certain other conditions are satisfied. See "Description
of Corresponding Junior Subordinated Debentures."
In addition, CPL and the Debenture Trustee may execute, without the consent
of any holder of Junior Subordinated Debentures (including the Junior
Subordinated Debentures being offered hereby), any supplemental indenture for
certain other usual purposes, including the creation of any new series of Junior
Subordinated Debentures. (Sections 2.01, 9.01 and 10.01)
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DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debentures, which has
occurred and is continuing, constitutes a "Debenture Event of Default" with
respect to such series of Junior Subordinated Debentures:
(a) failure for 60 days to pay interest on the Junior Subordinated
Debentures of that series when due and payable (subject to CPL's right to
defer interest payments pursuant to an Extension Period as described under
"-- Option to Extend Interest Payment Date"); or
(b) failure for 3 days to pay principal of or premium, if any, on the
Junior Subordinated Debentures of that series when due whether at maturity,
upon redemption, by declaration or otherwise, or to make any sinking or
analogous fund payment if established with respect to that series; or
(c) failure to observe or perform any other covenant (other than those
specifically relating to one or more other series of Junior Subordinated
Debentures) contained in the Indenture for 90 days after notice; or
(d) a decree or order by a court having jurisdiction in the premises
shall have been entered adjudging CPL a bankrupt or insolvent, or approving
as properly filed a petition seeking liquidation or reorganization of CPL
under the Federal Bankruptcy Code or any other similar applicable federal
or state law, and such decree or order shall have continued unvacated and
unstayed for a period of 90 days; an involuntary case shall be commenced
under such Code in respect of CPL and shall continue undismissed for a
period of 90 days or an order for relief in such case shall have been
entered; or a decree or order of a court having jurisdiction in the
premises shall have been entered for the appointment on the ground of
insolvency or bankruptcy of a receiver, custodian, liquidator, trustee or
assignee in bankruptcy or insolvency of CPL or of its property, or for the
winding up or liquidation of its affairs, and such decree or order shall
have remained in force unvacated and unstayed for a period of 90 days; or
(e) CPL shall institute proceedings to be adjudicated a voluntary
bankrupt, shall consent to the filing of a bankruptcy proceeding against
it, shall file a petition or answer or consent seeking liquidation or
reorganization under the Federal Bankruptcy Code or other similar
applicable federal or state law, shall consent to the filing of any such
petition or shall consent to the appointment on the ground of insolvency or
bankruptcy of a receiver or custodian or liquidator or trustee or assignee
in bankruptcy or insolvency of it or of its property, or shall make an
assignment for the benefit of creditors; or
(f) any other Event of Default specified with respect to the Junior
Subordinated Debentures of that series (Section 6.01).
The holders of a majority in aggregate outstanding principal amount of any
series of the Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee for that series. (Section 6.06) The Debenture Trustee or the
holders of not less than 33% in aggregate outstanding principal amount of any
particular series of the Junior Subordinated Debentures may declare the
principal due and payable immediately upon a Debenture Event of Default with
respect to such series and, in the case of Corresponding Junior Subordinated
Debentures, should the Debenture Trustee or such holders of such Corresponding
Junior Subordinated Debentures fail to make such declaration, the holders of at
least 33% in aggregate liquidation preference of the related series of Preferred
Securities shall have such right.
At any time after a declaration of acceleration with respect to the Junior
Subordinated Debentures of any series has been made and before a judgment or
decree for payment of the money due has been obtained, the Debenture Event or
Events of Default giving rise to such declaration of acceleration will, without
further act, be deemed to have been waived, and such
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declaration and its consequences will, without further act, be deemed to have
been rescinded and annulled, if:
(a) CPL has paid or deposited with the Debenture Trustee a sum
sufficient to pay:
(1) all overdue interest on all Junior Subordinated Debentures of
such series;
(2) the principal of and premium, if any, on any Junior
Subordinated Debentures of such series which have become due otherwise
than by such declaration of acceleration and interest thereon at the
rate or rates prescribed therefor in such Junior Subordinated
Debentures;
(3) interest upon overdue interest at the rate or rates prescribed
therefor in such Junior Subordinated Debentures, to the extent that
payment of such interest is lawful;
(4) all amounts due to the Debenture Trustee under the Indenture;
and
(b) any other Debenture Event or Events of Default with respect to
Junior Subordinated Debentures of such series, other than the nonpayment of
the principal of the Junior Subordinated Debentures of such series which
has become due solely by such declaration of acceleration, have been cured
or waived as provided in the Indenture. (Section 6.01)
The holders of a majority in aggregate outstanding principal amount of all
series of the Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Junior Subordinated Debentures of such series, waive any
past default, except a default in the payment of principal, premium, if any, or
interest. (Section 6.06) In the case of Corresponding Junior Subordinated
Debentures, should the holders of such Corresponding Junior Subordinated
Debentures fail to waive such default, the holders of a majority in aggregate
liquidation preference of the related series of Preferred Securities shall have
such right. CPL is required to file annually with the Debenture Trustee a
certificate as to whether or not CPL is in compliance with all the conditions
and covenants under the Indenture. (Section 5.03(d))
In case a Debenture Event of Default shall occur and be continuing as to a
series of Corresponding Junior Subordinated Debentures, the Property Trustee
will have the right to declare the principal of and the interest on such
Corresponding Junior Subordinated Debentures and any other amounts payable under
the Indenture, to be forthwith due and payable and to enforce its other rights
as a creditor with respect to such Corresponding Junior Subordinated Debentures.
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of CPL to pay interest or principal on the
Corresponding Junior Subordinated Debentures on the date such interest or
principal is otherwise payable, then a holder of Preferred Securities may
institute a Direct Action (as defined below under "Description of Preferred
Securities -- Enforcement of Certain Rights by Holders of Preferred Securities")
for payment after the respective due dates specified in the Corresponding Junior
Subordinated Debentures. CPL may not amend the Indenture to remove the foregoing
right to bring a Direct Action without the prior written consent of the holders
of all of the Preferred Securities. CPL shall be subrogated to the rights of the
holder of such Preferred Securities with respect to payments on the Preferred
Securities to the extent of any payments made by CPL to such holder in any
Direct Action.
The holders of the Preferred Securities would not be able to exercise
directly any rights against CPL other than those set forth in the preceding
paragraph available to the holders of the Corresponding Junior Subordinated
Debentures unless the Property Trustee or the Debenture Trustee, acting for the
benefit of the Property Trustee, fails to do so for 60 days. In such event, to
the fullest extent permitted by law, the holders of at least 33% in aggregate
liquidation preference of the outstanding Preferred Securities would have the
right to directly institute proceedings for enforcement of such rights. See
"Description of Preferred Securities -- Enforcement of Certain Rights by Holders
of Preferred Securities."
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CONSOLIDATION, MERGER AND SALE
The Indenture does not contain any covenant which restricts CPL's ability
to merge or consolidate with or into any other corporation, sell or convey all
or substantially all of its assets to any corporation or otherwise engage in
restructuring transactions. (Section 10.01)
CONVERSION OR EXCHANGE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures of any series may be convertible or exchangeable
into Preferred Securities or other securities. The specific terms on which
Junior Subordinated Debentures of any series may be so converted or exchanged
will be set forth in the applicable Prospectus Supplement. Such terms may
include provisions for conversion or exchange, either mandatory, at the option
of the holder, or at the option of CPL, in which case the number of shares of
Preferred Securities or other securities to be received by the holders of Junior
Subordinated Debentures would be calculated as of a time and in the manner
stated in the applicable Prospectus Supplement.
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, if CPL deposits with the Debenture
Trustee, in trust, moneys or Government Obligations, in an amount sufficient to
pay all the principal of, and interest on, the Junior Subordinated Debentures of
any series on the dates such payments are due in accordance with the terms of
such Junior Subordinated Debentures and if CPL delivers to the Debenture Trustee
an Opinion of Counsel to the effect that the holders of Junior Subordinated
Debentures of such series will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and the release of certain
obligations of the Company (as described below) and will be subject to federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit and release had not occurred:
(a) CPL will be released from substantially all of its covenants and
other obligations contained in the Indenture and thereafter any failure to
comply with any such covenant or obligation will not constitute a Default
or a Debenture Event of Default with respect to the Junior Subordinated
Debentures of such series;
(b) the occurrence of an event described in clause (c) under
"Debenture Events of Default" above will no longer constitute a Default or
a Debenture Event of Default with respect to the Junior Subordinated
Debentures of such series; and
(c) the Junior Subordinated Debentures of such series will thereafter
be deemed not to be outstanding for purposes of determining whether the
holders of the requisite aggregate principal amount of Junior Subordinated
Debentures have approved any amendment, modification or waiver with respect
to any covenant or obligation described in clause (a) above or any event
described in clause (b) above;
provided that the foregoing will not relieve CPL of its obligations to make
payments in respect of the Junior Subordinated Debentures of such series.
In addition to discharging certain obligations under the Indenture as
stated above, if CPL delivers to the Debenture Trustee an Opinion of Counsel (in
lieu of the Opinion of Counsel referred to above) to the effect that (a) CPL has
received from, or there has been published by, the Internal Revenue Service a
ruling or (b) since the date of the Indenture there has been a change in
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the holders of Junior
Subordinated Debentures of such series will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount and in
the same manner and at the same times, as would have been the case if such
deposit, defeasance and
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discharge had not occurred, and (c) the trust resulting from the defeasance is a
valid trust and will not constitute a regulated investment company under the
Investment Company Act of 1940, as amended, then, in such event, CPL will be
deemed to have paid and discharged the entire indebtedness on the Junior
Subordinated Debentures (except as to any surviving rights such as rights of
registration of transfer or exchange expressly provided for in the Indenture).
In the event of any such defeasance and discharge of Junior Subordinated
Debentures of such series, holders of Junior Subordinated Debentures of such
series would be able to look only to such trust fund for payment of principal of
(and premium, if any) and interest, if any, on the Junior Subordinated
Debentures of such series. (Sections 11.01, 11.02 and 11.03) Prospective
investors are urged to consult their own tax advisors as to the specific
consequences to them of such deposit.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by,
and construed in accordance with, the laws of the State of New York. (Section
13.04)
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. (Section 7.01) Subject to such provision, the
Debenture Trustee is under no obligation to exercise any of the powers vested in
it by the Indenture at the request of any holder of Junior Subordinated
Debentures, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby. (Section 7.02)
The Debenture Trustee is not required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties if
the Debenture Trustee reasonably believes that repayment or adequate indemnity
is not reasonably assured to it. (Section 7.01)
The Bank of New York serves as trustee and agent under agreements involving
CPL and its affiliates.
MISCELLANEOUS
CPL will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned subsidiary
of CPL; provided that, in the event of any such assignment, CPL will remain
liable for all such obligations. Subject to the foregoing, the Indenture will be
binding upon and inure to the benefit of the parties thereto and their
respective successors and permitted assigns. The Indenture provides that it may
not otherwise be assigned by the parties thereto. (Section 13.11)
DESCRIPTION OF PREFERRED SECURITIES
The Preferred Securities and the Common Securities of each Issuer Trust
will be created pursuant to the terms of the Trust Agreement for each Issuer
Trust. The Preferred Securities of a particular issue will represent preferred
undivided beneficial interests in the assets of the related Issuer Trust and the
holders thereof will be entitled to a preference in certain circumstances with
respect to Distributions and amounts payable on redemption or liquidation over
the Common Securities of such Issuer Trust, as well as other benefits as
described in the corresponding Trust Agreement. This summary of certain
provisions of the Preferred Securities and each Trust Agreement does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of each Trust Agreement, including the definitions
therein of certain terms, and the Trust Indenture Act. Wherever particular
defined terms of a Trust Agreement (as supplemented or amended from time to
time) are referred to herein or in a Prospectus Supplement, such defined terms
are incorporated herein or therein by reference. The form of each Trust
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Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Each of the Issuer Trusts is a legally separate
entity and the assets of one are not available to satisfy the obligations of any
of the others.
GENERAL
The Preferred Securities of an Issuer Trust will rank pari passu, and
payments will be made thereon pro rata, with the Common Securities of that
Issuer Trust except as described below under "-- Subordination of Common
Securities." Legal title to the Corresponding Junior Subordinated Debentures
will be held by the Property Trustee in trust for the benefit of the holders of
the related Preferred Securities and Common Securities. Each Guarantee Agreement
executed by CPL for the benefit of the holders of an Issuer Trust's Preferred
Securities (each, a "Guarantee") will be a guarantee on a subordinated basis
with respect to the related Preferred Securities but will not guarantee payment
of Distributions or amounts payable on redemption or liquidation of such
Preferred Securities when the related Issuer Trust does not have funds on hand
available to make such payments. See "Description of Guarantees."
DISTRIBUTIONS
Each Issuer Trust's Preferred Securities represent preferred undivided
beneficial interests in the assets of such Issuer Trust, and the Distributions
on each Preferred Security will be payable at a rate specified in the Prospectus
Supplement for such Preferred Securities. The amount of Distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months unless otherwise specified in the applicable Prospectus Supplement.
Distributions to which holders of Preferred Securities are entitled will
accumulate additional Distributions ("Additional Amounts") if and as specified
in the applicable Prospectus Supplement. The term "Distributions" as used herein
includes any Additional Amounts unless otherwise stated.
Distributions on the Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such dates
as specified in the applicable Prospectus Supplement. In the event that any date
on which Distributions are payable on the Preferred Securities is not a Business
Day (as defined below), payment of the Distribution payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay) except that, if such Business Day
is in the next succeeding calendar year, 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 the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office of
the Property Trustee or the Debenture Trustee is closed for business.
If provided in the applicable Prospectus Supplement, CPL has the right
under the Indenture to defer the payment of interest on any series of the
Corresponding Junior Subordinated Debentures at any time or from time to time
for one or more Extension Periods, subject to the terms, conditions and
covenants, if any, specified in the applicable Prospectus Supplement, provided
that no Extension Period may extend beyond the maturity of such series of
Corresponding Junior Subordinated Debentures. As a consequence of any such
extension, Distributions on the corresponding Preferred Securities would be
deferred (but would continue to accumulate additional Distributions thereon at
the rate per annum set forth in the Prospectus Supplement for such Preferred
Securities) by the Issuer Trust of such Preferred Securities during any such
Extension Period. During such Extension Period CPL may not, and may not permit
any subsidiary of CPL to, (i) declare, set aside or pay any dividend or
distribution on, or repurchase, redeem, or otherwise acquire or make any sinking
fund payment with respect to, any shares of CPL's capital stock, including the
Common Stock of CPL, or (ii) make any payment of principal, interest or premium,
if any, on or repay, repurchase or redeem any debt securities that rank pari
passu with or junior in interest to the Corresponding Junior Subordinated
Debentures or make any guarantee payments with respect to
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the foregoing (other than (a) dividends or distributions in shares of its
capital stock or in rights to acquire shares of its capital stock, (b)
conversions into or exchanges for shares of its capital stock, (c) redemptions,
purchases or other acquisitions of shares of its capital stock made for the
purpose of an employee incentive plan or benefit plan of CPL or any of its
subsidiaries and mandatory redemptions or sinking fund payments with respect to
any series of Preferred Stock of CPL that are subject to mandatory redemption or
sinking fund requirements, provided that the aggregate stated value of all such
series outstanding at the time of any such payment does not exceed five percent
of the aggregate of (1) the total principal amount of all bonds or other
securities representing secured indebtedness issued or assumed by CPL and then
outstanding and (2) the capital and surplus of CPL to be stated on the books of
account of CPL after giving effect to such payment, provided, however, that any
moneys deposited in any sinking fund and not in violation of this provision may
thereafter be applied to the purchase or redemption of such Preferred Stock in
accordance with the terms of such sinking fund without regard to the
restrictions contained in this provision, and (d) payments under any guarantee
by CPL with respect to any securities of a subsidiary of CPL, provided that the
proceeds from the issuance of such securities were issued to purchase Junior
Subordinated Debentures of any series under the Indenture). See "Description of
Junior Subordinated Debentures -- Option to Extend Interest Payment Date," and
"-- Certain Covenants of CPL" and "Description of Corresponding Junior
Subordinated Debentures -- Certain Covenants of CPL."
The revenue of each Issuer Trust available for distribution to holders of
its Preferred Securities will be limited to payments under the Corresponding
Junior Subordinated Debentures in which such Issuer Trust will invest the
proceeds from the issuance and sale of its Preferred Securities and its Common
Securities. See "Description of Corresponding Junior Subordinated Debentures."
If CPL does not make interest payments on such Corresponding Junior Subordinated
Debentures, the Property Trustee will not have funds available to pay
Distributions on the related Preferred Securities. The payment of Distributions
(if and to the extent the Issuer Trust has funds available for the payment of
such Distributions and cash sufficient to make such payments) is guaranteed by
CPL on a limited basis as set forth herein under "Description of Guarantees."
Distributions on the Preferred Securities of each Issuer Trust will be
payable to the holders thereof as they appear on the register of such Issuer
Trust on the relevant record dates, which, as long as the Preferred Securities
remain in book-entry form, will be one Business Day prior to the relevant
Distribution Date. Subject to any applicable laws and regulations and the
provisions of the applicable Trust Agreement, each such payment will be made as
described under "-- Book-entry Issuance." In the event any Preferred Securities
are not in book-entry form, the relevant record date for such Preferred
Securities shall be a date at least 15 days prior to the relevant Distribution
Date, as specified in the applicable Prospectus Supplement.
REDEMPTION OR EXCHANGE
Mandatory Redemption. Upon the repayment or redemption, in whole or in
part, of any Corresponding Junior Subordinated Debentures, whether at maturity
or upon earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the related Preferred Securities and Common
Securities, upon not less than 30 nor more than 60 days' notice prior to the
date fixed for repayment or redemption (the "Redemption Date"), at a redemption
price equal to the aggregate liquidation preference of such Preferred Securities
plus accumulated and unpaid Distributions thereon to the Redemption Date (the
"Redemption Price") and the related amount of the premium, if any, paid by CPL
upon the concurrent redemption of such Corresponding Junior Subordinated
Debentures. See "Description of Corresponding Junior Subordinated Debentures --
Optional Redemption." If less than all of any series of Corresponding Junior
Subordinated Debentures are to be repaid or redeemed on a Redemption Date, then
the proceeds from such repayment or redemption shall be allocated to the
redemption pro rata of the related Preferred Securities and the Common
Securities. The amount of premium, if any, paid by CPL upon the
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redemption of all or any part of any series of any Corresponding Junior
Subordinated Debentures to be repaid or redeemed on a Redemption Date shall be
allocated to the redemption pro rata of the related Preferred Securities and the
Common Securities.
CPL will have the right to redeem any series of Corresponding Junior
Subordinated Debentures at any time, in whole (but not in part), upon the
occurrence of a Tax Event or an Investment Company Event (each as defined below,
a "Special Event") and subject to the further conditions described under
"Description of Corresponding Junior Subordinated Debentures -- Optional
Redemption." In addition, the applicable Prospectus Supplement will specify the
period or periods within which, the price or prices at which and the terms and
conditions upon which the Corresponding Junior Subordinated Debentures of any
series may be redeemed, in whole or in part, at the option of CPL. Corresponding
Junior Subordinated Debentures in denominations larger than $25 may be redeemed
in part but only in integral multiples of $25. Except as otherwise specified in
the applicable Prospectus Supplement, the Redemption Price for any Corresponding
Junior Subordinated Debenture so redeemed shall equal any accrued and unpaid
interest thereon to the Redemption Date, plus 100% of the principal amount
thereof.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION OF CORRESPONDING
JUNIOR SUBORDINATED DEBENTURES.
If a Special Event in respect of a series of Preferred Securities and
Common Securities shall occur and be continuing, CPL has the right to redeem the
Corresponding Junior Subordinated Debentures in whole (but not in part) and
thereby cause a mandatory redemption of such Preferred Securities and Common
Securities in whole (but not in part) within 90 days following the occurrence of
such Special Event at the Redemption Price. Whether or not a Special Event has
occurred, CPL has the right to terminate the related Issuer Trust at any time
and, after satisfaction of liabilities to creditors of such Issuer Trust, if
any, as provided by applicable law, cause such Corresponding Junior Subordinated
Debentures to be distributed to the holders of such Preferred Securities and
Common Securities in liquidation of the Issuer Trust. If CPL does not elect
either option described above, the applicable series of Preferred Securities
will remain outstanding and, in the event a Tax Event has occurred and is
continuing, Additional Sums (as defined below) may be payable on the
Corresponding Junior Subordinated Debentures.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount of Distributions then due and payable by an Issuer Trust on the
outstanding Preferred Securities and Common Securities of the Issuer Trust shall
not be reduced as a result of any additional taxes, duties and other
governmental charges to which such Issuer Trust has become subject as a result
of a Tax Event.
"Investment Company Event" means the receipt by the applicable Issuer Trust
of an opinion of counsel, rendered by a law firm having a recognized national
tax and securities practice, to the effect that, as a result of the occurrence
of a change in law or regulation or a change in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law") the applicable Issuer Trust is
or will be considered an "investment company" that is required to be registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), which Change in 1940 Act Law becomes effective on or after the date of
original issuance of the series of Preferred Securities issued by the applicable
Issuer Trust.
"Like Amount" means (i) with respect to a redemption of any series of
Preferred Securities, Preferred Securities and Common Securities of such series
having a Liquidation Amount (as defined below) equal to that portion of the
principal amount of Corresponding Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture and the proceeds of
which will be used to pay the Redemption Price of such Preferred Securities and
Common Securities, and (ii) with respect to a distribution of Corresponding
Junior Subordinated Debentures
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to holders of any series of Preferred Securities in connection with a
termination or liquidation of the related Issuer Trust, Corresponding Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Preferred Securities or Common Securities of the holder to whom
such Corresponding Junior Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Preferred Security
and Common Security.
"Tax Event" means the receipt by the applicable Issuer Trust of an opinion
of counsel, rendered by a law firm having a recognized national tax and
securities practice, to the effect that, as a result of any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States, or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the related Trust Agreement, there is more than an
insubstantial risk that (i) the applicable Issuer Trust is, or will be within 90
days of the date of such opinion, subject to United States federal income tax
with respect to income received or accrued on the corresponding series of
Corresponding Junior Subordinated Debentures, (ii) interest payable by CPL on
such series of Corresponding Junior Subordinated Debentures is not, or within 90
days of the date of such opinion, will not be, deductible by CPL, in whole or in
part, for United States federal income tax purposes, or (iii) the applicable
Issuer Trust is, or will be within 90 days of the date of such opinion, subject
to more than a de minimis amount of other taxes, duties or other governmental
charges.
After the liquidation date fixed for any distribution of Corresponding
Junior Subordinated Debentures for any series of Preferred Securities and Common
Securities (i) such series of Preferred Securities and Common Securities will no
longer be deemed to be outstanding, (ii) The Depository Trust Company ("DTC") or
its nominee, as the record holder of such series of Preferred Securities, will
receive a registered global certificate or certificates representing the
Corresponding Junior Subordinated Debentures to be delivered upon such
distribution and (iii) any certificates representing such series of Preferred
Securities not held by DTC or its nominee will be deemed to represent the
Corresponding Junior Subordinated Debentures having a principal amount equal to
the stated liquidation preference of such series of Preferred Securities, and
bearing accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on such series of Preferred Securities until such certificates are
presented to the Administrative Trustees or their agent for transfer or
reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Corresponding Junior Subordinated Debentures that may be
distributed in exchange for Preferred Securities if a termination and
liquidation of an Issuer Trust were to occur. Accordingly, the Preferred
Securities that an investor may purchase, or the Corresponding Junior
Subordinated Debentures that the investor may receive on termination and
liquidation of an Issuer Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Corresponding Junior Subordinated Debentures. Redemptions of
the Preferred Securities shall be made and the Redemption Price shall be payable
on each Redemption Date only to the extent that the related Issuer Trust has
funds on hand available for the payment of such Redemption Price. See also
"-- Subordination of Common Securities."
If an Issuer Trust gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are available, the
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Property Trustee will deposit irrevocably with DTC, funds sufficient to pay the
applicable Redemption Price and will give DTC irrevocable instructions and
authority to pay the Redemption Price to the holders of such Preferred
Securities. See "-- Book-entry Issuance." If such Preferred Securities are no
longer in book-entry form, such Issuer Trust, to the extent funds are available,
will irrevocably deposit with the paying agent for such Preferred Securities
funds sufficient to pay the applicable Redemption Price and will give such
paying agent irrevocable instructions and authority to pay the Redemption Price
to the holders thereof upon surrender of their certificates evidencing such
Preferred Securities. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date for any Preferred Securities called for redemption
shall be payable to the holder of such Preferred Securities as of 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 the holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price, and such Preferred Securities will cease to be outstanding. In
the event that any date fixed for redemption of Preferred Securities is not a
Business Day, then payment of the Redemption Price 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 falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of the Redemption
Price in respect of Preferred Securities called for redemption is improperly
withheld or refused and not paid either by the Issuer Trust or by CPL pursuant
to the Guarantee as described under "Description of Guarantees," Distributions
on such Preferred Securities will continue to accrue at the then applicable
rate, from the Redemption Date originally established by the Issuer Trust for
such Preferred 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.
Subject to applicable law (including, without limitation, United States
federal securities law), CPL or its subsidiaries, if any, may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Corresponding Junior Subordinated Debentures to holders of
Preferred Securities shall be made to the applicable recordholders thereof as
they appear on the register for such Preferred Securities on the relevant record
date, which shall be one Business Day prior to the relevant Redemption Date or
liquidation date, as applicable; provided, however, that in the event that any
Preferred Securities are not in book-entry form, the relevant record date for
such Preferred Securities shall be the fifteenth day prior to the Redemption
Date or liquidation date, as applicable, as specified in the applicable
Prospectus Supplement.
If less than all of the Preferred Securities and Common Securities issued
by an Issuer Trust are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata among the Preferred Securities and Common
Securities. The particular Preferred Securities to be redeemed shall be selected
on a pro rata basis 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 redemption of portions
(equal to $25 or an integral multiple of $25 in excess thereof) of the
liquidation preference of Preferred Securities of a denomination larger than
$25. The Property Trustee shall promptly notify the trust registrar in writing
of the Preferred Securities selected for redemption and, in the case of any
Preferred Securities selected for partial redemption, the liquidation preference
thereof to be redeemed. For all purposes of each 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
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portion of the aggregate liquidation preference of Preferred Securities which
has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Preferred Securities to be
redeemed at its registered address.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions (including Additional Sums, if applicable) on, and
the Redemption Price of, each Issuer Trust's Preferred Securities and Common
Securities, as applicable, shall be made pro rata based on the Liquidation
Amount of such Preferred Securities and Common Securities; provided, however,
that if on any Distribution Date or Redemption Date any Event of Default
resulting from a Debenture Event of Default shall have occurred and be
continuing, no payment of any Distribution (including Additional Sums, if
applicable) on, or Redemption Price of, any of the Issuer Trust's Common
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of such Common Securities, shall be made unless payment in
full in cash of all accumulated and unpaid Distributions (including Additional
Amounts, if applicable) on all of the Issuer Trust's 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 of the Issuer Trust's outstanding Preferred Securities then called
for redemption, shall have been made or provided for, and all funds available to
the Property Trustee shall first be applied to the payment in full in cash of
all Distributions (including Additional Sums, if applicable) on, or Redemption
Price of, the Issuer Trust's Preferred Securities then due and payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, CPL as holder of each Issuer Trust's Common Securities will be deemed
to have waived any right to act with respect to any such Event of Default under
the applicable Trust Agreement until the effect of all such Events of Default
with respect to such Preferred Securities have been cured, waived or otherwise
eliminated. Until any such Events of Default under the applicable 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 such Preferred Securities and not on behalf of CPL as holder of the
Common Securities, and only the holders of such Preferred Securities will have
the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Issuer Trust shall automatically
terminate upon expiration of its term and shall be terminated on the first to
occur of: (i) certain events of bankruptcy, dissolution or liquidation of CPL;
(ii) the distribution of a Like Amount of the Corresponding Junior Subordinated
Debentures to the holders of its Preferred Securities and Common Securities if
CPL, as Depositor, has given written direction to the Property Trustee to
terminate such Issuer Trust (which direction is optional and wholly within the
discretion of CPL as Depositor); (iii) the redemption of all of such Issuer
Trust's Preferred Securities as described under "-- Redemption or Exchange"; and
(iv) the entry by a court of competent jurisdiction of an order for the
dissolution of such Issuer Trust.
If an early termination occurs as described in clause (i), (ii) or (iv)
above, such Issuer Trust shall be liquidated by the Issuer Trustees as
expeditiously as the Issuer Trustees determine to be possible by distributing,
after satisfaction of liabilities to creditors of such Issuer Trust as provided
by applicable law, to the holders of such Preferred Securities and Common
Securities a Like Amount of the Corresponding Junior Subordinated Debentures,
unless such distribution is determined by the Property Trustee not to be
practical, in which event such holders will be entitled to receive out of the
assets of the Issuer Trust available for distribution to holders, after
satisfaction of liabilities to creditors of such Issuer Trust as provided by
applicable law, an amount equal to, in the case of holders of Preferred
Securities, the aggregate of the liquidation preference plus accrued and unpaid
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Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because such Issuer Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by such
Issuer Trust on its Preferred Securities shall be paid on a pro rata basis. The
holders of such Issuer Trust's Common Securities will be entitled to receive
distributions upon any such liquidation pro rata with the holders of its
Preferred Securities, except that if a Debenture Event of Default has occurred
and is continuing, such Preferred Securities shall have a priority over such
Common Securities. A supplemental indenture may provide that if an early
termination occurs as described in clause (iv) above, the Corresponding Junior
Subordinated Debentures may be subject to optional redemption in whole (but not
in part).
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under
each Trust Agreement (an "Event of Default") with respect to the Preferred
Securities issued thereunder (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 under the Indenture
with respect to the Corresponding Junior Subordinated Debentures (see
"Description of Junior Subordinated Debentures -- Debenture Events of
Default"); or
(ii) default by an Issuer Trust in the payment of any Distribution
with respect to Preferred Securities of that issue when it becomes due and
payable, and continuation of such default for a period of 30 days; or
(iii) default by an Issuer Trust in the payment of any Redemption
Price of any Preferred Security or Common Security of that issue 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 Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which 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 Issuer
Trustee or Trustees by the holders of at least 33% in aggregate liquidation
preference of the outstanding Preferred Securities of that issue, a written
notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" under such Trust
Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by CPL to appoint a
successor Property Trustee within 60 days thereof.
Within 15 Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Issuer Trust's Preferred
Securities, the Administrative Trustees and CPL, as Depositor, unless such Event
of Default shall have been cured or waived. CPL, as Depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under each Trust Agreement.
If, in the event of a Debenture Event of Default, the Debenture Trustee
fails or the holders of not less than 33% in aggregate principal amount of the
Corresponding Junior Subordinated Debentures fail to declare the principal due
and payable, the holders of at least 33% in aggregate liquidation preference of
the related series of Preferred Securities shall have such right. Except as set
forth
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above, the existence of an Event of Default does not entitle the holders of
Preferred Securities to accelerate the maturity thereof or declare amounts due
and payable.
If a Debenture Event of Default with respect to any Corresponding Junior
Subordinated Debentures has occurred and is continuing, the corresponding
Preferred Securities shall have a preference over the related Common Securities
upon termination of the applicable Issuer Trust as described above. See
"-- Liquidation Distribution Upon Termination."
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing, then the
holders of Preferred Securities would rely on the enforcement by the Property
Trustee or the Debenture Trustee, acting for the benefit of the Property
Trustee, of its rights as a holder of the Corresponding Junior Subordinated
Debentures against CPL. Notwithstanding the foregoing, if a Debenture Event of
Default has occurred and is continuing and such event is attributable to the
failure of CPL to pay interest or principal on the Corresponding Junior
Subordinated Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, on the redemption date), then a holder of
Preferred Securities may directly institute a proceeding against CPL for
enforcement of payment to such holder of the principal of or interest on the
Corresponding Junior Subordinated Debentures having a principal amount equal to
the aggregate liquidation preference of the Preferred Securities of such holder
(a "Direct Action") after the respective due dates specified in the
Corresponding Junior Subordinated Debentures. In connection with such Direct
Action, CPL will be subrogated to the rights of such holder of Preferred
Securities with respect to payments on the Preferred Securities to the extent of
any payment made by CPL to such holder of Preferred Securities in such Direct
Action.
The holders of the Preferred Securities would not be able to exercise
directly against CPL any rights other than those set forth in the preceding
paragraph available to the holders of the Corresponding Junior Subordinated
Debentures unless the Property Trustee or the Debenture Trustee, acting for the
benefit of the Property Trustee, fails to do so for 60 days. In such event, to
the fullest extent permitted by law, the holders of at least 33% in aggregate
liquidation preference of the outstanding Preferred Securities would have the
right to directly institute proceedings for enforcement of such rights.
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default with respect to any Corresponding
Junior Subordinated Debentures shall have occurred and be continuing, the
applicable Issuer Trustee may be removed at any time by the holder of the
related Common Securities. If such a Debenture Event of Default has occurred and
is continuing, the Property Trustee and the Delaware Trustee may be removed at
such time by the holders of a majority in Liquidation Amount of the outstanding
corresponding Preferred Securities. In no event will the holders of the
Preferred Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in CPL as
the holder of the Common Securities. No resignation or removal of an Issuer
Trustee and no appointment of a successor trustee shall be effective until the
acceptance of appointment by the successor trustee in accordance with the
provisions of the applicable Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY 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 applicable Trust
Property may at the time be located, CPL, as the holder of the Common
Securities, shall have power to appoint one or more persons either to act as a
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
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of appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the applicable Trust Agreement. In case a Debenture Event of
Default with respect to any Corresponding Junior Subordinated Debentures has
occurred and is continuing, the Property Trustee alone shall have power to make
such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any entity into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
entity succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under each Trust Agreement,
provided such entity shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUER TRUSTS
An Issuer Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. An Issuer Trust may, at the request of CPL, with the consent of
the Administrative Trustees and without the consent of the holders of the
Preferred Securities of such Issuer Trust, merge with or into, consolidate,
amalgamate, be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to a trust organized as such under the laws
of any State; provided that (i) such successor entity either (a) expressly
assumes all of the obligations of such Issuer Trust with respect to such
Preferred Securities or (b) substitutes for such Preferred Securities other
securities having substantially the same terms as such Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as
such Preferred Securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) CPL expressly appoints
a trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Corresponding Junior Subordinated
Debentures, (iii) the Successor Securities are listed or traded, or any
Successor Securities will be listed or traded upon notification of issuance, on
any national securities exchange or other organization on which such Preferred
Securities are then listed, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause such
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of such
Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of such Issuer Trust, (vii) prior to such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, CPL has received an
opinion from independent counsel to such Issuer Trust experienced in such
matters to the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of such Preferred Securities
(including any Successor Securities) in any material respect, and (b) following
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, neither such Issuer Trust nor such successor entity will be required to
register as an "investment company" under the Investment Company Act and (viii)
CPL or any permitted successor or assignee owns all of the common securities of
such successor entity and guarantees the obligations of such successor entity
under the Successor Securities at least to the extent provided by the applicable
Guarantee. Notwithstanding the foregoing, an Issuer Trust shall not, except with
the consent of holders of 100% in aggregate liquidation preference of the
Preferred Securities of such Issuer Trust, consolidate, amalgamate, merge with
or into, be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other entity or permit any other entity to
consolidate, amalgamate,
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merge with or into, or replace it if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause such Issuer Trust or the
successor entity to be classified as other than a "grantor trust" for United
States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "Description of Guarantees -- Amendments
and Assignment" and as otherwise required by law and the applicable Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
Each Trust Agreement may be amended from time to time by CPL and the
Administrative Trustees, without the consent of the holders of the related
Preferred Securities, (i) to reflect the acceptance of appointment by a
successor Issuer Trustee, (ii) to cure any ambiguity, correct or supplement any
provisions in such Trust Agreement that may be inconsistent with any other
provision, or to make any other provisions with respect to matters or questions
arising under such Trust Agreement, that shall not be inconsistent with the
other provisions of such Trust Agreement, or (iii) to modify, eliminate or add
to any provisions of such Trust Agreement to such extent as shall be necessary
to ensure that the related Issuer Trust will be classified for United States
federal income tax purposes as a "grantor trust" at all times that any Preferred
Securities and Common Securities of such Issuer Trust are outstanding or to
ensure that such Issuer Trust will not be required to register as an "investment
company" under the Investment Company Act, provided, however, that in the case
of clause (ii) above, such action shall not adversely affect in any material
respect the interests of any holder of Preferred Securities or Common Securities
of such Issuer Trust, and, in the case of clause (iii), any amendments of such
Trust Agreement shall become effective when notice thereof is given to the
holders of such Preferred Securities and Common Securities. Such Trust Agreement
may be amended by the Administrative Trustees and CPL with (i) the consent of
holders representing not less than a majority (based upon Liquidation Amounts)
of such outstanding Preferred Securities and Common Securities and (ii) receipt
by the Issuer Trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the Issuer Trustees in
accordance with such amendment will not affect such Issuer Trust's status as a
"grantor trust" for United States federal income tax purposes or such Issuer
Trust's exemption from status as an "investment company" under the Investment
Company Act, provided, further that without the consent of each holder of such
Preferred Securities and Common Securities, such Trust Agreement may not be
amended to (i) change the amount or timing of any Distribution on such Preferred
Securities and Common Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of such Preferred Securities and
Common Securities as of a specified date or (ii) restrict the right of holders
of such Preferred Securities and Common Securities to institute suit for the
enforcement of any such payment on or after such date as described under
"-- Events of Default; Notice" above.
So long as any Corresponding Junior Subordinated Debentures are held by the
Property Trustee, the Issuer Trustees shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee or executing any trust or power conferred on the Property Trustee with
respect to such Corresponding Junior Subordinated Debentures, (ii) waive any
past default that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Corresponding
Junior Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or such Corresponding
Junior Subordinated Debentures, where such consent shall be required, without,
in each case, obtaining the prior approval of the holders of a majority in
aggregate liquidation preference of all outstanding corresponding Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Corresponding Junior Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of each holder of the corresponding Preferred
Securities. The Issuer Trustees shall not revoke any action previously
authorized or approved by a
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vote of the holders of the Preferred Securities except by subsequent vote of the
holders of the Preferred Securities. The Property Trustee shall notify each
holder of record of the Preferred Securities of any notice of default with
respect to the Corresponding Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of the holders of the Preferred Securities,
prior to taking any of the foregoing actions, the Issuer Trustees shall obtain
an opinion of counsel experienced in such matters to the effect that the
applicable Issuer Trust will be classified as a "grantor trust" and will not be
classified as an association taxable as a corporation for United States federal
income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be given
to each holder of record of Preferred Securities in the manner set forth in the
applicable Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for an Issuer Trust to redeem and cancel its Preferred Securities in accordance
with the applicable Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned by CPL, the Issuer Trustees or any affiliate of CPL or
any Issuer Trustees shall, for purposes of such vote or consent, be treated as
if they were not outstanding.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to DTC, which
shall credit the relevant accounts at DTC on the applicable Distribution Dates
or, if any Issuer Trust's Preferred Securities are not held by DTC, such
payments shall be made by check mailed to the address of the holder entitled
thereto as such address shall appear on the Register. Unless otherwise specified
in the applicable Prospectus Supplement, the paying agent (the "Paying Agent")
shall initially be the Property Trustee and any co-paying agent chosen by the
Property Trustee and acceptable to the Administrative Trustees and CPL. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Property Trustee and CPL. In the event that the Property Trustee
shall no longer be the Paying Agent, the Administrative Trustees shall appoint a
successor (which shall be a bank or trust company acceptable to the Property
Trustee and CPL) to act as Paying Agent.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Preferred Securities.
The Preferred Securities will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global certificates will be issued for the Preferred Securities
of each Issuer Trust, representing in the aggregate the total number of such
Issuer Trust's Preferred Securities, and will be deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants
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and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain custodial relationships with Direct
Participants, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Preferred Securities, except in the event that use
of the book-entry system for the Preferred Securities of such Issuer Trust is
discontinued.
To facilitate subsequent transfers, all of the Preferred Securities
deposited by the 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 Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Preferred Securities. If less than all of an Issuer Trust's Preferred
Securities are being redeemed, DTC's current practice is to determine by lot the
amount of the interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those instances in which 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 (the "Omnibus Proxy") to the Property Trustee as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts such Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Distribution payments on the Preferred Securities will be made by the
Property Trustee to DTC. DTC's practice is to credit Direct 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 such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of DTC, the
Property Trustee, the Issuer Trust thereof or CPL, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
Distributions to DTC is the responsibility of the Property Trustee, disbursement
of such payments to Direct Participants is the responsibility of DTC, and
disbursements of such payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.
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DTC may discontinue providing its services as securities depositary with
respect to any of the Preferred Securities at any time by giving reasonable
notice to the Property Trustee and CPL. In the event that a successor securities
depositary is not obtained, definitive Preferred Security certificates
representing such Preferred Securities are required to be printed and delivered.
CPL, at its option, may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor depositary). After a Debenture Event of
Default, the holders of a majority in liquidation preference of Preferred
Securities may determine to discontinue the system of book-entry transfers
through DTC. In any such event, definitive certificates for such Issuer Trust's
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 the Issuer Trusts and CPL believe to be
accurate, but the Issuer Trusts and CPL assume no responsibility for the
accuracy thereof. None of the Issuer Trusts, any Issuer Trustee nor CPL has any
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee 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 each Issuer Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Issuer Trusts will not be required to register or cause to be
registered the transfer of their Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in each Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise or
use in the conduct of his or her own affairs. Subject to this provision, the
Property Trustee is under no obligation to exercise any of the powers vested in
it by the applicable Trust Agreement at the request of any holder of Preferred
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If no Event of Default has
occurred and is continuing and the Property Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in the
applicable Trust Agreement or is unsure of the application of any provision of
the applicable Trust Agreement, and the matter is not one on which holders of
Preferred Securities are entitled under such Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by CPL and if not so
directed, shall take such action as it deems advisable and in the best interests
of the holders of the Preferred Securities and the Common Securities and will
have no liability except for its own bad faith, negligence or willful
misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuer Trusts in such a way that no Issuer Trust
will be deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Corresponding
Junior Subordinated Debentures will be treated as indebtedness of CPL for United
States federal income tax purposes. In this connection, CPL and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of each Issuer Trust or each
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Trust Agreement, that CPL and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of the
related Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Issuer Trust may borrow money or issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF GUARANTEES
Each Guarantee will be executed and delivered by CPL concurrently with the
issuance by each Issuer Trust of its Preferred Securities for the benefit of the
holders from time to time of such Preferred Securities. The Bank of New York
will act as indenture trustee ("Guarantee Trustee") under each Guarantee for the
purposes of compliance with the Trust Indenture Act and each Guarantee will be
qualified as an indenture under the Trust Indenture Act. This summary of certain
provisions of the Guarantees does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all of the provisions of each
Guarantee, including the definitions therein of certain terms, and the Trust
Indenture Act. The form of each Guarantee has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. Reference in this
summary to the Preferred Securities and the Issuer Trust mean the Preferred
Securities of an Issuer Trust and such Issuer Trust, respectively, to which a
Guarantee relates. The Guarantee Trustee will hold each Guarantee for the
benefit of the holders of the related Issuer Trust's Preferred Securities.
GENERAL
CPL will irrevocably agree to pay in full on a subordinated basis, to the
extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Preferred Securities, as and when due, regardless of any defense,
right of set-off or counterclaim that such Issuer Trust may have or assert other
than the defense of payment. The following payments with respect to the
Preferred Securities, to the extent not paid by or on behalf of the related
Issuer Trust (the "Guarantee Payments"), will be subject to the Guarantees: (i)
any accumulated and unpaid Distributions required to be paid on such Preferred
Securities, to the extent that such Issuer Trust has funds on hand available
therefor, (ii) the Redemption Price with respect to any Preferred Securities
called for redemption to the extent that such Issuer Trust has funds on hand
available therefor, and (iii) upon a voluntary or involuntary termination,
winding up or liquidation of such Issuer Trust (unless the Corresponding Junior
Subordinated Debentures are distributed to holders of such Preferred
Securities), the lesser of (a) the Liquidation Amount plus accumulated and
unpaid Distributions on the Preferred Securities to the date of payment to the
extent that such Issuer Trust has funds on hand available therefor and (b) the
amount of assets of such Issuer Trust remaining available for distribution to
holders of Preferred Securities. CPL's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amounts by CPL to the holders
of the applicable Preferred Securities or by causing the Issuer Trust to pay
such amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Issuer Trust's obligations under the Preferred Securities, but will
apply only to the extent that such related Issuer Trust has funds sufficient to
make such payments, and is not a guarantee of collection.
If CPL does not make interest payments on the Corresponding Junior
Subordinated Debentures held by the Issuer Trust, it is expected the Issuer
Trust will not be able to pay Distributions on the Preferred Securities and will
not have funds available therefor. Each Guarantee will rank subordinate and
junior in right of payment to all Senior Indebtedness of CPL. See "-- Status of
the Guarantees." Except as otherwise provided in the applicable Prospectus
Supplement, the Guarantees do not limit the incurrence or issuance of other
secured or unsecured debt of CPL, whether under the Indenture or any existing or
other indenture that CPL may enter into in the future or otherwise.
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CPL has, through the applicable Guarantee, the applicable Trust Agreement,
the Junior Subordinated Debentures, the Indenture and the Expense Agreements (as
defined below), taken together, fully, irrevocably and unconditionally
guaranteed all of the Issuer Trust's obligations under the Preferred Securities.
No single document standing alone or operating in conjunction with fewer than
all of the other documents constitutes such a guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer Trust's obligations under
the Preferred Securities. See "Relationship Among the Preferred Securities, the
Corresponding Junior Subordinated Debentures and the Guarantees."
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of CPL and will rank
subordinate and junior in right of payment to all Senior Indebtedness of CPL.
Each Guarantee will rank pari passu with all other Guarantees issued by
CPL. Each Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
CPL to enforce its rights under the Guarantee without first instituting a legal
proceeding against any other person or entity). Each Guarantee will be held for
the benefit of the holders of the related Preferred Securities. Each Guarantee
will not be discharged except by payment of the related Guarantee Payments in
full to the extent not paid by the related Issuer Trust or upon distribution to
the holders of the Preferred Securities of the Corresponding Junior Subordinated
Debentures. None of the Guarantees places a limitation on the amount of
additional Senior Indebtedness that may be incurred by CPL. CPL may, from time
to time, incur additional indebtedness constituting Senior Indebtedness.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related Preferred Securities (in which case no vote
will be required), no Guarantee may be amended without the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amount of such
outstanding Preferred Securities. The manner of obtaining any such approval will
be as set forth under "Description of the Preferred Securities -- Voting Rights;
Amendment of Trust Agreement." All guarantees and agreements contained in each
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of CPL and shall inure to the benefit of the holders of the
related Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of CPL
to perform any of its payment or other obligations thereunder. The holders of
not less than a majority in aggregate Liquidation Amount of the related
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such Guarantee.
Any holder of the related Preferred Securities may institute a legal
proceeding directly against CPL to enforce its rights under such related
Guarantee without first instituting a legal proceeding against the Issuer Trust,
the Guarantee Trustee or any other person or entity.
CPL, as guarantor, is required to file annually with the Guarantee Trustee
a certificate as to whether or not CPL is in compliance with all the conditions
and covenants applicable to it under the Guarantees.
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INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by CPL in performance of any Guarantee, undertakes to perform only
such duties as are specifically set forth in each Guarantee and, after default
with respect to any Guarantee, must exercise the same degree of care and skill
as a prudent person would exercise or use in the conduct of his or her own
affairs. Notwithstanding this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by any Guarantee at the
request of any holder of any Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the related Preferred Securities, upon
full payment of the amounts payable upon liquidation of the related Issuer Trust
or upon distribution of Corresponding Junior Subordinated Debentures to the
holders of the related Preferred Securities. Each Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the related Preferred Securities must restore payment of any sums paid under
such Preferred Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
THE EXPENSE AGREEMENTS
Pursuant to the related Agreement as to Expenses and Liabilities entered
into by CPL under each Trust Agreement (the "Expense Agreement"), CPL will, as
holder of the Common Securities, irrevocably and unconditionally guarantee to
each person or entity to whom the Issuer Trust becomes indebted or liable, the
full payment of any costs, expenses or liabilities of the Issuer Trust, other
than obligations of the Issuer Trust to pay to the holders of any Preferred
Securities or other similar interests in the Issuer Trust the amounts due such
holders pursuant to the terms of the Preferred Securities or such other similar
interests, as the case may be.
DESCRIPTION OF CORRESPONDING
JUNIOR SUBORDINATED DEBENTURES
The Corresponding Junior Subordinated Debentures are to be issued in one or
more series under the Indenture with terms corresponding to the terms of the
related Preferred Securities. For a summary of certain terms and provisions of
Junior Subordinated Debentures that, except where noted, pertains in all
respects to the Corresponding Junior Subordinated Debentures, see "Description
of Junior Subordinated Debentures." This summary of certain terms and provisions
of, or relating to, Corresponding Junior Subordinated Debentures and the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Indenture, the form of which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, and
to the Trust Indenture Act. Whenever particular defined terms of the Indenture
(as supplemented or amended from time to time) are referred to herein or in a
Prospectus Supplement, such defined terms are incorporated herein or therein by
reference.
GENERAL
Concurrently with the issuance of each Issuer Trust's Preferred Securities,
such Issuer Trust will invest the proceeds thereof and the consideration paid by
CPL for the Common Securities in a
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series of Corresponding Junior Subordinated Debentures issued by CPL to such
Issuer Trust. Each series of Corresponding Junior Subordinated Debentures will
be in the principal amount equal to the aggregate stated Liquidation Amount of
the related Preferred Securities plus CPL's concurrent investment in the Common
Securities and will rank pari passu with all other series of Junior Subordinated
Debentures. The Corresponding Junior Subordinated Debentures will be unsecured
and subordinate and junior in right of payment to the extent and in the manner
set forth in the Indenture to all Senior Indebtedness of CPL. See "Description
of Junior Subordinated Debentures -- Subordination" and the Prospectus
Supplement relating to any offering of related Preferred Securities.
OPTIONAL REDEMPTION
The applicable Prospectus Supplement will specify the period or periods
within which, the price or prices at which and the terms and conditions upon
which the Corresponding Junior Subordinated Debentures of any series may be
redeemed, in whole or in part, at the option of CPL. Except as otherwise set
forth in the applicable Prospectus Supplement, the redemption price for any
Corresponding Junior Subordinated Debentures so redeemed shall be equal to any
accrued and unpaid interest thereon to the date fixed for redemption, plus 100%
of the principal amount thereof. See "Description of Junior Subordinated
Debentures -- Redemption."
If a Special Event in respect of an Issuer Trust shall occur and be
continuing, CPL may, at its option, redeem the Corresponding Junior Subordinated
Debentures at any time within 90 days of the occurrence of such Special Event,
in whole but not in part, subject to the provisions of the Indenture. The
redemption price for any Corresponding Junior Subordinated Debentures shall be
equal to 100% of the principal amount of such Corresponding Junior Subordinated
Debentures then outstanding plus accrued and unpaid interest to the date fixed
for redemption.
For so long as the applicable Issuer Trust is the holder of all the
outstanding series of Corresponding Junior Subordinated Debentures, the proceeds
of any such redemption will be used by the Issuer Trust to redeem the related
Preferred Securities in accordance with their terms. CPL may not redeem a series
of Corresponding Junior Subordinated Debentures in part unless all accrued and
unpaid interest has been paid in full on all outstanding Corresponding Junior
Subordinated Debentures of such series for all interest periods terminating on
or prior to the Redemption Date.
CERTAIN COVENANTS OF CPL
CPL will covenant in the applicable Supplemental Indenture as to each
series of Corresponding Junior Subordinated Debentures, that if and so long as
(i) the Issuer Trust of the corresponding series of Preferred Securities and
Common Securities is the holder of all such Corresponding Junior Subordinated
Debentures, (ii) a Tax Event in respect of such Issuer Trust has occurred and is
continuing and (iii) CPL has elected, and has not revoked such election, to pay
Additional Sums in respect of such Preferred Securities and Common Securities,
CPL will pay to such Issuer Trust such Additional Sums. CPL will also covenant,
as to each series of Corresponding Junior Subordinated Debentures, that it will
not, and will not permit any subsidiary of CPL to, (i) declare, set aside or pay
any dividend or distribution on, or repurchase, redeem or otherwise acquire, or
make any sinking fund payment for the purchase or redemption of, any shares of
its capital stock, including the Common Stock of CPL, or (ii) make any payment
of principal, interest or premium, if any, on or repay or repurchase or redeem
any debt securities (including other Corresponding Junior Subordinated
Debentures) that rank pari passu with or junior in interest to the Corresponding
Junior Subordinated Debentures or make any guarantee payments with respect to
the foregoing (other than (a) dividends or distributions in shares of its
capital stock or in rights to acquire shares of its capital stock, (b)
conversions into or exchanges for shares of its capital stock, (c) redemptions,
purchases or other acquisitions of shares of its capital stock made for the
purpose of an employee incentive plan or benefit plan of CPL or any of its
subsidiaries and mandatory redemptions or sinking
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fund payments with respect to any series of Preferred Stock of CPL that are
subject to mandatory redemption or sinking fund requirements, provided that the
aggregate stated value of all such series outstanding at the time of any such
payment does not exceed five percent of the aggregate of (1) the total principal
amount of all bonds or other securities representing secured indebtedness issued
or assumed by CPL and then outstanding and (2) the capital and surplus of CPL to
be stated on the books of account of CPL after giving effect to such payment,
provided, however, that any moneys deposited in any sinking fund and not in
violation of this provision may thereafter be applied to the purchase or
redemption of such Preferred Stock in accordance with the terms of such sinking
fund without regard to the restrictions contained in this provision, and (d)
payments under any guarantee by CPL with respect to any securities of a
subsidiary of CPL, provided that the proceeds from the issuance of such
securities were used to purchase Junior Subordinated Debentures of any series
under the Indenture) if at such time (i) there shall have occurred any event of
which CPL has actual knowledge that (a) with the giving of notice or the lapse
of time, or both, would constitute a "Debenture Event of Default" under the
Indenture with respect to Corresponding Junior Subordinated Debentures of such
series and (b) in respect of which CPL shall not have taken reasonable steps to
cure, (ii) CPL shall be in default with respect to its payment of any
obligations under the related Guarantee or (iii) CPL shall have given notice of
its selection of an Extension Period as provided in the Indenture with respect
to Corresponding Junior Subordinated Debentures of such series and shall not
have rescinded such notice, or such Extension Period, or any extension thereof,
shall be continuing.
CPL will also covenant, as to each series of Corresponding Junior
Subordinated Debentures, (i) to maintain directly or indirectly 100% ownership
of the Common Securities of the Issuer Trust to which Corresponding Junior
Subordinated Debentures have been issued, provided that certain successors which
are permitted pursuant to the Indenture may succeed to CPL's ownership of the
Common Securities, (ii) not to voluntarily terminate, wind-up or liquidate any
Issuer Trust, except (a) in connection with a distribution of Corresponding
Junior Subordinated Debentures to the holders of the Preferred Securities and
Common Securities in liquidation of such Issuer Trust or (b) in connection with
certain mergers, consolidations or amalgamations permitted by the related Trust
Agreement and (iii) to use its reasonable efforts, consistent with the terms and
provisions of the related Trust Agreement, to cause such Issuer Trust to remain
classified as a "grantor trust" and not to be classified as an association
taxable as a corporation for United States federal income tax purposes. CPL will
also make certain additional agreements relating to the Indenture as provided in
the last sentence of the first paragraph under "Description of Junior
Subordinated Debentures -- Modification of Indenture."
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE CORRESPONDING JUNIOR
SUBORDINATED DEBENTURES AND THE GUARANTEES
As long as payments of interest and other payments are made when due on
each series of Corresponding Junior Subordinated Debentures, such payments will
be sufficient to cover Distributions and other payments due on the related
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debentures will be equal to the
sum of the aggregate Liquidation Amount of the related Preferred Securities and
related Common Securities; (ii) the interest rate and interest and other payment
dates on each series of Corresponding Junior Subordinated Debentures will match
the Distribution rate and Distribution and other payment dates for the related
Preferred Securities; (iii) CPL shall pay for all and any costs, expenses and
liabilities of such Issuer Trust except the Issuer Trust's obligations to
holders of its Preferred Securities under such Preferred Securities; and (iv)
each Trust Agreement further provides that the Issuer Trust will not engage in
any activity that is not consistent with the limited purposes of such Issuer
Trust.
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Issuer Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed
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by CPL as and to the extent set forth under "Description of Guarantees." Taken
together, CPL's obligations under each series of Corresponding Junior
Subordinated Debentures, the Indenture, the related Trust Agreement, the related
Expense Agreement, and the related Guarantee provide a full, irrevocable and
unconditional guarantee of payments of distributions and other amounts due on
the related series of Preferred Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of the
Issuer Trust's obligations under the Preferred Securities. If and to the extent
that CPL does not make payments on any series of Corresponding Junior
Subordinated Debentures, such Issuer Trust will not pay Distributions or other
amounts due on related Preferred Securities. The Guarantees do not cover payment
of Distributions when the related Issuer Trust does not have sufficient funds to
pay such Distributions. In such event, the remedies of a holder of a series of
Preferred Securities are as described above under "Description of Junior
Subordinated Debentures -- Debenture Events of Default," "Description of
Preferred Securities -- Events of Default; Notice" and "-- Enforcement of
Certain Rights by Holders of Preferred Securities." The obligations of CPL under
each Guarantee are subordinate and junior in right of payment to all Senior
Indebtedness of CPL.
Notwithstanding anything to the contrary in the Indenture, CPL has the
right to set off any payment it is otherwise required to make thereunder with
and to the extent CPL has theretofore made, or is concurrently on the date of
such payment making, a payment under the related Guarantee.
A holder of any related Preferred Security may institute a legal proceeding
directly against CPL to enforce its rights under the related Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the related
Issuer Trust or any other person or entity.
Each Issuer Trust's Preferred Securities evidence a beneficial interest in
such Issuer Trust, and each Issuer Trust exists for the sole purpose of issuing
its Preferred Securities and Common Securities and investing the proceeds
thereof in Corresponding Junior Subordinated Debentures. A principal difference
between the rights of a holder of a Preferred Security and the rights of a
holder of a Corresponding Junior Subordinated Debenture is that a holder of a
Corresponding Junior Subordinated Debenture is entitled to receive from CPL the
principal amount of and interest accrued on Corresponding Junior Subordinated
Debentures held, while a holder of Preferred Securities is entitled to receive
Distributions from such Issuer Trust (or from CPL under the applicable
Guarantee) if and to the extent such Issuer Trust has funds available for the
payment of such Distributions.
Upon any voluntary or involuntary termination, winding-up or liquidation of
any Issuer Trust involving the liquidation of the Corresponding Junior
Subordinated Debentures, the holders of the related Preferred Securities will be
entitled to receive, out of assets held by such Issuer Trust and after
satisfaction of liabilities to creditors of such Issuer Trust as provided by
applicable law, the Liquidation Distribution in cash. See "Description of
Preferred Securities -- Liquidation Distribution Upon Termination." Upon any
voluntary or involuntary liquidation or bankruptcy of CPL, the Property Trustee,
as holder of the Corresponding Junior Subordinated Debentures, would be a
subordinated creditor of CPL, subordinated in right of payment to all Senior
Indebtedness, but entitled to receive payment in full of principal and interest,
before any shareholders of CPL receive payments or distributions. Since CPL is
the guarantor under each Guarantee and has agreed to pay for all costs, expenses
and liabilities of each Issuer Trust (other than the Issuer Trust's obligations
to the holders of its Preferred Securities), the positions of a holder of such
Preferred Securities and a holder of such Corresponding Junior Subordinated
Debentures relative to other creditors and to shareholders of CPL in the event
of liquidation or bankruptcy of CPL would be substantially the same.
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A default or event of default under any Senior Indebtedness of CPL will not
constitute a default or Event of Default under the Indenture. However, in the
event of payment defaults under, or acceleration of, Senior Indebtedness of CPL,
the subordination provisions of the Indenture provide that no payments may be
made in respect of the Corresponding Junior Subordinated Debentures until such
Senior Indebtedness has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on any series of
Corresponding Junior Subordinated Debentures would constitute a Debenture Event
of Default under the Indenture with respect to such series.
PLAN OF DISTRIBUTION
CPL may sell any series of the Junior Subordinated Debentures, and each
Issuer Trust may sell any series of Preferred Securities, through underwriters,
dealers or agents, or directly to one or more purchasers. The Prospectus
Supplement with respect to the securities offered thereby will set forth the
terms of the offering of such Offered Securities, including the name or names of
any underwriters, dealers or agents, the purchase price of such Offered
Securities and the proceeds to CPL or the Issuer Trust, as the case may be, from
such sale, any underwriting discounts and other items constituting underwriters'
or agents' compensation, any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers.
If underwriters are involved in the sale of any Offered Securities, such
Offered Securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The underwriter or underwriters with respect to
a particular underwritten offering of Offered Securities will be named in the
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover page of such Prospectus Supplement. Unless otherwise set forth in such
Prospectus Supplement, the obligations of the underwriters to purchase the
Offered Securities will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all such Offered Securities if any
are purchased.
If a dealer is used in the sale of any Offered Securities, CPL will sell
such Offered Securities to the dealer, as principal. The dealer may then resell
such Offered Securities to the public at varying prices to be determined by such
dealer at the time of resale. The name of any dealer involved in a particular
offering of Offered Securities and any discounts or concessions allowed or
reallowed or paid to the dealer will be set forth in the Prospectus Supplement
relating to such offering.
The Offered Securities may be sold directly by CPL or through agents
designated by CPL from time to time. Any such agent, who may be deemed to be an
underwriter as that term is defined in the Securities Act, involved in the offer
or sale of any of the Offered Securities will be named, and any commissions
payable by CPL to such agent will be set forth, in the Prospectus Supplement
relating to such offer or sale. Unless otherwise indicated in such Prospectus
Supplement, any such agent will be acting on a reasonable best efforts basis for
the period of its appointment.
Certain of the underwriters, dealers or agents and their associates may be
customers of, engage in the transactions with or perform services for CPL and/or
the applicable Issuer Trust and/or any of their respective affiliates in the
ordinary course of business.
CPL will indicate in a Prospectus Supplement the extent to which it
anticipates that a secondary market for the Offered Securities will be
available.
Underwriters, dealers and agents participating in the distribution of the
Offered Securities may be deemed to be "underwriters" within the meaning of, and
any discounts and commissions received by them and any profit realized by them
on resale of such Offered Securities may be deemed to be underwriting discounts
and commissions under, the Securities Act. Subject to certain conditions, CPL
and the applicable Issuer Trustee may agree to indemnify the several
underwriters,
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dealers or agents and their controlling persons against certain civil
liabilities, including certain liabilities under the Securities Act, or to
contribute to payments any such person may be required to make in respect
thereof.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus Supplement, certain
legal matters in connection with the Offered Securities, including the validity
of the Junior Subordinated Debentures, the Indenture and the Guarantees, will be
passed upon for CPL and each Issuer Trust by Milbank, Tweed, Hadley & McCloy,
New York, New York, and for the underwriters by Sidley & Austin, Chicago,
Illinois. Sidley & Austin has from time to time represented CSW and certain of
its affiliates, including CPL, in connection with certain matters. All matters
of Texas law will be passed upon by Vinson & Elkins L.L.P., Dallas, Texas.
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the enforceability of each Trust Agreement and the creation of each
Issuer Trust will be passed upon by Richards, Layton & Finger, P.A., as special
Delaware counsel to CPL and the Issuer Trusts. Certain tax matters in connection
with the Preferred Securities will be passed upon for CPL and each Issuer Trust
by Christy & Viener, New York, New York.
EXPERTS
The financial statements and schedules incorporated in this Prospectus by
reference from CPL's Annual Report on Form 10-K have been audited by Arthur
Andersen LLP, independent public accountants, as stated in their reports, which
are incorporated herein by reference and have been so incorporated herein in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
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======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS OR ANY OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CPL SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors..................................... S-4
Incorporation of Certain Documents by Reference.. S-8
CPL Capital I.................................... S-8
Central Power and Light Company.................. S-9
Recent Developments.............................. S-9
Use of Proceeds.................................. S-11
Consolidated Ratios of Earnings to Fixed Charges
and Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements.......... S-11
Selected Financial Information................... S-12
Accounting Treatment............................. S-13
Certain Terms of the Series A Preferred
Securities..................................... S-13
Certain Terms of the Series A Debentures......... S-15
ERISA Considerations............................. S-19
Certain Federal Income Tax Considerations........ S-21
Underwriting..................................... S-25
Legal Opinions................................... S-27
PROSPECTUS
Available Information............................ 1
Incorporation of Certain Documents by Reference.. 1
Central Power and Light Company.................. 2
The Issuer Trusts................................ 2
Use of Proceeds.................................. 3
Consolidated Ratios of Earnings to Fixed Charges
and Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements.......... 4
Description of Junior Subordinated Debentures.... 4
Description of Preferred Securities.............. 15
Description of Guarantees........................ 29
Description of Corresponding Junior Subordinated
Debentures..................................... 31
Relationship Among the Preferred Securities, the
Corresponding Junior Subordinated Debentures
and the Guarantees............................. 33
Plan of Distribution............................. 35
Legal Opinions................................... 36
Experts.......................................... 36
</TABLE>
======================================================
======================================================
6,000,000 PREFERRED SECURITIES
CPL CAPITAL I
8.00% CUMULATIVE QUARTERLY
INCOME PREFERRED SECURITIES,
SERIES A (QUIPS(SM))
GUARANTEED, AS DESCRIBED HEREIN, BY
CENTRAL POWER AND
LIGHT COMPANY
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SMITH BARNEY INC.
REPRESENTATIVES OF THE UNDERWRITERS
======================================================
