<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1997
FILE NO. 333-20661
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PENNSYLVANIA POWER & LIGHT COMPANY PENNSYLVANIA 23-0959590
PP&L CAPITAL TRUST DELAWARE 23-7879922
(EXACT NAME OF REGISTRANT AS (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
SPECIFIED IN ITS CHARTER) OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
TWO NORTH NINTH STREET
ALLENTOWN, PENNSYLVANIA 18101
610/774-5151
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN R. BIGGAR
VICE PRESIDENT-FINANCE
PENNSYLVANIA POWER & LIGHT COMPANY
TWO NORTH NINTH STREET
ALLENTOWN, PENNSYLVANIA 18101
610/774-5151
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
VINCENT PAGANO, JR. ROBERT B. HIDEN, JR.
SIMPSON THACHER & BARTLETT SULLIVAN & CROMWELL
425 LEXINGTON AVENUE 125 BROAD STREET
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10004
(212) 455-2000 (212) 558-1000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
___________________________
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED
PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT PLANS, CHECK THE FOLLOWING BOX.[ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933 OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. [ ]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(b) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(c)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
___________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 3, 1997
PROSPECTUS
4,000,000 PREFERRED SECURITIES
PP&L CAPITAL TRUST
% TRUST ORIGINATED PREFERRED SECURITIES SM ("TOPRS SM")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
PENNSYLVANIA POWER & LIGHT COMPANY
----------
The % Trust Originated Preferred Securities SM (the "Preferred Securities")
offered hereby evidence undivided beneficial ownership interests in the assets
of PP&L Capital Trust, a statutory business trust created under the laws of the
State of Delaware (the "Trust"). Pennsylvania Power & Light Company, a
Pennsylvania corporation (the "Company" or "PP&L"), will own all the common
securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities") representing the remaining undivided
beneficial ownership interests in the assets of the Trust. The Trust exists for
the sole purpose of issuing the Trust Securities and investing the proceeds
thereof in an equivalent amount of the Company's % junior subordinated
deferrable interest debentures due , 2027 (the "Subordinated Debentures").
SEE "RISK FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING
THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS
ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
The Preferred Securities have been approved for listing on the New York Stock
Exchange, Inc. (the "NYSE"), subject to official notice of issuance. Trading of
the Preferred Securities on the NYSE is expected to commence within a 30-day
period after the initial delivery of the Preferred Securities. See
"Underwriting."
----------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4)
- --------------------------------------------------------------------------------
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Per Preferred Security............. $ (3) $
- --------------------------------------------------------------------------------
Total.............................. $ (3) $
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued distributions, if any, from , 1997.
(2) The Company and the Trust have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Subordinated Debentures, the Company has
agreed to pay to the Underwriters, as compensation for their arranging the
investment therein of such proceeds, $ per Preferred Security (or $ in
the aggregate). See "Underwriting."
(4) Expenses of the offering to be paid by the Company are estimated to be
approximately $ .
----------
The 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 delivery of the Preferred Securities will be made only in book-
entry form through the facilities of The Depository Trust Company on or about
, 1997.
----------
MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
----------
The date of this Prospectus is , 1997.
- -----
SM "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF
PREFERRED SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
___________________________
(CONTINUED FROM COVER PAGE)
The Subordinated Debentures when issued will be unsecured obligations of
the Company and will be subordinate and junior in right of payment to
certain other indebtedness of the Company, as described herein. Upon an
event of default under the Trust Agreement (as defined herein), the holders
of the Preferred Securities will have a preference over the holders of the
Common Securities with respect to payments in respect of distributions and
payments upon redemption, liquidation and otherwise.
Holders of the Preferred Securities will be entitled to receive
cumulative cash distributions accumulating from the date of original
issuance and payable quarterly in arrears on the first day of January,
April, July and October of each year, commencing , 1997, at the
annual rate of % (the "Securities Rate") of the stated Liquidation Amount
(as defined below) of $25 per Preferred Security ("Distributions"). Subject
to certain exceptions, as described herein, the Company has the right to
defer payment of interest on the Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarters with respect
to each deferral period (each, an "Extension Period"), during which
Extension Periods the Company shall have the right to make full or partial
payments of interest on any Interest Payment Date (as defined herein),
provided that no Extension Period may extend beyond the Stated Maturity (as
defined herein) of the Subordinated Debentures. No interest shall be due and
payable during an Extension Period, except at the end thereof. Upon the
termination of any such Extension Period and the payment of all amounts then
due on any Interest Payment Date, the Company may elect to begin a new
Extension Period subject to the requirements set forth herein. If interest
payments on the Subordinated Debentures are so deferred, cash distributions
on the Preferred Securities will also be deferred and the Company may not,
and may not permit any subsidiary of the Company to, subject to certain
exceptions set forth herein, among other things, declare or pay any cash
distributions with respect to the Company's capital stock or debt securities
that rank pari passu with or junior to the Subordinated Debentures. During
an Extension Period interest on the Subordinated Debentures will continue to
accrue (and the amount of Distributions to which holders of the Preferred
Securities are entitled will accumulate at the Securities Rate, compounded
quarterly), and holders of the Preferred Securities will be required to
accrue interest income for United States federal income tax purposes prior
to receipt of the cash related to such interest income. See "Description of
Subordinated Debentures--Option to Extend Interest Payment Period" and
"Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount."
The Company has, through the Guarantee, the Trust Agreement, the
Subordinated Debentures and the Indenture (each, as defined herein), taken
together, fully, irrevocably and unconditionally guaranteed all of the
Trust's obligations under the Preferred Securities. See "Relationship Among
the Preferred Securities, the Subordinated Debentures and the Guarantee."
The Company guarantees the payment of Distributions and payments on
liquidation of the Trust or redemption of the Preferred Securities, but only
in each case to the extent of funds held by the Trust, as described herein
(the "Guarantee"). See "Description of Guarantee" herein. If the Company
does not make interest payments on the Subordinated Debentures held by the
Trust, the Trust will have insufficient funds to pay Distributions on the
Preferred Securities. The Guarantee does not cover payment of Distributions
when the Trust does not have sufficient funds to pay such Distributions. In
the event a Debenture Event of Default (as defined below) has occurred and
is continuing and such default is attributable to the failure of the Company
to pay interest or principal on the Subordinated Debentures, a holder of
Preferred Securities may institute a legal proceeding directly against the
Company to enforce payment of such Distributions to such holder. The
obligations of the Company under the Guarantee and the Subordinated
Debentures are subordinate and junior in right of payment to all Senior Debt
(as defined in "Description of Subordinated Debentures--Subordination"
herein) of the Company.
The Preferred Securities are subject to mandatory redemption, in whole or
in part, upon repayment of the Subordinated Debentures at maturity or their
earlier redemption in an amount equal to the amount of related Subordinated
Debentures maturing or being redeemed at a redemption price equal to the
aggregate liquidation preference of such Preferred Securities plus
accumulated and unpaid Distributions thereon to the date of redemption. The
Subordinated Debentures are redeemable prior to maturity at the option of
the Company (i) on or after , 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 Subordinated 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), upon the occurrence and continuation of a
Special Event (as defined herein), at any time within 90 days following the
occurrence of such Special Event, at a redemption price equal to the accrued
and unpaid interest on the Subordinated Debentures so redeemed to the date
2
<PAGE>
fixed for redemption, plus 100% of the principal amount thereof, in each
case subject to the further conditions described under "Description of
Subordinated Debentures--Redemption."
At any time, the Company will have the right to liquidate the Trust and
cause the Subordinated Debentures to be distributed to the holders of the
Preferred Securities and the Common Securities in liquidation of the Trust.
See "Description of Preferred Securities--Redemption--Special Event
Redemption or Distribution of Subordinated Debentures."
At any time, the Company shall have the right to shorten or extend the
maturity of the Subordinated Debentures, provided that it can not shorten
the maturity to a date earlier than , 2002 and can extend the
maturity only if certain conditions are met. See "Description of
Subordinated Debentures--General."
The Subordinated Debentures are subordinate and junior in right of
payment to all Senior Debt (as defined herein) of the Company. As of
December 31, 1996, the Company had approximately $3.0 billion aggregate
principal amount of Senior Debt outstanding. The terms of the Subordinated
Debentures place no limitation on the amount of Senior Debt that may be
incurred by the Company. See "Description of Subordinated Debentures--
Subordination."
In the event of the liquidation of the Trust, after satisfaction of the
creditors of the Trust, if any, as provided by applicable law, the holders
of the Preferred Securities will be entitled to receive the stated
Liquidation Amount of $25 per Preferred Security plus accumulated and unpaid
Distributions thereon to the date of payment, which may be in the form of a
distribution of such amount in Subordinated Debentures, subject to certain
exceptions. See "Description of Preferred Securities--Liquidation
Distribution Upon Termination."
The Preferred Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its
nominee. Beneficial interests in the Preferred Securities will be shown on,
and transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described herein, Preferred Securities in
certificated form will not be issued in exchange for the global
certificates. See "Description of the Preferred Securities--Book-Entry
Issuance."
___________________________
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Securities and Exchange
Commission (the "Commission") are incorporated by reference in this
Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1996.
2. The Company's Current Reports on Form 8-K dated March 3, 1997 and
April 2, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), after the date of this Prospectus and prior to the termination of the
offering made hereunder shall be deemed to be incorporated by reference into
this Prospectus and to be a part of this Prospectus from the respective
dates of the filing of such documents. The Company will provide without
charge to each person to whom this Prospectus is delivered, on the written
or oral request of such person, a copy of any or all of the documents
incorporated by reference herein (other than exhibits not specifically
incorporated by reference into the text of such documents). Requests should
be directed to Pennsylvania Power & Light Company, Two North Ninth Street,
Allentown, PA 18101, Attention: Investor Services Department (800/345-3085).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document
which also is or is deemed to be incorporated herein by reference modifies
or supersedes such statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports and other information with
the Commission. Reports, proxy statements and other information filed by the
Company with the Commission pursuant to the informational requirements of
the Exchange Act may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Chicago Regional Office, Suite 1400, Citicorp
Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661; and
New York Regional Office, 7 World Trade Center, 13th Floor, Suite 1300, New
York, New York 10048. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Commission also
maintains a Web site (http://www.sec.gov) that contains reports, proxy
statements and other information regarding the Company. In addition,
reports, proxy statements and other information concerning the Company may
be inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005 and the Philadelphia Stock Exchange, 1900 Market Street, Philadelphia,
Pennsylvania 19103.
The Company and the Trust have filed with the Commission a Registration
Statement on Form S-3 (together with all amendments and exhibits thereto,
the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the securities offered hereby. This
Prospectus omits, in accordance with the rules and regulations of the
Commission, certain of the information contained in the Registration
Statement. Reference is hereby made to the Registration Statement and the
exhibits and the financial statements, notes and schedules filed as a part
thereof or incorporated by reference therein for further information with
respect to the Company, the Trust and the securities offered hereby.
Statements contained herein concerning the provisions of any document are
not necessarily complete and, in each instance, where a copy of such
document has been filed as an exhibit to the Registration Statement or
otherwise has been filed with the Commission, reference is made to the copy
so filed. Each such statement is qualified in its entirety by such
reference.
No separate financial statements of the Trust have been included herein.
The Company and the Trust do not consider that such financial statements
would be material to holders of the Preferred Securities because the Trust
is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage
in any activity other than holding as trust assets the Subordinated
Debentures of the Company and issuing the Preferred Securities and Common
Securities. See "PP&L Capital Trust", "Description of Preferred Securities",
"Description of Guarantee" and "Description of Subordinated Debentures."
4
<PAGE>
SUMMARY OF OFFERING
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. See "Risk
Factors" for a discussion of certain information prospective investors
should carefully review in connection with an investment in the securities
offered hereby.
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The Company........................... The Company is an operating electric
utility, incorporated under the laws
of the Commonwealth of Pennsylvania
in 1920. PP&L serves approximately
1.2 million customers in a 10,000
square mile territory in 29 counties
of central eastern Pennsylvania with
a population of approximately 2.6
million persons. This service area
has 129 communities with populations
over 5,000, the largest cities of
which are Allentown, Bethlehem,
Harrisburg, Hazleton, Lancaster,
Scranton, Wilkes-Barre and
Williamsport.
The Trust............................. PP&L Capital Trust is a statutory
business trust formed under Delaware
law solely for the purpose of issuing
the Preferred Securities and the
Common Securities and investing the
proceeds thereof in the Subordinated
Debentures (and engaging in
activities necessary or incidental
thereto).
The Trustees.......................... The Chase Manhattan Bank will act as
property trustee (the "Property
Trustee") of the Trust. Two employees
of the Company also will act as
trustees (the "Administrative
Trustees") of the Trust. Chase
Manhattan Bank Delaware will be an
additional trustee (the "Delaware
Trustee") of the Trust. The Chase
Manhattan Bank also will act as
trustee (the "Indenture Trustee")
under the indenture pursuant to which
the Subordinated Debentures will be
issued and will act as trustee under
the Guarantee (the "Guarantee
Trustee"). The Property Trustee,
Delaware Trustee and Administrative
Trustees are sometimes referred to as
the "Trust Trustees."
Preferred Securities Offered.......... The Trust will offer 4,000,000
Preferred Securities evidencing
undivided beneficial ownership
interests in the assets of the Trust.
Holders of the Preferred Securities
are entitled to receive
Distributions, accumulating from the
date of original issuance and payable
quarterly in arrears on January 1,
April 1, July 1 and October 1 of each
year, commencing on , 1997
(each, a "Distribution Date").
Holders of the Preferred Securities
will have a preference under certain
circumstances with respect to
Distributions and amounts payable on
liquidation or redemption over the
Common Securities. See "Description
of Preferred
Securities--Subordination of Common
Securities." The Securities Rate and
the Distribution Dates for the
Preferred Securities will correspond
to the interest rate and payment
dates on the Subordinated Debentures,
which will constitute all the assets
of the Trust. As a result, if
principal or interest is not paid on
the Subordinated Debentures, no
amounts will be paid on the Preferred
Securities. See "Description of
Preferred Securities" herein.
Record Date........................... The record date for Distributions on
the Preferred Securities (other than
on a Redemption Date) will, for so
long as the Preferred Securities
remain in book-entry form, be the
close of business one Business Day
prior to the relevant Distribution
Date.
Subordinated Debentures............... The Trust will invest the proceeds
from the issuance of the Trust
Securities in an equivalent amount of
Subordinated Debentures. The
Subordinated Debentures will mature
on , 2027. At any time, the
Company shall have the right to
shorten or extend the maturity of
the
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5
<PAGE>
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Subordinated Debentures, provided
that it can not shorten the maturity
to a date earlier than ,2002
and can extend the maturity only if
certain conditions are met. See
"Description of Subordinated
Debentures--General." The
Subordinated Debentures will be
subordinate and junior in right of
payment to all Senior Debt of the
Company. See "Description of
Subordinated
Debentures--Subordination."
Guarantee............................. The Company has, through the
Guarantee, the Trust Agreement, the
Subordinated Debentures and the
Indenture, taken together, fully,
irrevocably and unconditionally
guaranteed all of the Trust's
obligations under the Preferred
Securities. See "Relationship Among
the Preferred Securities, the
Subordinated Debentures and the
Guarantee." The Company guarantees
the payment of Distributions and
payments on liquidation of the Trust
or redemption of the Preferred
Securities, but only in each case to
the extent of funds held by the
Trust, as described herein (the
"Guarantee"). See "Description of
Guarantee" herein. If the Company
does not make interest payments on
the Subordinated Debentures held by
the Trust, the Trust will have
insufficient funds to pay
Distributions on the Preferred
Securities. The Guarantee does not
cover payment of Distributions when
the Trust does not have sufficient
funds to pay such Distributions. In
the event a Debenture Event of
Default has occurred and is
continuing and such default is
attributable to the failure of the
Company to pay interest or principal
on the Subordinated Debentures, a
holder of Preferred Securities may
institute a legal proceeding directly
against the Company to enforce
payment of such Distributions to such
holder. The obligations of the
Company under the Guarantee and the
Subordinated Debentures are
subordinate and junior in right of
payment to all Senior Debt of the
Company.
Interest Deferral..................... Subject to certain exceptions, as
described herein, the Company has the
right to defer payment of interest on
the Subordinated Debentures at any
time or from time to time for a
period not exceeding 20 consecutive
quarters with respect to each
deferral period (each, an "Extension
Period"), during which Extension
Periods the Company shall have the
right to make full or partial
payments on any Interest Payment Date
(as defined herein), provided that no
Extension Period may extend beyond
the Stated Maturity (as defined
herein) of the Subordinated
Debentures. No interest shall be due
and payable during any Extension
Period, except at the end thereof.
Upon the termination of any such
Extension Period and the payment of
all amounts then due on any Interest
Payment Date, the Company may elect
to begin a new Extension Period
subject to the requirements set forth
herein. If interest payments on the
Subordinated Debentures are so
deferred, distributions on the
Preferred Securities will also be
deferred and the Company may not, and
may not permit any subsidiary of the
Company to, subject to certain
exceptions set forth herein, among
other things, declare or pay any cash
distributions with respect to the
Company's capital stock or debt
securities that rank pari passu with
or junior to the Subordinated
Debentures. During an Extension
Period, interest on the Subordinated
Debentures will continue to accrue
(and the amount of Distributions to
which holders of the Preferred
Securities are entitled will
accumulate at the Securities Rate,
compounded quarterly), and holders of
the Preferred Securities will be
required to accrue interest income
for United States federal income tax
purposes prior to receipt of the cash
related to such interest income. See
"Description of Subordinated
Debentures--Option to Extend Interest
Payment Period" and "Certain Federal
Income Tax Consequences--Interest
Income and Original Issue Discount."
Redemption; Distribution.............. The Preferred Securities are subject
to mandatory redemption, in whole or
in part, upon repayment of the
Subordinated Debentures at maturity
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6
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or their earlier redemption in an
amount equal to the amount of related
Subordinated Debentures maturing or
being redeemed at a redemption price
equal to the aggregate liquidation
preference of such Preferred
Securities plus accumulated and
unpaid Distributions thereon to the
date of redemption. The Subordinated
Debentures are redeemable prior to
maturity at the option of the Company
(i) on or after , 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 Subordinated 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),
upon the occurrence and continuation
of a Special Event (as defined
herein), at any time within 90 days
following the occurrence of such
Special Event, at a redemption price
equal to the accrued and unpaid
interest on the Subordinated
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 Subordinated
Debentures--Redemption."
At any time, the Company will have
the right to liquidate the Trust and
cause the Subordinated Debentures to
be distributed to the holders of the
Preferred Securities and the Common
Securities in liquidation of the
Trust. See "Description of Preferred
Securities--Redemption--Special Event
Redemption or Distribution of
Subordinated Debentures."
Special Event........................ A "Special Event" means a Tax Event
or an Investment Company Event. A
"Tax Event" means the receipt by the
Trust of an opinion of counsel
experienced in such matters to the
effect that, as a result of any
amendment to, or change (including
any announced proposed 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 proposed
change, pronouncement or decision is
announced on or after the date of
original issuance of the Preferred
Securities under the Trust Agreement,
there is more than an insubstantial
risk that (i) the Trust is, or will
be within 90 days of the date of such
opinion, subject to United States
federal income tax with respect to
income received or accrued on the
Subordinated Debentures, (ii)
interest payable by the Company on
such Subordinated Debentures is not,
or within 90 days of the date of such
opinion, will not be, deductible by
the Company, in whole or in part, for
United States federal income tax
purposes, or (iii) the Trust is, or
will be within 90 days of the date of
such opinion, subject to more than a
de minimis amount of other taxes,
duties or other governmental charges.
"Investment Company Event" means the
receipt by the Trust of an opinion of
counsel experienced in such matters
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 Trust is or will
be considered an "investment company"
that is required to be registered
under the Investment Company Act of
1940, as amended, which Change in
1940 Act Law becomes effective on or
after the date of original issuance
of the Preferred Securities under the
Trust Agreement.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Redemption Price In the event of the redemption of the
Trust Securities or other termination
of the Trust without distribution of
the Subordinated Debentures, each
Preferred Security shall be entitled
to receive a liquidation amount of
$25 plus accrued and unpaid
Distributions thereon to the date of
payment.
</TABLE>
8
<PAGE>
RISK FACTORS
Prospective purchasers of the Preferred Securities should carefully
review the information contained elsewhere in this Prospectus and should
particularly consider the following matters. In addition, because holders of
the Preferred Securities may receive Subordinated Debentures in exchange
therefor upon liquidation of the Trust, prospective purchasers of Preferred
Securities are also making an investment decision with regard to the
Subordinated Debentures and should carefully review all the information
regarding the Subordinated Debentures contained herein.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE SUBORDINATED
DEBENTURES
The obligations of the Company under the Guarantee issued by the Company
for the benefit of the holders of Preferred Securities and under the
Subordinated Debentures are unsecured and rank subordinate and junior in
right of payment to all Senior Debt of the Company. At December 31, 1996,
the Senior Debt of the Company aggregated approximately $3.0 billion.
Neither the Indenture, the Guarantee nor the Trust Agreement places any
limitation on the amount of secured or unsecured debt, including Senior
Debt, that may be incurred by the Company. See "Description of Guarantee--
Status of the Guarantee" and "Description of Subordinated Debentures--
Subordination."
The ability of the Trust to pay amounts due on the Preferred Securities
is solely dependent upon the Company making payments on the Subordinated
Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture (as defined herein) to defer
the payment of interest on the Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarters with respect
to each Extension Period, during which Extension Periods the Company shall
have the right to make full or partial payments of interest on any Interest
Payment Date, provided that no Extension Period may extend beyond the Stated
Maturity (as defined below) of the Subordinated Debentures. As a consequence
of any such deferral, quarterly Distributions on the Preferred Securities by
the Trust will also be deferred (and the amount of Distributions to which
holders of the Preferred Securities are entitled will accumulate additional
Distributions thereon at the Securities Rate, compounded quarterly from the
relevant payment date for such Distributions) during any such Extension
Period. During any such Extension Period, the Company shall not, and shall
not permit any subsidiary of the Company to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or
(ii) make any payment of principal, interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Company that rank
pari passu with or junior in interest to the Subordinated Debentures or make
any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company if such guarantee ranks
pari passu with or junior in interest to the Subordinated Debentures (other
than (a) dividends or distributions in capital stock of the Company, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan or the redemption or repurchase of any such rights
pursuant thereto and (c) payments under the Guarantee). Prior to the
termination of any such Extension Period, the Company may further extend the
interest payment period, provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the
Subordinated Debentures. Upon the termination of any Extension Period and
the payment of all amounts then due on any Interest Payment Date, the
Company 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. There is no limitation on the number of
times that the Company may elect to begin an Extension Period. See
"Description of Preferred Securities--Distributions" and "Description of
Subordinated Debentures--Option to Extend Interest Payment Period."
Should an Extension Period occur, a holder of Preferred Securities will
be required to accrue income (in the form of original issue discount) in
respect of its pro rata share of the Subordinated Debentures held by the
Trust for United States federal income tax purposes. As a result, a holder
of Preferred Securities will include such income in gross income for United
States federal income tax purposes in advance of receipt of the cash related
to such income, and will not receive the cash related to such income from
the Trust if the holder disposes of the Preferred Securities prior to the
record date for the payment of Distributions. See "Certain Federal Income
Tax Consequences--Interest Income and Original Issue Discount" and "--Sale
or Redemption of Preferred Securities."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures. However, should the Company elect to exercise such
right in the future, the market price of the Preferred Securities is likely
to be affected. A holder that disposes of its Preferred Securities during an
9
<PAGE>
Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Preferred Securities.
SPECIAL EVENT REDEMPTION
Upon the occurrence and continuation of a Special Event (as defined
below), the Company has the right to redeem the Subordinated Debentures in
whole (but not in part) at a redemption price equal to the principal amount
of the Subordinated Debentures so redeemed plus accrued and unpaid interest
thereon to the date fixed for redemption within 90 days following the
occurrence of such Special Event and thereby cause a mandatory redemption of
the Preferred Securities and Common Securities.
A "Special Event" means a Tax Event or an Investment Company Event. A
"Tax Event" means the receipt by the Trust of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment
to, or change (including any announced proposed 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
proposed change, pronouncement or decision is announced on or after the date
of original issuance of the Preferred Securities under the Trust Agreement,
there is more than an insubstantial risk that (i) the Trust is, or will be
within 90 days of the date of such opinion, subject to United States federal
income tax with respect to income received or accrued on the Subordinated
Debentures, (ii) interest payable by the Company on such Subordinated
Debentures is not, or within 90 days of the date of such opinion, will not
be, deductible by the Company, in whole or in part, for United States
federal income tax purposes, or (iii) the Trust is, or will be within 90
days of the date of such opinion, subject to more than a de minimis amount
of other taxes, duties or other governmental charges. "Investment Company
Event" means the receipt by the Trust of an opinion of counsel experienced
in such matters 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 Trust is or will be
considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended, which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Preferred
Securities under the Trust Agreement.
See "Risk Factors--Possible Tax Law Changes Affecting the Preferred
Securities" for a discussion of certain legislative proposals that, if
adopted, could give rise to a Tax Event, which may permit the Company to
cause a redemption of the Preferred Securities prior to , 2002.
EXCHANGE OF PREFERRED SECURITIES FOR SUBORDINATED DEBENTURES
The Company will have the right at any time to liquidate the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Preferred Securities in exchange therefor upon liquidation of
the Trust. See "Description of Preferred Securities--Redemption--Special
Event Redemption or Distribution of Subordinated Debentures."
Under current United States federal income tax law and interpretations
and assuming, as expected, the Trust is classified as a grantor trust for
such purposes, a distribution of the Subordinated Debentures upon a
liquidation of the Trust would not be a taxable event to holders of the
Preferred Securities. However, if a Tax Event were to occur which would
cause the Trust to be subject to United States federal income tax with
respect to income received or accrued on the Subordinated Debentures, a
distribution of the Subordinated Debentures by the Trust could be a taxable
event to the Trust and the holders of the Preferred Securities. See "Certain
Federal Income Tax Consequences--Distribution of Subordinated Debentures to
Holders of Preferred Securities."
SHORTENING OR EXTENSION OF STATED MATURITY OF SUBORDINATED DEBENTURES
The Company will have the right at any time to shorten the maturity of
the Subordinated Debentures to a date not earlier than , 2002 and
thereby cause the Preferred Securities to be redeemed on such earlier date.
The Company will also have the right to extend the maturity of the
Subordinated Debentures, whether or not the Trust is liquidated and the
Subordinated Debentures are distributed to holders of the Preferred
Securities, to a date no later than the 49th anniversary of the initial
issuance of the Preferred Securities, provided that the Company can extend
the maturity only if at the time such election is made and at the time of
such extension (i) the Company is not in bankruptcy, otherwise insolvent or
in liquidation, (ii) the Company is not in default in the payment of any
interest or principal on the Subordinated Debentures, (iii) if the Trust has
not been liquidated, the Trust is not in arrears on payments of
Distributions on the Preferred
10
<PAGE>
Securities and no deferred Distributions are accumulated and (iv) the
Subordinated Debentures are rated not less than BBB-by Standard & Poor's
Ratings Services or Baa3 by Moody's Investors Service, Inc. or the
equivalent by any other nationally recognized statistical rating
organization. To the extent that the Stated Maturity of the Subordinated
Debentures is extended at such time as the Preferred Securities are
outstanding, the Preferred Securities would remain outstanding until such
extended date or until redeemed at an earlier date.
MARKET PRICES
There can be no assurance as to the market prices for Preferred
Securities or Subordinated Debentures that may be distributed in exchange
for Preferred Securities upon liquidation of the Trust. Accordingly, the
Preferred Securities that an investor may purchase, whether pursuant to the
offer made hereby or in the secondary market, or the Subordinated Debentures
that a holder of Preferred Securities may receive on liquidation of the
Trust, may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby. As a result of the
existence of the Company's right to defer interest payments, the market
price of the Preferred Securities (which represent undivided beneficial
ownership interests in the assets of the Trust) may be more volatile than
the market prices of other securities that are not subject to such optional
deferrals. In addition, because the Company has the right (i) to shorten the
Stated Maturity of the Subordinated Debentures or (ii) to extend the
maturity of the Subordinated Debentures (subject to the conditions described
above), there can be no assurance that the Company will not exercise its
option to change the maturity of the Subordinated Debentures as permitted by
the terms thereof and of the Indenture.
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities the
following payments, to the extent not paid by the Trust: (i) any accumulated
and unpaid Distributions required to be paid on the Preferred Securities, to
the extent that the Trust has funds on hand available therefor at such time,
(ii) the redemption price including all accrued and unpaid Distributions to
the date of redemption with respect to any Preferred Securities called for
redemption by the Trust, to the extent that the Trust has funds on hand
available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding-up or liquidation of the Trust (unless the Subordinated
Debentures are distributed to holders of the Preferred Securities), the
lesser of (a) the aggregate of the liquidation preference and all accrued
and unpaid Distributions to the date of payment or (b) the amount of assets
of the Trust remaining available for distribution to holders of the
Preferred Securities in liquidation of the Trust after satisfaction of
liabilities to creditors of the Trust as required by applicable law. The
Guarantee will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The Chase Manhattan Bank will
act as the indenture trustee under the Guarantee (the "Guarantee Trustee")
for the purposes of compliance with the Trust Indenture Act and will hold
the Guarantee for the benefit of the holders of the Preferred Securities.
The Chase Manhattan Bank will also act as Debenture Trustee for the
Subordinated Debentures and as Property Trustee under the Trust Agreement
and Chase Manhattan Bank Delaware will act as Delaware Trustee under the
Trust Agreement.
The holders of not less than a majority in aggregate liquidation amount
of the Preferred Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Guarantee or to direct the exercise of any trust
or power conferred upon the Guarantee Trustee under the Guarantee.
Notwithstanding the foregoing, any holder of the Preferred Securities may
institute a legal proceeding directly against the Company to enforce its
rights under the Guarantee without first instituting a legal proceeding
against the Trust, the Guarantee Trustee or any other person or entity. If
the Company were to default on its obligation to pay amounts payable under
the Subordinated Debentures, the Trust would lack available funds for the
payment of Distributions or amounts payable on redemption of the Preferred
Securities or otherwise, and, in such event, holders of the Preferred
Securities would not be able to rely upon the Guarantee for payment of such
amounts. Instead, in the event a Debenture Event of Default shall have
occurred and be continuing and such default is attributable to the failure
of the Company to pay interest on or principal of the Subordinated
Debentures, then a holder of Preferred Securities may directly institute a
proceeding against the Company for enforcement of payment to such holder of
the interest on or the principal of such Subordinated Debentures having a
principal amount equal to the aggregate liquidation preference of the
Preferred Securities of such holder (a "Direct Action"). In connection with
such Direct Action, the Company will be subrogated to the rights of such
holder of Preferred Securities under the Trust Agreement to the extent of
any payment made by the Company to such holder of Preferred Securities in
such Direct Action. Except as set forth herein, holders of Preferred
Securities will not be able to exercise directly any other remedy available
to the holders of Subordinated Debentures or assert directly any other
rights in respect of the Subordinated Debentures. See "Description of
Preferred Securities--Enforcement of Certain Rights by Holders of Preferred
Securities", "Description of Guarantee" and "Description of Subordinated
Debentures--Debenture Events of Default." The Trust Agreement provides that
each holder of Preferred Securities by acceptance thereof agrees to the
provisions of the Guarantee (including the subordination provisions thereof)
and the Indenture.
11
<PAGE>
LIMITED VOTING RIGHTS
Holders of Preferred Securities will generally have limited voting rights
relating only to the modification of the Preferred Securities and certain
other matters described herein. Holders of Preferred Securities will not be
entitled to vote to appoint, remove or replace the Property Trustee, the
Delaware Trustee or any Administrative Trustee, which voting rights are
vested exclusively in the holder of the Common Securities, except, with
respect to the Property Trustee and the Delaware Trustee, upon the
occurrence of certain events described herein. The Trust Trustees (as
defined below) and the Company may amend the Trust Agreement without the
consent of holders of Preferred Securities to ensure that the Trust will not
be taxable as a corporation or classified as other than a grantor trust for
federal income tax purposes unless such action adversely affects in any
material respect the interests of such holders. See "Description of
Preferred Securities--Voting Rights; Amendment of the Trust Agreement" and
"--Removal of Trust Trustees."
TRADING CHARACTERISTICS OF PREFERRED SECURITIES
The Preferred Securities have been approved for listing on the NYSE,
subject to official notice of issuance. The Preferred Securities may trade
at prices that do not fully reflect the value of accrued and unpaid interest
with respect to the underlying Subordinated Debentures. See "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount" and "-
-Sales or Redemption of Preferred Securities" for a discussion of the United
States federal income tax consequences that may result from a taxable
disposition of the Preferred Securities.
As indicated above, application will be made to list the Preferred
Securities on the NYSE. If the Preferred Securities are not listed on a
national securities exchange or the NASDAQ National Market and the
underwriters do not make a market for the securities, the liquidity of the
Preferred Securities could be adversely affected.
POSSIBLE TAX LAW CHANGES AFFECTING THE PREFERRED SECURITIES
Legislation was proposed by the United States Department of the Treasury
on February 6, 1997 as part of President Clinton's Fiscal 1998 Budget
Proposal (the "Proposed Legislation") that contains a provision which
generally would deny the interest deduction for interest paid or accrued on
an instrument issued by a corporation that has a weighted average maturity
of more than 40 years. The Proposed Legislation also contains a provision
which generally would deny an interest deduction for interest paid or
accrued on an instrument issued by a corporation that (i) has a maximum term
of more than 15 years and (ii) 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. For purposes of determining the
weighted average maturity or the term of an instrument, any right to extend
the maturity of such instrument would be treated as exercised. The above-
described provisions were proposed to be effective generally for instruments
issued on or after the date of the first Congressional committee action on
the Proposed Legislation. If either provision were to apply to the
Subordinated Debentures, the Company would not be able to deduct the
interest on the Subordinated Debentures. There can be no assurance that the
Proposed Legislation or future legislative proposals will not adversely
affect the ability of the Company to deduct interest on the Subordinated
Debentures or otherwise affect the tax treatment of the transactions
described herein. Such a change could give rise to a Tax Event, which would
permit the Company to cause a redemption of the Preferred Securities before
, 2002. See "Description of Subordinated Debentures--Redemption" and
"Description of Preferred Securities--Redemption." See also "Certain Federal
Income Tax Consequences--Possible Tax Law Changes."
PP&L CAPITAL TRUST
The Trust is a statutory business trust formed under Delaware law
pursuant to (i) the Amended and Restated Trust Agreement (the "Trust
Agreement") executed by the Company, as Depositor, The Chase Manhattan Bank,
as Property Trustee, Chase Manhattan Bank Delaware, as Delaware Trustee, and
the Administrative Trustees named therein, and (ii) the filing of a
certificate of trust with the Delaware Secretary of State on January 28,
1997. The Trust's business and affairs are conducted by The Chase Manhattan
Bank, as Property Trustee, Chase Manhattan Bank Delaware, as Delaware
Trustee, and two individual Administrative Trustees who are employees of the
Company (collectively, the "Trust Trustees"). The Trust exists for the
exclusive purposes of (i) issuing and selling the Preferred Securities and
Common Securities, (ii) using the proceeds from the sale of the Preferred
Securities and Common Securities to acquire the Subordinated Debentures and
(iii) engaging in only those other activities necessary or incidental
thereto. Accordingly, the Subordinated Debentures (and any cash on deposit
or owing and proceeds in respect of the Subordinated Debentures) will be the
sole assets of the Trust, and payments under the Subordinated Debentures
will be the sole revenue of the Trust. All of the Common Securities will be
owned by
12
<PAGE>
the Company. The Common Securities will rank pari passu, and payments will
be made thereon pro rata, with the Preferred Securities, except that upon
the occurrence and continuance of an Event of Default (as defined herein)
under the Trust Agreement resulting from a Debenture Event of Default (as
defined herein) under the Indenture, the rights of the Company 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. See "Description of Preferred
Securities--Subordination of Common Securities." The Company will acquire
Common Securities in an aggregate liquidation amount equal to 3% of the
total capital of the Trust. The Trust has a term of 55 years, but may
terminate earlier as provided in the Trust Agreement. The principal
executive office of the Trust is located at Two North Ninth Street,
Allentown, PA 18101, and its telephone number is 610/774-5151.
The Trust Agreement will be substantially in the form filed as an exhibit
to the Registration Statement of which this Prospectus forms a part. The
Trust Agreement will be qualified as an indenture under the Trust Indenture
Act. The Chase Manhattan Bank, as Property Trustee, will act as sole
indenture trustee under the Trust Agreement for purposes of compliance with
the Trust Indenture Act. The Chase Manhattan Bank will also act as trustee
under the Guarantee and the Indenture (each as defined herein). See
"Description of Guarantee" and "Description of Subordinated Debentures." The
holder of the Common Securities, unless a Debenture Event of Default has
occurred and is continuing, or the holders of a majority in liquidation
preference of the Preferred Securities if any Debenture Event of Default has
occurred and is continuing, will be entitled to appoint, remove or replace
the Property Trustee and 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 Trust Trustee are governed by the Trust Agreement and,
in the case of the Property Trustee, by the Trust Indenture Act. The Company
will pay all fees and expenses related to the Trust and the offering of the
Preferred Securities and will pay, directly or indirectly, all ongoing
costs, expenses and liabilities of the Trust.
It is anticipated that the Trust will not be subject to the reporting
requirements of the Exchange Act.
PENNSYLVANIA POWER & LIGHT COMPANY
The Company is an operating electric utility, incorporated under the laws
of the Commonwealth of Pennsylvania in 1920. PP&L serves approximately 1.2
million customers in a 10,000 square mile territory in 29 counties of
central eastern Pennsylvania with a population of approximately 2.6 million
persons. This service area has 129 communities with populations over 5,000,
the largest cities of which are Allentown, Bethlehem, Harrisburg, Hazleton,
Lancaster, Scranton, Wilkes-Barre and Williamsport. The Company's offices
are located at Two North Ninth Street, Allentown, PA 18101, and its
telephone number is 610/774-5151.
PP&L operates its generation and transmission facilities as part of the
Pennsylvania-New Jersey-Maryland Interconnection Association ("PJM"). The
PJM, one of the world's largest power pools, includes eleven companies
serving about 22 million people in a 50,000 square mile territory covering
all or part of Pennsylvania, New Jersey, Maryland, Delaware, Virginia and
Washington, D.C.
During the year ended December 31, 1996, about 98% of total operating
revenues was derived from electric energy sales, with 35% coming from
residential customers, 28% from commercial customers, 20% from industrial
customers, 13% from contractual sales to other major utilities, 1% from
energy sales to members of the PJM and 3% from others.
All of the outstanding shares of common stock of the Company is owned by
PP&L Resources, Inc., a Pennsylvania corporation ("Resources").
RESTRUCTURING PLAN
In December 1996, Pennsylvania enacted the Electricity Generation
Customer Choice and Competition Act (the "Act") to restructure its electric
utility industry in order to create retail access to a competitive market
for the generation of electricity. Under the Act, the Pennsylvania Public
Utility Commission (the "PUC") is authorized to determine the level of
stranded costs for each electric utility, and provide a mechanism for
recovery of an appropriate amount of stranded costs in accordance with
standards established by the Act. That mechanism is a non-bypassable
competitive transition charge to be paid by all PUC-jurisdictional customers
who receive transmission and distribution service from the Company. In
accordance with the Act, the Company filed its restructuring plan (the
"Restructuring Plan") with the PUC on April 1, 1997.
As set forth in the Restructuring Plan, the Company's net mitigated
stranded cost claim is $4.6 billion. Of this amount, the Company anticipates
collecting $4.2 billion by applying the competitive transition charge
proposed in the Restructuring Plan over the transition period which ends
December 2005. If the PUC permits full recovery of the Company's stranded
costs, including full recovery of all regulatory assets and above-market
non-utility generation costs over the transition period, the Company
estimates that its net income through the year 2005 would be reduced by
about five percent. The Restructuring Plan is subject to the approval of the
PUC, which according to the Act must take action by the end of 1997. The PUC
may make adjustments to the Restructuring Plan that could have an adverse
effect on the amount of the competitive transition charge proposed by the
Company or the categories of stranded costs that are recoverable. As a
result of these uncertainties, from an accounting perspective the Company
cannot determine whether and to what extent it may be subject to a write-off
or reduction in earnings until the PUC issues its order with respect to the
Restructuring Plan. Based on the substantial amounts involved, should the
Company be required to incur a write-off, it could be material in
amount.
More information regarding the Restructuring Plan is contained in the
Company's Current Report on Form 8-K dated April 2, 1997. Certain statements
regarding the Restructuring Plan contained herein and therein are "forward-
looking statements" within the meaning of the securities laws. Although the
Company believes that the expectations reflected in such statements are
reasonable, it can give no assurance that such expectations will prove to
have been correct.
USE OF PROCEEDS
All of the proceeds from the sale of Preferred Securities will be
invested by the Trust in Subordinated Debentures. The proceeds from such
sale of such Subordinated Debentures will be loaned (either directly or
indirectly) to Resources to finance a portion of the purchase price for
Resources' outstanding tender offer for any and all outstanding shares of
preferred stock of the Company.
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<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a
subsidiary of the Company and, accordingly, the accounts of the Trust will
be included in the consolidated financial statements of the Company. The
Preferred Securities will be presented as a separate line item in the
consolidated balance sheet of the Company and appropriate disclosures about
the Preferred Securities, the Guarantee and the Subordinated Debentures will
be included in the notes to the consolidated financial statements.
SELECTED FINANCIAL DATA
The following selected consolidated financial data of the Company for the
three years ended December 31, 1996 have been derived from audited financial
statements. This financial data is qualified by the detailed information and
financial statements appearing in the documents incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994(a) 1995(b) 1996
----------------------------------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C>
Operating Revenues................................ $2,725 $2,752 $2,910
Operating Income.................................. $ 501 $ 574 $ 556
Net Income........................................ $ 243 $ 352 $ 357
Ratio of Earnings to Fixed Charges(c)............. 2.70 3.48 3.50
Ratio of Earnings to Combined Fixed Charges and
Preferred Dividend Requirements(d).............. 2.26 2.92 2.93
</TABLE>
- -----------
(a) Earnings for 1994 were adversely affected by several one-time charges to
income. These charges related to a voluntary early retirement program; a
write-down in the carrying value of a subsidiary's investment in
undeveloped coal reserves; the disallowance of replacement power costs
through the Company's energy cost rate; and a decision of the
Commonwealth Court of Pennsylvania related to the deferral of post-
retirement benefit costs.
(b) Earnings for 1995 were positively affected by the final order of the
Pennsylvania Public Utility Commission issued on September 27, 1995
pertaining to PP&L's base rate case filed in December 1994. The decision
increased revenues and permitted recovery of voluntary early retirement
and post-retirement benefits other than pensions and disallowed certain
costs applicable to the construction of Susquehanna Unit 1. In addition,
the Company realized a gain on the sale of subsidiary coal reserves
which were previously written down in 1994.
(c) Fixed charges include interest expense and the estimated interest
component of rentals. The ratios for 1992 and 1993 were 3.15 and 3.31,
respectively.
(d) Combined fixed charges and preferred dividend requirements include
interest expense, preferred dividend requirements and the estimated
interest component of rentals. The ratios for 1992 and 1993 were 2.53
and 2.71, respectively.
14
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1996, and as adjusted to reflect (i) the issuance
of the $100,000,000 of Preferred Securities offered hereby, (ii) the
redemption on April 1, 1997 of $30 million of 6.75% First Mortgage Bonds due
November 1997, $40 million of 7.00% First Mortgage Bonds due January 1999,
$60 million of 7.25% First Mortgage Bonds due February 2001 and $80 million
of 7.50% First Mortgage Bonds due January 2003 and (iii) the consummation of
Resources' outstanding tender offer for any and all outstanding shares of
preferred stock of the Company (assuming all of such outstanding shares are
tendered and purchased). The following data is qualified by the detailed
information and financial statements appearing in the documents incorporated
by reference.
<TABLE>
<CAPTION>
As of December 31, 1996
---------------------------------
PERCENTAGE
ACTUAL AS ADJUSTED (%)
---------------------------------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Long Term Debt (including current maturities).. $ 2,832 $ 2,622 49.1%
Preferred Securities offered hereby(1).............. 0 100 1.9
Preferred Stock:
With Sinking Funds................................. 295 0 0.0
Without Sinking Funds.............................. 171 0 0.0
Common Equity....................................... 2,617 2,617 49.0
-------- -------- ------
Total Capitalization......................... $ 5,915 $ 5,339 100.0%
======== ======== ======
</TABLE>
- ----------
(1) As described herein, the sole assets of the Trust will be approximately
$103,092,800 principal amount of Subordinated Debentures issued by the
Company. The Subordinated Debentures will bear interest at a rate of
% per annum and will mature on , 2027. The Company will own
all of the Common Securities of the Trust.
15
<PAGE>
DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement, the Administrative Trustees
on behalf of the Trust will issue the Preferred Securities and the Common
Securities. The Preferred Securities will represent undivided beneficial
ownership interests in the assets of the 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, as well as other benefits as described in the Trust
Agreement. All of the Common Securities will be owned, directly or
indirectly, by the Company. The following summary of material terms and
provisions of the Preferred Securities and the 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 the Trust Agreement, including the
definitions therein of certain terms, and the Trust Indenture Act. Wherever
particular defined terms of the Trust Agreement (as supplemented or amended
from time to time) are referred to herein, the definitions of such defined
terms are incorporated herein by reference. The form of the Trust Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
GENERAL
The Preferred Securities will rank pari passu, and payments will be made
thereon pro rata, with the Common Securities except as described under "--
Subordination of Common Securities." Legal title to the Subordinated
Debentures will be held by the Property Trustee in trust for the benefit of
the holders of the Preferred Securities and the Common Securities. The
Guarantee executed by the Company for the benefit of the holders of the
Preferred Securities will be a guarantee on a subordinated basis with
respect to the Preferred Securities but will not guarantee payment of
Distributions or amounts payable on redemption or liquidation of the
Preferred Securities when the Trust does not have funds on hand available to
make such payments. See "Description of Guarantee."
DISTRIBUTIONS
The Preferred Securities represent undivided beneficial ownership
interests in the assets of the Trust and Distributions on the Preferred
Securities will be payable at the annual rate of % (the "Securities
Rate") of the stated Liquidation Amount of $25, payable quarterly in arrears
on January 1, April 1, July 1 and October 1 of each year. Distributions will
accumulate from , 1997, the date of original issuance. The first
Distribution payment date for the Preferred Securities will be ,
1997. The amount of Distributions payable in the first payment period will
be computed on the basis of days in a 360-day year. The amount of
Distributions payable for any period thereafter will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date
on which Distributions are payable on the 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,
such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment
was originally payable (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.
The revenue of the Trust available for distribution to holders of its
Preferred Securities will be limited to payments under the Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Preferred Securities and the Common Securities. See "Description
of Subordinated Debentures." If the Company does not make interest payments
on the Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Preferred Securities. The payment of
Distributions (if and to the extent the Trust has funds legally available
for the payment of such Distributions) is guaranteed by the Company on a
limited basis as set forth herein under "Description of Guarantee."
Distributions on the Preferred Securities (other than distributions on a
Redemption Date) will be payable to the holders thereof as they appear on
the register of the Trust on the relevant record dates, which, as long as
the Preferred Securities remain in book-entry form, will be the close of
business one Business Day prior to the relevant Distribution Date. Subject
to any applicable laws and regulations and the provisions of the Trust
Agreement, each such payment will be made as described under "--Book-Entry
Issuance." In the event the Preferred Securities are not in book-entry form,
the relevant record date for the Preferred Securities shall be the fifteenth
day of the month prior to the relevant Distribution Date (whether or not
such record date is a Business Day).
16
<PAGE>
So long as no Debenture Event of Default under the Indenture has occurred
and is continuing, the Company has the right under the Indenture to defer
the payment of interest on the Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarters (each, an
"Extension Period"), during which Extension Periods the Company shall have
the right to make full or partial payments of interest on any Interest
Payment Date, provided that no Extension Period may extend beyond the Stated
Maturity (as defined below) of the Subordinated Debentures. As a consequence
of any such extension, quarterly Distributions on the Preferred Securities
will also be deferred by the Trust during any such Extension Period.
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions thereon at the Securities Rate,
compounded quarterly from the relevant payment date for such Distributions.
The term "Distributions" as used herein shall include any such additional
Distributions. During any such Extension Period, the Company shall not, and
shall not permit any subsidiary of the Company to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or
(ii) make any payment of principal, interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Company that rank
pari passu with or junior in interest to the Subordinated Debentures or make
any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company if such guarantee ranks
pari passu with or junior in interest to the Subordinated Debentures (other
than (a) dividends or distributions in capital stock of the Company, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan or the redemption or repurchase of any such rights
pursuant thereto and (c) payments under the Guarantee). Prior to the
termination of any such Extension Period, the Company may further extend the
interest payment period, provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the
Subordinated Debentures. Upon the termination of any such Extension Period
and the payment of all amounts then due on any Interest Payment Date, the
Company may elect to begin a new Extension Period. No interest shall be due
and payable during an Extension Period, except at the end thereof. There is
no limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of the Subordinated Debentures--Option to
Extend Interest Payment Period" and "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period of the
Subordinated Debentures.
REDEMPTION
MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in
part, of the Subordinated Debentures, whether at Stated 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 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, at a redemption price (the
"Redemption Price"), with respect to the Preferred Securities, equal to the
aggregate Liquidation Amount of such Preferred Securities plus accrued and
unpaid Distributions thereon to the date of redemption (the "Redemption
Date"). If less than all of the 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 on a pro rata basis among
the Preferred Securities and the Common Securities.
The Company will have the right to redeem the Subordinated Debentures (i)
on or after , 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
Subordinated 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), upon the occurrence and continuation of a Special Event, within 90
days following the occurrence of such Special Event, at a redemption price
equal to the accrued and unpaid interest on the Subordinated 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 Subordinated Debentures--Redemption" and "Description of
Subordinated Debentures--Optional Redemption."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION OF SUBORDINATED DEBENTURES. If a
Special Event shall occur and be continuing, the Company will have the right
to redeem the Subordinated Debentures in whole (but not in part) and thereby
cause a mandatory redemption of the Preferred Securities in whole (but not
in part) at the Redemption Price within 90 days following the occurrence of
such Special Event. At any time, the Company will have the right to
liquidate the Trust and, after satisfaction of the liabilities of creditors
of the Trust as provided by applicable law, cause the Subordinated
Debentures to be distributed to the holders of the Preferred Securities in
liquidation of the Trust. Under current United States federal income tax law
and interpretations and assuming, as expected, the Trust is treated as a
grantor trust, a distribution of the Subordinated Debentures would not be a
taxable event to holders of the Preferred Securities. However, should there
be a change in law or a change in legal interpretation as a result of the
occurrence of a Tax Event or otherwise, the distribution could be a taxable
event to holders of the Preferred Securities. See "Certain Federal Income
Tax Consequences--Distribution of Subordinated
17
<PAGE>
Debentures to Holders of Preferred Securities." If the Company does not
elect either option described above, the Preferred Securities will remain
outstanding until the repayment of the Subordinated Debentures.
If the Company elects to liquidate the Trust and thereby causes the
Subordinated Debentures to be distributed to holders of the Preferred
Securities in liquidation of the Trust, the Company shall continue to have
the right to shorten the Stated Maturity of the Subordinated Debentures to a
date not earlier than 2002 or extend the maturity of the Subordinated
Debentures, provided that it can extend the maturity only if certain
conditions are met. See "Description of Subordinated Debentures--General."
If the Subordinated Debentures are distributed to the holders of the
Preferred Securities in liquidation of the Trust the Company will use its
best efforts to cause the Subordinated Debentures to be listed on the NYSE
or on such other stock exchange or automated quotation systems, if any, on
which the Preferred Securities are then listed or quoted.
"Like Amount" means (i) with respect to a redemption of the Preferred
Securities and the Common Securities, Preferred Securities and the Common
Securities having a Liquidation Amount (as defined below) equal to the
principal amount of the Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture allocated 3% to the Common
Securities and 97% to the Preferred Securities and the proceeds of which
will be used to pay the Redemption Price of such Preferred Securities and to
redeem such Common Securities, and (ii) with respect to a distribution of
the Subordinated Debentures to holders of Preferred Securities and Common
Securities in connection with a dissolution or liquidation of the Trust,
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Preferred Securities or the Common Securities, as the case may
be, of the holder to whom such Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Preferred Security
or Common Security. After the liquidation date fixed for any distribution of
Subordinated Debentures (i) the Preferred Securities will no longer be
deemed to be outstanding, (ii) The Depository Trust Company ("DTC") or its
nominee, as the record holder of such Preferred Securities, will receive a
registered global certificate or certificates representing the Subordinated
Debentures to be delivered upon such distribution, (iii) the Company shall
use its best efforts to have the Subordinated Debentures listed on the NYSE
or on such other exchange, interdealer quotation system or self-regulatory
organization as the Preferred Securities are then listed or traded, (iv) any
certificates representing Preferred Securities not held by DTC or its
nominee will be deemed to represent Subordinated Debentures having a
principal amount equal to the stated liquidation preference of such
Preferred Securities, and bearing accrued and unpaid interest in an amount
equal to the accrued and unpaid Distributions on such Preferred Securities
until such certificates are presented to the Administrative Trustees or
their agent for transfer or reissuance (and until such certificates are so
surrendered, no payments of interest or principal will be made to holders of
Preferred Securities Certificates with respect to such Subordinated
Debentures) and (v) all rights of holders of Preferred Securities will
cease, except the right of such holders to receive Subordinated Debentures
upon surrender of Preferred Securities Certificates.
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in
exchange for Preferred Securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor
may purchase, whether pursuant to the offer made hereby or in the secondary
market, or the Subordinated Debentures that the investor may receive on
dissolution and liquidation of the Trust, may trade at a discount to the
price that the investor paid to purchase 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 or payment at Stated Maturity of the 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 Trust has funds available for the payment of such Redemption Price.
See also "--Subordination of Common Securities."
If the Property Trustee gives a notice of redemption in respect of the
Preferred Securities, then, on the Redemption Date, to the extent funds are
available, the 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 the Preferred Securities. See "--Book-Entry Issuance." If the
Preferred Securities are no longer in book-entry form, the Property Trustee,
to the extent funds are available, will irrevocably deposit with the paying
agent for the Preferred Securities funds sufficient to pay the applicable
Redemption Price and will give the paying agent irrevocable instructions and
authority to pay the Redemption Price to the holders thereof upon surrender
of their certificates evidencing the 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
holders of such Preferred Securities on the relevant record dates for the
related Distribution Dates. If notice of redemption shall have been given
and funds deposited as required, then upon the date of such deposit, all
rights of 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 and any Distribution payable on or prior to the
Redemption Date, but without interest on such Redemption Price, and such
Preferred Securities will cease to be
18
<PAGE>
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 each case with the same force and effect as if made on the date such
payment was originally payable. 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 Trust or by the Company
pursuant to the Guarantee as described under "Description of Guarantee",
Distributions on such Preferred Securities will continue to accrue at the
Securities Rate, from the Redemption Date originally established by the
Trust for the 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), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in
the open market or by private agreement.
If less than all of the Preferred Securities and Common Securities issued
by the 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 the
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 Amount 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 Amount thereof to be
redeemed. For all purposes of the Trust Agreement, unless the context
otherwise requires, all provisions relating to the redemption of Preferred
Securities shall relate, in the case of any Preferred Securities redeemed or
to be redeemed only in part, to the portion of the aggregate Liquidation
Amount 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. Unless the Trust
defaults in payment of the Redemption Price, on and after the Redemption
Date, Distributions will cease to accrue on such Preferred Securities or
portions thereof called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Preferred
Securities and the 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 under the Indenture shall have occurred and be continuing, no
payment of any Distribution on, or Redemption Price of, any of the 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 on all of the
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 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 on, or Redemption Price of,
the Preferred Securities then due and payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, the Company as holder of the Common Securities will be deemed to
have waived any right to act with respect to any such Event of Default under
the Trust Agreement until all such Events of Default with respect to the
Preferred Securities have been cured, waived or otherwise eliminated. Until
any such Events of Default under the Trust Agreement with respect to the
Preferred Securities have been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the holders of the Preferred
Securities and not on behalf of the Company as holder of the Common
Securities, and only the holders of the Preferred Securities will have the
right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to the Trust Agreement, the Trust shall automatically terminate
on December 31, 2051 (the "Expiration Date") or on the first to occur of any
of the following events (each, an "Early Termination Event"): (i) certain
events of bankruptcy, dissolution or liquidation of the Company as the
holder of the Common Securities; (ii) the distribution of a
19
<PAGE>
Like Amount of the Subordinated Debentures to the holders of the Preferred
Securities and Common Securities after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, if the Company, as
Depositor, has given written direction to the Property Trustee to terminate
the Trust (which direction is optional and wholly within the discretion of
the Company, as Depositor); (iii) the redemption of all of the Preferred
Securities in connection with the redemption of all of the Subordinated
Debentures; and (iv) the entry by a court of competent jurisdiction of an
order for the dissolution of the Trust.
If an Early Termination Event occurs as described in clause (i), (ii) or
(iv) above or upon the Expiration Date, the Trust shall be liquidated by the
Trust Trustees as expeditiously as the Trust Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, to the holders of the Preferred
Securities and Common Securities a Like Amount of the 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 Trust available for distribution to holders, after
satisfaction of liabilities to creditors of the Trust as provided by
applicable law, an amount equal to, in the case of holders of Preferred
Securities, the aggregate of the Liquidation Amount plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable by the
Trust on the Trust Securities shall be paid on a pro rata basis.
Notwithstanding the foregoing sentence, the holder(s) of the Common
Securities will be entitled to receive distributions upon any such
liquidation pro rata with the holders of the Preferred Securities, except
that if an Event of Default resulting from a Debenture Event of Default
under the Indenture has occurred and is continuing, the Preferred Securities
shall have a priority over the Common Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under
the 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 (see "Description of Subordinated Debentures--Debenture Events of
Default"); or
(ii) default in the payment of any Distribution when it becomes due
and payable, and continuation of such default for a period of 30 days; or
(iii) default in the payment of any Redemption Price of any
Preferred Security or Common Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Trust Trustees in the Trust Agreement
(other than a covenant or warranty a default in the performance or breach of
which is dealt with in clause (ii) or (iii) above), and continuation of such
default or breach for a period of 90 days after there has been given, by
registered or certified mail, to the defaulting Trust Trustee or Trustees by
the holders of at least 25% in aggregate Liquidation Amount of the
outstanding Preferred Securities, a written notice specifying such default
or breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee if a successor Property Trustee has not been
appointed within 90 days thereof.
Within ten 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 the Preferred Securities,
the Administrative Trustees and the Company, as Depositor, unless such Event
of Default shall have been cured or waived. The Company, 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 the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities upon
termination of the Trust as described above. See "--Liquidation Distribution
Upon Termination." The existence of an Event of Default does not entitle the
holders of Preferred Securities to accelerate the maturity thereof.
20
<PAGE>
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If an Event of Default has occurred and is continuing, then the holders
of Preferred Securities would rely on the enforcement by the Property
Trustee of its rights as a holder of the Subordinated Debentures against the
Company. Notwithstanding the foregoing, if a Debenture Event of Default has
occurred and is continuing and such default is attributable to the failure
of the Company to pay any amounts payable in respect of the Subordinated
Debentures, then a holder of Preferred Securities has the right to institute
a legal proceeding directly against the Company for enforcement of payment
to such holder of the principal of or interest on the Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Preferred Securities of such holder (a "Direct Action"). In connection with
such Direct Action, the Company will be subrogated to the rights of such
holder of Preferred Securities under the Trust Agreement to the extent of
any payment made by the Company to such holder of Preferred Securities in
such Direct Action.
REMOVAL OF TRUST TRUSTEES
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trust Trustee may be removed at any time by the holder of
the Common Securities. If a Debenture Event of Default has occurred and is
continuing, the Property Trustee or the Delaware Trustee, or both of them,
may be removed at such time by the holders of a majority in Liquidation
Amount of the 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
the Company as the holder of the Common Securities. No resignation or
removal of a Trust Trustee and no appointment of a successor trustee shall
be effective until the acceptance of appointment by the successor trustee in
accordance with the applicable requirements of the 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 Trust
Property may at the time be located, the Company, as the holder of the
Common Securities, and the Administrative Trustees 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 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 Trust Agreement. In
case a Debenture Event of Default has occurred and is continuing, the
Property Trustee alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF TRUST TRUSTEES
Any Person 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 Person resulting from
any merger, conversion or consolidation to which such Trustee shall be a
party, or any Person succeeding to all or substantially all the corporate
trust business of such Trustee, shall be the successor of such Trustee under
the Trust Agreement, provided such Person shall be otherwise qualified and
eligible under the Trust Agreement.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge, consolidate or amalgamate with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. The Trust may, at the request of the Company, with the
consent of the Administrative Trustees and without the consent of the
holders of the Preferred Securities, merge, consolidate or amalgamate with
or into, 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 the Trust with respect to the
Preferred Securities or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities
(the "Successor Securities") so long as the Successor Securities rank the
same as the Preferred Securities rank in priority with respect to
distributions and payments upon liquidation, redemption and otherwise, (ii)
the Company expressly appoints a trustee of such successor entity possessing
substantially the same powers and duties as the Property Trustee as the
holder of the Subordinated Debentures, (iii) the Successor Securities are
listed or traded, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then listed or traded, if
any, (iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights,
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preferences and privileges of the holders of the Preferred Securities
(including any Successor Securities) in any material respect, (vi) such
successor entity has a purpose identical to that of the Trust, (vii) prior
to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Company and the Property Trustee has received an
opinion from independent counsel to the 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 the Preferred Securities
(including any Successor Securities) in any material respect and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither the Trust nor such successor entity will be
required to register as an investment company under the Investment Company
Act, (viii) the Company 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 Guarantee and (ix) the Company has delivered
to the Property Trustee an officers' certificate and an opinion of counsel,
each to the effect that all conditions precedent to such transactions have
been satisfied. Notwithstanding the foregoing, the Trust shall not, except
with the consent of holders of 100% in Liquidation Amount of the Preferred
Securities, consolidate, amalgamate or 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 or merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause
the 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 THE TRUST AGREEMENT
Except as provided below and under "Description of Guarantee--Amendments
and Assignment" and as otherwise required by law and the Trust Agreement,
the holders of the Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the holders of
the Common Securities and the Trust Trustees, without the consent of the
holders of the Preferred Securities (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent
with any other provision, or to make any other provisions with respect to
matters or questions arising under the Trust Agreement that shall not be
inconsistent with the other provisions of the Trust Agreement, or (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such
extent as shall be necessary to ensure that the 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 are outstanding or to
ensure that the Trust will not be required to register as an "investment
company" under the Investment Company Act, provided, however, that in the
case of either clause (i) or (ii), such action shall not adversely affect in
any material respect the interests of any holder of Preferred Securities,
and any amendments of the Trust Agreement shall become effective when notice
thereof is given to the holders of Preferred Securities and Common
Securities. The Trust Agreement may be amended by the Trust Trustees and the
Company with (i) the consent of holders representing not less than a
majority (based upon Liquidation Amounts) of the outstanding Preferred
Securities and Common Securities and (ii) receipt by the Trust Trustees of
an opinion of counsel to the effect that such amendment or the exercise of
any power granted to the Trust Trustees in accordance with such amendment
will not affect the Trust's status as a grantor trust for United States
federal income tax purposes or the Trust's exemption from status of an
"investment company" under the Investment Company Act, provided, further
that without the consent of each holder of Preferred Securities and Common
Securities affected thereby, the Trust Agreement may not be amended to (i)
change the amount or timing of any Distribution on the Preferred Securities
and Common Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Preferred Securities and
Common Securities as of a specified date or (ii) restrict the right of a
holder of Preferred Securities or Common Securities to institute suit for
the enforcement of any such payment on or after such date.
So long as any Subordinated Debentures are held by the Property Trustee,
the Trust 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 Debenture Trustee with
respect to such 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 Subordinated Debentures shall be
due and payable or (iv) consent to any amendment, modification or
termination of the Indenture or such Subordinated Debentures, where such
consent shall be required, without, in each case, obtaining the prior
approval of the holders of at least a majority in Liquidation Amount of all
outstanding Preferred Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Subordinated
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior written consent of each holder of Preferred
Securities. The Trust Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Preferred Securities
except pursuant to a 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 which it receives with respect
to the 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 Trust Trustees shall at the expense of the
Company obtain an opinion of
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counsel experienced in such matters to the effect that the Trust will not be
classified as other than a grantor trust 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 Trust Agreement.
No vote or consent of the holders of Preferred Securities will be
required for the Trust to redeem and cancel its Preferred Securities in
accordance with the 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 the Company, the Administrative
Trustees or any affiliate of the Company or any Administrative 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 the 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. The paying agent (the
"Paying Agent") shall initially be the Property Trustee and any co-paying
agent chosen by the Property Trustee (which may be the Company) and
acceptable to the Administrative Trustees and the Company. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to
the Administrative Trustees, the Property Trustee and the Company. 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 the Company) 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, representing in the aggregate the total number of 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
("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 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 the Trust is discontinued.
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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 the 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 Trust or the Company, 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.
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 the Company. In the event that a
successor securities depositary is not obtained, definitive Preferred
Securities certificates representing such Preferred Securities are required
to be printed and delivered. The Company, 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 the Preferred Securities will be printed
and delivered. Except as provided herein, a Beneficial Owner of an interest
in a global Preferred Securities certificate will not be entitled to receive
physical delivery of Preferred Securities. Accordingly, each Beneficial
Owner must rely on the procedures of DTC to exercise any rights under the
Preferred Securities.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Trust or the Company believe
to be accurate, but the Trust and the Company assume no responsibility for
the accuracy thereof. None of the Trust Trustees, the Trust or the Company
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
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 the Trust, but only upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Trust will not be required (i) to register or
cause to be registered the transfer or exchange of the Preferred Securities
during a period beginning at the opening of business 15 days before the day
of the mailing of the relevant notice of redemption and ending at the close
of business on the day of mailing of such notice of redemption or (ii) to
register or cause to be registered the transfer or exchange of any Preferred
Securities so selected for redemption, except in the case of any Preferred
Securities being redeemed in part, any portion thereof not to be redeemed.
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INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Company and its affiliates utilize various of the banking services
offered by the Property Trustee. Such services include providing lines of
credit.
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 the 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 Trust Agreement at the request of any
holder of Preferred Securities unless it is offered reasonable indemnity by
such holder 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 Trust Agreement or is unsure of
the application of any provision of the Trust Agreement, and the matter is
not one on which holders of Preferred Securities are entitled under the
Trust Agreement to vote, then the Property Trustee may, but shall be under
no duty to, take such action as is directed by the Company 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. The Property Trustee also serves as
Trustee under the Guarantee and the Indenture.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not 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 or as other than a grantor trust for United States federal
income tax purposes and so that the Subordinated Debentures will be treated
as indebtedness of the Company for United States federal income tax
purposes. In this connection, the Company and the Administrative Trustees
are authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Trust, the certificate of incorporation of the
Company or the Trust Agreement, that the Company and the Administrative
Trustees determine in their discretion to be necessary or desirable for such
purposes, as long as such action does not adversely affect in any material
respect the interests of the holders of the Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt or mortgage or pledge any of
its assets.
GOVERNING LAW
The Trust Agreement and the Trust Securities will be governed by and
construed in accordance with the laws of the State of Delaware.
DESCRIPTION OF SUBORDINATED DEBENTURES
The Subordinated Debentures are to be issued under a Junior Subordinated
Indenture (the "Indenture"), between the Company and The Chase Manhattan
Bank, as trustee (the "Debenture Trustee"). The following summary of
material terms and provisions of the 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 are referred to herein, such defined terms
are incorporated herein by reference.
GENERAL
Concurrently with the issuance of the Preferred Securities, the Trust
will invest the proceeds thereof and the consideration paid by the Company
for the Common Securities in the Subordinated Debentures issued by the
Company. The Subordinated Debentures will be in the principal amount equal
to the aggregate stated Liquidation Amount of the Preferred Securities plus
the Company's concurrent investment in the Common Securities. The
Subordinated Debentures will bear interest at the annual rate of % of the
principal amount thereof, payable quarterly in arrears on January 1, April
1, July 1 and October 1 of each year (each, an "Interest Payment Date"),
commencing , 1997, to the person in
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whose name each of the Subordinated Debentures is registered, subject to
certain exceptions, at the close of business on the Business Day next
preceding such Interest Payment Date (other than interest payable on a
Redemption Date or the maturity date). In the event the Subordinated
Debentures are not in book-entry form, the relevant record date for the
Subordinated Debentures shall be the fifteenth day of the month prior to the
relevant Interest Payment Date. It is anticipated that, until the
liquidation, if any, of the Trust, each Subordinated Debentures will be held
in the name of the Property Trustee in trust for the benefit of the holders
of the Preferred Securities and the Common Securities. The amount of
interest payable in the first payment period will be computed on the basis
of days in a 360-day year. The amount of interest payable for any period
thereafter will be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on the
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on the
date such 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 %
thereof, compounded quarterly. The term "interest" as used herein shall
include quarterly interest payments and interest on quarterly interest
payments not paid on the applicable Interest Payment Date.
The Subordinated Debentures will mature on , 2027 (such date, as
it may be shortened or extended as hereinafter described, the "Stated
Maturity"). Such date may be shortened at any time by the Company to any
date not earlier than , 2002. Such date may also be extended at
any time at the election of the Company to any date not later than
, 2046, provided that at the time such election is made and at the time of
extension (i) the Company is not in bankruptcy, otherwise insolvent or in
liquidation, (ii) the Company is not in default in the payment of any
interest or principal on the Subordinated Debentures, (iii) in the case of
Subordinated Debentures held by the Trust, the Trust is not in arrears on
payments of Distributions on the Preferred Securities and no deferred
Distributions are accumulated and (iv) the Subordinated Debentures are rated
not less than BBB- by Standard & Poor's Ratings Services or Baa3 by Moody's
Investors Service, Inc. or the equivalent by any other nationally recognized
statistical rating organization.
The Subordinated Debentures will be unsecured and will rank junior and be
subordinate in right of payment to all Senior Debt (as defined below) of the
Company. The Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Company, whether under the Indenture or any
existing or other indenture that the Company may enter into in the future or
otherwise. See "--Subordination."
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Special Event, Subordinated Debentures may be
distributed to the holders of the Trust Securities in liquidation of the
Trust. See "Description of Preferred Securities - Special Event Redemption
or Distribution of Subordinated Debentures."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Event of Default under the Indenture has occurred and is
continuing, the Company has the right under the Indenture to defer the
payment of interest at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each Extension Period,
during which Extension Periods the Company shall have the right to make full
or partial payments of interest on any Interest Payment Date, provided that
no Extension Period may extend beyond the Stated Maturity of the
Subordinated Debentures. At the end of such Extension Period, the Company
must pay all interest then accrued and unpaid (together with interest
thereon at the annual rate of %, compounded quarterly, to the extent
permitted by applicable law). During an Extension Period, interest will
continue to accrue and holders of Subordinated Debentures (or holders of
Preferred Securities while the Preferred Securities are outstanding) will be
required to accrue interest income for United States federal income tax
purposes. See "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount."
During any such Extension Period, the Company may not, and may not permit
any subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of the Company's capital stock or (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase
or redeem any debt securities of the Company that rank pari passu with or
junior in interest to the Subordinated Debentures or make any guarantee
payments with respect to any guarantee by the Company of debt securities of
any subsidiary of the Company if such guarantee ranks pari passu with or
junior in interest to the Subordinated Debentures (other than (a) dividends
or distributions in capital stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights
plan or the redemption or repurchase of any such rights pursuant thereto and
(c) payments under the Guarantee). Prior to the termination of any such
Extension Period, the Company may further extend the interest payment
period, provided that no Extension Period may exceed 20 consecutive quarters
or extend beyond the Stated Maturity of the Subordinated Debentures. Upon
the termination of any such Extension Period and upon the payment
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of all amounts then due on any Interest Payment Date, the Company 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. The Company must give the Debenture Trustee and the holders of
Subordinated Debentures 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 Preferred Securities would have been payable except for
the election to begin such Extension Period or (ii) the date the
Administrative Trustees are required to give notice to the NYSE, the Nasdaq
National Market or other applicable stock exchange or automated quotation
system on which the Preferred Securities are then listed or quoted or to
holders of such 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 Property Trustee shall give notice of the
Company's election to begin a new Extension Period to the holders of the
Preferred Securities. There is no limitation on the number of times that the
Company may elect to begin an Extension Period.
CERTAIN COVENANTS OF THE COMPANY
The Company will covenant that it will not, and will not permit any
subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of the Company's capital stock or (ii) make any
payment of principal, interest or premium, if any, on or repay or repurchase
or redeem any debt securities of the Company that rank pari passu with or
junior in interest to the Subordinated Debentures or make any guarantee
payments with respect to any guarantee by the Company of debt securities of
any subsidiary of the Company if such guarantee ranks pari passu with or
junior in interest to the Subordinated Debentures (other than (a) dividends
or distributions in capital stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights
plan or the redemption or repurchase of any such rights pursuant thereto and
(c) payments under the Guarantee) if at such time (i) there shall have
occurred any event of which the Company 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 Subordinated
Debentures and (b) in respect of which the Company shall not have taken
reasonable steps to cure, (ii) the Company shall be in default with respect
to its payment of any obligations under the Guarantee or (iii) the Company
shall have given notice of its election to begin an Extension Period as
provided in the Indenture and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing. The Company
will also covenant (i) to maintain directly or indirectly 100% ownership of
the Common Securities of the Trust, provided that certain successors which
are permitted pursuant to the Indenture may succeed to the Company's
ownership of the Common Securities, (ii) not to voluntarily terminate, wind-
up or liquidate the Trust, except (a) in connection with a distribution of
Subordinated Debentures to the holders of the Preferred Securities in
liquidation of the Trust or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the Trust Agreement, and (iii)
to use its reasonable efforts, consistent with the terms and provisions of
the Trust Agreement, to cause the Trust to remain classified as a grantor
trust and not as an association taxable as a corporation for United States
federal income tax purposes.
REDEMPTION
The Subordinated Debentures are redeemable prior to maturity at the
option of the Company (i) on or after , 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 Subordinated 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, at a redemption price equal to the accrued and unpaid
interest on the Subordinated Debentures so redeemed to the date fixed for
redemption, plus 100% of the principal amount thereof.
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 Subordinated
Debentures to be redeemed at its registered address. Unless the Company
defaults in payment of the redemption price, on and after the redemption
date, interest will cease to accrue on such Subordinated Debentures or
portions thereof called for redemption on or after such date.
DISTRIBUTIONS OF SUBORDINATED DEBENTURES
Under certain circumstances involving the liquidation of the Trust,
Subordinated Debentures may be distributed to the holders of the Preferred
Securities in liquidation of the Trust after satisfaction of liabilities to
creditors of the Trust as provided by applicable law. If distributed to
holders of Preferred Securities in liquidation, the Subordinated Debentures
will initially be issued in the form of one or more global securities and
DTC, or any successor depositary for the Preferred Securities, will act as
depositary for the Subordinated Debentures. It is anticipated that the
depositary arrangements for the Subordinated Debentures would be
substantially identical to those in effect for the Preferred Securities. If
the Subordinated Debentures are distributed to the holders of Preferred
Securities upon the liquidation of the Trust, the Company will use its best
efforts to list the Subordinated Debentures on the NYSE or such other stock
exchanges or interdealer quotation
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systems, if any, on which the Preferred Securities are then listed or
traded. There can be no assurance as to the market price of any Subordinated
Debentures that may be distributed to the holders of Preferred Securities.
For a description of DTC and the terms of the depositary matters, see
"Description of Preferred Securities--Book-Entry Issuance."
Under current United States federal income tax law and interpretations
thereof and assuming, as expected, the Trust is treated as a grantor trust
for United States federal income tax purposes, a distribution by the Trust
of the Subordinated Debentures pursuant to a liquidation of the Trust will
not be a taxable event to the Trust or to holders of the Preferred
Securities and will result in a holder of the Preferred Securities receiving
directly such holder's pro rata share of the Subordinated Debentures
(previously held indirectly through the Trust). If, however, the liquidation
of the Trust were to occur because the Trust is subject to United States
federal income tax with respect to income accrued or received on the
Subordinated Debentures as a result of the occurrence of a Tax Event or
otherwise, the distribution of Subordinated Debentures to holders of the
Preferred Securities by the Trust could be a taxable event to the Trust and
each holder, and holders of the Preferred Securities may be required to
recognize gain or loss as if they had exchanged their Preferred Securities
for the Subordinated Debentures they received upon the liquidation of the
Trust. See "Certain United States Federal Income Tax Consequences--
Distribution of Subordinated Debentures to Holders of Preferred Securities."
GLOBAL SUBORDINATED DEBENTURES
The Subordinated Debentures may be issued in whole or in part in the form
of a Global Subordinated Debentures that will be deposited with, or on
behalf of, a depositary, which initially will be DTC (the "Depositary").
Global 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 Subordinated Debentures represented
thereby, Global Subordinated Debentures may not be transferred except as a
whole by the Depositary for such Global Subordinated Debentures 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.
Upon the issuance of a Global Subordinated Debentures and the deposit of
such Global Subordinated Debentures with or on behalf of the Depositary, the
Depositary for such Global Subordinated Debentures or its nominee will
credit on its book-entry registration and transfer system the respective
principal amounts of the individual Subordinated Debentures represented by
such Global Subordinated Debentures 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
Subordinated Debentures or by the Company if such Subordinated Debentures
are offered and sold directly by the Company. Ownership of beneficial
interests in a Global Subordinated Debentures will be limited to
Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Subordinated Debentures
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 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 Subordinated Debentures.
So long as the Depositary for a Global Subordinated Debentures, or its
nominee, is the registered owner of such Global Subordinated Debentures,
such Depositary or such nominee, as the case may be, will be considered the
sole owner or holder of the Subordinated Debentures represented by such
Global Subordinated Debentures for all purposes under the Indenture
governing such Subordinated Debentures. Except as provided below, owners of
beneficial interests in a Global Subordinated Debentures will not be
entitled to have any of the individual Subordinated Debentures of the series
represented by such Global Subordinated Debentures registered in their
names, will not receive or be entitled to receive physical delivery of any
such 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 and interest on individual Subordinated
Debentures represented by a Global Subordinated Debentures 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
Subordinated Debentures representing such Subordinated Debentures. None of
the Company, the Debenture Trustee, any Paying Agent or the Securities
Registrar for such 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 Subordinated
Debentures representing such Subordinated Debentures or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary or its nominee, upon receipt of
any payment of principal or interest in respect of a permanent Global
Subordinated Debentures representing any of such Subordinated Debentures,
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the principal
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amount of such Global Subordinated Debentures representing such Subordinated
Debentures as shown on the records of such Depositary or its nominee. The
Company also expects that payments by Participants to owners of beneficial
interests in such Global Subordinated Debentures 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.
If the Depositary is at any time unwilling, unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within 90 days, the Company will issue individual Subordinated
Debentures in exchange for the Global Subordinated Debentures representing
such Subordinated Debentures. In addition, the Company may at any time and
in its sole discretion, determine not to have any Subordinated Debentures
represented by one or more Global Subordinated Debentures and, in such
event, will issue individual Subordinated Debentures in exchange for the
Global Subordinated Debentures representing such Subordinated Debentures.
Further, if the Company so specifies with respect to the Subordinated
Debentures, an owner of a beneficial interest in a Global Subordinated
Debentures representing Subordinated Debentures may, on terms acceptable to
the Company, the Debenture Trustee and the Depositary for such Global
Subordinated Debentures, receive individual Subordinated Debentures in
exchange for such beneficial interests. In any such instance, an owner of a
beneficial interest in a Global Subordinated Debentures will be entitled to
physical delivery of individual Subordinated Debentures of the series
represented by such Global Subordinated Debentures equal in principal amount
to such beneficial interest and to have such Subordinated Debentures
registered in its name. Individual Subordinated Debentures so issued will be
issued in denominations, unless otherwise specified by the Company, of $25
and integral multiples thereof.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on Subordinated Debentures will
be made at the office of the Debenture Trustee in the City of New York or at
the office of such Paying Agent or Paying Agents (which may include the
Company) as the Company may designate from time to time, except that at the
option of the Company payment of any interest may be made by check mailed to
the address of the Person entitled thereto as such address shall appear in
the Securities Register or by wire or electronic funds transfer. Payment of
any interest on Subordinated Debentures (other than interest payable on a
Redemption Date or the maturity date) will be made to the Person in whose
name such Subordinated Debentures is registered at the close of business on
the Regular Record Date for such interest, except in the case of Defaulted
Interest. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent; however the Company will at all
times be required to maintain a Paying Agent in each Place of Payment.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Company in trust, for the payment of the principal of or
interest on any Subordinated Debentures and remaining unclaimed for two
years after such principal or interest has become due and payable shall, at
the request of the Company, be repaid to the Company and the holder of such
Subordinated Debentures shall thereafter look, as a general unsecured
creditor, only to the Company for payment thereof.
REGISTRATION AND TRANSFER OF SUBORDINATED DEBENTURES
If the Depositary is DTC, a global security shall be exchangeable for
Subordinated Debentures registered in the names of persons other than DTC or
its nominee only if (i) DTC notifies the Company that it is unwilling or
unable to continue as a depository for such global security and no successor
depository shall have been appointed by the Company within 90 days or if at
any time DTC ceases to be a clearing agency registered under the Exchange
Act, (ii) the Company in its sole discretion determines that such global
security shall be so exchangeable, or (iii) there shall have occurred and be
continuing a Debenture Event of Default with respect to such global
security. 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 Subordinated Debentures are issued in definitive form, such
Subordinated Debentures will be in denominations of $25 and integral
multiples thereof and may be transferred or exchanged at the offices
described below. Payments on Subordinated Debentures represented by a global
security will be made to DTC, as the Depositary for the Subordinated
Debentures. In the event Subordinated Debentures are issued in definitive
form, principal and interest will be payable, the transfer of the
Subordinated Debentures will be registrable, and Subordinated Debentures
will be exchangeable for Subordinated 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 the Company, provided that payment of interest
may be made at the option of the Company by check mailed to the address of
the persons entitled thereto or by wire or electronic funds transfer. In
addition, if the Subordinated Debentures are issued in certificated form,
the record dates for payment of interest will be the 15th day of the last
month of each calendar quarter. For a description of DTC and the terms of
the depositary arrangements relating to payments, transfers,
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voting rights, redemptions and other notices and other matters, see
"Description of Preferred Securities--Book-Entry Issuance."
Subordinated Debentures may be presented for exchange as provided above,
and may be presented for registration of transfer (with the form of transfer
endorsed thereon, or a satisfactory written instrument of transfer, duly
executed), at the office of the Securities Registrar or at the office of any
transfer agent designated by the Company for such purpose with respect to
the Subordinated Debentures, without service charge and upon payment of any
taxes and other governmental charges as described in the Indenture. The
Company will appoint the Debenture Trustee as Securities Registrar under the
Indenture. The Company may at any time rescind the designation of any
transfer agent or approve a change in the location through which any
transfer agent acts, provided that the Company maintains a transfer agent in
each Place of Payment. The Company may at any time designate additional
transfer agents with respect to the Subordinated Debentures.
In the event of any redemption, neither the Company nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Subordinated Debentures during a period beginning at the opening of business
15 days before the day of selection for redemption of the Subordinated
Debentures pursuant to the Indenture and ending at the close of business on
the day of mailing of such notice of redemption or (ii) transfer or exchange
any Subordinated Debentures so selected for redemption, except, in the case
of any Subordinated Debentures being redeemed in part, any portion thereof
not to be redeemed.
MODIFICATION OF INDENTURE
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of the Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies (provided that any
such action does not adversely affect in any material respect the interest
of the holders of Subordinated Debentures or, for so long as the Preferred
Securities shall remain outstanding, the holders of the Preferred
Securities) and qualifying, or maintaining the qualification of, the
Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting the Company and the Debenture Trustee, with the consent of the
holders of not less than a majority in principal amount of outstanding
Subordinated Debenture affected, to modify the Indenture in a manner
affecting the rights of the holders of such Subordinated Debentures;
provided that no such modification may, without the consent of the holder of
each outstanding Subordinated Debenture so affected, among others, (i)
change the stated maturity of the Subordinated Debentures, reduce the
principal amount thereof, change the method of calculating the rate of
interest thereon or reduce the rate or extend the time of payment of
interest thereon (except such change or extension as is contemplated by the
Indenture) or (ii) reduce the percentage of principal amount of the
Subordinated Debentures, the holders of which are required to consent to any
such modification of the Indenture, provided that, so long as any Preferred
Securities remain outstanding, no such modification may be made that
adversely affects the interests of 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 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 Amount of the
Preferred Securities unless and until the principal of the Subordinated
Debentures and all accrued and unpaid interest thereon have been paid in
full and certain other conditions are satisfied.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Subordinated Debentures that has occurred and is
continuing constitutes a "Debenture Event of Default" (a "Debenture Event of
Default") with respect to the Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Subordinated
Debentures, when due (subject to the deferral of any due date in the case of
an Extension Period); or
(ii) failure to pay any principal of the Subordinated Debentures when
due whether at maturity or upon redemption; or
(iii) failure to observe or perform certain other covenants
contained in the Indenture for 90 days after written notice to the Company
from the Debenture Trustee or from the holders of at least 25% in
outstanding principal amount of outstanding Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of
the Company.
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The holders of a majority in aggregate outstanding principal amount of
Subordinated Debentures have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of Subordinated Debentures may
declare the principal due and payable immediately upon a Debenture Event of
Default resulting from the Company's failure to make payments with respect
to the Subordinated Debentures when due and payable or failure to observe or
perform covenants contained in the Indenture, and, should the Debenture
Trustee or such holders of such Subordinated Debentures fail to make such
declaration, the holders of at least 25% in Liquidation Amount of the
Preferred Securities shall have such right. Upon a Debenture Event of
Default resulting from certain events of bankruptcy of the Company, the
principal of the Subordinated Debentures shall automatically, and without
any declaration or any further action on the part of the Debenture Trustee
or any holder, become immediately due and payable. The holders of a majority
in aggregate outstanding principal amount of Subordinated Debentures may
rescind or annul such declaration and waive the default if the default
(other than the non-payment of the principal of Subordinated Debentures
which has become due solely by such acceleration) has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture
Trustee, and should the holders of such Subordinated Debentures fail to
rescind or annul such declaration and waive such default, the holders of a
majority in Liquidation Amount of the Preferred Securities shall have such
right.
The holders of a majority in aggregate outstanding principal amount of
the Subordinated Debentures affected thereby and the holders of at least a
majority in Liquidation Amount of the Preferred Securities may, on behalf of
the holders of all the Subordinated Debentures or the holders of all the
Preferred Securities, as the case may be, waive any past default, except a
default in the payment of principal or interest (unless such default has
been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Debenture Trustee) or a default in respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
holder of each outstanding Subordinated Debenture. The Company is required
to file annually with the Debenture Trustee a certificate as to whether or
not the Company is in compliance with all the conditions and covenants
applicable to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing, the
Debenture Trustee will have the right to declare the principal of and the
interest on such 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 Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest or
principal on the Subordinated Debentures on the date such interest or
principal is otherwise payable, a holder of Preferred Securities may
institute a Direct Action for payment. The Company 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.
Notwithstanding any payment made to such holder of Preferred Securities by
the Company in connection with a Direct Action, the Company shall remain
obligated to pay the principal of or interest on the Subordinated Debentures
held by the Trust or the Property Trustee and the Company 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 the Company to such holder in any Direct Action. Except as
provided above, holders of Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the Subordinated
Debentures.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, unless (i) in case the
Company consolidates with or merges into another Person or conveys,
transfers or leases its properties and assets substantially as an entirety
to any Person, the successor Person is organized under the laws of the
United States or any state or the District of Columbia, and such successor
Person expressly assumes the Company's obligations on the Subordinated
Debentures issued under the Indenture; (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, shall have
happened and be continuing; (iii) if at the time any Preferred Securities
are outstanding, such transaction is not precluded by the Trust Agreement or
Guarantee and does not give rise to any breach or violation of the Trust
Agreement or the Guarantee, and (iv) certain other conditions as prescribed
in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Subordinated Debentures protection in the event of a highly leveraged or
other transaction involving the Company that may adversely affect holders of
the Subordinated Debentures.
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SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Subordinated
Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at their Stated Maturity within one year or (iii) are to be called
for redemption within one year under arrangements satisfactory to the
Debenture Trustee for the giving of notice of redemption, and the Company
deposits or causes to be deposited with the Debenture Trustee funds, in
trust, for such purpose and in an amount sufficient to pay and discharge the
entire indebtedness on the Subordinated Debentures not previously delivered
to the Debenture Trustee for cancellation, for the principal and interest to
the date of the deposit or to the Stated Maturity or the Redemption Date, as
the case may be, then the Indenture will cease to be of further effect
(except as to the Company's obligations to pay all other sums due pursuant
to the Indenture and to provide the officers' certificates and opinions of
counsel described therein), and the Company will be deemed to have satisfied
and discharged the Indenture.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Debt to the extent provided in the Indenture.
Upon any payment or distribution of assets of the Company upon any
liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency,
debt restructuring or similar proceedings in connection with any insolvency
or bankruptcy proceeding of the Company, the holders of Senior Debt will
first be entitled to receive payment in full of principal of (and premium,
if any) and interest, if any, on such Senior Debt before the holders of
Subordinated Debentures or the Property Trustee on behalf of the holders of
Preferred Securities will be entitled to receive or retain any payment in
respect of the principal of or interest, if any, on the Subordinated
Debentures; provided, however, that holders of Senior Debt shall not be
entitled to receive payment of any such amounts to the extent that such
holders would be required by the subordination provisions of such Senior
Debt to pay such amounts over to the obligees on trade accounts payable or
other liabilities arising in the ordinary course of the Company's business.
In the event of the acceleration of the maturity of any Subordinated
Debentures, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all
amounts due thereon (including any amounts due upon acceleration) before the
holders of Subordinated Debentures will be entitled to receive or retain any
payment or distribution in respect of the principal of or interest, if any,
on the Subordinated Debentures; provided, however, that holders of Senior
Debt shall not be entitled to receive payment of any such amounts to the
extent that such holders would be required by the subordination provisions
of such Senior Debt to pay such amounts over to the obligees on trade
accounts payable or other liabilities arising in the ordinary course of the
Company's business.
No payments on account of principal or interest in respect of the
Subordinated Debentures may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior Debt or an event
of default with respect to any Senior Debt resulting in the acceleration of
the maturity thereof, or if any judicial proceeding shall be pending with
respect to any such default.
"Debt" means with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i)
every obligation of such Person for money borrowed; (ii) every obligation of
such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person;
(iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable
or accrued liabilities arising in the ordinary course of business); (v)
every capital lease obligation of such Person; (vi) every obligation of such
Person for claims in respect of derivative products, including interest
rate, foreign exchange rate and commodity forward contracts, options, swaps
and similar arrangements; and (vii) every obligation of the type referred to
in clauses (i) through (vi) of another Person and all dividends of another
Person the payment of which, in either case, such Person has guaranteed or
is responsible or liable for, directly or indirectly, as obligor or
otherwise.
"Senior Debt" means the principal of (and premium, if any) and interest,
if any (including interest accruing on or after the filing of any petition
in bankruptcy or for reorganization relating to the Company whether or not
such claim for post-petition interest is allowed in such proceeding), on
Debt of the Company, whether incurred on or prior to the date of the
Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
provided that such obligations are not superior in right of payment to the
Subordinated Debentures or to other Debt which is pari passu with, or
subordinated to, the Subordinated Debentures; provided, however, that Senior
Debt shall not be deemed to include (i) any Debt of the Company to any of
its subsidiaries or affiliates, (ii) Debt of the Company to any employee of
the Company, (iii) Debt which by its terms is subordinated to trade accounts
payable or accrued liabilities
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arising in the ordinary course of business to the extent that payments made
to the holders of such Debt by the holders of the Subordinated Debentures as
a result of the subordination provisions of the Indenture would be greater
than such payments otherwise would have been (absent giving effect to this
clause (iii)) as a result of any obligation of such holders of such Debt to
pay amounts over to the obligees on such trade accounts payable or accrued
liabilities arising in the ordinary course of business as a result of
subordination provisions to which such Debt is subject, and (iv) any other
debt securities issued pursuant to the Indenture.
The Indenture places no limitation on the amount of additional Senior
Debt that may be incurred by the Company.
TRUST COSTS AND EXPENSES
In the Indenture, the Company, as borrower, has agreed to pay all debts
and other obligations (other than with respect to the Trust Securities) and
all costs and expenses of the Trust (including costs and expenses relating
to the organization of the Trust, the fees and expenses of the Trustees and
the costs and expenses relating to the operation of the Trust) and to pay
any and all taxes and all costs and expenses with respect thereto (other
than United States withholding taxes) to which the Trust might become
subject.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Company and its affiliates utilize various of the banking services
offered by the Debenture Trustee. Such services include providing lines of
credit.
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, 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 Subordinated Debentures, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. 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.
DESCRIPTION OF GUARANTEE
The Guarantee will be executed and delivered by the Company concurrently
with the issuance by the Trust of the Trust Securities for the benefit of
the holders from time to time of such Trust Securities. The Chase Manhattan
Bank will act as indenture trustee ("Guarantee Trustee") under the Guarantee
for the purposes of compliance with the Trust Indenture Act and the
Guarantee will be qualified as an Indenture under the Trust Indenture Act.
The following summary of material terms and provisions of the Guarantee does
not purport to be complete and is subject to, and qualified in its entirety
by reference to, all of the provisions of the Guarantee, including the
definitions therein of certain terms, and the Trust Indenture Act. The form
of the Guarantee has been filed as an exhibit to the Registration Statement
of which this Prospectus forms a part. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Trust Securities.
GENERAL
The Company will irrevocably and unconditionally 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 Trust Securities, as and when due,
regardless of any defense, right of set-off or counterclaim that the Trust
may have or assert other than the defense of payment. The following payments
with respect to the Trust Securities, to the extent not paid by or on behalf
of the Trust (the "Guarantee Payments"), will be subject to the Guarantee:
(i) any accumulated and unpaid Distributions required to be paid on the
Trust Securities, to the extent that the Trust has funds on hand available
therefor at the time, (ii) the Redemption Price with respect to any Trust
Securities called for redemption to the extent that the Trust has funds on
hand available therefor at such time, and (iii) upon a voluntary or
involuntary termination, winding up or liquidation of the Trust (unless the
Subordinated
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Debentures are distributed to holders of the Trust Securities), the lesser
of (a) the aggregate of the Liquidation Amount plus accrued and unpaid
Distributions to the date of payment and (b) the amount of assets of the
Trust remaining available for distribution to holders of Trust Securities in
liquidation of the Trust after satisfaction of liabilities to creditors of
the Trust as required by applicable law. The Company's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts
by the Company to the holders of the applicable Trust Securities or by
causing the Trust to pay such amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis of
the Trust's obligations under the Trust Securities, but will apply only to
the extent that the Trust has funds on hand available to make such payments,
and is not a guarantee of collection.
If the Company does not make interest payments on the Subordinated
Debentures held by the Trust, the Trust will not be able to pay
Distributions on the Trust Securities and will not have funds legally
available therefor. The Guarantee will rank subordinate and junior in right
of payment to all Senior Debt of the Company. See "--Status of the
Guarantee." The Guarantee does not limit the incurrence or issuance of
additional Debt of the Company, whether secured or unsecured or whether
under the Indenture or any existing or other indenture that the Company may
enter into in the future or otherwise.
The Company has, through the Guarantee, the Trust Agreement, the
Subordinated Debentures and the Indenture, taken together, fully,
irrevocably and unconditionally guaranteed all of the 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 guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Preferred
Securities. See "Relationship Among the Preferred Securities, the
Subordinated Debentures and the Guarantee--General."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Debt of
the Company in the same manner as the Subordinated Debentures, except that
upon the occurrence and continuance of an Event of Default under the Trust
Agreement resulting from a Debenture Event of Default under the Indenture,
the rights of the Company 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 to payment of the holders of
the Preferred Securities. See "Description of Preferred Securities--
Subordination of Common Securities."
The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Guarantor to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity). The Guarantee will be held for the benefit of the holders of the
Trust Securities. The Guarantee will not be discharged except by payment of
the Guarantee Payments in full (without duplication of amounts theretofore
paid by the Trust) or upon distribution of the Subordinated Debentures to
the holders of the Trust Securities in exchange for all of the Trust
Securities as provided in the Trust Agreement. The Guarantee does not limit
the incurrence or issuance of additional Debt of the Company, whether
secured or unsecured or whether under the Indenture or any existing or other
indenture that the Company may enter into in the future or otherwise.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect in any
material respect the rights of holders of the Trust Securities (in which
case consent of the holders or the Guarantee Trustee, as the case may be,
will be required), the Guarantee may not be amended without the prior
approval of the holders of not less than a majority in Liquidation Amount of
the 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 the Trust Agreement." All guarantees
and agreements contained in the Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Company and shall
inure to the benefit of the holders of the Trust Securities then
outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of
the Company to perform any of its payment or other obligations thereunder.
The holders of not less than a majority in aggregate Liquidation Amount of
the Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Guarantee or to direct the exercise of any trust
or power conferred upon the Guarantee Trustee under the Guarantee.
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Any holder of the Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Company and its affiliates utilize various of the banking services
offered by the Guarantee Trustee. Such services include providing lines of
credit.
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Company in performance of the Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the 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. Subject to this provision, the Guarantee Trustee
is under no obligation to exercise any of the powers vested in it by the
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 GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the Trust Securities, upon full
payment of the amounts payable upon liquidation of the Trust or upon
distribution of Subordinated Debentures to the holders of the Trust
Securities in exchange for all of the Trust Securities. The Guarantee will
continue to be effective or will be reinstated, as the case may be, if at
any time any holder of the Trust Securities must restore payment of any sums
paid under the Trust Securities or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SUBORDINATED DEBENTURES AND THE GUARANTEE
Payments of Distributions and other amounts due on the Trust Securities
(to the extent the Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the
extent set forth under "Description of Guarantee." Taken together, the
Company's obligations under the Subordinated Debentures, the Indenture, the
Trust Agreement and the Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of distributions and
other amounts due on the 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 Trust's obligations under the Preferred
Securities. If and to the extent that the Company does not make payments on
the Subordinated Debentures, the Trust will not pay Distributions or other
amounts due on the Preferred Securities. The Guarantee does not cover
payment of Distributions when the Trust does not have sufficient funds to
pay such Distributions. In the event a Debenture Event of Default has
occurred and is continuing and such default is attributable to the failure
of the Company to pay interest or principal on the Subordinated Debentures,
a holder of Preferred Securities may institute a legal proceeding directly
against the Company to enforce payment of such Distributions to such holder.
The obligations of the Company under the Guarantee are subordinate and
junior in right of payment to all Senior Debt of the Company.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
the Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Preferred Securities, primarily
because (i) the aggregate principal amount of the Subordinated Debentures
will be equal to the sum of the aggregate stated Liquidation Amount of the
Preferred Securities and the Common Securities; (ii) the interest rate and
interest and other payment dates on the Subordinated Debentures will match
the Securities Rate and Distributions and other payment dates for the
related Preferred Securities; (iii)
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<PAGE>
the Company shall pay for all and any costs, expenses and liabilities of the
Trust except the Trust's obligations to holders of its Preferred Securities
under the Preferred Securities; and (iv) the Trust Agreement further
provides that the Trust will not engage in any activity that is not
consistent with the limited purposes of the Trust.
Notwithstanding anything to the contrary in the Indenture, the Company
has the right to set-off any payment it is otherwise required to make
thereunder with and to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the
Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Guarantee Trustee,
the Trust or any other person or entity.
A default or event of default under any Senior Debt of the Company will
not constitute an Event of Default or a Debenture Event of Default. However,
in the event of payment defaults under, or acceleration of, Senior Debt of
the Company, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Subordinated Debentures until such
Senior Debt has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on the Subordinated
Debentures would constitute an Event of Default under the Indenture.
LIMITED PURPOSE OF TRUST
The Preferred Securities evidence a beneficial ownership interest in the
Trust, and the Trust exists for the sole purpose of issuing the Preferred
Securities and the Common Securities and investing the proceeds thereof in
Subordinated Debentures (and engaging in activities necessary or incidental
thereto). A principal difference between the rights of a holder of Preferred
Securities and a holder of Subordinated Debentures is that a holder of
Subordinated Debentures is entitled to receive from the Company the
principal amount of and interest accrued on Subordinated Debentures held,
while a holder of Preferred Securities is entitled to receive Distributions
from the Trust (or from the Company under the Guarantee) if and to the
extent the Trust has funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation
of the Trust involving the liquidation of the Subordinated Debentures, after
satisfaction of liabilities to creditors of the Trust in accordance with
applicable law, the holders of the Preferred Securities will be entitled to
receive, out of assets held by the Trust, the Liquidation Distribution in
cash. See "Description of Preferred Securities--Liquidation Distribution
Upon Termination." Upon any voluntary or involuntary liquidation or
bankruptcy of the Company, the Property Trustee, as holder of the
Subordinated Debentures, would be a subordinated creditor of the Company,
subordinated in right of payment to all Senior Debt, but entitled to receive
payment in full of principal and interest before any stockholders of the
Company receive payments or distributions. Since the Company is the
guarantor under the Guarantee and has agreed to pay for all costs, expenses
and liabilities of the Trust (other than the Trust's obligations to the
holders of the Preferred Securities), the positions of a holder of Preferred
Securities and a holder of the Subordinated Debentures relative to other
creditors and to stockholders of the Company in the event of liquidation or
bankruptcy of the Company would be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Simpson Thacher & Bartlett, special tax counsel to the
Company and the Trust ("Tax Counsel"), the following summary accurately
describes the material United States federal income tax consequences that
may be relevant to the purchase, ownership and disposition of Preferred
Securities. Unless otherwise stated, this summary deals only with Preferred
Securities held as capital assets by United States Persons (defined below)
who purchase the Preferred Securities upon original issuance. As used
herein, a "United States Person" means a person that is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source,
or (iv) any trust if a court within the United States is able to exercise
primary supervision over the administration of such trust and one or more
United States fiduciaries have the authority to control all substantial
decisions
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<PAGE>
of such trust. The tax treatment of a holder may vary depending on his, her
or its particular situation. This summary does not address all the tax
consequences that may be relevant to a particular holder or to holders who
may be subject to special tax treatment, such as banks, real estate
investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or foreign
investors. In addition, this summary does not include any description of any
alternative minimum tax consequences or the tax laws of any state, local or
foreign government that may be applicable to a holder of Preferred
Securities. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury regulations promulgated thereunder and
administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
The following discussion does not discuss the tax consequences that might
be relevant to persons that are not United States Persons ("non-United
States Persons"). Non-United States Persons should consult their own tax
advisors as to the specific United States federal income tax consequences of
the purchase, ownership and disposition of Preferred Securities.
The authorities on which this summary is based are subject to various
interpretations and the opinions of Tax Counsel are not binding on the
Internal Revenue Service ("IRS") or the courts, either of which could take a
contrary position. Moreover, no rulings have been or will be sought from the
IRS with respect to the transactions described herein. Accordingly, there
can be no assurance that the IRS will not challenge the opinions expressed
herein or that a court would not sustain such a challenge. Nevertheless, Tax
Counsel has advised that it is of the view that, if challenged, the opinions
expressed herein would be sustained by a court with jurisdiction in a
properly presently case.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE
REDEMPTION OF THE PREFERRED SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX
EVENTS SEE "DESCRIPTION OF PREFERRED SECURITIES--REDEMPTION."
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Tax Counsel
is of the opinion that, under current law and assuming compliance with the
terms of the Trust Agreement, and based on certain facts and assumptions
contained in such opinion, the Trust 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 Preferred
Securities (a "Securityholder") will be treated as owning an undivided
beneficial interest in the Subordinated Debentures. Accordingly, each
Securityholder will be required to include in its gross income its pro rata
share of the interest income or original issue discount that is paid or
accrued on the Subordinated Debentures. See "--Interest Income and Original
Issue Discount."
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
The Company, the Trust and the holders of the Preferred Securities (by
acceptance of a beneficial interest in a Preferred Security) will agree to
treat the Subordinated Debentures as indebtedness for all United States tax
purposes. In connection with the issuance of the Subordinated Debentures,
Tax Counsel is of the opinion that, under current law, and based on certain
representations, facts and assumptions set forth in such opinion, the
Subordinated Debentures will be classified as indebtedness for United States
federal income tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under the applicable Treasury regulations, the Subordinated Debentures
will not be considered to have been issued with "original issue discount"
("OID") within the meaning of Section 1273(a) of the Code. Accordingly,
except as set forth below, stated interest on the Subordinated Debentures
generally will be included in income by a Securityholder at the time such
interest income is paid or accrued in accordance with such Securityholder's
regular method of tax accounting.
If, however, the Company exercises its right to defer payments of
interest on the Subordinated Debentures, the Subordinated Debentures will
become OID instruments at such time and all Securityholders will be required
to accrue the stated interest on the Subordinated Debentures on a daily
basis during the Extension Period, even though the Company will not pay such
interest until the end of the Extension Period, and even though some
Securityholders may use the cash method of tax accounting. Moreover,
thereafter the Subordinated Debentures will be taxed as OID instruments for
as long as they remain outstanding. Thus, even after the end of the
Extension Period, all Securityholders would be required to continue to
include the stated interest on the Subordinated Debentures in income on a
daily economic accrual basis, regardless of their
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<PAGE>
method of tax accounting and in advance of receipt of the cash attributable
to such interest income. Under the OID economic accrual rules, a
Securityholder would accrue an amount of interest income each year that
approximates the stated interest payments called for under the terms of the
Subordinated Debentures, and actual cash payments of interest on the
Subordinated Debentures would not be reported separately as taxable income.
Any amount of OID included in a Securityholder's gross income (whether or
not during an Extension Period) will increase such Securityholder's tax
basis in its Preferred Securities, and the amount of Distributions received
by a Securityholder with respect to such Preferred Securities will reduce
the tax basis of such Preferred Securities.
The Treasury regulations described above have not yet been addressed in
any rulings or other interpretations by the IRS, and it is possible that the
IRS could take a contrary position. If the IRS were to assert successfully
that the stated interest on the Subordinated Debentures was OID regardless
of whether the Company exercises its right to defer payments of interest on
such debentures, all Securityholders would be required to include such
stated interest in income on a daily economic accrual basis as described
above.
Corporate Securityholders will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the
Preferred Securities.
DISTRIBUTION OF SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED SECURITIES
Under current law, a distribution by the Trust of the Subordinated
Debentures as described under the caption "Description of Preferred
Securities--Liquidation of Trust and Distribution of Subordinated Debentures
to Holders" will be non-taxable and will result in the Securityholder
receiving directly its pro rata share of the Subordinated Debentures
previously held indirectly through the Trust, with a holding period and
aggregate tax basis equal to the holding period and aggregate tax basis such
Securityholder had in its Preferred Securities before such distribution. If,
however, the liquidation of the Trust were to occur because the Trust is
subject to United States federal income tax with respect to income accrued
or received on the Subordinated Debentures, the distribution of Subordinated
Debentures to Securityholders by the Trust would be a taxable event to the
Trust and each Securityholder, and a Securityholder would recognize gain or
loss as if the Securityholder had exchanged its Preferred Securities for the
Subordinated Debentures it received upon the liquidation of the Trust. A
Securityholder will accrue interest in respect of Subordinated Debentures
received from the Trust in the manner described above under "--Interest
Income and Original Issue Discount."
SALES OR REDEMPTION OF PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of
Preferred Securities (including a redemption for cash) in an amount equal to
the difference between the amount realized by the Securityholder on the sale
or redemption of the Preferred Securities (except to the extent that such
amount realized is characterized as a payment in respect of accrued but
unpaid interest on such Securityholder's allocable share of the Subordinated
Debentures that such Securityholder has not included in gross income
previously) and the Securityholder's adjusted tax basis in the Preferred
Securities sold or redeemed. Such gain or loss generally will be taxable as
long-term capital gain or loss if the Securityholder held the Preferred
Securities that it sold or redeemed for more than one year. Subject to
certain limited exceptions, capital losses cannot be applied to offset
ordinary income for federal income tax purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest (including any OID) accrued in respect of the
Preferred Securities held of record by United States Persons (other than
corporations and other exempt Securityholders), if any, will be reported to
the Internal Revenue Service. "Backup" withholding at a rate of 31% will
apply to payments of interest to non-exempt United States Persons unless the
Securityholder furnishes its taxpayer identification number in the manner
prescribed in applicable Treasury Regulations, certifies that such number is
correct, certifies as to no loss of exemption from backup withholding and
meets certain other conditions.
Payment of the proceeds from the disposition of Preferred Securities to
or through the United States office of a broker is subject to information
reporting and backup withholding unless the holder or beneficial owner
establishes an exemption from information reporting and backup withholding.
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 Internal Revenue Service.
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It is anticipated that income on the Preferred Securities will be
reported to holders on Form 1099 and mailed to holders of the Preferred
Securities by January 31 following each calendar year.
POSSIBLE TAX LAW CHANGES
Legislation was proposed by the United States Department of the Treasury
on February 6, 1997 as part of President Clinton's Fiscal 1998 Budget
Proposal (the "Proposed Legislation") that contains a provision which
generally would deny the interest deduction for interest paid or accrued on
an instrument issued by a corporation that has a weighted average maturity
of more than 40 years. The Proposed Legislation also contains a provision
which generally would deny an interest deduction for interest paid or
accrued on an instrument issued by a corporation that (i) has a maximum term
of more than 15 years and (ii) 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. For purposes of determining the
weighted average maturity or the term of an instrument, any right to extend
the maturity of such instrument would be treated as exercised. The above-
described provisions were proposed to be effective generally for instruments
issued on or after the date of the first Congressional committee action on
the Proposed Legislation. If either provision were to apply to the
Subordinated Debentures, the Company would not be able to deduct the
interest on the Subordinated Debentures. There can be no assurance that the
Proposed Legislation or future legislative proposals or final legislation
will not adversely affect the ability of the Company to deduct interest on
the Subordinated Debentures or otherwise affect the tax treatment of the
transactions described herein. Moreover, such a change could give rise to a
Tax Event, which would permit the Company to cause a redemption of the
Preferred Securities, as described more fully under "Description of
Preferred Securities--Redemption."
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement (the "Underwriting Agreement"), the Trust has agreed to sell to
each of the Underwriters named below, and each of the Underwriters, for whom
Merrill Lynch, Pierce, Fenner & Smith Incorporated, A.G. Edwards & Sons,
Inc., Legg Mason Wood Walker, Incorporated, PaineWebber Incorporated and
Prudential Securities Incorporated are acting as representatives (the
"Representatives"), has severally agreed to purchase the number of Preferred
Securities set forth opposite its name below. In the Underwriting Agreement,
the several Underwriters have agreed, subject to the terms and conditions
set forth therein, to purchase all of the Preferred Securities offered
hereby if any of the Preferred Securities are purchased. In the event of
default by an Underwriter, the Underwriting Agreement provides that, in
certain circumstances, the purchaser commitments of the nondefaulting
Underwriters may be increased or the Underwriting Agreement may be
terminated.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF
PREFERRED SECURITIES
--------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................
A.G. Edwards & Sons, Inc................
Legg Mason Wood Walker, Incorporated....
PaineWebber Incorporated................
Prudential Securities Incorporated......
Total............................. 4,000,000
==========
</TABLE>
The Underwriters propose to offer the Preferred Securities in part
directly to the public at the initial public offering price, as set forth on
the cover page of this Prospectus, and in part to certain securities dealers
at such price less a concession of $ per Preferred Security. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per Preferred Security to certain brokers and dealers.
After the 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 of the sale of the Preferred
Securities will be used to purchase the Subordinated Debentures of the
Company, the Underwriting Agreement provides that the Company will agree to
pay as compensation (the "Underwriters' Compensation") to the Underwriters
for the Underwriters' arranging the investment therein of such proceeds, an
amount in immediately available funds of $ per Preferred Security (or
$ in the aggregate) for the accounts of the several Underwriters.
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During a period of 30 days from the date of this Prospectus, neither the
Trust nor the Company will, without the prior written consent of the
Representatives, directly or indirectly, sell, offer to sell, grant any
option for the sale of, or otherwise dispose of, any Preferred Securities,
any security convertible into or exchangeable into or exercisable for
Preferred Securities or the Subordinated Debentures or any debt securities
substantially similar to the Subordinated Debentures or any equity
securities substantially similar to the Preferred Securities (except for the
Subordinated Debentures and the Preferred Securities offered hereby).
The Preferred Securities have been approved for listing on the NYSE,
subject to official notice of issuance under the symbol "PPLPRC." Trading of
the Preferred Securities on the NYSE is expected to commence within a 30-day
period after the initial delivery of the Preferred Securities. The
Representatives have advised the Trust that they intend to make a market in
the Preferred Securities prior to the commencement of trading on the NYSE.
The Representatives will have no obligation to make a market in the
Preferred Securities, however, and may cease market making activities, if
commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the
Preferred Securities on the NYSE, the Underwriters will undertake to sell
lots of 100 or more Preferred Securities to a minimum of 400 beneficial
holders.
Until the distribution of the Preferred Securities is completed, rules of
the Commission may limit the ability of the Underwriters and certain selling
group members to bid for and purchase the Preferred Securities. As an
exception to these rules, the Representatives are permitted to engage in
certain transactions that stabilize the price of the Preferred Securities.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Preferred Securities.
If the Underwriters create a short position in the Preferred Securities
in connection with the offering, i.e., if they sell more Preferred
Securities than are set forth on the cover page of this Prospectus, the
Representatives may reduce that short position by purchasing Preferred
Securities in the open market.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
Preferred Securities in the open market to reduce the Underwriters' short
position or to stabilize the price of the Preferred Securities, they may
reclaim the amount of the selling concession from the Underwriters and
selling group members who sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases. The imposition of
a penalty bid might also have an effect on the price of a security to the
extent that it were to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Preferred
Securities. In addition, neither the Company nor any of the Underwriters
makes any representation that the Representatives will engage in such
transactions or that such transactions, once commenced, will not be
discontinued without notice.
The Company and the Trust have agreed to indemnify the Underwriters
against, or contribute to payments that the Underwriters may be required to
make in respect of, certain liabilities, including liabilities under the
Securities Act.
Certain of the Underwriters engage in transactions with, and, from time
to time, perform services for, the Company and its affiliates in the
ordinary course of business.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the enforceability of the Trust Agreement and the formation of
the Trust will be passed upon by Richards, Layton & Finger, special Delaware
Counsel to the Company and the Trust. The legality of the Guarantee and the
Subordinated Debentures will be passed upon for the Company by Michael A.
McGrail, Esq., Senior Counsel of the Company, and Simpson Thacher & Bartlett
(a partnership which includes professional corporations), and for the
Underwriters by Sullivan & Cromwell. Certain matters relating to United
States federal income tax considerations will be passed upon for the Company
by Simpson Thacher & Bartlett. However, all matters pertaining to the
organization of the Company will be passed upon only by Mr. McGrail. As to
matters involving the law of the Commonwealth of Pennsylvania, Simpson
Thacher & Bartlett and Sullivan & Cromwell will rely on the opinion of Mr.
McGrail, and as to matters involving the law of the State of Delaware, Mr.
McGrail, Simpson Thacher
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& Bartlett and Sullivan & Cromwell will rely on the opinion of Richards
Layton & Finger. Mr. McGrail is a full-time employee of the Company.
EXPERTS
The consolidated financial statements and related financial statement
schedule of the Company as of December 31, 1996 and 1995 and for the two
years then ended incorporated in this Prospectus by reference to PP&L's
Annual Report on Form 10-K have been so incorporated in reliance on the
report (which contains an explanatory paragraph relating to the Company's
reorganization) of Price Waterhouse LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
The consolidated financial statements, prior to restatement (not
presented separately therein), and related financial statement schedules as
of December 31, 1994 and for the year ended December 31, 1994 incorporated
in this Prospectus by reference from the Company's 1996 Annual Report on
Form 10-K have been audited by Deloitte & Touche LLP, independent auditors,
as stated in their reports which are incorporated herein by reference, and
have been so incorporated in reliance upon such reports given upon the
authority of that firm as experts in accounting and auditing.
Statements made herein and in the documents incorporated by reference in
this Prospectus as to matters of law and legal conclusions (except with
respect to any Delaware law or tax matters) have been reviewed by Michael A.
McGrail, Esq., Senior Counsel of the Company, and have been made in reliance
upon his authority as an expert.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE TRUST OR
THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THE TRUST SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO
DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by Reference........................... 4
Available Information..................................................... 4
Summary of Offering....................................................... 5
Risk Factors.............................................................. 9
PP&L Capital Trust........................................................ 12
Pennsylvania Power & Light Company........................................ 13
Use of Proceeds........................................................... 13
Accounting Treatment...................................................... 14
Selected Financial Data................................................... 14
Capitalization............................................................ 15
Description of Preferred Securities....................................... 16
Description of Subordinated Debentures.................................... 25
Description of Guarantee.................................................. 33
Relationship Among the Preferred Securities, the Subordinated Debentures
and the Guarantee........................................................ 35
Certain Federal Income Tax Consequences................................... 36
Underwriting.............................................................. 39
Validity of Securities.................................................... 41
Experts................................................................... 41
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,000,000 PREFERRED SECURITIES
PP&L CAPITAL TRUST
% TRUST ORIGINATED PREFERRED SECURITIES SM ("TOPRS SM")
(LIQUIDATION AMOUNT
$25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY
GUARANTEED, AS SET FORTH HEREIN, BY
PENNSYLVANIA POWER &
LIGHT COMPANY
---------------
PROSPECTUS
---------------
MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
(a) SEC registration fee........................................ 30,303
(b) Printing fees and expenses.................................. 50,000
(c) Legal fees and expenses..................................... 150,000
(d) Accounting fees and expenses................................ 40,000
(e) Blue Sky fees and expenses.................................. 10,000
(f) New York Stock Exchange Listing Fee......................... 44,300
(g) Rating Agency Fees.......................................... 68,500
(h) Trustees' fees and expenses................................. 6,500
(i) Other....................................................... 15,397
--------
Total.................................................... $415,000
========
</TABLE>
- ----------
All of the above except the SEC registration fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 7.02 of the By-laws of the Company reads as follows:
"Section 7.02. Indemnification of Directors and Officers.
(a) RIGHT TO INDEMNIFICATION. Except as prohibited by law, every
director and officer of the Company shall be entitled as of right to be
indemnified by the Company against reasonable expense and any liability
paid or incurred by such person in connection with any actual or
threatened claim, action, suit or proceeding, civil, criminal,
administrative, investigative or other, whether brought by or in the
right of the Company or otherwise, in which he or she may be involved, as
a party or otherwise, by reason of such person being or having been a
director or officer of the Company or by reason of the fact that such
person is or was serving at the request of the Company as a director,
officer, employee, fiduciary or other representative of another
corporation, partnership, joint venture, trust, employee benefit plan or
other entity (such claim, action, suit or proceeding hereinafter being
referred to as "action"). Such indemnification shall include the right to
have expenses incurred by such person in connection with an action paid
in advance by the Company prior to final disposition of such action,
subject to such conditions as may be prescribed by law. Persons who are
not directors or officers of the Company may be similarly indemnified in
respect of service to the Company or to another such entity at the
request of the Company to the extent the Board of Directors at any time
denominates such person as entitled to the benefits of this Section 7.02.
As used herein, "expense" shall include fees and expenses of counsel
selected by such persons; and "liability" shall include amounts of
judgments, excise taxes, fines and penalties, and amounts paid in
settlement.
(b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under paragraph (a)
of this Section 7.02 is not paid in full by the Company within thirty
days after a written claim has been received by the Company, the claimant
may at any time thereafter bring suit against the Company to recover the
unpaid amount of the claim, and, if successful in whole or in part, the
claimant shall also be entitled to be paid the expense of prosecuting
such claim. It shall be a defense to any such action that the conduct of
the claimant was such that under Pennsylvania law the Company would be
prohibited from indemnifying the claimant for the amount claimed, but the
burden of proving such defense shall be on the Company. Neither the
failure of the Company (including its Board of Directors, independent
legal counsel and its shareholders) to have made a determination prior to
the commencement of such action that indemnification of the claimant is
proper in the circumstances because the conduct of the claimant was not
such that indemnification would be prohibited by law, nor an actual
determination by the Company (including its Board of Directors,
independent legal counsel or its shareholders) that the conduct of the
claimant was such that indemnification would be prohibited by law, shall
be a defense to the action or create a presumption that the conduct of
the claimant was such that indemnification would be prohibited by law.
(c) INSURANCE AND FUNDING. The Company may purchase and maintain
insurance to protect itself and any person eligible to be indemnified
hereunder against any liability or expense asserted or incurred by such
person in connection with any action, whether or not the Company would
have the power to indemnify such person against such liability or
II-1
<PAGE>
expense by law or under the provisions of this Section 7.02. The Company
may create a trust fund, grant a security interest, cause a letter of
credit to be issued or use other means (whether or not similar to the
foregoing) to ensure the payment of such sums as may become necessary to
effect indemnification as provided herein.
(d) NON-EXCLUSIVITY; NATURE AND EXTENT OF RIGHTS. The right of
indemnification provided for herein (1) shall not be deemed exclusive of
any other rights, whether now existing or hereafter created, to which
those seeking indemnification hereunder may be entitled under any
agreement, by-law or charter provision, vote of shareholders or directors
or otherwise, (2) shall be deemed to create contractual rights in favor
of persons entitled to indemnification hereunder, (3) shall continue as
to persons who have ceased to have the status pursuant to which they were
entitled or were denominated as entitled to indemnification hereunder and
shall inure to the benefit of the heirs and legal representatives of
persons entitled to indemnification hereunder and (4) shall be applicable
to actions, suits or proceedings commenced after the adoption hereof,
whether arising from acts or omissions occurring before or after the
adoption hereof. The right of indemnification provided for herein may not
be amended, modified or repealed so as to limit in any way the
indemnification provided for herein with respect to any acts or omissions
occurring prior to the effective date of any such amendment, modification
or repeal."
Directors and officers of the Company may also be indemnified in certain
circumstances pursuant to the statutory provisions of general application
contained in Pennsylvania law.
Reference is also made to the Form of Underwriting Agreement, filed as
Exhibit 1 hereto, which contains provisions for indemnification of the
Company and its directors and officers by the several Underwriters against
certain liabilities for information furnished by the Underwriters.
The Company presently has insurance policies which, among other things,
include liability insurance coverage for officers and directors under which
officers and directors are covered against any "loss" by reason of payment
of damages, judgments, settlements and costs, as well as charges and
expenses incurred in the defense of actions, suits or proceedings. "Loss" is
specifically defined to exclude fines and penalties, as well as matters
deemed uninsurable under the law pursuant to which the insurance policy
shall be construed. The policies also contain other specific exclusions,
including illegally obtained personal profit or advantage, and dishonesty.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Reference is made to the Exhibit Index filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person
II-2
<PAGE>
of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, PENNSYLVANIA
POWER & LIGHT COMPANY CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE
THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILLING ON FORM S-3 AND HAS DULY
CAUSED THIS AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ALLENTOWN, AND COMMONWEALTH OF PENNSYLVANIA, ON THE 3RD DAY OF APRIL, 1997.
PENNSYLVANIA POWER & LIGHT COMPANY
By: /s/ William F. Hecht
---------------------------------------
William F. Hecht, Chairman, President
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE 3RD DAY OF APRIL,
1997.
SIGNATURE TITLE
--------- -----
/s/ William F. Hecht Principal Executive
- --------------------------------------------------- Officer and Director
WILLIAM F. HECHT, CHAIRMAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
/s/ R.E. Hill Principal Financial
- --------------------------------------------------- Officer
R.E. HILL, SENIOR VICE PRESIDENT--FINANCIAL
/s/ J.J. McCabe Principal Accounting
- --------------------------------------------------- Officer
J.J. MCCABE, VICE PRESIDENT AND CONTROLLER
E. ALLEN DEAVER, NANCE K. DICCIANI, WILLIAM J. } Directors
FLOOD, ELMER D. GATES, DEREK C. HATHAWAY, }
STUART HEYDT, CLIFFORD L. JONES, RUTH LEVENTHAL, }
FRANK A. LONG AND NORMAN ROBERTSON }
By /s/ William F. Hecht
-------------------------------------
WILLIAM F. HECHT, ATTORNEY-IN-FACT
II-4
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, PP&L
CAPITAL TRUST CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED
THIS AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ALLENTOWN, AND COMMONWEALTH OF PENNSYLVANIA, ON THE 3RD DAY OF APRIL, 1997.
PP&L CAPITAL TRUST
By: Pennsylvania Power & Light Company,
as Depositor
By: /s/ William F. Hecht
-------------------------------------
William F. Hecht, Chairman, President
and Chief Executive Officer
II-5
<PAGE>
PENNSYLVANIA POWER AND LIGHT COMPANY
EXHIBIT INDEX
The following Exhibits indicated by an asterisk preceding the Exhibit
number are filed herewith. The balance of the Exhibits have been filed by
previous amendment.
1.1 Proposed form of Underwriting Agreement for Preferred Securities.
4.1 Form of Junior Subordinated Indenture between the Company and The
Chase Manhattan Bank, as Debenture Trustee.
4.2 Certificate of Trust of PP&L Capital Trust.
4.3 Trust Agreement of PP&L Capital Trust.
4.4 Form of Amended and Restated Trust Agreement.
4.5 Form of Preferred Security Certificate for PP&L Capital Trust.
4.6 Form of Guarantee Agreement.
5.1 Opinion of Michael A. McGrail, Esq., relating to the legality of the
Subordinated Debentures and the Guarantee.
5.2 Opinion of Simpson Thacher & Bartlett, relating to the legality of
the Subordinated Debentures and the Guarantee.
5.3 Opinion of Richards, Layton & Finger, special Delaware counsel,
relating to the legality of the Preferred Securities of PP&L Capital
Trust.
8.1 Opinion of Simpson Thacher & Bartlett, as to certain United States
federal income tax matters.
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges
12.2 Statement re: Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Dividends.
*23.1 Consent of Price Waterhouse LLP.
*23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.2
hereto).
23.4 Consent of Richards, Layton & Finger, special Delaware counsel
(included in Exhibit 5.3 hereto).
23.5 Consent of Simpson Thacher & Bartlett (included in Exhibit 8.1
hereto).
24.1 Powers of Attorney (previously filed).
25.1 Statement of Eligibility under the Trust Indenture Act of 1939 of
The Chase Manhattan Bank, as Trustee under the Junior Subordinated
Indenture.
25.2 Statement of Eligibility under the Trust Indenture Act of 1939 of
The Chase Manhattan Bank, as Property Trustee under the Amended and
Restated Trust Agreement of PP&L Capital Trust.
25.3 Statement of Eligibility under the Trust Indenture Act of 1939 of
The Chase Manhattan Bank, as Guarantee Trustee under the Guarantee
for PP&L Capital Trust.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated February 3, 1997 appearing on page 41 of Pennsylvania Power & Light
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
Price Waterhouse LLP
Philadelphia, Pennsylvania
April 2, 1997
<PAGE>
Exhibit 23.2
[Deloitte & Touche LLP Letterhead]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Pennsylvania Power & Light Company and PP&L Capital Trust on Form S-3 of our
report dated February 3, 1995 on the consolidated statements of income,
shareowners' common equity, and cash flows of Pennsylvania Power & Light Company
and its subsidiaries for the year ended December 31, 1994, prior to restatement,
appearing in the Annual Report on Form 10-K of Pennsylvania Power & Light
Company for the year ended December 31, 1996 and to the reference to us under
the heading "Experts" in the Prospectus, which is part of this Registration
Statement.
Parsippany, New Jersey
April 2, 1997
