<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1997
FILE NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<S> <C> <C>
PENNSYLVANIA POWER PENNSYLVANIA 23-0959590
& LIGHT COMPANY PP&L DELAWARE [TO COME]
CAPITAL TRUST II (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
(EXACT NAME OF REGISTRANT AS OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
SPECIFIED IN ITS CHARTER)
</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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION FEE
PRICE PER UNIT(1) OFFERING PRICE(1)
<S> <C> <C> <C> <C>
Junior Subordinated Deferrable Interest Debentures, $150,000,000 $ 25 $150,000,000 NA
Series B of Pennsylvania Power & Light Company(2)..
Preferred Securities of PP&L Capital Trust II....... 6,000,000 $ 25 $150,000,000 $45,454.55
Pennsylvania Power & Light Company Guarantee with NA NA NA NA
respect to Preferred Securities and Pennsylvania
Power & Light Company obligations with respect to
such Preferred Securities under an Indenture and a
Trust Agreement(3).................................
Total................................................. $150,000,000(4) 100% $150,000,000(4) $45,454.55
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457.
(2) The Junior Subordinated Deferrable Interest Debentures, Series B will be
purchased by PP&L Capital Trust II with the proceeds of the sale of the
Preferred Securities.
(3) The Guarantee, when taken together with Pennsylvania Power & Light Company's
obligations under the Junior Subordinated Deferrable Interest Debentures,
Series B, the Indenture and the Trust Agreement, will effectively provide a
full, irrevocable and unconditional guarantee, on a subordinated basis, by
Pennsylvania Power & Light Company of PP&L Capital Trust II's obligations
under the Preferred Securities. No separate consideration will be received
for the Guarantee or such back-up obligations.
(4) Such amount represents the principal amount of Junior Subordinated
Deferrable Interest Debentures, Series B issued at their principal amount
and the issue price rather than the principal amount of Junior Subordinated
Deferrable Interest Debentures, Series B issued at an original issue
discount. Such amount also represents the initial public offering price of
the Preferred Securities.
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 such State.
SUBJECT TO COMPLETION, DATED MAY 23, 1997
PROSPECTUS
- ----------
6,000,000 Preferred Securities
PP&L Capital Trust II
% 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 II, 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, Series B due , 2027 (the "Subordinated
Debentures").
(continued on next page)
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 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.
--------------
Application will be made to list the Preferred Securities on the New York
Stock Exchange, Inc. (the "NYSE"). 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.
<TABLE>
<CAPTION>
Initial Public Underwriting Proceeds to
Offering Price(1) Commission(2) Trust(3)(4)
<S> <C> <C> <C>
Per Preferred Security.................. $ 25.00 (3) $ 25.00
Total................................... $150,000,000 (3) $150,000,000
==========================================================================================
</TABLE>
(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 $430,000.
--------------
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.
Dean Witter Reynolds Inc.
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 October 1, 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 March 31, 1997, the
Company had approximately $3.2 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 Quarterly Report on Form 10-Q for the period ended March
31, 1997.
3. The Company's Current Reports on Form 8-K dated March 3, 1997, April 2,
1997 and May 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 II", "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.
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 II 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 6,000,000
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 October 1, 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
Subordinated Debentures, provided
that it can not shorten the maturity
to a date earlier than ,
2002 and can extend the maturity only
if
5
<PAGE>
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
or their earlier redemption in an
amount equal to the amount of related
Subordinated Debentures maturing or
being redeemed at a redemption
6
<PAGE>
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.
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.
7
<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 March 31, 1997, the Senior Debt of the
Company aggregated approximately $3.2 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
8
<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
9
<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.
10
<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
Application will be made to list the Preferred Securities on the NYSE. 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.
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 II
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 May 16, 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 the Company. The Common Securities will rank pari passu, and payments
will be made thereon pro rata, with the Preferred
11
<PAGE>
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.
Beginning in April 1997, PP&L began to self-schedule its generating units to
meet native load demand and bilateral energy sales. Prior to April 1997, PP&L's
generating units were dispatched by the Pennsylvania-New Jersey-Maryland
Interconnection Association.
During the twelve months ended March 31, 1997, 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 ("PP&L Resources").
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 added to the Company's general funds and used
for general corporate purposes, including the repayment of short-term debt.
12
<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 and for the twelve months ended March 31, 1997 have been derived from
unaudited 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, TWELVE MONTHS ENDED
1994(A) 1995(B) 1996 MARCH 31, 1997
-----------------------------------------------
(IN MILLIONS, EXCEPT RATIOS)
----------------------------
<S> <C> <C> <C> <C>
Operating Revenues............................................ $2,725 $2,752 $2,910 $2,907
Operating Income.............................................. $ 501 $ 574 $ 556 $ 551
Net Income.................................................... $ 243 $ 352 $ 357 $ 352
Ratio of Earnings to Fixed Charges(c)......................... 2.70 3.48 3.50 3.49
Ratio of Earnings to Combined Fixed Charges and 2.26 2.92 2.93 2.92
Preferred Dividend Requirements(d)..............
- ---------------------------------------------------------------------------------------------------------------
</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.
13
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of March 31, 1997, and as adjusted to reflect (i) the issuance of the
$150,000,000 of Preferred Securities offered hereby and $100,000,000 of the
8.20% Trust Originated Preferred Securities issued by PP&L Capital Trust on
April 8, 1997 and (ii) the redemption on April 1, 1997 of $210 million principal
amount of the Company's first mortgage bonds. The following data is qualified by
the detailed information and financial statements appearing in the documents
incorporated herein by reference.
<TABLE>
<CAPTION>
As of March 31, 1997
ACTUAL AS ADJUSTED PERCENTAGE
(%)
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Long-Term Debt (including current maturities).. $2,832 $2,622 43.7 %
8.20% Trust Originated Preferred Securities
of PP&L Capital Trust (1).................... 0 100 1.7
Preferred Securities offered hereby (2)........ 0 150 2.5
Preferred Stock(3):
With Sinking Funds............................ 295 295 4.9
Without Sinking Funds......................... 171 171 2.8
Common Equity.................................. 2,661 2,661 44.4 %
------ ------ ------
Total Capitalization........................ $5,959 $5,999 100.0 %
====== ====== ======
- ----------------------------------------------------------------------------------
</TABLE>
(1) PP&L Capital Trust issued $100,000,000 of 8.20% Trust Originated Preferred
Securities on April 8, 1997. The sole asset of PP&L Capital Trust is
$103,092,800 of junior subordinated deferrable interest debentures of the
Company that bear interest at a rate of 8.20% per annum and will mature on
April 1, 2027. The Company owns all of the common securities of PP&L
Capital Trust.
(2) As described herein, PP&L Capital Trust II is offering $150,000,000 of
Preferred Securities. The sole asset of PP&L Capital Trust II will be
$154,639,200 of Subordinated Debentures of the Company that bear interest at
a rate of % per annum and will mature on , 2027. The Company
will own all of the Common Securities of PP&L Capital Trust II.
(3) In April 1997, PP&L Resources completed a tender offer for the outstanding
preferred stock of the Company. As a result of that tender offer, PP&L
Resources acquired $248 million of the Company's preferred stock with
sinking funds and $120 million of the Company's preferred stock without
sinking funds. In the aggregate, PP&L Resources acquired and now owns 79% of
the outstanding preferred stock of the Company.
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.
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<PAGE>
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 October 1, 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).
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
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<PAGE>
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
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
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<PAGE>
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 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
17
<PAGE>
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 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
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<PAGE>
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.
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
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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, 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.
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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 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.
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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.
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.
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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.
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.
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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 October 1, 1997, to the
person in 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, the 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
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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 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
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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 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"). A Global
Subordinated Debentures may be issued only in fully registered form and in
either temporary or permanent form. Unless and until it is
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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 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.
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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, 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.
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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.
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
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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.
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
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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 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.
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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 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
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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.
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.
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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) 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.
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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 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
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<PAGE>
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
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
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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.
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."
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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, Dean Witter Reynolds Inc., 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.
UNDERWRITERS NUMBER OF
- ------------ PREFERRED SECURITIES
--------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................
Dean Witter Reynolds Inc................
A.G. Edwards & Sons, Inc................
Legg Mason Wood Walker, Incorporated....
PaineWebber Incorporated................
Prudential Securities Incorporated......
Total................................... 6,000,000
==========
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. 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.
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 are expected to be approved for listing on the NYSE,
subject to official notice of issuance under the symbol " ". 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.
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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 & 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 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 schedule 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 report which
is 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
PAGE
----
Incorporation of Certain Documents by Reference... 4
Available Information............................. 4
Summary of Offering............................... 5
Risk Factors...................................... 8
PP&L Capital Trust II............................. 11
Pennsylvania Power & Light Company................ 12
Use of Proceeds................................... 12
Accounting Treatment.............................. 13
Selected Financial Data........................... 13
Capitalization.................................... 14
Description of Preferred Securities............... 14
Description of Subordinated Debentures............ 24
Description of Guarantee.......................... 32
Relationship Among the Preferred Securities, the
Subordinated Debentures and the Guarantee........ 34
Certain Federal Income Tax Consequences........... 35
Underwriting...................................... 38
Validity of Securities............................ 39
Experts........................................... 39
6,000,000 Preferred Securities
PP&L Capital Trust II
% 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.
DEAN WITTER REYNOLDS INC
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED.
, 1997
================================================================================
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
(a) SEC registration fee............................... $ 45,455
(b) Printing fees and expenses......................... 60,000
(c) Legal fees and expenses............................ 75,000
(d) Accounting fees and expenses....................... 28,000
(e) Blue Sky fees and expenses......................... 10,000
(f) New York Stock Exchange Listing Fee................ 66,450
(g) Rating Agency Fees................................. 125,000
(h) Trustees' fees and expenses........................ 7,500
(i) Other.............................................. 12,595
--------
Total............................................. $430,000
========
- ------------------------------------------------------------------
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 expense by law or under the provisions
of this Section 7.02. The Company may create a trust fund, grant a security
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<PAGE>
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 of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
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<PAGE>
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.
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<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 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 23RD DAY OF MAY, 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 REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON THE 23RD DAY OF MAY, 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
FREDERICK M. BERNTHAL, E. ALLEN DEAVER, NANCE K. Directors
DICCIANI, WILLIAM J. 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
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<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, PP&L CAPITAL
TRUST II 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 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
23RD DAY OF MAY, 1997.
PP&L CAPITAL TRUST II
By: Pennsylvania Power & Light Company,
as Depositor
By: /s/ William F. Hecht
----------------------------------
William F. Hecht, Chairman, President
and Chief Executive Officer
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<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 will be filed by 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 (Incorporated by reference to
Exhibit 4.1 of Amendment No. 1 to the Registration Statement on Form S-
3 of PP&L Capital Trust and Pennsylvania Power and Light Company filed
on March 26, 1997).
4.2 Certificate of Trust of PP&L Capital Trust II.
4.3 Trust Agreement of PP&L Capital Trust II.
4.4 Form of Amended and Restated Trust Agreement of PP&L Capital Trust II.
4.5 Form of Preferred Security Certificate for PP&L Capital Trust II.
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 II.
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.
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 II.
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 II.
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<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
May 22, 1997
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Pennsylvania Power & Light Company and PP&L Capital Trust II 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
May 22, 1997
<PAGE>
Exhibit 24.1
PENNSYLVANIA POWER & LIGHT COMPANY
ISSUANCE OF TRUST PREFERRED SECURITIES
POWER OF ATTORNEY
-----------------
The undersigned directors of Pennsylvania Power & Light Company, a
Pennsylvania corporation, hereby appoint William F. Hecht, Ronald E. Hill and
Robert J. Grey their true and lawful attorney, and each of them their true and
lawful attorney, with power to act without the other and with full power of
substitution and resubstitution, to execute for the undersigned directors and in
their names to file with the Securities and Exchange Commission, Washington,
D.C., under provisions of the Securities Act of 1933, as amended, a registration
statement or registration statements for the registration under provisions of
the Securities Act of 1933, as amended, and any other rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, of
either (i) not in excess of $150 million of Trust Preferred Securities of PP&L
Capital Trust II, a special purpose Delaware trust formed by Pennsylvania Power
& Light Company, as well as the underlying Subordinated Debentures and
Guarantees of Pennsylvania Power & Light Company, or (ii) $150 million of such
Subordinated Debentures alone (including in both cases any registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
which increases said amount to the extent permitted by any such Rule); and any
and all amendments thereto, whether said amendments add to, delete from or
otherwise alter any such registration statement or registration statements, or
add or withdraw any
<PAGE>
2
exhibits or schedules to be filed therewith and any and all instruments in
connection therewith. The undersigned hereby grant to said attorneys and each
of them full power and authority to do and perform in the name of and on behalf
of the undersigned, and in any and all capabilities, any act and thing
whatsoever required or necessary to be done in and about the premises, as fully
and to all intents and purposes as the undersigned might do, hereby ratifying
and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals
this 19th day of May, 1997.
___________________________L.S. ____________________L.S.
Frederick M. Bernthal William F. Hecht
___________________________L.S. ____________________L.S.
E. Allen Deaver Stuart Heydt
___________________________L.S. ____________________L.S.
Nance K. Dicciani Clifford L. Jones
___________________________L.S. ____________________L.S.
William J. Flood Ruth Leventhal
___________________________L.S. ____________________L.S.
Elmer D. Gates Frank A. Long
___________________________L.S. ____________________L.S.
Derek C. Hathaway Norman Robertson
