As filed with the Securities and Exchange Commission on January 29, 1997
File No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PENNSYLVANIA
DELAWARE 23-0959590
PENNSYLVANIA POWER & LIGHT (State Or Other Applied For
COMPANY PP&L CAPITAL TRUST Jurisdiction (I.R.S. Employer
(Exact Name Of Registrant As Of Incorporation Or Identification
Specified In Its Charter) Organization) Number)
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)
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. / /
<PAGE>
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. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of each maximum maximum
class of offering aggregate Amount of
securities to be Amount to be price per offering registrat
registered registered unit<F1> price<F1> ion fee
- --------------- --------------- -------- --------------- -----------
<S> <C> <C> <C> <C>
Junior
Subordinated
Deferrable
Interest
Debentures of
Pennsylvania
Power & Light
Company<F2> $100,000,000 $25 $100,000,000 NA
Preferred
Securities of
PP&L Capital
Trust . . . 4,000,000 $25 $100,000,000 $30303.04
Pennsylvania
Power & Light
Company
Guarantee
with respect
to Preferred
Securities
and
Pennsylvania
Power & Light
Company
obligations
with respect
to such
Preferred
Securities
under an
Indenture and
a Trust
Agreement<F3> NA NA NA NA
Total . . . . . $100,000,000<F4> 100% $100,000,000<F4> $30303.04
<PAGE>
<FN>
<F1> Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457.
<F2> The Junior Subordinated Deferrable Interest Debentures will be purchased
by PP&L Capital Trust with the proceeds of the sale of the Preferred
Securities.
<F3> The Guarantee, when taken together with the Pennsylvania Power & Light
Company's obligations under the Junior Subordinated Deferrable Interest
Debentures, 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's
obligations under the Preferred Securities. No separate considerations
will be received for the Guarantee or such back-up obligations.
<F4> Such amount represents the principal amount of Junior Subordinated
Deferrable Interest Debentures issued at their principal amount and the
issue price rather than the principal amount of Junior Subordinated
Deferrable Interest Debentures issued at an original issue discount. Such
amount also represents the initial public offering price of the Preferred
Securities.
</TABLE>
________________________
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.
_____________________________________________________________________________
_____________________________________________________________________________
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 29, 1997
PROSPECTUS
4,000,000 Preferred Securities
PP&L Capital Trust
% Trust Originated Preferred SecuritiesSM ("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 SecuritiesSM (the "Preferred
Securities") offered hereby evidence undivided beneficial ownership interests
in the assets of PP&L Capital Trust, a statutory business trust created under
the laws of the State of Delaware (the "Trust"). Pennsylvania Power & Light
Company, a Pennsylvania corporation (the "Company" or "PP&L"), will own all the
common securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities") representing the remaining undivided
beneficial ownership interests in the assets of the Trust. The Trust exists for
the sole purpose of issuing the Trust Securities and investing the proceeds
thereof in an equivalent amount of the Company's % junior subordinated
deferrable interest debentures due , 2027 (the "Subordinated
Debentures").
(continued on next page)
_________________________
See "Risk Factors" beginning on page 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"). If approved, 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.
<PAGE>
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public<F1> Discounts<F2> Trust<F2><F3><F4>
-------------- ---------------- ----------------
<S> <C> <C> <C>
Per Preferred
Security . . . . . $ <F3> $
Total . . . . . . . $ <F3> $
<FN>
<F1> Plus accrued distributions, if any, from , 1997.
<F2> The Company and the Trust have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. See "Underwriting".
<F3> Because 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 arranging the investment therein of
such proceeds, $ per Preferred Security (or $ in the
aggregate). See "Underwriting."
<F4> Expenses of the offering to be paid by the Company are estimated to be
approximately $ .
</TABLE>
_________________________
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.
_________________________
The date of this Prospectus is , 1997.
____________________
[FN]
<F1> SM "Trust Originated Preferred Securities" and "TOPrS" are
service marks of Merrill Lynch & Co., Inc.
<PAGE>
(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 accruing from
the date of original issuance and payable quarterly in
arrears on the first day of March, June, September and
December of each year, commencing , 1997, at the
annual rate of % (the "Securities Rate") of the stated
Liquidation Amount (as defined below) of $25 per Preferred
Security ("Distributions"). Subject to certain exceptions, as
described herein, the Company has the right to defer
payment of interest on the Subordinated Debentures at
any time or from time to time for a period not exceeding
20 consecutive quarters with respect to each deferral
period (each, an "Extension Period"), during which
Extension Periods the Company shall have the right to
make full or partial payments of interest on any
Interest Payment Date (as defined herein), provided that
no Extension Period may extend beyond the Stated
Maturity (as defined herein) of the Subordinated
Debentures. 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, 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 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
<PAGE>
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
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
terminate 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 extend the maturity
<PAGE>
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 September 30,
1996, the Company had approximately $3.1 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."
_________________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS
MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR
MAINTAIN THE MARKET PRICE OF THE PREFERRED SECURITIES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NYSE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
_________________________
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, 1995.
<PAGE>
2. The Company's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1996, June 30,
1996 and September 30, 1996.
3. The Company's Current Reports on Form 8-K dated
December 6, 1996 and on Form 8-K/A dated
December 9, 1996.
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
<PAGE>
(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 New York Stock Exchange, 20 Broad
Street, New York, New York 10005 and the Philadelphia
Stock Exchange, 1900 Market Street, Philadelphia,
Pennsylvania 19103.
The Company and the Trust have filed with the
Commission a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to
the securities offered hereby. This Prospectus omits, in
accordance with the rules and regulations of the
Commission, certain of the information contained in the
Registration Statement. Reference is hereby made to the
Registration Statement and the exhibits and the
financial statements, notes and schedules filed as a
part thereof or incorporated by reference therein for
further information with respect to the Company, the
Trust and the securities offered hereby. Statements
contained herein concerning the provisions of any
document are not necessarily complete and, in each
instance, where a copy of such document has been filed
as an exhibit to the Registration Statement or otherwise
has been filed with the Commission, reference is made to
the copy so filed. Each such statement is qualified in
its entirety by such reference.
No separate financial statements of the Trust have
been included herein. The Company and the Trust do not
consider that such financial statements would be
material to holders of the Preferred Securities because
the Trust is a newly formed special purpose entity, has
no operating history or independent operations and is
not engaged in and does not propose to engage in any
activity other than holding as trust assets the
Subordinated Debentures of the Company and issuing the
Preferred Securities and Common Securities. See "PP&L
Capital Trust", "Description of Preferred Securities",
"Description of Guarantee" and "Description of
Subordinated Debentures".
<PAGE>
SUMMARY OF OFFERING
The following summary is qualified in its entirety
by reference to the detailed information appearing
elsewhere in this Prospectus.
The Company . . . . . . The Company is an operating
electric utility, incorporated
under the laws of the
Commonwealth of Pennsylvania in
1920. PP&L serves approximately
1.2 million customers in a
10,000 square mile territory in
29 counties of central eastern
Pennsylvania with a population
of approximately 2.6 million
persons. This service area has
129 communities with
populations over 5,000, the
largest cities of which are
Allentown, Bethlehem,
Harrisburg, Hazleton,
Lancaster, Scranton,
Wilkes-Barre and Williamsport.
The Trust . . . . . . . PP&L Capital Trust is a
statutory business trust formed
under Delaware law solely for
the purpose of issuing the
Preferred Securities and the
Common Securities and investing
the proceeds thereof in the
Subordinated Debentures (and
engaging in activities
necessary or incidental
thereto).
The Trustees . . . . . The Chase Manhattan Bank will
act as property trustee (the
"Property Trustee") of the
Trust. Two employees of the
Company also will act as
trustees (the "Administrative
Trustees") of the Trust. Chase
Manhattan Bank Delaware will be
an additional trustee (the
"Delaware Trustee") of the
Trust. The Chase Manhattan Bank
also will act as trustee (the
"Indenture Trustee") under the
indenture pursuant to which the
Subordinated Debentures will be
issued and will act as trustee
under the Guarantee (the
"Guarantee Trustee"). The
Property Trustee, Delaware
Trustee and Administrative
<PAGE>
Trustees are sometimes referred
to as the "Trust Trustees."
Preferred Securities
Offered . . . . . . . . The Trust will offer 4,000,000
Preferred Securities evidencing
undivided beneficial ownership
interests in the assets of the
Trust. Holders of the Preferred
Securities are entitled to
receive cumulative cash
distributions at the Securities
Rate, accruing from the date of
original issuance and payable
quarterly in arrears on March
1, June 1, September 1 and
December 1 of each year,
commencing on , 1997
(each, a "Distribution Date").
Holders of the Preferred
Securities will have a
preference under certain
circumstances with respect to
Distributions and amounts
payable on liquidation or
redemption over the Common
Securities. See "Description of
Preferred Securities--
Subordination of Common
Securities." The Securities
Rate and the Distribution Dates
for the Preferred Securities
will correspond to the interest
rate and payment dates on the
Subordinated Debentures, which
will constitute all the assets
of the Trust. As a result, if
principal or interest is not
paid on the Subordinated
Debentures, no amounts will be
paid on the Preferred
Securities. See "Description of
Preferred Securities" herein.
Record Date . . . . . . The record date for
Distributions on the Preferred
Securities (other than on a
Redemption Date) will, for so
long as the Preferred
Securities remain in book-entry
form, be the close of business
one Business Day prior to the
relevant Distribution Date.
Subordinated
Debentures . . . . . . The Trust will invest the
proceeds from the issuance of
the Trust Securities in an
equivalent amount of
Subordinated Debentures. The
Subordinated Debentures will
mature on , 2027. At
<PAGE>
any time, the Company shall
have the right to shorten 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". 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
<PAGE>
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"),
provided that no Extension
Period may extend beyond the
Stated Maturity (as defined
herein) 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
(as defined herein), 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,
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
<PAGE>
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 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 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".
<PAGE>
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 such
proposed change, pronouncement
or decision is announced on or
after the date of 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
<PAGE>
(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.
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.
<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.
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 September 30, 1996, the Senior Debt of the Company
aggregated approximately $3.1 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, 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 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
<PAGE>
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 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,
(c) payments under the Guarantee and (d) purchases of
common stock related to the issuance of common stock or
rights under any of the Company's benefit plans for its
directors, officers or employees, related to the
issuance of common stock or rights under a dividend
reinvestment and stock purchase plan, or related to the
issuance of common stock (or securities convertible into
or exchangeable for common stock) as consideration in an
acquisition transaction). 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 (as defined below) 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. 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 the Company defer payment of interest on the
Subordinated Debentures, a holder of Preferred
Securities will continue 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 Extension
Period, therefore, might not receive the same return on
its investment as a holder that continues to hold its
Preferred Securities.
<PAGE>
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 the redemption price 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
such proposed change, pronouncement or decision is
announced on or after the date of 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.
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.
<PAGE>
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
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
<PAGE>
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, 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 to the extent that the Trust has
funds on hand available therefor at such time or (b) the
amount of assets of the Trust remaining available for
distribution to holders of the Preferred Securities. 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.
<PAGE>
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 proceeding directly against the Company
to enforce its rights under the Guarantee without first
instituting a 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
event 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 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 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 and the Indenture.
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
19
<PAGE>
described herein. Holders of Preferred Securities will
not be entitled to vote to appoint, remove or replace
the Property Trustee or the Delaware Trustee, which
voting rights are vested exclusively in the holder of
the Common Securities except 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 be classified
for United States federal income tax purposes as a grant
or trust even if such action adversely affects 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.
As indicated above, application will be made to list
the Preferred Securities on the NYSE. If the Preferred
Securities are not listed on a national securities
exchange or the NASDAQ National Market and the
underwriters do not make a market for the securities,
the liquidity of the Preferred Securities could be
adversely affected.
Possible Tax Law Changes Affecting the Preferred
Securities
On March 19, 1996, the Revenue Reconciliation Bill
of 1996 (the "Bill") was introduced in the 104th
Congress which would have, among other things, generally
denied interest deductions for interest on an instrument
issued by a corporation that has a maximum weighted
average maturity of more than 40 years. The Bill also
generally would have denied interest deductions for
interest on an instrument issued by a corporation that
has a maximum term of more than 20 years and that 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 would be treated as
exercised. The above-described provisions of the Bill
were proposed to be effective generally for instruments
issued on or after December 7, 1995. If either provision
<PAGE>
were to apply to the Subordinated Debentures, the
Company would not be able to deduct interest on the
Subordinated Debentures. However, on March 29, 1996, the
Chairmen of the Senate Finance and House Ways and Means
Committees issued a joint statement (the "Joint
Statement") to the effect that it was their intention
that the effective date of the President's legislative
proposals, if adopted, would be no earlier than the date
of appropriate Congressional action. In addition,
subsequent to the publication of the Joint Statement,
Senator Daniel Patrick Moynihan and Representatives Sam
M. Gibbons and Charles B. Rangel wrote letters to
Treasury Department officials concurring with the view
expressed in the Joint Statement (the "Democrat
Letters"). The 104th Congress adjourned without enacting
the Bill. Moreover, if the principles contained in the
Joint Statement and the Democrat Letters were followed,
any similar legislation that is enacted would not apply
to the Subordinated Debentures. There can be no
assurance, however, that current 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. Such a
change could give rise to a Tax Event, which would
permit the Company to cause a redemption of the
Preferred Securities before , 2002. See
"Description of Subordinated Debentures--Redemption" and
"Description of Preferred Securities--Redemption". See
also "Certain Federal Income Tax Consequences--Possible
Tax Law Changes."
PP&L CAPITAL TRUST
The Trust is a statutory business trust formed under
Delaware law pursuant to (i) the Amended and Restated
Trust Agreement (the "Trust Agreement") executed by the
Company, as Depositor, The Chase Manhattan Bank, as
Property Trustee, Chase Manhattan Bank Delaware, as
Delaware Trustee, and the Administrative Trustees named
therein, and (ii) the filing of a certificate of trust
with the Delaware Secretary of State on January 28,
1997. The Trust's business and affairs are conducted by
The Chase Manhattan Bank, as Property Trustee, Chase
Manhattan Bank Delaware, as Delaware Trustee, and two
individual Administrative Trustees who are employees of
the Company (collectively, the "Trust Trustees"). The
Trust exists for the exclusive purposes of (i) issuing
and selling the Preferred Securities and Common
Securities, (ii) using the proceeds from the sale of the
Preferred Securities and Common Securities to acquire
the Subordinated Debentures and (iii) engaging in only
those other activities necessary or incidental thereto.
Accordingly, the Subordinated Debentures 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
<PAGE>
Company. The Common Securities will rank pari passu, and
payments will be made thereon pro rata, with the
Preferred Securities, except that upon the occurrence
and continuance of an Event of Default (as defined
herein) under the Trust Agreement resulting from a
Debenture Event of Default (as defined herein) under the
Indenture, the rights of the Company as holder of the
Common Securities to payment in respect of Distributions
and payments upon liquidation, redemption or otherwise
will be subordinated to the rights of the holders of the
Preferred Securities. See "Description of Preferred
Securities--Subordination of Common Securities". The
Company will acquire Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of
the Trust. The Trust has a term of 55 years, but may
terminate earlier as provided in the Trust Agreement.
The principal executive office of the Trust is located
at Two North Ninth Street, Allentown, PA 18101, and its
telephone number is 610/774-5151.
The Trust Agreement will be substantially in the
form filed as an exhibit to the Registration Statement
of which this Prospectus forms a part. The Trust
Agreement will be qualified as an indenture under the
Trust Indenture Act. The Chase Manhattan Bank, as
Property Trustee, will act as sole indenture trustee
under the Trust Agreement for purposes of compliance
with the Trust Indenture Act. The Chase Manhattan Bank
will also act as trustee under the Guarantee and the
Indenture (each as defined herein). See "Description of
Guarantee" and "Description of Subordinated Debentures".
The holder of the Common Securities, unless a Debenture
Event of Default has occurred and is continuing, or the
holders of a majority in liquidation preference of the
Preferred Securities if any Debenture Event of Default
has occurred and is continuing, will be entitled to
appoint, remove or replace the Property Trustee and the
Delaware Trustee. In no event will the holders of the
Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustees; such
voting rights are vested exclusively in the holder of
the Common Securities. The duties and obligations of
each Trust Trustee are governed by the Trust Agreement.
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
<PAGE>
29 counties of central eastern Pennsylvania with a
population of approximately 2.6 million persons. This
service area has 129 communities with populations over
5,000, the largest cities of which are Allentown,
Bethlehem, Harrisburg, Hazleton, Lancaster, Scranton,
Wilkes-Barre and Williamsport. The Company's offices are
located at Two North Ninth Street, Allentown, PA 18101,
and its telephone number is 610/774-5151.
PP&L operates its generation and transmission
facilities as part of the Pennsylvania-New Jersey-
Maryland Interconnection Association ("PJM"). The PJM,
one of the world's largest power pools, includes eleven
companies serving about 22 million people in a 50,000
square mile territory covering all or part of
Pennsylvania, New Jersey, Maryland, Delaware, Virginia
and Washington, D.C.
During the twelve months ended September 30, 1996,
approximately $2.8 billion or about 97% 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.
The Company is a wholly owned subsidiary of PP&L
Resources, Inc., a Pennsylvania corporation
("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 the sale of such
Subordinated Debentures will be added to the Company's
general funds and used for general corporate purposes.
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.
<PAGE>
SELECTED FINANCIAL DATA
The following selected consolidated financial data
of the Company for the two years ended December 31, 1995
have been derived from audited financial statements, and
the selected consolidated financial data for the twelve
months ended September 30, 1996 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<F1> 1995<F2> September 30, 1996
------------------ ------------------ ------------------------------
(in millions, except ratios)
<S> <C> <C> <C>
Operating Revenues . . . . . . . . . . . . . . . . . $2,725 $2,752 $2,904
Operating Income . . . . . . . . . . . . . . . . . . 501 574 559
Net Income . . . . . . . . . . . . . . . . . . . . . 243 352 377
Ratio of Earnings to Fixed Charges<F3> . . . . . . . 2.70 3.48 3.52
Ratio of Earnings to Combined Fixed Charges and
Preferred Dividend Requirements<F4> . . . . . . . 2.26 2.92 2.99
____________________
<FN>
<F1> 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.
<F2> 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.
<F3> Fixed charges include interest expense and the estimated interest
component of rentals.
<F4> Combined fixed charges and preferred dividend requirements include
interest expense, preferred dividend requirements and the estimated
interest component of rentals.
</TABLE>
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1996, and as adjusted to reflect (i) the issuance of the
$100,000,000 of Preferred Securities offered hereby and (ii) the redemption of
$30 million of 6.75% First Mortgage Bonds due November 1997, $40 million of
7.00% First Mortgage Bonds due January 1999, $60 million of 7.25% First
Mortgage Bonds due February 2001 and $80 million of 7.50% First Mortgage Bonds
due January 2003. The following data is qualified by the detailed information
and financial statements appearing in the documents incorporated by reference.
<TABLE>
<CAPTION>
As of September 30, 1996
-----------------------------------------------
Percentage
Actual As Adjusted (%)
-------------- -------------- --------------
(in millions, except percentages)
<S> <C> <C> <C>
Long Term Debt (including current maturities) . . . . . . . . . $2,832 $2,622 45.3%
Preferred Securities:
Preferred Stock With Sinking Funds . . . . . . . . . . . . . 295 295 5.1
Preferred Stock Without Sinking Funds . . . . . . . . . . . 171 171 2.9
Preferred Securities offered hereby. . . . . . . . . . . . . 0 100 1.7
Common Equity . . . . . . . . . . . . . . . . . . . . . . . . . 2,605 2,605 50.0
-------- -------- -------
Total Capitalization . . . . . . . . . . . . . . . . . . . $5,903 $5,793 100.0%
======== ======== =======
</TABLE>
<PAGE>
DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement, the Administrative Trustees
on behalf of the Trust will issue the Preferred Securities and the Common
Securities. The Preferred Securities will represent undivided beneficial
ownership interests in the assets of the Trust and the holders thereof will be
entitled to a preference in certain circumstances with respect to Distributions
and amounts payable on redemption or liquidation over the Common Securities, as
well as other benefits as described in the Trust Agreement. This summary of
certain provisions of the Preferred Securities and the Trust Agreement does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Trust Agreement, including the
definitions therein of certain terms, and the Trust Indenture Act. Wherever
particular defined terms of the Trust Agreement (as supplemented or amended
from time to time) are referred to herein, the definitions of such defined
terms are incorporated herein by reference. The form of the Trust Agreement has
been filed as an exhibit to the Registration Statement of which this Prospectus
forms a part.
General
The Preferred Securities will rank pari passu, and payments will be made
thereon pro rata, with the Common Securities except as described under "--
Subordination of Common Securities". Legal title to the Subordinated Debentures
will be held by the Property Trustee in trust for the benefit of the holders of
the Preferred Securities and the Common Securities. The Guarantee executed by
the Company for the benefit of the holders of the Preferred Securities will be
a guarantee on a subordinated basis with respect to the Preferred Securities
but will not guarantee payment of Distributions or amounts payable on
redemption or liquidation of the Preferred Securities when the Trust does not
have funds on hand available to make such payments. See "Description of
Guarantee".
Distributions
The Preferred Securities represent undivided beneficial ownership interests
in the assets of the Trust and Distributions on each 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 March 1, June 1,
September 1 and December 1 of each year. Distributions will accumulate from
, 1997, the date of original issuance. The first Distribution
payment date for the Preferred Securities will be , 1997. The
amount of Distributions payable in the first payment period will be computed
on the basis of days in a 360-day year. The amount of Distributions
payable for any period thereafter will be computed on the basis of a 360-day
year of twelve 30-day months. In the event that any date on which Distributions
are payable on the Preferred Securities is not a Business Day, then payment
of the Distributions payable on such date will be made on the next succeeding
day that is a Business Day (and without any additional Distributions or
other payment in respect of any such delay), except that, if such Business
Day is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date such payment was originally payable (each date on which
Distributions are payable in accordance with the foregoing, a "Distribution
Date"). A "Business Day" shall mean any day other than a Saturday or a Sunday,
or a day on which banking institutions in The City of New York are authorized
<PAGE>
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 15 days prior to the relevant
Distribution Date.
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"), 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 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 the debt securities of any subsidiary of the Company if such
guarantee ranks pari passu 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, (c) payments under the Guarantee and (d) purchases of common
stock related to the issuance of common stock or rights under any of the
Company's benefit plans for its directors, officers or employees, related to
the issuance of common stock or rights under a dividend reinvestment and stock
purchase plan, or related to the issuance of common stock (or securities
convertible into or exchangeable for common stock) as consideration in an
acquisition transaction). 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
<PAGE>
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. 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 (as defined
below) 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 pro rata of 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, 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.
<PAGE>
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 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".
"Like Amount" means (i) with respect to a redemption of the Preferred
Securities and the Common Securities, Preferred Securities and the Common
Securities having a Liquidation Amount (as defined below) equal to the
principal amount of the Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture allocated 3% to the Common Securities
and 97% to the Preferred Securities and the proceeds of which will be used to
pay the Redemption Price of such Preferred Securities and to redeem such Common
Securities, and (ii) with respect to a distribution of the Subordinated
Debentures to holders of Preferred Securities and Common Securities in
connection with a dissolution or liquidation of the Trust, Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Preferred Securities or the Common Securities, as the case may be, of the
holder to whom such Subordinated Debentures are distributed. "Liquidation
Amount" means the stated amount of $25 per Preferred Security or Common
Security. After the liquidation date fixed for any distribution of Subordinated
Debentures (i) the Preferred Securities will no longer be deemed to be
outstanding, (ii) The Depository Trust Company ("DTC") or its nominee, as the
record holder of such Preferred Securities, will receive a registered global
certificate or certificates representing the Subordinated Debentures to be
delivered upon such distribution and (iii) 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.
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 Trust 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 Trust, to the extent funds are available, will
<PAGE>
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, 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 from the outstanding Preferred Securities not
previously called for redemption, by such method as the Property Trustee shall
deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to $25 or an integral multiple of $25 in excess
thereof) of the liquidation preference of Preferred Securities of a
denomination larger than $25. The Property Trustee shall promptly notify the
trust registrar in writing of the Preferred Securities selected for redemption
and, in the case of any Preferred Securities selected for partial redemption,
the liquidation preference thereof to be redeemed. For all purposes of 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 preference of Preferred Securities which has been or
is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Preferred Securities to be
redeemed at its registered address. 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.
<PAGE>
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, an 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
upon expiration of its term and shall terminate on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company or 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, 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 occurs as described in clause (i), (ii) or (iv)
above, 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 preference 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 directly by the
<PAGE>
Trust on the Preferred Securities shall be paid on a pro rata basis. The
holder(s) of the Common Securities will be entitled to receive distributions
upon any such liquidation pro rata with the holders of the Preferred
Securities, except that if an Event of Default resulting from a Debenture Event
of Default under the Indenture has occurred and is continuing, the Preferred
Securities shall have a priority over the Common Securities.
Events of Default; Notice
Any one of the following events constitutes an "Event of Default" under the
Trust Agreement (an "Event of Default") with respect to the Preferred
Securities issued thereunder (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under the
Indenture (see "Description of Subordinated Debentures--Debenture Events of
Default"); or
(ii) default in the payment of any Distribution when it becomes due
and payable, and continuation of such default for a period of 30 days; or
(iii) default in the payment of any Redemption Price of any Preferred
Security or Common Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Trust Trustees in the Trust Agreement (other
than a covenant or warranty a default in the performance of which or the breach
of which is dealt with in clause (ii) or (iii) above), and continuation of such
default or breach for a period of 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 preference 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 Trust.
Within five 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.
<PAGE>
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 interest or principal on 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 principal of or interest on
the 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.
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 and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Preferred
Securities. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Company as the holder of the Common
Securities. No resignation or removal of a Trust Trustee and no appointment of
a successor trustee shall be effective until the acceptance of appointment by
the successor trustee in accordance with the provisions 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 corporation 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 corporation resulting
from any merger, conversion or consolidation to which such Trustee shall be a
party, or any corporation 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 corporation shall be otherwise qualified and
eligible.
<PAGE>
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 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, 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 aggregate 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.
<PAGE>
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 Property Trustee with respect to
such Subordinated Debentures, (ii) waive any past default that is waiveable
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 a majority in
aggregate liquidation preference 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 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
<PAGE>
approvals of the holders of the Preferred Securities, prior to taking any of
the foregoing actions, the Trust Trustees shall receive 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.
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 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 Administrative Trustees 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
36
<PAGE>
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.
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
<PAGE>
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
<PAGE>
unless it is offered reasonable indemnity by such holder against the costs,
expenses and liabilities that might be incurred thereby. If no Event of Default
has occurred and is continuing and the Property Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in the
Trust Agreement or is unsure of the application of any provision of the Trust
Agreement, and the matter is not one on which holders of Preferred Securities
are entitled under the Trust Agreement to vote, then the Property Trustee may,
but shall be under no duty to, take such action as is directed by the Company
and, if not so directed, shall take such action as it deems advisable and in
the best interests of the holders of the Preferred Securities and the Common
Securities and will have no liability except for its own bad faith, negligence
or willful misconduct. The Property Trustee also serves as Trustee under the
Guarantee and the Indenture.
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
or as other than a grantor trust for United States federal income tax purposes
and so that the Subordinated Debentures will be treated as indebtedness of the
Company for United States federal income tax purposes. In this connection, the
Company and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of the Trust 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 materially adversely affect 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 nor mortgage or pledge any of
its assets.
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"). This summary of certain 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 March 1, June 1, September 1 and December 1
<PAGE>
of each year (each, an "Interest Payment Date"), commencing , 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 in which occurs the relevant
Interest Payment Date. It is anticipated that, until the liquidation, if any,
of the Trust, each Subordinated Debentures will be held in the name of the
Property Trustee in trust for the benefit of the holders of the Preferred
Securities and the Common Securities. The amount of interest payable in the
first payment period will be computed on the basis of days in a 360-day
year. The amount of interest payable for any period thereafter will be computed
on the basis of a 360-day year of twelve 30-day months. In the event that any
date on which interest is payable on the Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date such payment was originally payable. Accrued interest
that is not paid on the applicable Interest Payment Date will bear additional
interest on the amount thereof (to the extent permitted by law) at the rate per
annum of % thereof, compounded quarterly. The term "interest" as used herein
shall include quarterly interest payments and interest on quarterly interest
payments not paid on the applicable Interest Payment Date.
The Subordinated Debentures will mature on , 2027 (such date, as
it may be shortened or extended as hereinafter described, the "Stated
Maturity"). Such date may be shortened at any time by the Company to any date
not earlier than , 2002. Such date may also be extended at any time
at the election of the Company to any date not later than , 2046,
provided that at the time such election is made and at the time of extension
(i) the Company is not in bankruptcy, otherwise insolvent or in liquidation,
(ii) the Company is not in default in the payment of any interest or principal
on the Subordinated Debentures, (iii) if the Trust has not been liquidated, 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
<PAGE>
consecutive quarters with respect to each Extension Period, 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 the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu 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, (c) payments under the Guarantee and
(d) purchases of common stock related to the issuance of common stock or rights
under any of the Company's benefit plans for its directors, officers or
employees, related to the issuance of common stock or rights under a dividend
reinvestment and stock purchase plan, or related to the issuance of common
stock (or securities convertible into or exchangeable for common stock) as
consideration in an acquisition transaction). Prior to the termination of any
such Extension Period, the Company may further extend the interest payment
period, provided that no Extension Period may exceed 20 consecutive quarters or
extend beyond the Stated Maturity of the Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then
due on any Interest Payment Date, the Company may elect to begin a new
Extension Period 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 Property Trustee, the Administrative Trustees and the Debenture
Trustee notice of its election of such Extension Period at least one Business
Day prior to the earlier of (i) the date the Distributions on the Preferred
Securities would have been payable except for the election to begin such
Extension Period, (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 (iii) 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
<PAGE>
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 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, (c) payments under the Guarantee and
(d) purchases of common stock related to the issuance of common stock or rights
under any of the Company's benefit plans for its directors, officers or
employees, related to the issuance of common stock or rights under a dividend
reinvestment and stock purchase plan, or related to the issuance of common
stock (or securities convertible into or exchangeable for common stock) as
consideration in an acquisition transaction) 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 of 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 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 ceases to
accrue on such Subordinated Debentures or portions thereof called for
redemption.
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
<PAGE>
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 automated quotation
systems, if any, on which the Preferred Securities are then listed or quoted.
There can be no assurance as to the market price of any Subordinated Debentures
that may be distributed to the holders of Preferred Securities. For a
description of DTC and the terms of the depositary matters, see "Description of
Preferred Securities--Book-Entry Issuance".
Under current United States federal income tax law and interpretations
thereof and assuming, as expected, the Trust is treated as a grantor trust for
United States federal income tax purposes, a distribution by the Trust of the
Subordinated Debentures pursuant to a liquidation of the Trust will not be a
taxable event to the Trust or to holders of the Preferred Securities and will
result in a holder of the Preferred Securities receiving directly such holder's
pro rata share of the Subordinated Debentures (previously held indirectly
through the Trust). If, however, the liquidation of the Trust were to occur
because the Trust is subject to United States federal income tax with respect
to income accrued or received on the Subordinated Debentures as a result of the
occurrence of a Tax Event or otherwise, the distribution of Subordinated
Debentures to holders of the Preferred Securities by the Trust could be a
taxable event to the Trust and each holder, and holders of the Preferred
Securities may be required to recognize gain or loss as if they had exchanged
their Preferred Securities for the Subordinated Debentures they received upon
the liquidation of the Trust. See "Certain United States Federal Income Tax
Consequences--Distribution of Subordinated Debentures to Holders of Preferred
Securities."
Global Subordinated Debentures
The Subordinated Debentures may be issued in whole or in part in the form
of a Global Subordinated Debentures that will be deposited with, or on behalf
of, a depositary, which initially will be DTC (the "Depositary"). Global
Subordinated Debentures may be issued only in fully registered form and in
either temporary or permanent form. Unless and until it is exchanged in whole
or in part for the individual Subordinated Debentures represented thereby,
a 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
<PAGE>
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 premium, if any, 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, premium, if any, 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
<PAGE>
Trustee and the Depositary for such Global Subordinated Debentures, receive
individual Subordinated Debentures in exchange for such beneficial interests.
In any such instance, an owner of a beneficial interest in a Global
Subordinated Debentures will be entitled to physical delivery of individual
Subordinated Debentures of the series represented by such Global Subordinated
Debentures equal in principal amount to such beneficial interest and to have
such Subordinated Debentures registered in its name. Individual Subordinated
Debentures so issued will be issued in denominations, unless otherwise
specified by the Company, of $25 and integral multiples thereof.
Payment and Paying Agents
Payment of principal of and any interest on Subordinated Debentures will be
made at the office of the Debenture Trustee in the City of New York or at the
office of such Paying Agent or Paying Agents (which may include the Company) as
the Company may designate from time to time, except that at the option of the
Company payment of any interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Securities
Register or by wire or electronic funds transfer. Payment of any interest on
Subordinated Debentures (other than interest payable on a Redemption Date or
the maturity date) will be made to the Person in whose name such Subordinated
Debentures is registered at the close of business on the Regular Record Date
for such interest, except in the case of Defaulted Interest. The Company may at
any time designate additional Paying Agents or rescind the designation of any
Paying Agent; however the Company will at all times be required to maintain a
Paying Agent in each Place of Payment.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Company in trust, for the payment of the principal of and
premium, if any, or interest on any Subordinated Debentures and remaining
unclaimed for two years after such principal and premium, if any, 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, 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
<PAGE>
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 appropriate 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 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) transfer or exchange any Subordinated Debentures so selected
for redemption, except, in the case of any Subordinated Debentures being
redeemed in part, any portion thereof not to be redeemed.
Modification of Indenture
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of the Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not adversely affect in any material respect the interest of the holders
of Subordinated Debentures) 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 Debentures 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 of the
outstanding Subordinated Debenture so affected, (i) change the stated maturity
of the Subordinated Debentures, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon (except such
change or extension as is contemplated hereby) 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 interest 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
<PAGE>
holders of at least a majority of the aggregate liquidation preference 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 on the Subordinated Debentures
when due whether at maturity or upon redemption; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice to
the Company from the Debenture Trustee or the holders of at least 25% in
aggregate 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, and,
should the Debenture Trustee or such holders of such Subordinated Debentures
fail to make such declaration, the holders of at least 25% in aggregate
liquidation preference of the Preferred Securities shall have such right. The
holders of a majority in aggregate outstanding principal amount of Subordinated
Debentures may 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 annul such declaration and
waive such default, the holders of a majority in aggregate liquidation
preference of the Preferred Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures affected thereby may, on behalf of the holders of all
the Subordinated Debentures, waive any past default, except a default in the
payment of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee)
or a default in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holder of each
outstanding Subordinated Debenture, and should the holders of such
Subordinated Debentures fail to annul such declaration and waive such default,
the holders of a majority in aggregate liquidation preference of the Preferred
Securities shall have such right. The Company is required to file annually with
the Debenture Trustee a certificate as to whether or not the Company is in
<PAGE>
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
Property 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. The 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
Under the terms of the Indenture, the Company will be discharged from any
and all obligations in respect of the Subordinated Debentures (except in each
case to register the transfer or exchange of the Subordinated Debentures,
replace stolen, lost or mutilated Subordinated Debentures, maintain paying
agencies and hold moneys for payment in trust) if the Company deposits with the
Debenture Trustee, in trust, moneys or Government Obligations (as defined in
<PAGE>
the Indenture), or a combination thereof, in an amount sufficient to pay all
the principal of, and interest on, the Subordinated Debentures on the dates
such payments are due in accordance with the terms of the Subordinated
Debentures. Such defeasance or discharge may occur only if, among other things,
the Company has delivered to the Debenture Trustee an opinion of counsel to the
effect that the holders of the Subordinated Debentures will not recognize gain,
loss or income for United States federal income tax purposes as a result of the
satisfaction and discharge of the Indenture and such holders will be subject to
federal income taxation on the same amounts and in the same manner and at the
same times as if such satisfaction and discharge had not occurred.
Subordination
In the Indenture, the Company has covenanted and agreed that any
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Debt to the extent provided in the Indenture.
Upon any payment or distribution of assets of the Company upon any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the holders of Senior Debt will first be
entitled to receive payment in full of principal of (and premium, if any) and
interest, if any, on such Senior Debt before the holders of Subordinated
Debentures or the Property Trustee on behalf of the holders of Preferred
Securities will be entitled to receive or retain any payment in respect of the
principal of (and premium, if any) 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 in
respect of the principal of (or premium, if any) 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 premium, if any) 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
<PAGE>
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 such as
interest and foreign exchange rate contracts, commodity contracts 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, 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,
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 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 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 Preferred Securities) and all
costs and expenses of the Trust (including costs and expenses relating to the
organization of the Trust, the fees and expenses of the Trustees and the costs
and expenses relating to the operation of the Trust) and to pay any and all
taxes and all costs and expenses with respect thereto (other than United States
withholding taxes) to which the Trust might become subject.
Governing Law
The Indenture and the Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
Information Concerning the Debenture Trustee
The Company and its affiliates utilize various of the banking services
offered by the Debenture Trustee. Such services include providing lines of
credit.
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
<PAGE>
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. This summary of
certain 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, or (iii) upon a voluntary or involuntary dissolution,
winding up or liquidation of the Trust (unless the Subordinated Debentures are
distributed to holders of the Trust Securities), the lesser of (a) the
Liquidation Distribution to the extent that the Trust has funds on hand
available therefor at such time and (b) the amount of assets of the Trust
remaining available for distribution to holders of Trust Securities. 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
51
<PAGE>
Debt of the Company. See "--Status of the Guarantee". The Guarantee does not
limit the incurrence or issuance of additional Debt of the Company, whether
secured or unsecured or whether under the Indenture or any existing or other
indenture that the Company may enter into in the future or otherwise.
The Company has, through the Guarantee, the Trust Agreement, the
Subordinated Debentures and the Indenture, taken together, fully, irrevocably
and unconditionally guaranteed all of the Trust's obligations under the
Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Preferred Securities. See "Relationship Among the
Preferred Securities, the Subordinated Debentures and the Guarantee--General".
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Debt of the
Company.
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 to the extent not 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. 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
no vote will be required), the Guarantee may not be amended without the prior
approval of the holders of not less than a majority in aggregate 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
<PAGE>
first instituting a legal proceeding against the Trust, the Guarantee Trustee
or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with
all the conditions and covenants applicable to it under the Guarantee.
Information Concerning the Guarantee Trustee
The Company and its affiliates utilize various of the banking services
offered by the Guarantee Trustee. Such services include providing lines of
credit.
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care
and skill as a prudent person would exercise or use in the conduct of his or
her own affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of any Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the Trust Securities, upon full payment
of the amounts payable upon liquidation of the Trust or upon distribution of
Subordinated Debentures to the holders of the Trust Securities in exchange for
all of the Trust Securities. The Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of the Trust
Securities must restore payment of any sums paid under the Trust Securities or
the Guarantee.
Governing Law
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SUBORDINATED DEBENTURES AND THE GUARANTEE
Payments of Distributions and other amounts due on the Trust Securities (to
the extent the Trust has funds available for the payment of such Distributions)
are irrevocably guaranteed by the Company as and to the extent set forth under
"Description of Guarantee". Taken together, the Company's obligations under the
Subordinated Debentures, the Indenture, the Trust Agreement and the Guarantee
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the Preferred Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
Preferred Securities. If and to the extent that the Company does not make
payments on the Subordinated Debentures, the Trust will not pay Distributions
<PAGE>
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.
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. A principal difference between the rights of a holder
of a Preferred Securities and a holder of a Subordinated Debentures is that a
holder of a 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.
<PAGE>
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
<PAGE>
to the specific United States federal income tax consequences of the purchase,
ownership and disposition of Preferred Securities.
The authorities on which this summary is based are subject to various
interpretations and the opinions of Tax Counsel are not binding on the Internal
Revenue Service ("IRS") or the courts, either of which could take a contrary
position. Moreover, no rulings have been or will be sought from the IRS with
respect to the transactions described herein. Accordingly, there can be no
assurance that the IRS will not challenge the opinions expressed herein or that
a court would not sustain such a challenge. Nevertheless, Tax Counsel has
advised that it is of the view that, if challenged, the opinions expressed
herein would be sustained by a court with jurisdiction in a properly presently
case.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION
OF THE PREFERRED SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS SEE
"DESCRIPTION OF PREFERRED SECURITIES--REDEMPTION."
Classification of the Trust
In connection with the issuance of the Preferred Securities, Tax Counsel is
of the opinion that, under current law and assuming compliance with the terms
of the Trust Agreement, and based on certain facts and assumptions contained in
such opinion, the Trust will be classified as a grantor trust and not as an
association taxable as a corporation for United States federal income tax
purposes. As a result, each beneficial owner of Preferred Securities (a
"Securityholder") will be treated as owning an undivided beneficial interest in
the Subordinated Debentures. Accordingly, each Securityholder will be required
to include in its gross income its pro rata share of the interest income or
original issue discount that is paid or accrued on the Subordinated Debentures.
See "--Interest Income and Original Issue Discount."
Classification of the Subordinated Debentures
The Company, the Trust and the holders of the Preferred Securities (by
acceptance of a beneficial interest in a Preferred Security) will agree to
treat the Subordinated Debentures as indebtedness for all United States tax
purposes. In connection with the issuance of the Subordinated Debentures, Tax
Counsel is of the opinion that, under current law, and based on certain
representations, facts and assumptions set forth in such opinion, the
Subordinated Debentures will be classified as indebtedness for United States
federal income tax purposes.
Interest Income and Original Issue Discount
Under the applicable Treasury regulations, the Subordinated Debentures will
not be considered to have been issued with "original issue discount" ("OID")
within the meaning of Section 1273(a) of the Code. Accordingly, except as set
forth below, stated interest on the Subordinated Debentures generally will be
included in income by a Securityholder at the time such interest income is paid
or accrued in accordance with such Securityholder's regular method of tax
accounting.
If, however, the Company exercises its right to defer payments of interest
on the Subordinated Debentures, the Subordinated Debentures will become OID
<PAGE>
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 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
<PAGE>
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
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill") was
introduced in the 104th Congress. The Bill would have among other things,
generally denied interest deductions for interest on an instrument issued by a
corporation that has a maximum weighted average maturity of more than 40 years.
The Bill also would have generally denied interest deductions for interest on
an instrument issued by a corporation that has a maximum term of more than
20 years and that 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 would be treated as exercised. The
above-described provisions of the Bill were proposed to be effective generally
for instruments issued on or after December 7, 1995. If either provision were
applicable to the Subordinated Debentures, the Company would not be able to
deduct interest on the Subordinated Debentures. However, on March 29, 1996, the
Chairmen of the Senate Finance and House Ways and Means Committees issued the
Joint Statement to the effect that it was their intention that the effective
date of the President's legislative proposals, if adopted, would be no earlier
than the date of appropriate Congressional action. In addition, subsequent to
the publication of the Joint Statement, Senator Daniel Patrick Moynihan and
<PAGE>
Representatives Sam M. Gibbons and Charles B. Rangel wrote the Democrat Letters
to Treasury Department officials concurring with the view expressed in the
Joint Statement. The 104th Congress adjourned without enacting the Bill.
Moreover, if the principles contained in the Joint Statement and the Democrat
Letters were followed, any similar legislation that is subsequently enacted
would not apply to the Subordinated Debentures. There can be no assurance,
however, that current or future legislative proposals or final legislation will
not adversely affect the ability of the Company to deduct interest on the
Subordinated Debentures or otherwise affect the tax treatment of the
transactions described herein. Moreover, such a change could give rise to a Tax
Event, which would permit the Company to cause a redemption of the Preferred
Securities, as described more fully under "Description of Preferred
Securities--Redemption."
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated is acting as representative (the
"Representative"), has severally agreed to purchase the number of Preferred
Securities set forth opposite its name below. In the Underwriting Agreement,
the several Underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all of the Preferred Securities offered hereby if
any of the Preferred Securities are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchaser commitments of the nondefaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
Number of
Underwriters Preferred Securities
------------- ---------------------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000
==========
</TABLE>
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price, as set forth on the cover
page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $ per Preferred Security. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per
Preferred Security to certain brokers and dealers. After the Preferred
Securities are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Representative.
<PAGE>
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
Representative, 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
Representative has advised the Trust that they intend to make a market in the
Preferred Securities prior to the commencement of trading on the NYSE. The
Representative 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.
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, have performed 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, Simpson Thacher & Bartlett,
<PAGE>
Sullivan & Cromwell and Mr. McGrail will rely on the opinion of Richards Layton
& Finger. Mr. McGrail is a full-time employee of the Company.
EXPERTS
The consolidated financial statements and related financial statement
schedule of the Company as of December 31, 1995 and for the year then ended
incorporated by reference in this Prospectus have been so incorporated in
reliance on the report (which contains an explanatory paragraph relating to the
Company's reorganization as described in Note 1 to the consolidated financial
statements) of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements, prior to restatement (not presented
separately therein), and related financial statement schedules as of December
31, 1994 and 1993 and for the two years in the period ended December 31, 1994
incorporated in this Prospectus by reference from the Company's 1995 Annual
Report on Form 10-K have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports (such reports are unqualified but contain
an explanatory paragraph concerning a change in accounting principles) which
are incorporated herein by reference, and have been so incorporated in reliance
upon such reports given upon the authority of that firm as experts in
accounting and auditing.
Statements made herein and in the documents incorporated by reference in
this Prospectus as to matters of law and legal conclusions (except with respect
to any 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.
<PAGE>
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 . . . . . . . . . . . . . . . . . . . . . . . . . 5
Summary of Offering . . . . . . . . . . . . . . . . . . . . . . . . . 7
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
PP&L Capital Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Pennsylvania Power & Light Company . . . . . . . . . . . . . . . . . . 22
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . 23
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . 24
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Description of Preferred Securities . . . . . . . . . . . . . . . . . . 26
Description of Subordinated Debentures . . . . . . . . . . . . . . . . 39
Description of Guarantees . . . . . . . . . . . . . . . . . . . . . . . 51
Relationship Among the Preferred Securities,
the Subordinated Debentures and
the Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . 53
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . 55
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Validity of Securities . . . . . . . . . . . . . . . . . . . . . . . . 60
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
<PAGE>
4,000,000 Preferred Securities
PP&L Capital Trust
% Trust Originated Preferred SecuritiesSM
("TOPrSSM")
(Liquidation amount
$25 per Preferred Security)
Fully and unconditionally
guaranteed, as set forth herein, by
Pennsylvania Power &
Light Company
_________________________
PROSPECTUS
_________________________
Merrill Lynch & Co.
, 1997
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
<TABLE>
<CAPTION>
<S> <C>
(a) SEC registration fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,303
(b) Printing fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
(c) Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
(e) Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
(f) New York Stock Exchange Listing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,300
(g) Rating Agency Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,500
(h) Trustees' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,500
(i) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========
____________________
<FN>
All of the above except the SEC registration fee are estimated.
</TABLE>
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
<PAGE>
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 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
<PAGE>
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.
<PAGE>
(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 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.
<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 29th day of January, 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 29th day of January, 1997.
Signature Title
---------- -----
/s/ William F. Hecht Principal Executive
- ---------------------------------------------------- Officer and Director
William F. Hecht, Chairman, President
and Chief Executive Officer
/s/ R.E. Hill Principal Financial
- ---------------------------------------------------- Officer
R.E. Hill, Senior Vice President--Financial
/s/ J.J. McCabe Principal Accounting
- ---------------------------------------------------- Officer
J.J. McCabe, Vice President and Controller
E. Allen Deaver, Nance K. Dicciani, William J. Flood, Directors
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
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, PP&L
Capital Trust certifies that it has reasonable grounds to believe that it
meets all of the requirements for 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 29th day of January, 1997.
PP&L CAPITAL TRUST
By: Pennsylvania Power & Light Company,
as Depositor
By: /s/ William F. Hecht
------------------------------------
William F. Hecht, Chairman, President
and Chief Executive Officer
<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.
4.2 Certificate of Trust of PP&L Capital Trust.
4.3 Trust Agreement of PP&L Capital Trust.
4.4 Form of Amended and Restated Trust Agreement.
4.5 Form of Preferred Security Certificate for PP&L Capital Trust
(included in Exhibit 4.4).
4.6 Form of Guarantee Agreement.
5.1 Opinion of Michael A. McGrail, Esq., relating to the legality of
the Subordinated Debentures and the Guarantee.
5.2 Opinion of Simpson Thacher & Bartlett, relating to the legality of
the Subordinated Debentures and the Guarantee.
5.3 Opinion of Richards, Layton & Finger, special Delaware counsel,
relating to the legality of the Preferred Securities of PP&L
Capital Trust.
8.1 Opinion of Simpson Thacher & Bartlett, as to certain United States
federal income tax matters.
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges
12.2 Statement re: Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Dividends.
<F1>23.1 Consent of Price Waterhouse LLP.
<F1>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).
<F1>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.
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.
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 1, 1996 appearing on page 45 of Pennsylvania Power & Light
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
Price Waterhouse LLP
Philadelphia, Pennsylvania
January 29, 1997
<PAGE>
Exhibit 23.2
[Deloitte & Touche LLP Letterhead]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Pennsylvania Power & Light Company and PP&L Capital Trust on Form S-3 of
our report dated February 3, 1995 on the consolidated balance sheet and
statements of preferred and preference stock and long-term debt of
Pennsylvania Power & Light Company and its subsidiaries as of December 31,
1994, and the related consolidated statements of income, shareowners' common
equity, and cash flows for each of the two years in the period 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, 1995
and to the reference to us under the heading "Experts" in the Prospectus,
which is part of this Registration Statement.
January 29, 1997
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 L. 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 not in excess of $105 million of Trust Preferred
Securities of PP&L Capital Trust, a special purpose Delaware trust formed by
Pennsylvania Power & Light Company (and the underlying subordinated
debentures and guarantees of Pennsylvania Power & Light Company), 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 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
<PAGE>
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 22nd day of January, 1997.
/s/ E. Allen Deaver L.S. /s/ Stuart Heydt L.S.
- -----------------------------------------------------------
E. Allen Deaver Stuart Heydt
/s/ Nance K. Dicciani L.S. /s/ Clifford L. Jones L.S.
- -----------------------------------------------------------
Nance K. Dicciani Clifford L. Jones
/s/ William J. Flood L.S. /s/ Ruth Leventhal L.S.
- -----------------------------------------------------------
William J. Flood Ruth Leventhal
/s/ Elmer D. Gates L.S. /s/ Frank A. Long L.S.
- ----------------------------------------------------------
Elmer D. Gates Frank A. Long
/s/ Derek C. Hathaway L.S. /s/ Norman Robertson L.S.
- -----------------------------------------------------------
Derek C. Hathaway Norman Robertson
/s/ William F. Hecht L.S.
- -------------------------------
William F. Hecht
