<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1997
FILE NO. 333-27773
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<S> <C> <C>
PENNSYLVANIA POWER PENNSYLVANIA 23-0959590
& LIGHT COMPANY PP&L DELAWARE [TO COME]
CAPITAL TRUST II (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
(EXACT NAME OF REGISTRANT AS OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
SPECIFIED IN ITS CHARTER)
</TABLE>
TWO NORTH NINTH STREET
ALLENTOWN, PENNSYLVANIA 18101
610/774-5151
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN R. BIGGAR
VICE PRESIDENT-FINANCE
PENNSYLVANIA POWER & LIGHT COMPANY
TWO NORTH NINTH STREET
ALLENTOWN, PENNSYLVANIA 18101
610/774-5151
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
VINCENT PAGANO, JR. ROBERT B. HIDEN, JR.
SIMPSON THACHER & BARTLETT SULLIVAN & CROMWELL
425 LEXINGTON AVENUE 125 BROAD STREET
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10004
(212) 455-2000 (212) 558-1000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
-------------------------
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED
PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT PLANS, CHECK THE FOLLOWING
BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933 OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. [ ]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(b) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(c)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 6, 1997
PROSPECTUS
6,000,000 PREFERRED SECURITIES
PP&L CAPITAL TRUST II
% TRUST ORIGINATED PREFERRED SECURITIES SM ("TOPRS SM")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
PENNSYLVANIA POWER & LIGHT COMPANY
----------
The % Trust Originated Preferred Securities SM (the "Preferred Securities")
offered hereby evidence undivided beneficial ownership interests in the assets
of PP&L Capital Trust II, a statutory business trust created under the laws of
the State of Delaware (the "Trust"). Pennsylvania Power & Light Company, a
Pennsylvania corporation (the "Company" or "PP&L"), will own all the common
securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities") representing the remaining undivided
beneficial ownership interests in the assets of the Trust. The Trust exists for
the sole purpose of issuing the Trust Securities and investing the proceeds
thereof in an equivalent amount of the Company's % Junior Subordinated
Deferrable Interest Debentures, Series B due July 1, 2027 (the "Subordinated
Debentures").
SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING
THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS
ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
Application will be made to list the Preferred Securities on the New York
Stock Exchange, Inc. (the "NYSE"). Trading of the Preferred Securities on the
NYSE is expected to commence within a 30-day period after the initial delivery
of the Preferred Securities. See "Underwriting."
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security............ $25.00 (3) $25.00
- --------------------------------------------------------------------------------
Total............................. $150,000,000 (3) $150,000,000
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued distributions, if any, from , 1997.
(2) The Company and the Trust have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Subordinated Debentures, the Company has
agreed to pay to the Underwriters, as compensation for their arranging the
investment therein of such proceeds, $. per Preferred Security (or $
in the aggregate). See "Underwriting."
(4) Expenses of the offering to be paid by the Company are estimated to be
approximately $430,000.
----------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made only in book-
entry form through the facilities of The Depository Trust Company on or about
, 1997.
----------
MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
----------
- ----- The date of this Prospectus is , 1997.
SM "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING THE PURCHASE OF PREFERRED
SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
(CONTINUED FROM COVER PAGE)
The Subordinated Debentures when issued will be unsecured obligations of the
Company and will be subordinate and junior in right of payment to certain other
indebtedness of the Company, as described herein. Upon an event of default under
the Trust Agreement (as defined herein), the holders of the Preferred Securities
will have a preference over the holders of the Common Securities with respect to
payments in respect of distributions and payments upon redemption, liquidation
and otherwise.
Holders of the Preferred Securities will be entitled to receive cumulative
cash distributions accumulating from the date of original issuance and payable
quarterly in arrears on the first day of January, April, July and October of
each year, commencing October 1, 1997, at the annual rate of % (the
"Securities Rate") of the stated Liquidation Amount (as defined below) of $25
per Preferred Security ("Distributions"). Subject to certain exceptions, as
described herein, the Company has the right to defer payment of interest on the
Subordinated Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each deferral period (each, an
"Extension Period"), during which Extension Periods the Company shall have the
right to make full or partial payments of interest on any Interest Payment Date
(as defined herein), provided that no Extension Period may extend beyond the
Stated Maturity (as defined herein) of the Subordinated Debentures. No interest
shall be due and payable during an Extension Period, except at the end thereof.
Upon the termination of any such Extension Period and the payment of all amounts
then due on any Interest Payment Date, the Company may elect to begin a new
Extension Period subject to the requirements set forth herein. If interest
payments on the Subordinated Debentures are so deferred, cash distributions on
the Preferred Securities will also be deferred and the Company may not, and may
not permit any subsidiary of the Company to, subject to certain exceptions set
forth herein, among other things, declare or pay any cash distributions with
respect to the Company's capital stock or debt securities that rank pari passu
with or junior to the Subordinated Debentures. During an Extension Period
interest on the Subordinated Debentures will continue to accrue (and the amount
of Distributions to which holders of the Preferred Securities are entitled will
accumulate at the Securities Rate, compounded quarterly), and holders of the
Preferred Securities will be required to accrue interest income for United
States federal income tax purposes prior to receipt of the cash related to such
interest income. See "Description of Subordinated Debentures--Option to Extend
Interest Payment Period" and "Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount."
The Company has, through the Guarantee, the Trust Agreement, the Subordinated
Debentures and the Indenture (each, as defined herein), taken together, fully,
irrevocably and unconditionally guaranteed all of the Trust's obligations under
the Preferred Securities. See "Relationship Among the Preferred Securities, the
Subordinated Debentures and the Guarantee." The Company guarantees the payment
of Distributions and payments on liquidation of the Trust or redemption of the
Preferred Securities, but only in each case to the extent of funds held by the
Trust, as described herein (the "Guarantee"). See "Description of Guarantee"
herein. If the Company does not make interest payments on the Subordinated
Debentures held by the Trust, the Trust will have insufficient funds to pay
Distributions on the Preferred Securities. The Guarantee does not cover payment
of Distributions when the Trust does not have sufficient funds to pay such
Distributions. In the event a Debenture Event of Default (as defined below) has
occurred and is continuing and such default is attributable to the failure of
the Company to pay interest or principal on the Subordinated Debentures, a
holder of Preferred Securities may institute a legal proceeding directly against
the Company to enforce payment of such Distributions to such holder. The
obligations of the Company under the Guarantee and the Subordinated Debentures
are subordinate and junior in right of payment to all Senior Debt (as defined in
"Description of Subordinated Debentures--Subordination" herein) of the Company.
The Preferred Securities are subject to mandatory redemption, in whole or in
part, upon repayment of the Subordinated Debentures at maturity or their earlier
redemption in an amount equal to the amount of related Subordinated Debentures
maturing or being redeemed at a redemption price equal to the aggregate
liquidation preference of such Preferred Securities plus accumulated and unpaid
Distributions thereon to the date of redemption. The Subordinated Debentures are
redeemable prior to maturity at the option of the Company (i) on or after July
1, 2002, in whole at any time or in part from time to time, at a redemption
price equal to the accrued and unpaid interest on the Subordinated Debentures so
redeemed to the date fixed for redemption, plus 100% of the principal amount
thereof or (ii) at any time, in whole (but not in part), upon the occurrence and
continuation of a Special Event (as defined herein), at any time within 90 days
following the occurrence of such Special Event, at a redemption price equal to
the accrued and unpaid interest on the Subordinated Debentures so redeemed to
the date
2
<PAGE>
fixed for redemption, plus 100% of the principal amount thereof, in each case
subject to the further conditions described under "Description of Subordinated
Debentures--Redemption."
At any time, the Company will have the right to liquidate the Trust and cause
the Subordinated Debentures to be distributed to the holders of the Preferred
Securities and the Common Securities in liquidation of the Trust. See
"Description of Preferred Securities--Redemption--Special Event Redemption or
Distribution of Subordinated Debentures."
At any time, the Company shall have the right to shorten or extend the
maturity of the Subordinated Debentures, provided that it can not shorten the
maturity to a date earlier than July 1, 2002 and can extend the maturity only
if certain conditions are met. See "Description of Subordinated Debentures--
General."
The Subordinated Debentures are subordinate and junior in right of payment to
all Senior Debt (as defined herein) of the Company. As of March 31, 1997, the
Company had approximately $3.2 billion aggregate principal amount of Senior Debt
outstanding. The terms of the Subordinated Debentures place no limitation on the
amount of Senior Debt that may be incurred by the Company. See "Description of
Subordinated Debentures--Subordination."
In the event of the liquidation of the Trust, after satisfaction of the
creditors of the Trust, if any, as provided by applicable law, the holders of
the Preferred Securities will be entitled to receive the stated Liquidation
Amount of $25 per Preferred Security plus accumulated and unpaid Distributions
thereon to the date of payment, which may be in the form of a distribution of
such amount in Subordinated Debentures, subject to certain exceptions. See
"Description of Preferred Securities--Liquidation Distribution Upon
Termination."
The Preferred Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Preferred Securities will be shown on, and transfers
thereof will be effected only through, records maintained by participants in
DTC. Except as described herein, Preferred Securities in certificated form will
not be issued in exchange for the global certificates. See "Description of the
Preferred Securities--Book-Entry Issuance."
---------------------
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Securities and Exchange
Commission (the "Commission") are incorporated by reference in this Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1996.
2. The Company's Quarterly Report on Form 10-Q for the period ended March
31, 1997.
3. The Company's Current Reports on Form 8-K dated March 3, 1997, April 2,
1997 and May 2, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
after the date of this Prospectus and prior to the termination of the offering
made hereunder shall be deemed to be incorporated by reference into this
Prospectus and to be a part of this Prospectus from the respective dates of the
filing of such documents. The Company will provide without charge to each person
to whom this Prospectus is delivered, on the written or oral request of such
person, a copy of any or all of the documents incorporated by reference herein
(other than exhibits not specifically incorporated by reference into the text of
such documents). Requests should be directed to Pennsylvania Power & Light
Company, Two North Ninth Street, Allentown, PA 18101, Attention: Investor
Services Department (800/345-3085).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated herein by reference modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports and other information with the
Commission. Reports, proxy statements and other information filed by the Company
with the Commission pursuant to the informational requirements of the Exchange
Act may be inspected and copied at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, and at the following Regional Offices of the Commission:
Chicago Regional Office, Suite 1400, Citicorp Center, 14th Floor, 500 West
Madison Street, Chicago, Illinois 60661; and New York Regional Office, 7 World
Trade Center, 13th Floor, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The Commission also maintains a Web site (http://www.sec.gov) that
contains reports, proxy statements and other information regarding the Company.
In addition, reports, proxy statements and other information concerning the
Company may be inspected at the offices of the NYSE, 20 Broad Street, New York,
New York 10005 and the Philadelphia Stock Exchange, 1900 Market Street,
Philadelphia, Pennsylvania 19103.
The Company and the Trust have filed with the Commission a Registration
Statement on Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This
Prospectus omits, in accordance with the rules and regulations of the
Commission, certain of the information contained in the Registration Statement.
Reference is hereby made to the Registration Statement and the exhibits and the
financial statements, notes and schedules filed as a part thereof or
incorporated by reference therein for further information with respect to the
Company, the Trust and the securities offered hereby. Statements contained
herein concerning the provisions of any document are not necessarily complete
and, in each instance, where a copy of such document has been filed as an
exhibit to the Registration Statement or otherwise has been filed with the
Commission, reference is made to the copy so filed. Each such statement is
qualified in its entirety by such reference.
No separate financial statements of the Trust have been included herein. The
Company and the Trust do not consider that such financial statements would be
material to holders of the Preferred Securities because the Trust is a newly
formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Subordinated Debentures of the Company
and issuing the Preferred Securities and Common Securities. See "PP&L Capital
Trust II", "Description of Preferred Securities," "Description of Guarantee" and
"Description of Subordinated Debentures."
4
<PAGE>
SUMMARY OF OFFERING
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. See "Risk Factors"
for a discussion of certain information prospective investors should carefully
review in connection with an investment in the securities offered hereby.
The Company........................... The Company is an operating electric
utility, incorporated under the laws
of the Commonwealth of Pennsylvania
in 1920. PP&L serves approximately
1.2 million customers in a 10,000
square mile territory in 29 counties
of central eastern Pennsylvania with
a population of approximately 2.6
million persons. This service area
has 129 communities with populations
over 5,000, the largest cities of
which are Allentown, Bethlehem,
Harrisburg, Hazleton, Lancaster,
Scranton, Wilkes-Barre and
Williamsport.
The Trust............................. PP&L Capital Trust II is a statutory
business trust formed under Delaware
law solely for the purpose of issuing
the Preferred Securities and the
Common Securities and investing the
proceeds thereof in the Subordinated
Debentures (and engaging in
activities necessary or incidental
thereto).
The Trustees.......................... The Chase Manhattan Bank will act as
property trustee (the "Property
Trustee") of the Trust. Two employees
of the Company also will act as
trustees (the "Administrative
Trustees") of the Trust. Chase
Manhattan Bank Delaware will be an
additional trustee (the "Delaware
Trustee") of the Trust. The Chase
Manhattan Bank also will act as
trustee (the "Indenture Trustee")
under the indenture pursuant to which
the Subordinated Debentures will be
issued and will act as trustee under
the Guarantee (the "Guarantee
Trustee"). The Property Trustee,
Delaware Trustee and Administrative
Trustees are sometimes referred to as
the "Trust Trustees."
Preferred Securities Offered.......... The Trust will offer 6,000,000
Preferred Securities evidencing
undivided beneficial ownership
interests in the assets of the Trust.
Holders of the Preferred Securities
are entitled to receive
Distributions, accumulating from the
date of original issuance and payable
quarterly in arrears on January 1,
April 1, July 1 and October 1 of each
year, commencing on October 1, 1997
(each, a "Distribution Date").
Holders of the Preferred Securities
will have a preference under certain
circumstances with respect to
Distributions and amounts payable on
liquidation or redemption over the
Common Securities. See "Description
of Preferred
Securities--Subordination of Common
Securities." The Securities Rate and
the Distribution Dates for the
Preferred Securities will correspond
to the interest rate and payment
dates on the Subordinated Debentures,
which will constitute all the assets
of the Trust. As a result, if
principal or interest is not paid on
the Subordinated Debentures, no
amounts will be paid on the Preferred
Securities. See "Description of
Preferred Securities" herein.
Record Date........................... The record date for Distributions on
the Preferred Securities (other than
on a Redemption Date) will, for so
long as the Preferred Securities
remain in book-entry form, be the
close of business one Business Day
prior to the relevant Distribution
Date.
Subordinated Debentures............... The Trust will invest the proceeds
from the issuance of the Trust
Securities in an equivalent amount of
Subordinated Debentures. The
Subordinated Debentures will mature on
July 1, 2027. At any time, the Company
shall have the right to shorten or
extend the maturity of the Subordinated
Debentures, provided that it can not
shorten the maturity to a date earlier
than July 1, 2002 and can extend the
maturity only if
5
<PAGE>
certain conditions are met. See
"Description of Subordinated
Debentures--General." The
Subordinated Debentures will be
subordinate and junior in right of
payment to all Senior Debt of the
Company. See "Description of
Subordinated
Debentures--Subordination."
Guarantee............................. The Company has, through the
Guarantee, the Trust Agreement, the
Subordinated Debentures and the
Indenture, taken together, fully,
irrevocably and unconditionally
guaranteed all of the Trust's
obligations under the Preferred
Securities. See "Relationship Among
the Preferred Securities, the
Subordinated Debentures and the
Guarantee." The Company guarantees
the payment of Distributions and
payments on liquidation of the Trust
or redemption of the Preferred
Securities, but only in each case to
the extent of funds held by the
Trust, as described herein (the
"Guarantee"). See "Description of
Guarantee" herein. If the Company
does not make interest payments on
the Subordinated Debentures held by
the Trust, the Trust will have
insufficient funds to pay
Distributions on the Preferred
Securities. The Guarantee does not
cover payment of Distributions when
the Trust does not have sufficient
funds to pay such Distributions. In
the event a Debenture Event of
Default has occurred and is
continuing and such default is
attributable to the failure of the
Company to pay interest or principal
on the Subordinated Debentures, a
holder of Preferred Securities may
institute a legal proceeding directly
against the Company to enforce
payment of such Distributions to such
holder. The obligations of the
Company under the Guarantee and the
Subordinated Debentures are
subordinate and junior in right of
payment to all Senior Debt of the
Company.
Interest Deferral..................... Subject to certain exceptions, as
described herein, the Company has the
right to defer payment of interest on
the Subordinated Debentures at any
time or from time to time for a
period not exceeding 20 consecutive
quarters with respect to each
deferral period (each, an "Extension
Period"), during which Extension
Periods the Company shall have the
right to make full or partial
payments on any Interest Payment Date
(as defined herein), provided that no
Extension Period may extend beyond
the Stated Maturity (as defined
herein) of the Subordinated
Debentures. No interest shall be due
and payable during any Extension
Period, except at the end thereof.
Upon the termination of any such
Extension Period and the payment of
all amounts then due on any Interest
Payment Date, the Company may elect
to begin a new Extension Period
subject to the requirements set forth
herein. If interest payments on the
Subordinated Debentures are so
deferred, distributions on the
Preferred Securities will also be
deferred and the Company may not, and
may not permit any subsidiary of the
Company to, subject to certain
exceptions set forth herein, among
other things, declare or pay any cash
distributions with respect to the
Company's capital stock or debt
securities that rank pari passu with
or junior to the Subordinated
Debentures. During an Extension
Period, interest on the Subordinated
Debentures will continue to accrue
(and the amount of Distributions to
which holders of the Preferred
Securities are entitled will
accumulate at the Securities Rate,
compounded quarterly), and holders of
the Preferred Securities will be
required to accrue interest income
for United States federal income tax
purposes prior to receipt of the cash
related to such interest income. See
"Description of Subordinated
Debentures--Option to Extend Interest
Payment Period" and "Certain Federal
Income Tax Consequences--Interest
Income and Original Issue Discount."
Redemption; Distribution.............. The Preferred Securities are subject
to mandatory redemption, in whole or
in part, upon repayment of the
Subordinated Debentures at maturity
or their earlier redemption in an
amount equal to the amount of related
Subordinated Debentures maturing or
being redeemed at a redemption
6
<PAGE>
price equal to the aggregate
liquidation preference of such
Preferred Securities plus accumulated
and unpaid Distributions thereon to
the date of redemption. The
Subordinated Debentures are
redeemable prior to maturity at the
option of the Company (i) on or after
July 1, 2002, in whole at any time or in
part from time to time, at a
redemption price equal to the accrued
and unpaid interest on the
Subordinated Debentures so redeemed
to the date fixed for redemption,
plus 100% of the principal amount
thereof or (ii) at any time, in whole
(but not in part), upon the
occurrence and continuation of a
Special Event (as defined herein), at
any time within 90 days following the
occurrence of such Special Event, at
a redemption price equal to the
accrued and unpaid interest on the
Subordinated Debentures so redeemed
to the date fixed for redemption,
plus 100% of the principal amount
thereof, in each case subject to the
further conditions described under
"Description of Subordinated
Debentures--Redemption."
At any time, the Company will have
the right to liquidate the Trust and
cause the Subordinated Debentures to
be distributed to the holders of the
Preferred Securities and the Common
Securities in liquidation of the
Trust. See "Description of Preferred
Securities--Redemption--Special Event
Redemption or Distribution of
Subordinated Debentures."
Special Event....................... A "Special Event" means a Tax Event
or an Investment Company Event. A
"Tax Event" means the receipt by the
Trust of an opinion of counsel
experienced in such matters to the
effect that, as a result of any
amendment to, or change (including
any announced proposed change) in,
the laws (or any regulations
thereunder) of the United States or
any political subdivision or taxing
authority thereof or therein, or as a
result of any official administrative
pronouncement or judicial decision
interpreting or applying such laws or
regulations, which amendment or
change is effective or which proposed
change, pronouncement or decision is
announced on or after the date of
original issuance of the Preferred
Securities under the Trust Agreement,
there is more than an insubstantial
risk that (i) the Trust is, or will
be within 90 days of the date of such
opinion, subject to United States
federal income tax with respect to
income received or accrued on the
Subordinated Debentures, (ii)
interest payable by the Company on
such Subordinated Debentures is not,
or within 90 days of the date of such
opinion, will not be, deductible by
the Company, in whole or in part, for
United States federal income tax
purposes, or (iii) the Trust is, or
will be within 90 days of the date of
such opinion, subject to more than a
de minimis amount of other taxes,
duties or other governmental charges.
"Investment Company Event" means the
receipt by the Trust of an opinion of
counsel experienced in such matters
to the effect that, as a result of
the occurrence of a change in law or
regulation or a change in
interpretation or application of law
or regulation by any legislative
body, court, governmental agency or
regulatory authority (a "Change in
1940 Act Law"), the Trust is or will
be considered an "investment company"
that is required to be registered
under the Investment Company Act of
1940, as amended, which Change in
1940 Act Law becomes effective on or
after the date of original issuance
of the Preferred Securities under the
Trust Agreement.
Redemption Price.................... In the event of the redemption of the
Trust Securities or other termination
of the Trust without distribution of
the Subordinated Debentures, each
Preferred Security shall be entitled
to receive a liquidation amount of
$25 plus accrued and unpaid
Distributions thereon to the date of
payment.
7
<PAGE>
RISK FACTORS
Prospective purchasers of the Preferred Securities should carefully review
the information contained elsewhere in this Prospectus and should particularly
consider the following matters. In addition, because holders of the Preferred
Securities may receive Subordinated Debentures in exchange therefor upon
liquidation of the Trust, prospective purchasers of Preferred Securities are
also making an investment decision with regard to the Subordinated Debentures
and should carefully review all the information regarding the Subordinated
Debentures contained herein.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE SUBORDINATED
DEBENTURES
The obligations of the Company under the Guarantee issued by the Company for
the benefit of the holders of Preferred Securities and under the Subordinated
Debentures are unsecured and rank subordinate and junior in right of payment to
all Senior Debt of the Company. At March 31, 1997, the Senior Debt of the
Company aggregated approximately $3.2 billion. Neither the Indenture, the
Guarantee nor the Trust Agreement places any limitation on the amount of secured
or unsecured debt, including Senior Debt, that may be incurred by the Company.
See "Description of Guarantee--Status of the Guarantee" and "Description of
Subordinated Debentures--Subordination."
The ability of the Trust to pay amounts due on the Preferred Securities is
solely dependent upon the Company making payments on the Subordinated Debentures
as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
So long as no Debenture Event of Default has occurred and is continuing, the
Company has the right under the Indenture (as defined herein) to defer the
payment of interest on the Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to each
Extension Period, during which Extension Periods the Company shall have the
right to make full or partial payments of interest on any Interest Payment Date,
provided that no Extension Period may extend beyond the Stated Maturity (as
defined below) of the Subordinated Debentures. As a consequence of any such
deferral, quarterly Distributions on the Preferred Securities by the Trust will
also be deferred (and the amount of Distributions to which holders of the
Preferred Securities are entitled will accumulate additional Distributions
thereon at the Securities Rate, compounded quarterly from the relevant payment
date for such Distributions) during any such Extension Period. During any such
Extension Period, the Company shall not, and shall not permit any subsidiary of
the Company to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank pari passu with or junior in interest to the Subordinated
Debentures or make any guarantee payments with respect to any guarantee by the
Company of the debt securities of any subsidiary of the Company if such
guarantee ranks pari passu with or junior in interest to the Subordinated
Debentures (other than (a) dividends or distributions in capital stock of the
Company, (b) any declaration of a dividend in connection with the implementation
of a stockholders' rights plan or the redemption or repurchase of any such
rights pursuant thereto and (c) payments under the Guarantee). Prior to the
termination of any such Extension Period, the Company may further extend the
interest payment period, provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the Subordinated
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due on any Interest Payment Date, the Company may elect to begin a
new Extension Period subject to the above requirements. No interest shall be due
and payable during an Extension Period, except at the end thereof. There is no
limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of Preferred Securities--Distributions" and
"Description of Subordinated Debentures--Option to Extend Interest Payment
Period."
Should an Extension Period occur, a holder of Preferred Securities will be
required to accrue income (in the form of original issue discount) in respect of
its pro rata share of the Subordinated Debentures held by the Trust for United
States federal income tax purposes. As a result, a holder of Preferred
Securities will include such income in gross income for United States federal
income tax purposes in advance of receipt of the cash related to such income,
and will not receive the cash related to such income from the Trust if the
holder disposes of the Preferred Securities prior to the record date for the
payment of Distributions. See "Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount" and "--Sale or Redemption of Preferred
Securities."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures. However, should the Company elect to exercise such
right in the future, the market price of the Preferred Securities is likely to
be affected. A holder that disposes of its Preferred Securities during an
8
<PAGE>
Extension Period, therefore, might not receive the same return on its investment
as a holder that continues to hold its Preferred Securities.
SPECIAL EVENT REDEMPTION
Upon the occurrence and continuation of a Special Event (as defined below),
the Company has the right to redeem the Subordinated Debentures in whole (but
not in part) at a redemption price equal to the principal amount of the
Subordinated Debentures so redeemed plus accrued and unpaid interest thereon to
the date fixed for redemption within 90 days following the occurrence of such
Special Event and thereby cause a mandatory redemption of the Preferred
Securities and Common Securities.
A "Special Event" means a Tax Event or an Investment Company Event. A "Tax
Event" means the receipt by the Trust of an opinion of counsel experienced in
such matters to the effect that, as a result of any amendment to, or change
(including any announced proposed change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which proposed change,
pronouncement or decision is announced on or after the date of original issuance
of the Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Subordinated Debentures, (ii) interest payable
by the Company on such Subordinated Debentures is not, or within 90 days of the
date of such opinion, will not be, deductible by the Company, in whole or in
part, for United States federal income tax purposes, or (iii) the Trust is, or
will be within 90 days of the date of such opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges. "Investment
Company Event" means the receipt by the Trust of an opinion of counsel
experienced in such matters to the effect that, as a result of the occurrence of
a change in law or regulation or a change in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act of 1940, as amended, which Change in 1940 Act Law becomes
effective on or after the date of original issuance of the Preferred Securities
under the Trust Agreement.
See "Risk Factors--Possible Tax Law Changes Affecting the Preferred
Securities" for a discussion of certain legislative proposals that, if adopted,
could give rise to a Tax Event, which may permit the Company to cause a
redemption of the Preferred Securities prior to July 1, 2002.
EXCHANGE OF PREFERRED SECURITIES FOR SUBORDINATED DEBENTURES
The Company will have the right at any time to liquidate the Trust and, after
satisfaction of liabilities to creditors of the Trust as required by applicable
law, cause the Subordinated Debentures to be distributed to the holders of the
Preferred Securities in exchange therefor upon liquidation of the Trust. See
"Description of Preferred Securities--Redemption--Special Event Redemption or
Distribution of Subordinated Debentures."
Under current United States federal income tax law and interpretations and
assuming, as expected, the Trust is classified as a grantor trust for such
purposes, a distribution of the Subordinated Debentures upon a liquidation of
the Trust would not be a taxable event to holders of the Preferred Securities.
However, if a Tax Event were to occur which would cause the Trust to be subject
to United States federal income tax with respect to income received or accrued
on the Subordinated Debentures, a distribution of the Subordinated Debentures by
the Trust could be a taxable event to the Trust and the holders of the Preferred
Securities. See "Certain Federal Income Tax Consequences--Distribution of
Subordinated Debentures to Holders of Preferred Securities."
SHORTENING OR EXTENSION OF STATED MATURITY OF SUBORDINATED DEBENTURES
The Company will have the right at any time to shorten the maturity of the
Subordinated Debentures to a date not earlier than July 1, 2002 and thereby
cause the Preferred Securities to be redeemed on such earlier date.
The Company will also have the right to extend the maturity of the
Subordinated Debentures, whether or not the Trust is liquidated and the
Subordinated Debentures are distributed to holders of the Preferred Securities,
to a date no later than the 49th anniversary of the initial issuance of the
Preferred Securities, provided that the Company can extend the maturity only if
at the time such election is made and at the time of such extension (i) the
Company is not in bankruptcy, otherwise insolvent or in liquidation, (ii) the
Company is not in default in the payment of any interest or principal on the
Subordinated Debentures, (iii) if the Trust has not been liquidated, the Trust
is not in arrears on payments of Distributions on the Preferred
9
<PAGE>
Securities and no deferred Distributions are accumulated and (iv) the
Subordinated Debentures are rated not less than BBB-by Standard & Poor's Ratings
Services or Baa3 by Moody's Investors Service, Inc. or the equivalent by any
other nationally recognized statistical rating organization. To the extent that
the Stated Maturity of the Subordinated Debentures is extended at such time as
the Preferred Securities are outstanding, the Preferred Securities would remain
outstanding until such extended date or until redeemed at an earlier date.
MARKET PRICES
There can be no assurance as to the market prices for Preferred Securities or
Subordinated Debentures that may be distributed in exchange for Preferred
Securities upon liquidation of the Trust. Accordingly, the Preferred Securities
that an investor may purchase, whether pursuant to the offer made hereby or in
the secondary market, or the Subordinated Debentures that a holder of Preferred
Securities may receive on liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the Preferred Securities offered
hereby. As a result of the existence of the Company's right to defer interest
payments, the market price of the Preferred Securities (which represent
undivided beneficial ownership interests in the assets of the Trust) may be more
volatile than the market prices of other securities that are not subject to such
optional deferrals. In addition, because the Company has the right (i) to
shorten the Stated Maturity of the Subordinated Debentures or (ii) to extend the
maturity of the Subordinated Debentures (subject to the conditions described
above), there can be no assurance that the Company will not exercise its option
to change the maturity of the Subordinated Debentures as permitted by the terms
thereof and of the Indenture.
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities the
following payments, to the extent not paid by the Trust: (i) any accumulated and
unpaid Distributions required to be paid on the Preferred Securities, to the
extent that the Trust has funds on hand available therefor at such time, (ii)
the redemption price including all accrued and unpaid Distributions to the date
of redemption with respect to any Preferred Securities called for redemption by
the Trust, to the extent that the Trust has funds on hand available therefor at
such time, and (iii) upon a voluntary or involuntary dissolution, winding-up or
liquidation of the Trust (unless the Subordinated Debentures are distributed to
holders of the Preferred Securities), the lesser of (a) the aggregate of the
liquidation preference and all accrued and unpaid Distributions to the date of
payment or (b) the amount of assets of the Trust remaining available for
distribution to holders of the Preferred Securities in liquidation of the Trust
after satisfaction of liabilities to creditors of the Trust as required by
applicable law. The Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Chase
Manhattan Bank will act as the indenture trustee under the Guarantee (the
"Guarantee Trustee") for the purposes of compliance with the Trust Indenture Act
and will hold the Guarantee for the benefit of the holders of the Preferred
Securities. The Chase Manhattan Bank will also act as Debenture Trustee for the
Subordinated Debentures and as Property Trustee under the Trust Agreement and
Chase Manhattan Bank Delaware will act as Delaware Trustee under the Trust
Agreement.
The holders of not less than a majority in aggregate liquidation amount of
the Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee. Notwithstanding the
foregoing, any holder of the Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity. If the Company were to default
on its obligation to pay amounts payable under the Subordinated Debentures, the
Trust would lack available funds for the payment of Distributions or amounts
payable on redemption of the Preferred Securities or otherwise, and, in such
event, holders of the Preferred Securities would not be able to rely upon the
Guarantee for payment of such amounts. Instead, in the event a Debenture Event
of Default shall have occurred and be continuing and such default is
attributable to the failure of the Company to pay interest on or principal of
the Subordinated Debentures, then a holder of Preferred Securities may directly
institute a proceeding against the Company for enforcement of payment to such
holder of the interest on or the principal of such Subordinated Debentures
having a principal amount equal to the aggregate liquidation preference of the
Preferred Securities of such holder (a "Direct Action"). In connection with such
Direct Action, the Company will be subrogated to the rights of such holder of
Preferred Securities under the Trust Agreement to the extent of any payment made
by the Company to such holder of Preferred Securities in such Direct Action.
Except as set forth herein, holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of Subordinated
Debentures or assert directly any other rights in respect of the Subordinated
Debentures. See "Description of Preferred Securities--Enforcement of Certain
Rights by Holders of Preferred Securities", "Description of Guarantee" and
"Description of Subordinated Debentures--Debenture Events of Default." The Trust
Agreement provides that each holder of Preferred Securities by acceptance
thereof agrees to the provisions of the Guarantee (including the subordination
provisions thereof) and the Indenture.
10
<PAGE>
LIMITED VOTING RIGHTS
Holders of Preferred Securities will generally have limited voting rights
relating only to the modification of the Preferred Securities and certain other
matters described herein. Holders of Preferred Securities will not be entitled
to vote to appoint, remove or replace the Property Trustee, the Delaware Trustee
or any Administrative Trustee, which voting rights are vested exclusively in the
holder of the Common Securities, except, with respect to the Property Trustee
and the Delaware Trustee, upon the occurrence of certain events described
herein. The Trust Trustees (as defined below) and the Company may amend the
Trust Agreement without the consent of holders of Preferred Securities to ensure
that the Trust will not be taxable as a corporation or classified as other than
a grantor trust for federal income tax purposes unless such action adversely
affects in any material respect the interests of such holders. See "Description
of Preferred Securities--Voting Rights; Amendment of the Trust Agreement" and "-
- -Removal of Trust Trustees."
TRADING CHARACTERISTICS OF PREFERRED SECURITIES
Application has been made to list the Preferred Securities on the NYSE. The
Preferred Securities may trade at prices that do not fully reflect the value of
accrued and unpaid interest with respect to the underlying Subordinated
Debentures. See "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount" and "--Sales or Redemption of Preferred Securities" for
a discussion of the United States federal income tax consequences that may
result from a taxable disposition of the Preferred Securities.
If the Preferred Securities are not listed on a national securities exchange
or the NASDAQ National Market and the underwriters do not make a market for the
securities, the liquidity of the Preferred Securities could be adversely
affected.
POSSIBLE TAX LAW CHANGES AFFECTING THE PREFERRED SECURITIES
Legislation was proposed by the United States Department of the Treasury on
February 6, 1997 as part of President Clinton's Fiscal 1998 Budget Proposal (the
"Proposed Legislation") that contains a provision which generally would deny the
interest deduction for interest paid or accrued on an instrument issued by a
corporation that has a weighted average maturity of more than 40 years. The
Proposed Legislation also contains a provision which generally would deny an
interest deduction for interest paid or accrued on an instrument issued by a
corporation that (i) has a maximum term of more than 15 years and (ii) is not
shown as indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. For purposes of
determining the weighted average maturity or the term of an instrument, any
right to extend the maturity of such instrument would be treated as exercised.
The above-described provisions were proposed to be effective generally for
instruments issued on or after the date of the first Congressional committee
action on the Proposed Legislation. If either provision were to apply to the
Subordinated Debentures, the Company would not be able to deduct the interest on
the Subordinated Debentures. There can be no assurance that the Proposed
Legislation or future legislative proposals will not adversely affect the
ability of the Company to deduct interest on the Subordinated Debentures or
otherwise affect the tax treatment of the transactions described herein. Such a
change could give rise to a Tax Event, which would permit the Company to cause a
redemption of the Preferred Securities before July 1, 2002. See "Description of
Subordinated Debentures--Redemption" and "Description of Preferred Securities--
Redemption." See also "Certain Federal Income Tax Consequences--Possible Tax Law
Changes."
PP&L CAPITAL TRUST II
The Trust is a statutory business trust formed under Delaware law pursuant to
(i) the Amended and Restated Trust Agreement (the "Trust Agreement") executed by
the Company, as Depositor, The Chase Manhattan Bank, as Property Trustee, Chase
Manhattan Bank Delaware, as Delaware Trustee, and the Administrative Trustees
named therein, and (ii) the filing of a certificate of trust with the Delaware
Secretary of State on May 16, 1997. The Trust's business and affairs are
conducted by The Chase Manhattan Bank, as Property Trustee, Chase Manhattan Bank
Delaware, as Delaware Trustee, and two individual Administrative Trustees who
are employees of the Company (collectively, the "Trust Trustees"). The Trust
exists for the exclusive purposes of (i) issuing and selling the Preferred
Securities and Common Securities, (ii) using the proceeds from the sale of the
Preferred Securities and Common Securities to acquire the Subordinated
Debentures and (iii) engaging in only those other activities necessary or
incidental thereto. Accordingly, the Subordinated Debentures (and any cash on
deposit or owing and proceeds in respect of the Subordinated Debentures) will be
the sole assets of the Trust, and payments under the Subordinated Debentures
will be the sole revenue of the Trust. All of the Common Securities will be
owned by the Company. The Common Securities will rank pari passu, and payments
will be made thereon pro rata, with the Preferred
11
<PAGE>
Securities, except that upon the occurrence and continuance of an Event of
Default (as defined herein) under the Trust Agreement resulting from a Debenture
Event of Default (as defined herein) under the Indenture, the rights of the
Company as holder of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights of the holders of the Preferred Securities. See
"Description of Preferred Securities--Subordination of Common Securities." The
Company will acquire Common Securities in an aggregate liquidation amount equal
to 3% of the total capital of the Trust. The Trust has a term of 55 years, but
may terminate earlier as provided in the Trust Agreement. The principal
executive office of the Trust is located at Two North Ninth Street, Allentown,
PA 18101, and its telephone number is 610/774-5151.
The Trust Agreement will be substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. The Trust
Agreement will be qualified as an indenture under the Trust Indenture Act. The
Chase Manhattan Bank, as Property Trustee, will act as sole indenture trustee
under the Trust Agreement for purposes of compliance with the Trust Indenture
Act. The Chase Manhattan Bank will also act as trustee under the Guarantee and
the Indenture (each as defined herein). See "Description of Guarantee" and
"Description of Subordinated Debentures." The holder of the Common Securities,
unless a Debenture Event of Default has occurred and is continuing, or the
holders of a majority in liquidation preference of the Preferred Securities if
any Debenture Event of Default has occurred and is continuing, will be entitled
to appoint, remove or replace the Property Trustee and the Delaware Trustee. In
no event will the holders of the Preferred Securities have the right to vote to
appoint, remove or replace the Administrative Trustees; such voting rights are
vested exclusively in the holder of the Common Securities. The duties and
obligations of each Trust Trustee are governed by the Trust Agreement and, in
the case of the Property Trustee, by the Trust Indenture Act. The Company will
pay all fees and expenses related to the Trust and the offering of the Preferred
Securities and will pay, directly or indirectly, all ongoing costs, expenses and
liabilities of the Trust.
It is anticipated that the Trust will not be subject to the reporting
requirements of the Exchange Act.
PENNSYLVANIA POWER & LIGHT COMPANY
The Company is an operating electric utility, incorporated under the laws of
the Commonwealth of Pennsylvania in 1920. PP&L serves approximately 1.2 million
customers in a 10,000 square mile territory in 29 counties of central eastern
Pennsylvania with a population of approximately 2.6 million persons. This
service area has 129 communities with populations over 5,000, the largest cities
of which are Allentown, Bethlehem, Harrisburg, Hazleton, Lancaster, Scranton,
Wilkes-Barre and Williamsport. The Company's offices are located at Two North
Ninth Street, Allentown, PA 18101, and its telephone number is 610/774-5151.
Beginning in April 1997, PP&L began to self-schedule its generating units to
meet native load demand and bilateral energy sales. Prior to April 1997, PP&L's
generating units were dispatched by the Pennsylvania-New Jersey-Maryland
Interconnection Association.
During the twelve months ended March 31, 1997, about 98% of total operating
revenues was derived from electric energy sales, with 35% coming from
residential customers, 28% from commercial customers, 20% from industrial
customers, 13% from contractual sales to other major utilities, 1% from energy
sales to members of the PJM and 3% from others.
All of the outstanding shares of common stock of the Company is owned by PP&L
Resources, Inc., a Pennsylvania corporation ("PP&L Resources").
USE OF PROCEEDS
All of the proceeds from the sale of Preferred Securities will be invested by
the Trust in Subordinated Debentures. The proceeds from such sale of such
Subordinated Debentures will be added to the Company's general funds and used
for general corporate purposes, including the reduction of short-term debt
incurred in connection with the completed the tender offer by PP&L Resources
for the Company's preferred stock. See Note (3) under "Capitalization."
12
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust will be included in
the consolidated financial statements of the Company. The Preferred Securities
will be presented as a separate line item in the consolidated balance sheet of
the Company and appropriate disclosures about the Preferred Securities, the
Guarantee and the Subordinated Debentures will be included in the notes to the
consolidated financial statements.
SELECTED FINANCIAL DATA
The following selected consolidated financial data of the Company for the
three years ended December 31, 1996 have been derived from audited financial
statements and for the twelve months ended March 31, 1997 have been derived from
unaudited financial statements. This financial data is qualified by the detailed
information and financial statements appearing in the documents incorporated by
reference.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, TWELVE MONTHS ENDED
1994(A) 1995(B) 1996 MARCH 31, 1997
-----------------------------------------------
(IN MILLIONS, EXCEPT RATIOS)
----------------------------
<S> <C> <C> <C> <C>
Operating Revenues............................................ $2,725 $2,752 $2,910 $2,907
Operating Income.............................................. $ 501 $ 574 $ 556 $ 551
Net Income.................................................... $ 243 $ 352 $ 357 $ 352
Ratio of Earnings to Fixed Charges(c)......................... 2.70 3.48 3.50 3.49
Ratio of Earnings to Combined Fixed Charges and
Preferred Dividend Requirements(d).............. 2.26 2.92 2.93 2.92
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Earnings for 1994 were adversely affected by several one-time charges to
income. These charges related to a voluntary early retirement program; a
write-down in the carrying value of a subsidiary's investment in undeveloped
coal reserves; the disallowance of replacement power costs through the
Company's energy cost rate; and a decision of the Commonwealth Court of
Pennsylvania related to the deferral of post-retirement benefit costs.
(b) Earnings for 1995 were positively affected by the final order of the
Pennsylvania Public Utility Commission issued on September 27, 1995
pertaining to PP&L's base rate case filed in December 1994. The decision
increased revenues and permitted recovery of voluntary early retirement and
post-retirement benefits other than pensions and disallowed certain costs
applicable to the construction of Susquehanna Unit 1. In addition, the
Company realized a gain on the sale of subsidiary coal reserves which were
previously written down in 1994.
(c) Fixed charges include interest expense and the estimated interest component
of rentals. The ratios for 1992 and 1993 were 3.15 and 3.31, respectively.
(d) Combined fixed charges and preferred dividend requirements include interest
expense, preferred dividend requirements and the estimated interest
component of rentals. The ratios for 1992 and 1993 were 2.53 and 2.71,
respectively.
13
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of March 31, 1997, and as adjusted to reflect (i) the issuance of the
$150,000,000 of Preferred Securities offered hereby and $100,000,000 of the
8.20% Trust Originated Preferred Securities issued by PP&L Capital Trust on
April 8, 1997 and (ii) the redemption on April 1, 1997 of $210 million principal
amount of the Company's first mortgage bonds. The following data is qualified by
the detailed information and financial statements appearing in the documents
incorporated herein by reference.
<TABLE>
<CAPTION>
As of March 31, 1997
ACTUAL AS ADJUSTED PERCENTAGE
(%)
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Long-Term Debt (including current maturities).. $2,832 $2,622 43.7%
8.20% Trust Originated Preferred Securities
of PP&L Capital Trust (1).................... 0 100 1.7
Preferred Securities offered hereby (2)........ 0 150 2.5
Preferred Stock(3):
With Sinking Funds............................ 295 295 4.9
Without Sinking Funds......................... 171 171 2.8
Common Equity.................................. 2,661 2,661 44.4%
------ ------ ------
Total Capitalization........................ $5,959 $5,999 100.0%
====== ====== ======
- ----------------------------------------------------------------------------------
</TABLE>
(1) PP&L Capital Trust issued $100,000,000 of 8.20% Trust Originated Preferred
Securities on April 8, 1997. The sole asset of PP&L Capital Trust is
$103,092,800 of junior subordinated deferrable interest debentures of the
Company that bear interest at a rate of 8.20% per annum and will mature on
April 1, 2027. The Company owns all of the common securities of PP&L
Capital Trust.
(2) As described herein, PP&L Capital Trust II is offering $150,000,000 of
Preferred Securities. The sole asset of PP&L Capital Trust II will be
$154,639,200 of Subordinated Debentures of the Company that bear interest at
a rate of % per annum and will mature on July 1, 2027. The Company will
own all of the Common Securities of PP&L Capital Trust II.
(3) In April 1997, PP&L Resources completed a tender offer for the outstanding
preferred stock of the Company. As a result of that tender offer, PP&L
Resources acquired $248 million of the Company's preferred stock with
sinking funds and $120 million of the Company's preferred stock without
sinking funds. In the aggregate, PP&L Resources acquired and now owns 79% of
the outstanding preferred stock of the Company.
DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement, the Administrative Trustees on
behalf of the Trust will issue the Preferred Securities and the Common
Securities. The Preferred Securities will represent undivided beneficial
ownership interests in the assets of the Trust and the holders thereof will be
entitled to a preference in certain circumstances with respect to Distributions
and amounts payable on redemption or liquidation over the Common Securities, as
well as other benefits as described in the Trust Agreement. All of the Common
Securities will be owned, directly or indirectly, by the Company. The following
summary of material terms and provisions of the Preferred Securities and the
Trust Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Trust
Agreement, including the definitions therein of certain terms, and the Trust
Indenture Act. Wherever particular defined terms of the Trust Agreement (as
supplemented or amended from time to time) are referred to herein, the
definitions of such defined terms are incorporated herein by reference. The form
of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
14
<PAGE>
GENERAL
The Preferred Securities will rank pari passu, and payments will be made
thereon pro rata, with the Common Securities except as described under "--
Subordination of Common Securities." Legal title to the Subordinated Debentures
will be held by the Property Trustee in trust for the benefit of the holders of
the Preferred Securities and the Common Securities. The Guarantee executed by
the Company for the benefit of the holders of the Preferred Securities will be a
guarantee on a subordinated basis with respect to the Preferred Securities but
will not guarantee payment of Distributions or amounts payable on redemption or
liquidation of the Preferred Securities when the Trust does not have funds on
hand available to make such payments. See "Description of Guarantee."
DISTRIBUTIONS
The Preferred Securities represent undivided beneficial ownership interests
in the assets of the Trust and Distributions on the Preferred Securities will be
payable at the annual rate of % (the "Securities Rate") of the stated
Liquidation Amount of $25, payable quarterly in arrears on January 1, April 1,
July 1 and October 1 of each year. Distributions will accumulate from ,
1997, the date of original issuance. The first Distribution payment date for the
Preferred Securities will be October 1, 1997. The amount of Distributions
payable in the first payment period will be computed on the basis of
days in a 360-day year. The amount of Distributions payable for any period
thereafter will be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which Distributions are payable on the
Preferred Securities is not a Business Day, then payment of the Distributions
payable on such date will be made on the next succeeding day that is a Business
Day (and without any additional Distributions or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on the date such
payment was originally payable (each date on which Distributions are payable in
accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office of
the Property Trustee or the Debenture Trustee is closed for business.
The revenue of the Trust available for distribution to holders of its
Preferred Securities will be limited to payments under the Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Preferred Securities and the Common Securities. See "Description of
Subordinated Debentures." If the Company does not make interest payments on the
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Preferred Securities. The payment of Distributions (if
and to the extent the Trust has funds legally available for the payment of such
Distributions) is guaranteed by the Company on a limited basis as set forth
herein under "Description of Guarantee."
Distributions on the Preferred Securities (other than distributions on a
Redemption Date) will be payable to the holders thereof as they appear on the
register of the Trust on the relevant record dates, which, as long as the
Preferred Securities remain in book-entry form, will be the close of business
one Business Day prior to the relevant Distribution Date. Subject to any
applicable laws and regulations and the provisions of the Trust Agreement, each
such payment will be made as described under "--Book-Entry Issuance." In the
event the Preferred Securities are not in book-entry form, the relevant record
date for the Preferred Securities shall be the fifteenth day of the month prior
to the relevant Distribution Date (whether or not such record date is a Business
Day).
So long as no Debenture Event of Default under the Indenture has occurred and
is continuing, the Company has the right under the Indenture to defer the
payment of interest on the Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters (each, an "Extension
Period"), during which Extension Periods the Company shall have the right to
make full or partial payments of interest on any Interest Payment Date, provided
that no Extension Period may extend beyond the Stated Maturity (as defined
below) of the Subordinated Debentures. As a consequence of any such extension,
quarterly Distributions on the Preferred Securities will also be deferred by the
Trust during any such Extension Period. Distributions to which holders of the
Preferred Securities are entitled will accumulate additional Distributions
thereon at the Securities Rate, compounded quarterly from the relevant payment
date for such Distributions. The term "Distributions" as used herein shall
include any such additional Distributions. During any such Extension Period, the
Company shall not, and shall not permit any subsidiary of the Company to, (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of the Company's capital
stock or (ii) make any payment of principal, interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Company that rank pari
passu with or junior in interest to the Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the Subordinated Debentures (other than (a)
dividends or distributions in capital stock of the Company, (b) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan or the redemption or repurchase of any such rights pursuant thereto and (c)
payments under the Guarantee). Prior to the termination of any such Extension
15
<PAGE>
Period, the Company may further extend the interest payment period, provided
that no Extension Period may exceed 20 consecutive quarters or extend beyond the
Stated Maturity of the Subordinated Debentures. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest Payment
Date, the Company may elect to begin a new Extension Period. No interest shall
be due and payable during an Extension Period, except at the end thereof. There
is no limitation on the number of times that the Company may elect to begin an
Extension Period. See "Description of the Subordinated Debentures--Option to
Extend Interest Payment Period" and "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period of the
Subordinated Debentures.
REDEMPTION
MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in part,
of the Subordinated Debentures, whether at Stated Maturity or upon earlier
redemption as provided in the Indenture, the proceeds from such repayment or
redemption shall be applied by the Property Trustee to redeem a Like Amount (as
defined below) of the Preferred Securities and Common Securities, upon not less
than 30 nor more than 60 days notice prior to the date fixed for repayment or
redemption, at a redemption price (the "Redemption Price"), with respect to the
Preferred Securities, equal to the aggregate Liquidation Amount of such
Preferred Securities plus accrued and unpaid Distributions thereon to the date
of redemption (the "Redemption Date"). If less than all of the Subordinated
Debentures are to be repaid or redeemed on a Redemption Date, then the proceeds
from such repayment or redemption shall be allocated to the redemption on a pro
rata basis among the Preferred Securities and the Common Securities.
The Company will have the right to redeem the Subordinated Debentures (i) on
or after July 1, 2002, in whole at any time or in part from time to time, at a
redemption price equal to the accrued and unpaid interest on the Subordinated
Debentures so redeemed to the date fixed for redemption, plus 100% of the
principal amount thereof or (ii) at any time, in whole (but not in part), upon
the occurrence and continuation of a Special Event, within 90 days following the
occurrence of such Special Event, at a redemption price equal to the accrued and
unpaid interest on the Subordinated Debentures so redeemed to the date fixed for
redemption, plus 100% of the principal amount thereof, in each case subject to
the further conditions described under "Description of Subordinated Debentures--
Redemption" and "Description of Subordinated Debentures--Optional Redemption."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION OF SUBORDINATED DEBENTURES. If a
Special Event shall occur and be continuing, the Company will have the right to
redeem the Subordinated Debentures in whole (but not in part) and thereby cause
a mandatory redemption of the Preferred Securities in whole (but not in part) at
the Redemption Price within 90 days following the occurrence of such Special
Event. At any time, the Company will have the right to liquidate the Trust and,
after satisfaction of the liabilities of creditors of the Trust as provided by
applicable law, cause the Subordinated Debentures to be distributed to the
holders of the Preferred Securities in liquidation of the Trust. Under current
United States federal income tax law and interpretations and assuming, as
expected, the Trust is treated as a grantor trust, a distribution of the
Subordinated Debentures would not be a taxable event to holders of the Preferred
Securities. However, should there be a change in law or a change in legal
interpretation as a result of the occurrence of a Tax Event or otherwise, the
distribution could be a taxable event to holders of the Preferred Securities.
See "Certain Federal Income Tax Consequences--Distribution of Subordinated
Debentures to Holders of Preferred Securities." If the Company does not elect
either option described above, the Preferred Securities will remain outstanding
until the repayment of the Subordinated Debentures.
If the Company elects to liquidate the Trust and thereby causes the
Subordinated Debentures to be distributed to holders of the Preferred Securities
in liquidation of the Trust, the Company shall continue to have the right to
shorten the Stated Maturity of the Subordinated Debentures to a date not earlier
than July 1, 2002 or extend the maturity of the Subordinated Debentures,
provided that it can extend the maturity only if certain conditions are met. See
"Description of Subordinated Debentures--General." If the Subordinated
Debentures are distributed to the holders of the Preferred Securities in
liquidation of the Trust the Company will use its best efforts to cause the
Subordinated Debentures to be listed on the NYSE or on such other stock exchange
or automated quotation systems, if any, on which the Preferred Securities are
then listed or quoted.
"Like Amount" means (i) with respect to a redemption of the Preferred
Securities and the Common Securities, Preferred Securities and the Common
Securities having a Liquidation Amount (as defined below) equal to the principal
amount of the Subordinated Debentures to be contemporaneously redeemed in
accordance with the Indenture allocated 3% to the Common Securities and 97% to
the Preferred Securities and the proceeds of which will be used to pay the
Redemption Price of such Preferred Securities and to redeem such Common
Securities, and (ii) with respect to a distribution of the Subordinated
Debentures to holders of Preferred Securities and Common Securities in
connection with a dissolution or liquidation of the Trust, Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Preferred Securities or the Common Securities, as the case may be, of the holder
to whom such Subordinated Debentures are distributed. "Liquidation
16
<PAGE>
Amount" means the stated amount of $25 per Preferred Security or Common
Security. After the liquidation date fixed for any distribution of Subordinated
Debentures (i) the Preferred Securities will no longer be deemed to be
outstanding, (ii) The Depository Trust Company ("DTC") or its nominee, as the
record holder of such Preferred Securities, will receive a registered global
certificate or certificates representing the Subordinated Debentures to be
delivered upon such distribution, (iii) the Company shall use its best efforts
to have the Subordinated Debentures listed on the NYSE or on such other
exchange, interdealer quotation system or self-regulatory organization as the
Preferred Securities are then listed or traded, (iv) any certificates
representing Preferred Securities not held by DTC or its nominee will be deemed
to represent Subordinated Debentures having a principal amount equal to the
stated liquidation preference of such Preferred Securities, and bearing accrued
and unpaid interest in an amount equal to the accrued and unpaid Distributions
on such Preferred Securities until such certificates are presented to the
Administrative Trustees or their agent for transfer or reissuance (and until
such certificates are so surrendered, no payments of interest or principal will
be made to holders of Preferred Securities Certificates with respect to such
Subordinated Debentures) and (v) all rights of holders of Preferred Securities
will cease, except the right of such holders to receive Subordinated Debentures
upon surrender of Preferred Securities Certificates.
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase,
whether pursuant to the offer made hereby or in the secondary market, or the
Subordinated Debentures that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption or payment at Stated Maturity of the Subordinated Debentures.
Redemptions of the Preferred Securities shall be made and the Redemption Price
shall be payable on each Redemption Date only to the extent that the Trust has
funds available for the payment of such Redemption Price. See also "--
Subordination of Common Securities."
If the Property Trustee gives a notice of redemption in respect of the
Preferred Securities, then, on the Redemption Date, to the extent funds are
available, the Property Trustee will deposit irrevocably with DTC funds
sufficient to pay the applicable Redemption Price and will give DTC irrevocable
instructions and authority to pay the Redemption Price to the holders of the
Preferred Securities. See "--Book-Entry Issuance." If the Preferred Securities
are no longer in book-entry form, the Property Trustee, to the extent funds are
available, will irrevocably deposit with the paying agent for the Preferred
Securities funds sufficient to pay the applicable Redemption Price and will give
the paying agent irrevocable instructions and authority to pay the Redemption
Price to the holders thereof upon surrender of their certificates evidencing the
Preferred Securities. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date for any Preferred Securities called for redemption
shall be payable to the holders of such Preferred Securities on the relevant
record dates for the related Distribution Dates. If notice of redemption shall
have been given and funds deposited as required, then upon the date of such
deposit, all rights of the holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price and any Distribution payable on or
prior to the Redemption Date, but without interest on such Redemption Price, and
such Preferred Securities will cease to be outstanding. In the event that any
date fixed for redemption of Preferred Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable. In the event that payment of
the Redemption Price in respect of Preferred Securities called for redemption is
improperly withheld or refused and not paid either by the Trust or by the
Company pursuant to the Guarantee as described under "Description of Guarantee,"
Distributions on such Preferred Securities will continue to accrue at the
Securities Rate, from the Redemption Date originally established by the Trust
for the Preferred Securities to the date such Redemption Price is actually paid,
in which case the actual payment date will be the date fixed for redemption for
purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
If less than all of the Preferred Securities and Common Securities issued by
the Trust are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata among the Preferred Securities and the
Common Securities. The particular Preferred Securities to be redeemed shall be
selected on a pro rata basis not more than 60 days prior to the Redemption Date
by the Property Trustee
17
<PAGE>
from the outstanding Preferred Securities not previously called for redemption,
by such method as the Property Trustee shall deem fair and appropriate and which
may provide for the selection for redemption of portions (equal to $25 or an
integral multiple of $25 in excess thereof) of the Liquidation Amount of
Preferred Securities of a denomination larger than $25. The Property Trustee
shall promptly notify the trust registrar in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of the Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Preferred Securities shall relate, in
the case of any Preferred Securities redeemed or to be redeemed only in part, to
the portion of the aggregate Liquidation Amount of Preferred Securities which
has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Preferred Securities to be
redeemed at its registered address. Unless the Trust defaults in payment of the
Redemption Price, on and after the Redemption Date, Distributions will cease to
accrue on such Preferred Securities or portions thereof called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Preferred
Securities and the Common Securities, as applicable, shall be made pro rata
based on the Liquidation Amount of such Preferred Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date, any Event of Default resulting from a Debenture Event of Default under the
Indenture shall have occurred and be continuing, no payment of any Distribution
on, or Redemption Price of, any of the Common Securities, and no other payment
on account of the redemption, liquidation or other acquisition of such Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions on all of the outstanding Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the Redemption Price the full amount of such Redemption Price on all of the
outstanding Preferred Securities then called for redemption, shall have been
made or provided for, and all funds available to the Property Trustee shall
first be applied to the payment in full in cash of all Distributions on, or
Redemption Price of, the Preferred Securities then due and payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, the Company as holder of the Common Securities will be deemed to have
waived any right to act with respect to any such Event of Default under the
Trust Agreement until all such Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated. Until any such
Events of Default under the Trust Agreement with respect to the Preferred
Securities have been so cured, waived or otherwise eliminated, the Property
Trustee shall act solely on behalf of the holders of the Preferred Securities
and not on behalf of the Company as holder of the Common Securities, and only
the holders of the Preferred Securities will have the right to direct the
Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to the Trust Agreement, the Trust shall automatically terminate on
December 31, 2051 (the "Expiration Date") or on the first to occur of any of the
following events (each, an "Early Termination Event"): (i) certain events of
bankruptcy, dissolution or liquidation of the Company as the holder of the
Common Securities; (ii) the distribution of a Like Amount of the Subordinated
Debentures to the holders of the Preferred Securities and Common Securities
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, if the Company, as Depositor, has given written direction to the
Property Trustee to terminate the Trust (which direction is optional and wholly
within the discretion of the Company, as Depositor); (iii) the redemption of all
of the Preferred Securities in connection with the redemption of all of the
Subordinated Debentures; and (iv) the entry by a court of competent jurisdiction
of an order for the dissolution of the Trust.
If an Early Termination Event occurs as described in clause (i), (ii) or (iv)
above or upon the Expiration Date, the Trust shall be liquidated by the Trust
Trustees as expeditiously as the Trust Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to the holders of the Preferred Securities and
Common Securities a Like Amount of the Subordinated Debentures, unless such
distribution is determined by the Property Trustee not to be practical, in which
event such holders will be entitled to receive out of the assets of the Trust
available for distribution to holders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, an amount equal to, in the
case of holders of Preferred Securities, the aggregate of the Liquidation Amount
plus accrued and unpaid Distributions thereon to the date of payment (such
amount being the "Liquidation Distribution"). If such Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable by
the Trust on the Trust Securities shall be paid on a pro rata basis.
Notwithstanding the foregoing sentence, the holder(s) of the Common Securities
will be entitled to receive distributions upon any such liquidation pro rata
with the holders of the Preferred Securities, except that if an Event of Default
resulting from a Debenture
18
<PAGE>
Event of Default under the Indenture has occurred and is continuing, the
Preferred Securities shall have a priority over the Common Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under the
Trust Agreement (an "Event of Default") with respect to the Preferred Securities
issued thereunder (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under the Indenture (see
"Description of Subordinated Debentures--Debenture Events of Default"); or
(ii) default in the payment of any Distribution when it becomes due and
payable, and continuation of such default for a period of 30 days; or
(iii) default in the payment of any Redemption Price of any Preferred
Security or Common Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Trust Trustees in the Trust Agreement (other than a
covenant or warranty a default in the performance or breach of which is dealt
with in clause (ii) or (iii) above), and continuation of such default or breach
for a period of 90 days after there has been given, by registered or certified
mail, to the defaulting Trust Trustee or Trustees by the holders of at least 25%
in aggregate Liquidation Amount of the outstanding Preferred Securities, a
written notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" under the Trust Agreement;
or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee if a successor Property Trustee has not been
appointed within 90 days thereof.
Within ten Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Preferred Securities, the
Administrative Trustees and the Company, as Depositor, unless such Event of
Default shall have been cured or waived. The Company, as Depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the Common Securities upon termination
of the Trust as described above. See "--Liquidation Distribution Upon
Termination." The existence of an Event of Default does not entitle the holders
of Preferred Securities to accelerate the maturity thereof.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If an Event of Default has occurred and is continuing, then the holders of
Preferred Securities would rely on the enforcement by the Property Trustee of
its rights as a holder of the Subordinated Debentures against the Company.
Notwithstanding the foregoing, if a Debenture Event of Default has occurred and
is continuing and such default is attributable to the failure of the Company to
pay any amounts payable in respect of the Subordinated Debentures, then a holder
of Preferred Securities has the right to institute a legal proceeding directly
against the Company for enforcement of payment to such holder of the principal
of or interest on the Subordinated Debentures having a principal amount equal to
the Liquidation Amount of the Preferred Securities of such holder (a "Direct
Action"). In connection with such Direct Action, the Company will be subrogated
to the rights of such holder of Preferred Securities under the Trust Agreement
to the extent of any payment made by the Company to such holder of Preferred
Securities in such Direct Action.
REMOVAL OF TRUST TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Trust Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee or the Delaware Trustee, or both of them, may be removed at
such time by the holders of a majority in Liquidation Amount of the Preferred
Securities. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Company as the holder of the Common
Securities. No resignation or removal of a Trust Trustee and no appointment of a
successor trustee shall be
19
<PAGE>
effective until the acceptance of appointment by the successor trustee in
accordance with the applicable requirements of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any time
or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property may
at the time be located, the Company, as the holder of the Common Securities, and
the Administrative Trustees shall have power to appoint one or more persons
either to act as a co-trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to act as separate trustee of any such property,
in either case with such powers as may be provided in the instrument of
appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the Trust Agreement. In case a Debenture Event of Default has
occurred and is continuing, the Property Trustee alone shall have power to make
such appointment.
MERGER OR CONSOLIDATION OF TRUST TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under the Trust Agreement,
provided such Person shall be otherwise qualified and eligible under the Trust
Agreement.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge, consolidate or amalgamate with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. The Trust may, at the request of the Company, with the consent
of the Administrative Trustees and without the consent of the holders of the
Preferred Securities, merge, consolidate or amalgamate with or into, be replaced
by or convey, transfer or lease its properties and assets substantially as an
entirety to a trust organized as such under the laws of any State; provided that
(i) such successor entity either (a) expressly assumes all of the obligations of
the Trust with respect to the Preferred Securities or (b) substitutes for the
Preferred Securities other securities having substantially the same terms as the
Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Preferred Securities rank in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) the Company expressly appoints a trustee of such successor
entity possessing substantially the same powers and duties as the Property
Trustee as the holder of the Subordinated Debentures, (iii) the Successor
Securities are listed or traded, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then listed or traded, if
any, (iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized statistical
rating organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, (vi) such successor entity has a
purpose identical to that of the Trust, (vii) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Company and the Property Trustee has received an opinion from independent
counsel to the Trust experienced in such matters to the effect that (a) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not adversely affect the rights, preferences and privileges of the holders
of the Preferred Securities (including any Successor Securities) in any material
respect and (b) following such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the Trust nor such successor entity will
be required to register as an investment company under the Investment Company
Act, (viii) the Company or any permitted successor or assignee owns all of the
Common Securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee and (ix) the Company has delivered to the Property
Trustee an officers' certificate and an opinion of counsel, each to the effect
that all conditions precedent to such transactions have been satisfied.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in Liquidation Amount of the Preferred Securities, consolidate,
amalgamate or merge with or into, be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to any other entity or
permit any other entity to consolidate, amalgamate or merge with or into, or
replace it if such consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease would cause the Trust or the successor entity to be classified
as other than a grantor trust for United States federal income tax purposes.
20
<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 Debenture Trustee with respect to such
Subordinated Debentures, (ii) waive any past default that is waivable under the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Debentures shall be due and payable or (iv)
consent to any amendment, modification or termination of the Indenture or such
Subordinated Debentures, where such consent shall be required, without, in each
case, obtaining the prior approval of the holders of at least a majority in
Liquidation Amount of all outstanding Preferred Securities; provided, however,
that where a consent under the Indenture would require the consent of each
holder of Subordinated Debentures affected thereby, no such consent shall be
given by the Property Trustee without the prior written consent of each holder
of Preferred Securities. The Trust Trustees shall not revoke any action
previously authorized or approved by a vote of the holders of the Preferred
Securities except pursuant to a subsequent vote of the holders of the Preferred
Securities. The Property Trustee shall notify each holder of record of the
Preferred Securities of any notice of default which it receives with respect to
the Subordinated Debentures. In addition to obtaining the foregoing approvals of
the holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Trust Trustees shall at the expense of the Company obtain an
opinion of counsel experienced in such matters to the effect that the Trust will
not be classified as other than a grantor trust for United States federal income
tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be given
to each holder of record of Preferred Securities in the manner set forth in the
Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for the Trust to redeem and cancel its Preferred Securities in accordance with
the Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Company, the Administrative Trustees or any
affiliate of the Company or any Administrative Trustees, shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
21
<PAGE>
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to DTC, which
shall credit the relevant accounts at DTC on the applicable Distribution Dates
or, if the Preferred Securities are not held by DTC, such payments shall be made
by check mailed to the address of the holder entitled thereto as such address
shall appear on the Register. The paying agent (the "Paying Agent") shall
initially be the Property Trustee and any co-paying agent chosen by the Property
Trustee (which may be the Company) and acceptable to the Administrative Trustees
and the Company. The Paying Agent shall be permitted to resign as Paying Agent
upon 30 days' written notice to the Administrative Trustees, the Property
Trustee and the Company. In the event that the Property Trustee shall no longer
be the Paying Agent, the Administrative Trustees shall appoint a successor
(which shall be a bank or trust company acceptable to the Property Trustee and
the Company) to act as Paying Agent.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Preferred Securities.
The Preferred Securities will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more fully-
registered global certificates will be issued for the Preferred Securities,
representing in the aggregate the total number of Preferred Securities, and will
be deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain custodial relationships with Direct Participants, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Preferred Securities, except in the event that use
of the book-entry system for the Preferred Securities of the Trust is
discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Preferred Securities. If less than all of the Preferred Securities are being
redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities. Under its usual procedures, DTC would mail an
omnibus proxy (the "Omnibus Proxy") to the Property Trustee as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts such Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners and the voting rights of Direct
Participants, Indirect Participants and Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
22
<PAGE>
Distribution payments on the Preferred Securities will be made by the
Property Trustee to DTC. DTC's practice is to credit Direct Participants'
accounts on the relevant payment date in accordance with their respective
holdings shown on DTC's records, unless DTC has reason to believe that it will
not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of DTC, the
Property Trustee, the Trust or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
Distributions to DTC is the responsibility of the Property Trustee, disbursement
of such payments to Direct Participants is the responsibility of DTC, and
disbursements of such payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Preferred Securities at any time by giving reasonable
notice to the Property Trustee and the Company. In the event that a successor
securities depositary is not obtained, definitive Preferred Securities
certificates representing such Preferred Securities are required to be printed
and delivered. The Company, at its option, may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor depositary). After a
Debenture Event of Default, the holders of a majority in liquidation preference
of Preferred Securities may determine to discontinue the system of book-entry
transfers through DTC. In any such event, definitive certificates for the
Preferred Securities will be printed and delivered. Except as provided herein, a
Beneficial Owner of an interest in a global Preferred Securities certificate
will not be entitled to receive physical delivery of Preferred Securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Preferred Securities.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Trust or the Company believe to be
accurate, but the Trust and the Company assume no responsibility for the
accuracy thereof. None of the Trust Trustees, the Trust or the Company has any
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but only upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Trust will not be required (i) to register or cause to be
registered the transfer or exchange of the Preferred Securities during a period
beginning at the opening of business 15 days before the day of the mailing of
the relevant notice of redemption and ending at the close of business on the day
of mailing of such notice of redemption or (ii) to register or cause to be
registered the transfer or exchange of any Preferred Securities so selected for
redemption, except in the case of any Preferred Securities being redeemed in
part, any portion thereof not to be redeemed.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Company and its affiliates utilize various of the banking services
offered by the Property Trustee. Such services include providing lines of
credit.
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically set
forth in the Trust Agreement and, after such Event of Default, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Trust Agreement at the request of any holder of Preferred Securities unless it
is offered reasonable indemnity by such holder against the costs, expenses and
liabilities that might be incurred thereby. If no Event of Default has occurred
and is continuing and the Property Trustee is required to decide between
alternative causes of action, construe ambiguous provisions in the Trust
Agreement or is unsure of the application of any provision of the Trust
Agreement, and the matter is not one on which holders of Preferred Securities
are entitled under the Trust Agreement to vote, then the Property Trustee may,
but shall be under no duty to, take such action as is directed by the Company
and, if not so directed, shall take such action as it deems advisable and in the
best interests of the holders of the Preferred Securities and the Common
Securities and will have no liability except for its own bad faith, negligence
or willful misconduct. The Property Trustee also serves as Trustee under the
Guarantee and the Indenture.
23
<PAGE>
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
or as other than a grantor trust for United States federal income tax purposes
and so that the Subordinated Debentures will be treated as indebtedness of the
Company for United States federal income tax purposes. In this connection, the
Company and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of the Trust, the
certificate of incorporation of the Company or the Trust Agreement, that the
Company and the Administrative Trustees determine in their discretion to be
necessary or desirable for such purposes, as long as such action does not
adversely affect in any material respect the interests of the holders of the
Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt or mortgage or pledge any of its
assets.
GOVERNING LAW
The Trust Agreement and the Trust Securities will be governed by and
construed in accordance with the laws of the State of Delaware.
DESCRIPTION OF SUBORDINATED DEBENTURES
The Subordinated Debentures are to be issued under a Junior Subordinated
Indenture (the "Indenture"), between the Company and The Chase Manhattan Bank,
as trustee (the "Debenture Trustee"). The following summary of material terms
and provisions of the Subordinated Debentures and the Indenture does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, the Indenture, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and to the Trust Indenture Act.
Whenever particular defined terms of the Indenture are referred to herein, such
defined terms are incorporated herein by reference.
GENERAL
Concurrently with the issuance of the Preferred Securities, the Trust will
invest the proceeds thereof and the consideration paid by the Company for the
Common Securities in the Subordinated Debentures issued by the Company. The
Subordinated Debentures will be in the principal amount equal to the aggregate
stated Liquidation Amount of the Preferred Securities plus the Company's
concurrent investment in the Common Securities. The Subordinated Debentures will
bear interest at the annual rate of % of the principal amount thereof,
payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each
year (each, an "Interest Payment Date"), commencing October 1, 1997, to the
person in whose name each of the Subordinated Debentures is registered, subject
to certain exceptions, at the close of business on the Business Day next
preceding such Interest Payment Date (other than interest payable on a
Redemption Date or the maturity date). In the event the Subordinated Debentures
are not in book-entry form, the relevant record date for the Subordinated
Debentures shall be the fifteenth day of the month prior to the relevant
Interest Payment Date. It is anticipated that, until the liquidation, if any, of
the Trust, the Subordinated Debentures will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Preferred Securities and
the Common Securities. The amount of interest payable in the first payment
period will be computed on the basis of days in a 360-day year. The
amount of interest payable for any period thereafter will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which interest is payable on the Subordinated Debentures is not a Business Day,
then payment of the interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable. Accrued interest that is not
paid on the applicable Interest Payment Date will bear additional interest on
the amount thereof (to the extent permitted by law) at the rate per annum of
% thereof, compounded quarterly. The term "interest" as used herein shall
include quarterly interest payments and interest on quarterly interest payments
not paid on the applicable Interest Payment Date.
The Subordinated Debentures will mature on July 1, 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 July 1, 2002. Such date may also be extended at any time at the election of
the Company to any date not later than July 1, 2046, provided that at the time
such election is made and at the time of extension (i) the Company is not in
24
<PAGE>
bankruptcy, otherwise insolvent or in liquidation, (ii) the Company is not in
default in the payment of any interest or principal on the Subordinated
Debentures, (iii) in the case of Subordinated Debentures held by the Trust, the
Trust is not in arrears on payments of Distributions on the Preferred Securities
and no deferred Distributions are accumulated and (iv) the Subordinated
Debentures are rated not less than BBB- by Standard & Poor's Ratings Services or
Baa3 by Moody's Investors Service, Inc. or the equivalent by any other
nationally recognized statistical rating organization.
The Subordinated Debentures will be unsecured and will rank junior and be
subordinate in right of payment to all Senior Debt (as defined below) of the
Company. The Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Company, whether under the Indenture or any
existing or other indenture that the Company may enter into in the future or
otherwise. See "--Subordination."
Under certain circumstances involving the dissolution of the Trust following
the occurrence of a Special Event, Subordinated Debentures may be distributed to
the holders of the Trust Securities in liquidation of the Trust. See
"Description of Preferred Securities - Special Event Redemption or Distribution
of Subordinated Debentures."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Event of Default under the Indenture has occurred and is
continuing, the Company has the right under the Indenture to defer the payment
of interest at any time or from time to time for a period not exceeding 20
consecutive quarters with respect to each Extension Period, during which
Extension Periods the Company shall have the right to make full or partial
payments of interest on any Interest Payment Date, provided that no Extension
Period may extend beyond the Stated Maturity of the Subordinated Debentures. At
the end of such Extension Period, the Company must pay all interest then accrued
and unpaid (together with interest thereon at the annual rate of %,
compounded quarterly, to the extent permitted by applicable law). During an
Extension Period, interest will continue to accrue and holders of Subordinated
Debentures (or holders of Preferred Securities while the Preferred Securities
are outstanding) will be required to accrue interest income for United States
federal income tax purposes. See "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
During any such Extension Period, the Company may not, and may not permit any
subsidiary of the Company to, (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Company's capital stock or (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank pari passu with or junior in interest to the
Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of debt securities of any subsidiary of the Company if
such guarantee ranks pari passu with or junior in interest to the Subordinated
Debentures (other than (a) dividends or distributions in capital stock of the
Company, (b) any declaration of a dividend in connection with the implementation
of a stockholders' rights plan or the redemption or repurchase of any such
rights pursuant thereto and (c) payments under the Guarantee). Prior to the
termination of any such Extension Period, the Company may further extend the
interest payment period, provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the Subordinated
Debentures. Upon the termination of any such Extension Period and upon the
payment of all amounts then due on any Interest Payment Date, the Company may
elect to begin a new Extension Period subject to the above requirements. No
interest shall be due and payable during an Extension Period, except at the end
thereof. The Company must give the Debenture Trustee and the holders of
Subordinated Debentures notice of its election of such Extension Period at least
one Business Day prior to the earlier of (i) the date the Distributions on the
Preferred Securities would have been payable except for the election to begin
such Extension Period or (ii) the date the Administrative Trustees are required
to give notice to the NYSE, the Nasdaq National Market or other applicable stock
exchange or automated quotation system on which the Preferred Securities are
then listed or quoted or to holders of such Preferred Securities of the record
date or the date such Distributions are payable, but in any event not less than
one Business Day prior to such record date. The Property Trustee shall give
notice of the Company's election to begin a new Extension Period to the holders
of the Preferred Securities. There is no limitation on the number of times that
the Company may elect to begin an Extension Period.
CERTAIN COVENANTS OF THE COMPANY
The Company will covenant that it will not, and will not permit any
subsidiary of the Company to, (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Company's capital stock or (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Company that rank pari passu with or junior in interest to the
Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Company of debt securities of any subsidiary of the Company if
such guarantee ranks pari passu with or junior in interest to the Subordinated
Debentures (other than (a) dividends or distributions in capital stock of the
Company, (b) any declaration of a dividend in connection with the implementation
of a stockholders' rights plan or the redemption or repurchase of any such
rights pursuant thereto and (c) payments under the
25
<PAGE>
Guarantee) if at such time (i) there shall have occurred any event of which the
Company has actual knowledge that (a) with the giving of notice or the lapse of
time, or both, would constitute a Debenture Event of Default under the Indenture
with respect to Subordinated Debentures and (b) in respect of which the Company
shall not have taken reasonable steps to cure, (ii) the Company shall be in
default with respect to its payment of any obligations under the Guarantee or
(iii) the Company shall have given notice of its election to begin an Extension
Period as provided in the Indenture and shall not have rescinded such notice, or
such Extension Period, or any extension thereof, shall be continuing. The
Company will also covenant (i) to maintain directly or indirectly 100% ownership
of the Common Securities of the Trust, provided that certain successors which
are permitted pursuant to the Indenture may succeed to the Company's ownership
of the Common Securities, (ii) not to voluntarily terminate, wind-up or
liquidate the Trust, except (a) in connection with a distribution of
Subordinated Debentures to the holders of the Preferred Securities in
liquidation of the Trust or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the Trust Agreement, and (iii) to
use its reasonable efforts, consistent with the terms and provisions of the
Trust Agreement, to cause the Trust to remain classified as a grantor trust and
not as an association taxable as a corporation for United States federal income
tax purposes.
REDEMPTION
The Subordinated Debentures are redeemable prior to maturity at the option of
the Company (i) on or after July 1, 2002, in whole at any time or in part from
time to time, at a redemption price equal to the accrued and unpaid interest on
the Subordinated Debentures so redeemed to the date fixed for redemption, plus
100% of the principal amount thereof or (ii) at any time in whole (but not in
part), within 90 days of the occurrence of a Special Event, at a redemption
price equal to the accrued and unpaid interest on the Subordinated Debentures so
redeemed to the date fixed for redemption, plus 100% of the principal amount
thereof.
Notice of any redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each Holder of Subordinated Debentures to be
redeemed at its registered address. Unless the Company defaults in payment of
the redemption price, on and after the redemption date, interest will cease to
accrue on such Subordinated Debentures or portions thereof called for redemption
on or after such date.
DISTRIBUTIONS OF SUBORDINATED DEBENTURES
Under certain circumstances involving the liquidation of the Trust,
Subordinated Debentures may be distributed to the holders of the Preferred
Securities in liquidation of the Trust after satisfaction of liabilities to
creditors of the Trust as provided by applicable law. If distributed to holders
of Preferred Securities in liquidation, the Subordinated Debentures will
initially be issued in the form of one or more global securities and DTC, or any
successor depositary for the Preferred Securities, will act as depositary for
the Subordinated Debentures. It is anticipated that the depositary arrangements
for the Subordinated Debentures would be substantially identical to those in
effect for the Preferred Securities. If the Subordinated Debentures are
distributed to the holders of Preferred Securities upon the liquidation of the
Trust, the Company will use its best efforts to list the Subordinated Debentures
on the NYSE or such other stock exchanges or interdealer quotation systems, if
any, on which the Preferred Securities are then listed or traded. There can be
no assurance as to the market price of any Subordinated Debentures that may be
distributed to the holders of Preferred Securities. For a description of DTC and
the terms of the depositary matters, see "Description of Preferred Securities--
Book-Entry Issuance."
Under current United States federal income tax law and interpretations
thereof and assuming, as expected, the Trust is treated as a grantor trust for
United States federal income tax purposes, a distribution by the Trust of the
Subordinated Debentures pursuant to a liquidation of the Trust will not be a
taxable event to the Trust or to holders of the Preferred Securities and will
result in a holder of the Preferred Securities receiving directly such holder's
pro rata share of the Subordinated Debentures (previously held indirectly
through the Trust). If, however, the liquidation of the Trust were to occur
because the Trust is subject to United States federal income tax with respect to
income accrued or received on the Subordinated Debentures as a result of the
occurrence of a Tax Event or otherwise, the distribution of Subordinated
Debentures to holders of the Preferred Securities by the Trust could be a
taxable event to the Trust and each holder, and holders of the Preferred
Securities may be required to recognize gain or loss as if they had exchanged
their Preferred Securities for the Subordinated Debentures they received upon
the liquidation of the Trust. See "Certain United States Federal Income Tax
Consequences--Distribution of Subordinated Debentures to Holders of Preferred
Securities."
GLOBAL SUBORDINATED DEBENTURES
The Subordinated Debentures may be issued in whole or in part in the form of
a Global Subordinated Debentures that will be deposited with, or on behalf of, a
depositary, which initially will be DTC (the "Depositary"). A Global
Subordinated Debentures may be issued only in fully registered form and in
either temporary or permanent form. Unless and until it is
26
<PAGE>
exchanged in whole or in part for the individual Subordinated Debentures
represented thereby, Global Subordinated Debentures may not be transferred
except as a whole by the Depositary for such Global Subordinated Debentures to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by the Depositary or any nominee to a
successor Depositary or any nominee of such successor.
Upon the issuance of a Global Subordinated Debentures and the deposit of such
Global Subordinated Debentures with or on behalf of the Depositary, the
Depositary for such Global Subordinated Debentures or its nominee will credit on
its book-entry registration and transfer system the respective principal amounts
of the individual Subordinated Debentures represented by such Global
Subordinated Debentures to the accounts of persons that have accounts with such
Depositary ("Participants"). Such accounts shall be designated by the dealers,
underwriters or agents with respect to such Subordinated Debentures or by the
Company if such Subordinated Debentures are offered and sold directly by the
Company. Ownership of beneficial interests in a Global Subordinated Debentures
will be limited to Participants or persons that may hold interests through
Participants. Ownership of beneficial interests in such Global Subordinated
Debentures will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the applicable Depositary or its nominee
(with respect to interests of Participants) and the records of Participants
(with respect to interests of persons who hold through Participants). The laws
of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Subordinated
Debentures.
So long as the Depositary for a Global Subordinated Debentures, or its
nominee, is the registered owner of such Global Subordinated Debentures, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Subordinated Debentures represented by such Global
Subordinated Debentures for all purposes under the Indenture governing such
Subordinated Debentures. Except as provided below, owners of beneficial
interests in a Global Subordinated Debentures will not be entitled to have any
of the individual Subordinated Debentures of the series represented by such
Global Subordinated Debentures registered in their names, will not receive or be
entitled to receive physical delivery of any such Subordinated Debentures of
such series in definitive form and will not be considered the owners or holders
thereof under the Indenture.
Payments of principal of and interest on individual Subordinated Debentures
represented by a Global Subordinated Debentures registered in the name of a
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner of the Global Subordinated Debentures
representing such Subordinated Debentures. None of the Company, the Debenture
Trustee, any Paying Agent or the Securities Registrar for such Subordinated
Debentures will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Subordinated Debentures representing such Subordinated
Debentures or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal or interest in respect of a permanent Global Subordinated
Debentures representing any of such Subordinated Debentures, immediately will
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the principal amount of such Global
Subordinated Debentures representing such Subordinated Debentures as shown on
the records of such Depositary or its nominee. The Company also expects that
payments by Participants to owners of beneficial interests in such Global
Subordinated Debentures held through such Participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name." Such payments will be the responsibility of such Participants.
If the Depositary is at any time unwilling, unable or ineligible to continue
as depositary and a successor depositary is not appointed by the Company within
90 days, the Company will issue individual Subordinated Debentures in exchange
for the Global Subordinated Debentures representing such Subordinated
Debentures. In addition, the Company may at any time and in its sole discretion,
determine not to have any Subordinated Debentures represented by one or more
Global Subordinated Debentures and, in such event, will issue individual
Subordinated Debentures in exchange for the Global Subordinated Debentures
representing such Subordinated Debentures. Further, if the Company so specifies
with respect to the Subordinated Debentures, an owner of a beneficial interest
in a Global Subordinated Debentures representing Subordinated Debentures may, on
terms acceptable to the Company, the Debenture Trustee and the Depositary for
such Global Subordinated Debentures, receive individual Subordinated Debentures
in exchange for such beneficial interests. In any such instance, an owner of a
beneficial interest in a Global Subordinated Debentures will be entitled to
physical delivery of individual Subordinated Debentures of the series
represented by such Global Subordinated Debentures equal in principal amount to
such beneficial interest and to have such Subordinated Debentures registered in
its name. Individual Subordinated Debentures so issued will be issued in
denominations, unless otherwise specified by the Company, of $25 and integral
multiples thereof.
27
<PAGE>
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on Subordinated Debentures will be
made at the office of the Debenture Trustee in the City of New York or at the
office of such Paying Agent or Paying Agents (which may include the Company) as
the Company may designate from time to time, except that at the option of the
Company payment of any interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Securities
Register or by wire or electronic funds transfer. Payment of any interest on
Subordinated Debentures (other than interest payable on a Redemption Date or the
maturity date) will be made to the Person in whose name such Subordinated
Debentures is registered at the close of business on the Regular Record Date for
such interest, except in the case of Defaulted Interest. The Company may at any
time designate additional Paying Agents or rescind the designation of any Paying
Agent; however, the Company will at all times be required to maintain a Paying
Agent in each Place of Payment.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or then
held by the Company in trust, for the payment of the principal of or interest on
any Subordinated Debentures and remaining unclaimed for two years after such
principal or interest has become due and payable shall, at the request of the
Company, be repaid to the Company and the holder of such Subordinated Debentures
shall thereafter look, as a general unsecured creditor, only to the Company for
payment thereof.
REGISTRATION AND TRANSFER OF SUBORDINATED DEBENTURES
If the Depositary is DTC, a global security shall be exchangeable for
Subordinated Debentures registered in the names of persons other than DTC or its
nominee only if (i) DTC notifies the Company that it is unwilling or unable to
continue as a depository for such global security and no successor depository
shall have been appointed by the Company within 90 days or if at any time DTC
ceases to be a clearing agency registered under the Exchange Act, (ii) the
Company in its sole discretion determines that such global security shall be so
exchangeable, or (iii) there shall have occurred and be continuing a Debenture
Event of Default with respect to such global security. Any global security that
is exchangeable pursuant to the preceding sentence shall be exchangeable for
definitive certificates registered in such names as DTC shall direct. It is
expected that such instructions will be based upon directions received by DTC
from its Participants with respect to ownership of beneficial interests in such
global security. In the event that Subordinated Debentures are issued in
definitive form, such Subordinated Debentures will be in denominations of $25
and integral multiples thereof and may be transferred or exchanged at the
offices described below. Payments on Subordinated Debentures represented by a
global security will be made to DTC, as the Depositary for the Subordinated
Debentures. In the event Subordinated Debentures are issued in definitive form,
principal and interest will be payable, the transfer of the Subordinated
Debentures will be registrable, and Subordinated Debentures will be exchangeable
for Subordinated Debentures of other denominations of a like aggregate principal
amount, at the corporate office of the Debenture Trustee in New York, New York
or at the offices of any paying agent or transfer agent appointed by the
Company, provided that payment of interest may be made at the option of the
Company by check mailed to the address of the persons entitled thereto or by
wire or electronic funds transfer. In addition, if the Subordinated Debentures
are issued in certificated form, the record dates for payment of interest will
be the 15th day of the last month of each calendar quarter. For a description of
DTC and the terms of the depositary arrangements relating to payments,
transfers, voting rights, redemptions and other notices and other matters, see
"Description of Preferred Securities--Book-Entry Issuance."
Subordinated Debentures may be presented for exchange as provided above, and
may be presented for registration of transfer (with the form of transfer
endorsed thereon, or a satisfactory written instrument of transfer, duly
executed), at the office of the Securities Registrar or at the office of any
transfer agent designated by the Company for such purpose with respect to the
Subordinated Debentures, without service charge and upon payment of any taxes
and other governmental charges as described in the Indenture. The Company will
appoint the Debenture Trustee as Securities Registrar under the Indenture. The
Company may at any time rescind the designation of any transfer agent or approve
a change in the location through which any transfer agent acts, provided that
the Company maintains a transfer agent in each Place of Payment. The Company may
at any time designate additional transfer agents with respect to the
Subordinated Debentures.
In the event of any redemption, neither the Company nor the Debenture Trustee
shall be required to (i) issue, register the transfer of or exchange
Subordinated Debentures during a period beginning at the opening of business 15
days before the day of selection for redemption of the Subordinated Debentures
pursuant to the Indenture and ending at the close of business on the day of
mailing of such notice of redemption or (ii) transfer or exchange any
Subordinated Debentures so selected for redemption, except, in the case of any
Subordinated Debentures being redeemed in part, any portion thereof not to be
redeemed.
28
<PAGE>
MODIFICATION OF INDENTURE
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of the Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not adversely affect in any material respect the interest of the holders of
Subordinated Debentures or, for so long as the Preferred Securities shall remain
outstanding, the holders of the Preferred Securities) and qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act.
The Indenture contains provisions permitting the Company and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of outstanding Subordinated Debenture affected, to modify the
Indenture in a manner affecting the rights of the holders of such Subordinated
Debentures; provided that no such modification may, without the consent of the
holder of each outstanding Subordinated Debenture so affected, among others, (i)
change the stated maturity of the Subordinated Debentures, reduce the principal
amount thereof, change the method of calculating the rate of interest thereon or
reduce the rate or extend the time of payment of interest thereon (except such
change or extension as is contemplated by the Indenture) or (ii) reduce the
percentage of principal amount of the Subordinated Debentures, the holders of
which are required to consent to any such modification of the Indenture,
provided that, so long as any Preferred Securities remain outstanding, no such
modification may be made that adversely affects the interests of holders of such
Preferred Securities in any material respect, and no termination of the
Indenture may occur, and no waiver of any Debenture Event of Default or
compliance with any covenant under the Indenture may be effective, without the
prior consent of the holders of at least a majority of the aggregate Liquidation
Amount of the Preferred Securities unless and until the principal of the
Subordinated Debentures and all accrued and unpaid interest thereon have been
paid in full and certain other conditions are satisfied.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described events
with respect to the Subordinated Debentures that has occurred and is continuing
constitutes a "Debenture Event of Default" (a "Debenture Event of Default") with
respect to the Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Subordinated Debentures,
when due (subject to the deferral of any due date in the case of an Extension
Period); or
(ii) failure to pay any principal of the Subordinated Debentures when due
whether at maturity or upon redemption; or
(iii) failure to observe or perform certain other covenants contained in
the Indenture for 90 days after written notice to the Company from the Debenture
Trustee or from the holders of at least 25% in outstanding principal amount of
outstanding Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of
Subordinated Debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee. The
Debenture Trustee or the holders of not less than 25% in aggregate outstanding
principal amount of Subordinated Debentures may declare the principal due and
payable immediately upon a Debenture Event of Default resulting from the
Company's failure to make payments with respect to the Subordinated Debentures
when due and payable or failure to observe or perform covenants contained in the
Indenture, and, should the Debenture Trustee or such holders of such
Subordinated Debentures fail to make such declaration, the holders of at least
25% in Liquidation Amount of the Preferred Securities shall have such right.
Upon a Debenture Event of Default resulting from certain events of bankruptcy of
the Company, the principal of the Subordinated Debentures shall automatically,
and without any declaration or any further action on the part of the Debenture
Trustee or any holder, become immediately due and payable. The holders of a
majority in aggregate outstanding principal amount of Subordinated Debentures
may rescind or annul such declaration and waive the default if the default
(other than the non-payment of the principal of Subordinated Debentures which
has become due solely by such acceleration) has been cured and a sum sufficient
to pay all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee, and should the
holders of such Subordinated Debentures fail to rescind or annul such
declaration and waive such default, the holders of a majority in Liquidation
Amount of the Preferred Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures affected thereby and the holders of at least a majority
in Liquidation Amount of the Preferred Securities may, on behalf of the holders
of all the Subordinated Debentures or the holders of all the Preferred
Securities, as the case may be, waive any past default, except a default in the
payment of principal or interest (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee) or
29
<PAGE>
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Subordinated Debenture. The Company is required to file annually with the
Debenture Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
Indenture.
In case a Debenture Event of Default shall occur and be continuing, the
Debenture Trustee will have the right to declare the principal of and the
interest on such Subordinated Debentures and any other amounts payable under the
Indenture, to be forthwith due and payable and to enforce its other rights as a
creditor with respect to such Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such event
is attributable to the failure of the Company to pay interest or principal on
the Subordinated Debentures on the date such interest or principal is otherwise
payable, a holder of Preferred Securities may institute a Direct Action for
payment. The Company may not amend the Indenture to remove the foregoing right
to bring a Direct Action without the prior written consent of the holders of all
of the Preferred Securities. Notwithstanding any payment made to such holder of
Preferred Securities by the Company in connection with a Direct Action, the
Company shall remain obligated to pay the principal of or interest on the
Subordinated Debentures held by the Trust or the Property Trustee and the
Company shall be subrogated to the rights of the holder of such Preferred
Securities with respect to payments on the Preferred Securities to the extent of
any payments made by the Company to such holder in any Direct Action. Except as
provided above, holders of Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the Subordinated
Debentures.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, unless (i) in case the Company
consolidates with or merges into another Person or conveys, transfers or leases
its properties and assets substantially as an entirety to any Person, the
successor Person is organized under the laws of the United States or any state
or the District of Columbia, and such successor Person expressly assumes the
Company's obligations on the Subordinated Debentures issued under the Indenture;
(ii) immediately after giving effect thereto, no Debenture Event of Default, and
no event which, after notice or lapse of time or both, would become a Debenture
Event of Default, shall have happened and be continuing; (iii) if at the time
any Preferred Securities are outstanding, such transaction is not precluded by
the Trust Agreement or Guarantee and does not give rise to any breach or
violation of the Trust Agreement or the Guarantee, and (iv) certain other
conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holders of the
Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Subordinated
Debentures not previously delivered to the Debenture Trustee for cancellation
(i) have become due and payable or (ii) will become due and payable at their
Stated Maturity within one year or (iii) are to be called for redemption within
one year under arrangements satisfactory to the Debenture Trustee for the giving
of notice of redemption, and the Company deposits or causes to be deposited with
the Debenture Trustee funds, in trust, for such purpose and in an amount
sufficient to pay and discharge the entire indebtedness on the Subordinated
Debentures not previously delivered to the Debenture Trustee for cancellation,
for the principal and interest to the date of the deposit or to the Stated
Maturity or the Redemption Date, as the case may be, then the Indenture will
cease to be of further effect (except as to the Company's obligations to pay all
other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Company will be
deemed to have satisfied and discharged the Indenture.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any Subordinated
Debentures issued thereunder will be subordinate and junior in right of payment
to all Senior Debt to the extent provided in the Indenture. Upon any payment or
distribution of assets of the Company upon any liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of creditors, marshaling
of assets or any bankruptcy, insolvency, debt restructuring or similar
proceedings in connection with any insolvency or bankruptcy proceeding of the
Company, the holders of Senior Debt will first be entitled to receive payment
30
<PAGE>
in full of principal of (and premium, if any) and interest, if any, on such
Senior Debt before the holders of Subordinated Debentures or the Property
Trustee on behalf of the holders of Preferred Securities will be entitled to
receive or retain any payment in respect of the principal of or interest, if
any, on the Subordinated Debentures; provided, however, that holders of Senior
Debt shall not be entitled to receive payment of any such amounts to the extent
that such holders would be required by the subordination provisions of such
Senior Debt to pay such amounts over to the obligees on trade accounts payable
or other liabilities arising in the ordinary course of the Company's business.
In the event of the acceleration of the maturity of any Subordinated
Debentures, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the holders of
Subordinated Debentures will be entitled to receive or retain any payment or
distribution in respect of the principal of or interest, if any, on the
Subordinated Debentures; provided, however, that holders of Senior Debt shall
not be entitled to receive payment of any such amounts to the extent that such
holders would be required by the subordination provisions of such Senior Debt to
pay such amounts over to the obligees on trade accounts payable or other
liabilities arising in the ordinary course of the Company's business.
No payments on account of principal or interest in respect of the
Subordinated Debentures may be made if there shall have occurred and be
continuing a default in any payment with respect to Senior Debt or an event of
default with respect to any Senior Debt resulting in the acceleration of the
maturity thereof, or if any judicial proceeding shall be pending with respect to
any such default.
"Debt" means with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) every
obligation of such Person for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options, swaps and similar arrangements; and (vii) every obligation of the type
referred to in clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, such Person has guaranteed
or is responsible or liable for, directly or indirectly, as obligor or
otherwise.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt of the
Company, whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Subordinated Debentures or to other Debt
which is pari passu with, or subordinated to, the Subordinated Debentures;
provided, however, that Senior Debt shall not be deemed to include (i) any Debt
of the Company to any of its subsidiaries or affiliates, (ii) Debt of the
Company to any employee of the Company, (iii) Debt which by its terms is
subordinated to trade accounts payable or accrued liabilities arising in the
ordinary course of business to the extent that payments made to the holders of
such Debt by the holders of the Subordinated Debentures as a result of the
subordination provisions of the Indenture would be greater than such payments
otherwise would have been (absent giving effect to this clause (iii)) as a
result of any obligation of such holders of such Debt to pay amounts over to the
obligees on such trade accounts payable or accrued liabilities arising in the
ordinary course of business as a result of subordination provisions to which
such Debt is subject, and (iv) any other debt securities issued pursuant to the
Indenture.
The Indenture places no limitation on the amount of additional Senior Debt
that may be incurred by the Company.
TRUST COSTS AND EXPENSES
In the Indenture, the Company, as borrower, has agreed to pay all debts and
other obligations (other than with respect to the Trust Securities) and all
costs and expenses of the Trust (including costs and expenses relating to the
organization of the Trust, the fees and expenses of the Trustees and the costs
and expenses relating to the operation of the Trust) and to pay any and all
taxes and all costs and expenses with respect thereto (other than United States
withholding taxes) to which the Trust might become subject.
31
<PAGE>
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Company and its affiliates utilize various of the banking services
offered by the Debenture Trustee. Such services include providing lines of
credit.
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Subordinated Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Debenture Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties if the Debenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
DESCRIPTION OF GUARANTEE
The Guarantee will be executed and delivered by the Company concurrently with
the issuance by the Trust of the Trust Securities for the benefit of the holders
from time to time of such Trust Securities. The Chase Manhattan Bank will act as
indenture trustee ("Guarantee Trustee") under the Guarantee for the purposes of
compliance with the Trust Indenture Act, and the Guarantee will be qualified as
an Indenture under the Trust Indenture Act. The following summary of material
terms and provisions of the Guarantee does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the provisions
of the Guarantee, including the definitions therein of certain terms, and the
Trust Indenture Act. The form of the Guarantee has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. The Guarantee
Trustee will hold the Guarantee for the benefit of the holders of the Trust
Securities.
GENERAL
The Company will irrevocably and unconditionally agree to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined below) to the holders of the Trust Securities, as and when due,
regardless of any defense, right of set-off or counterclaim that the Trust may
have or assert other than the defense of payment. The following payments with
respect to the Trust Securities, to the extent not paid by or on behalf of the
Trust (the "Guarantee Payments"), will be subject to the Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on the Trust
Securities, to the extent that the Trust has funds on hand available therefor at
the time, (ii) the Redemption Price with respect to any Trust Securities called
for redemption to the extent that the Trust has funds on hand available therefor
at such time, and (iii) upon a voluntary or involuntary termination, winding up
or liquidation of the Trust (unless the Subordinated Debentures are distributed
to holders of the Trust Securities), the lesser of (a) the aggregate of the
Liquidation Amount plus accrued and unpaid Distributions to the date of payment
and (b) the amount of assets of the Trust remaining available for distribution
to holders of Trust Securities in liquidation of the Trust after satisfaction of
liabilities to creditors of the Trust as required by applicable law. The
Company's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of the applicable
Trust Securities or by causing the Trust to pay such amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis of the
Trust's obligations under the Trust Securities, but will apply only to the
extent that the Trust has funds on hand available to make such payments, and is
not a guarantee of collection.
If the Company does not make interest payments on the Subordinated Debentures
held by the Trust, the Trust will not be able to pay Distributions on the Trust
Securities and will not have funds legally available therefor. The Guarantee
will rank subordinate and junior in right of payment to all Senior Debt of the
Company. See "--Status of the Guarantee." The Guarantee does not limit the
incurrence or issuance of additional Debt of the Company, whether secured or
unsecured or whether under the Indenture or any existing or other indenture that
the Company may enter into in the future or otherwise.
The Company has, through the Guarantee, the Trust Agreement, the Subordinated
Debentures and the Indenture, taken together, fully, irrevocably and
unconditionally guaranteed all of the Trust's obligations under the Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such
32
<PAGE>
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Preferred Securities. See "Relationship Among the
Preferred Securities, the Subordinated Debentures and the Guarantee--General."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and will
rank subordinate and junior in right of payment to all Senior Debt of the
Company in the same manner as the Subordinated Debentures, except that upon the
occurrence and continuance of an Event of Default under the Trust Agreement
resulting from a Debenture Event of Default under the Indenture, the rights of
the Company as holder of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated to the rights to payment of the holders of the Preferred
Securities. See "Description of Preferred Securities--Subordination of Common
Securities."
The Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be held for the benefit of the holders of the Trust Securities.
The Guarantee will not be discharged except by payment of the Guarantee Payments
in full (without duplication of amounts theretofore paid by the Trust) or upon
distribution of the Subordinated Debentures to the holders of the Trust
Securities in exchange for all of the Trust Securities as provided in the Trust
Agreement. The Guarantee does not limit the incurrence or issuance of additional
Debt of the Company, whether secured or unsecured or whether under the Indenture
or any existing or other indenture that the Company may enter into in the future
or otherwise.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect in any
material respect the rights of holders of the Trust Securities (in which case
consent of the holders or the Guarantee Trustee, as the case may be, will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority in Liquidation Amount of the outstanding
Preferred Securities. The manner of obtaining any such approval will be as set
forth under "Description of the Preferred Securities--Voting Rights; Amendment
of the Trust Agreement." All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Trust Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
Any holder of the Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Company and its affiliates utilize various of the banking services
offered by the Guarantee Trustee. Such services include providing lines of
credit.
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the Guarantee Trustee is under no obligation
to exercise any of the powers vested in it by the Guarantee at the request of
any holder of any Preferred Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.
33
<PAGE>
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price of the Trust Securities, upon full payment of
the amounts payable upon liquidation of the Trust or upon distribution of
Subordinated Debentures to the holders of the Trust Securities in exchange for
all of the Trust Securities. The Guarantee will continue to be effective or will
be reinstated, as the case may be, if at any time any holder of the Trust
Securities must restore payment of any sums paid under the Trust Securities or
the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SUBORDINATED DEBENTURES AND THE GUARANTEE
Payments of Distributions and other amounts due on the Trust Securities (to
the extent the Trust has funds available for the payment of such Distributions)
are irrevocably guaranteed by the Company as and to the extent set forth under
"Description of Guarantee." Taken together, the Company's obligations under the
Subordinated Debentures, the Indenture, the Trust Agreement and the Guarantee
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of distributions and other amounts due on the Preferred Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
Preferred Securities. If and to the extent that the Company does not make
payments on the Subordinated Debentures, the Trust will not pay Distributions or
other amounts due on the Preferred Securities. The Guarantee does not cover
payment of Distributions when the Trust does not have sufficient funds to pay
such Distributions. In the event a Debenture Event of Default has occurred and
is continuing and such default is attributable to the failure of the Company to
pay interest or principal on the Subordinated Debentures, a holder of Preferred
Securities may institute a legal proceeding directly against the Company to
enforce payment of such Distributions to such holder. The obligations of the
Company under the Guarantee are subordinate and junior in right of payment to
all Senior Debt of the Company.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover Distributions
and other payments due on the Preferred Securities, primarily because (i) the
aggregate principal amount of the Subordinated Debentures will be equal to the
sum of the aggregate stated Liquidation Amount of the Preferred Securities and
the Common Securities; (ii) the interest rate and interest and other payment
dates on the Subordinated Debentures will match the Securities Rate and
Distributions and other payment dates for the related Preferred Securities;
(iii) the Company shall pay for all and any costs, expenses and liabilities of
the Trust except the Trust's obligations to holders of its Preferred Securities
under the Preferred Securities; and (iv) the Trust Agreement further provides
that the Trust will not engage in any activity that is not consistent with the
limited purposes of the Trust.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of Preferred Securities may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity.
A default or event of default under any Senior Debt of the Company will not
constitute an Event of Default or a Debenture Event of Default. However, in the
event of payment defaults under, or acceleration of, Senior Debt of the Company,
the subordination provisions of the Indenture provide that no payments may be
made in respect of the Subordinated Debentures until such Senior Debt has been
paid in full or any payment default thereunder has been cured or waived. Failure
to make required payments on the Subordinated Debentures would constitute an
Event of Default under the Indenture.
34
<PAGE>
LIMITED PURPOSE OF TRUST
The Preferred Securities evidence a beneficial ownership interest in the
Trust, and the Trust exists for the sole purpose of issuing the Preferred
Securities and the Common Securities and investing the proceeds thereof in
Subordinated Debentures (and engaging in activities necessary or incidental
thereto). A principal difference between the rights of a holder of Preferred
Securities and a holder of Subordinated Debentures is that a holder of
Subordinated Debentures is entitled to receive from the Company the principal
amount of and interest accrued on Subordinated Debentures held, while a holder
of Preferred Securities is entitled to receive Distributions from the Trust (or
from the Company under the Guarantee) if and to the extent the Trust has funds
available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
the Trust involving the liquidation of the Subordinated Debentures, after
satisfaction of liabilities to creditors of the Trust in accordance with
applicable law, the holders of the Preferred Securities will be entitled to
receive, out of assets held by the Trust, the Liquidation Distribution in cash.
See "Description of Preferred Securities--Liquidation Distribution Upon
Termination." Upon any voluntary or involuntary liquidation or bankruptcy of the
Company, the Property Trustee, as holder of the Subordinated Debentures, would
be a subordinated creditor of the Company, subordinated in right of payment to
all Senior Debt, but entitled to receive payment in full of principal and
interest before any stockholders of the Company receive payments or
distributions. Since the Company is the guarantor under the Guarantee and has
agreed to pay for all costs, expenses and liabilities of the Trust (other than
the Trust's obligations to the holders of the Preferred Securities), the
positions of a holder of Preferred Securities and a holder of the Subordinated
Debentures relative to other creditors and to stockholders of the Company in the
event of liquidation or bankruptcy of the Company would be substantially the
same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Simpson Thacher & Bartlett, special tax counsel to the
Company and the Trust ("Tax Counsel"), the following summary accurately
describes the material United States federal income tax consequences that may be
relevant to the purchase, ownership and disposition of Preferred Securities.
Unless otherwise stated, this summary deals only with Preferred Securities held
as capital assets by United States Persons (defined below) who purchase the
Preferred Securities upon original issuance. As used herein, a "United States
Person" means a person that is (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity created or organized in or under
the laws of the United States or any political subdivision thereof, (iii) an
estate the income of which is subject to United States federal income taxation
regardless of its source, or (iv) any trust if a court within the United States
is able to exercise primary supervision over the administration of such trust
and one or more United States fiduciaries have the authority to control all
substantial decisions of such trust. The tax treatment of a holder may vary
depending on his, her or its particular situation. This summary does not address
all the tax consequences that may be relevant to a particular holder or to
holders who may be subject to special tax treatment, such as banks, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, tax-exempt investors, or foreign investors. In
addition, this summary does not include any description of any alternative
minimum tax consequences or the tax laws of any state, local or foreign
government that may be applicable to a holder of Preferred Securities. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
the Treasury regulations promulgated thereunder and administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly on a retroactive basis.
The following discussion does not discuss the tax consequences that might be
relevant to persons that are not United States Persons ("non-United States
Persons"). Non-United States Persons should consult their own tax advisors as to
the specific United States federal income tax consequences of the purchase,
ownership and disposition of Preferred Securities.
The authorities on which this summary is based are subject to various
interpretations and the opinions of Tax Counsel are not binding on the Internal
Revenue Service ("IRS") or the courts, either of which could take a contrary
position. Moreover, no rulings have been or will be sought from the IRS with
respect to the transactions described herein. Accordingly, there can be no
assurance that the IRS will not challenge the opinions expressed herein or that
a court would not sustain such a challenge. Nevertheless, Tax Counsel has
advised that it is of the view that, if challenged, the opinions expressed
herein would be sustained by a court with jurisdiction in a properly presently
case.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SECURITIES, INCLUDING
35
<PAGE>
THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS. FOR A
DISCUSSION OF THE POSSIBLE REDEMPTION OF THE PREFERRED SECURITIES UPON THE
OCCURRENCE OF CERTAIN TAX EVENTS SEE "DESCRIPTION OF PREFERRED SECURITIES--
REDEMPTION."
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Tax Counsel is
of the opinion that, under current law and assuming compliance with the terms of
the Trust Agreement, and based on certain facts and assumptions contained in
such opinion, the Trust will be classified as a grantor trust and not as an
association taxable as a corporation for United States federal income tax
purposes. As a result, each beneficial owner of Preferred Securities (a
"Securityholder") will be treated as owning an undivided beneficial interest in
the Subordinated Debentures. Accordingly, each Securityholder will be required
to include in its gross income its pro rata share of the interest income or
original issue discount that is paid or accrued on the Subordinated Debentures.
See "--Interest Income and Original Issue Discount."
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
The Company, the Trust and the holders of the Preferred Securities (by
acceptance of a beneficial interest in a Preferred Security) will agree to treat
the Subordinated Debentures as indebtedness for all United States tax purposes.
In connection with the issuance of the Subordinated Debentures, Tax Counsel is
of the opinion that, under current law, and based on certain representations,
facts and assumptions set forth in such opinion, the Subordinated Debentures
will be classified as indebtedness for United States federal income tax
purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under the applicable Treasury regulations, the Subordinated Debentures will
not be considered to have been issued with "original issue discount" ("OID")
within the meaning of Section 1273(a) of the Code. Accordingly, except as set
forth below, stated interest on the Subordinated Debentures generally will be
included in income by a Securityholder at the time such interest income is paid
or accrued in accordance with such Securityholder's regular method of tax
accounting.
If, however, the Company exercises its right to defer payments of interest on
the Subordinated Debentures, the Subordinated Debentures will become OID
instruments at such time and all Securityholders will be required to accrue the
stated interest on the Subordinated Debentures on a daily basis during the
Extension Period, even though the Company will not pay such interest until the
end of the Extension Period, and even though some Securityholders may use the
cash method of tax accounting. Moreover, thereafter the Subordinated Debentures
will be taxed as OID instruments for as long as they remain outstanding. Thus,
even after the end of the Extension Period, all Securityholders would be
required to continue to include the stated interest on the Subordinated
Debentures in income on a daily economic accrual basis, regardless of their
method of tax accounting and in advance of receipt of the cash attributable to
such interest income. Under the OID economic accrual rules, a Securityholder
would accrue an amount of interest income each year that approximates the stated
interest payments called for under the terms of the Subordinated Debentures, and
actual cash payments of interest on the Subordinated Debentures would not be
reported separately as taxable income. Any amount of OID included in a
Securityholder's gross income (whether or not during an Extension Period) will
increase such Securityholder's tax basis in its Preferred Securities, and the
amount of Distributions received by a Securityholder with respect to such
Preferred Securities will reduce the tax basis of such Preferred Securities.
The Treasury regulations described above have not yet been addressed in any
rulings or other interpretations by the IRS, and it is possible that the IRS
could take a contrary position. If the IRS were to assert successfully that the
stated interest on the Subordinated Debentures was OID regardless of whether the
Company exercises its right to defer payments of interest on such debentures,
all Securityholders would be required to include such stated interest in income
on a daily economic accrual basis as described above.
Corporate Securityholders will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Preferred
Securities.
DISTRIBUTION OF SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED SECURITIES
Under current law, a distribution by the Trust of the Subordinated Debentures
as described under the caption "Description of Preferred Securities--Liquidation
of Trust and Distribution of Subordinated Debentures to Holders" will be non-
taxable and will result in the Securityholder receiving directly its pro rata
share of the Subordinated Debentures previously
36
<PAGE>
held indirectly through the Trust, with a holding period and aggregate tax basis
equal to the holding period and aggregate tax basis such Securityholder had in
its Preferred Securities before such distribution. If, however, the liquidation
of the Trust were to occur because the Trust is subject to United States federal
income tax with respect to income accrued or received on the Subordinated
Debentures, the distribution of Subordinated Debentures to Securityholders by
the Trust would be a taxable event to the Trust and each Securityholder, and a
Securityholder would recognize gain or loss as if the Securityholder had
exchanged its Preferred Securities for the Subordinated Debentures it received
upon the liquidation of the Trust. A Securityholder will accrue interest in
respect of Subordinated Debentures received from the Trust in the manner
described above under "--Interest Income and Original Issue Discount."
SALES OR REDEMPTION OF PREFERRED SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of Preferred
Securities (including a redemption for cash) in an amount equal to the
difference between the amount realized by the Securityholder on the sale or
redemption of the Preferred Securities (except to the extent that such amount
realized is characterized as a payment in respect of accrued but unpaid interest
on such Securityholder's allocable share of the Subordinated Debentures that
such Securityholder has not included in gross income previously) and the
Securityholder's adjusted tax basis in the Preferred Securities sold or
redeemed. Such gain or loss generally will be taxable as long-term capital gain
or loss if the Securityholder held the Preferred Securities that it sold or
redeemed for more than one year. Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for federal income tax
purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest (including any OID) accrued in respect of the
Preferred Securities held of record by United States Persons (other than
corporations and other exempt Securityholders), if any, will be reported to the
Internal Revenue Service. "Backup" withholding at a rate of 31% will apply to
payments of interest to non-exempt United States Persons unless the
Securityholder furnishes its taxpayer identification number in the manner
prescribed in applicable Treasury Regulations, certifies that such number is
correct, certifies as to no loss of exemption from backup withholding and meets
certain other conditions.
Payment of the proceeds from the disposition of Preferred Securities to or
through the United States office of a broker is subject to information reporting
and backup withholding unless the holder or beneficial owner establishes an
exemption from information reporting and backup withholding.
Any amounts withheld from a Securityholder under the backup withholding rules
will be allowed as a refund or a credit against such Securityholder's United
States federal income tax liability, provided the required information is
furnished to the Internal Revenue Service.
It is anticipated that income on the Preferred Securities will be reported to
holders on Form 1099 and mailed to holders of the Preferred Securities by
January 31 following each calendar year.
POSSIBLE TAX LAW CHANGES
Legislation was proposed by the United States Department of the Treasury on
February 6, 1997 as part of President Clinton's Fiscal 1998 Budget Proposal (the
"Proposed Legislation") that contains a provision which generally would deny the
interest deduction for interest paid or accrued on an instrument issued by a
corporation that has a weighted average maturity of more than 40 years. The
Proposed Legislation also contains a provision which generally would deny an
interest deduction for interest paid or accrued on an instrument issued by a
corporation that (i) has a maximum term of more than 15 years and (ii) is not
shown as indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. For purposes of
determining the weighted average maturity or the term of an instrument, any
right to extend the maturity of such instrument would be treated as exercised.
The above-described provisions were proposed to be effective generally for
instruments issued on or after the date of the first Congressional committee
action on the Proposed Legislation. If either provision were to apply to the
Subordinated Debentures, the Company would not be able to deduct the interest on
the Subordinated Debentures. There can be no assurance that the Proposed
Legislation or future legislative proposals or final legislation will not
adversely affect the ability of the Company to deduct interest on the
Subordinated Debentures or otherwise affect the tax treatment of the
transactions described herein. Moreover, such a change could give rise to a Tax
Event, which would permit the Company to cause a redemption of the Preferred
Securities, as described more fully under "Description of Preferred Securities--
Redemption."
37
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), including, without limitation, receipt by the
Company of approvals from the Pennsylvania Public Utility Commission in respect
of the Company's issuance of the Subordinated Debentures and the Guarantee, the
Trust has agreed to sell to each of the Underwriters named below, and each of
the Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated,
A.G. Edwards & Sons, Inc., Legg Mason Wood Walker, Incorporated, Morgan Stanley
& Co. Incorporated PaineWebber Incorporated and Prudential Securities
Incorporated are acting as representatives (the "Representatives"), has
severally agreed to purchase the number of Preferred Securities set forth
opposite its name below. In the Underwriting Agreement, the several Underwriters
have agreed, subject to the terms and conditions set forth therein, to purchase
all of the Preferred Securities offered hereby if any of the Preferred
Securities are purchased. In the event of default by an Underwriter, the
Underwriting Agreement provides that, in certain circumstances, the purchaser
commitments of the nondefaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
UNDERWRITERS NUMBER OF
- ------------ PREFERRED SECURITIES
--------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................
A.G. Edwards & Sons, Inc................
Legg Mason Wood Walker, Incorporated....
Morgan Stanley & Co. Incorporated.......
PaineWebber Incorporated................
Prudential Securities Incorporated......
Total................................... 6,000,000
==========
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price, as set forth on the cover
page of this Prospectus, and in part to certain securities dealers at such price
less a concession of $ per Preferred Security. After the Preferred
Securities are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Preferred Securities
will be used to purchase the Subordinated Debentures of the Company, the
Underwriting Agreement provides that the Company will agree to pay as
compensation (the "Underwriters' Compensation") to the Underwriters for the
Underwriters' arranging the investment therein of such proceeds, an amount in
immediately available funds of $ per Preferred Security (or $ in
the aggregate) for the accounts of the several Underwriters.
During a period of 30 days from the date of this Prospectus, neither the
Trust nor the Company will, without the prior written consent of the
Representatives, directly or indirectly, sell, offer to sell, grant any option
for the sale of, or otherwise dispose of, any Preferred Securities, any security
convertible into or exchangeable into or exercisable for Preferred Securities or
the Subordinated Debentures or any debt securities substantially similar to the
Subordinated Debentures or any equity securities substantially similar to the
Preferred Securities (except for the Subordinated Debentures and the Preferred
Securities offered hereby).
The Preferred Securities are expected to be approved for listing on the NYSE,
subject to official notice of issuance under the symbol "PPLPrD". Trading of the
Preferred Securities on the NYSE is expected to commence within a 30-day period
after the initial delivery of the Preferred Securities. The Representatives have
advised the Trust that they intend to make a market in the Preferred Securities
prior to the commencement of trading on the NYSE. The Representatives will have
no obligation to make a market in the Preferred Securities, however, and may
cease market making activities, if commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the NYSE, the Underwriters will undertake to sell lots of 100 or
more Preferred Securities to a minimum of 400 beneficial holders.
Until the distribution of the Preferred Securities is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Preferred Securities. As an exception to
these rules, the Representatives are permitted to engage in certain transactions
that stabilize the price of the Preferred Securities. Such transactions consist
of bids or purchases for the purpose of pegging, fixing or maintaining the price
of the Preferred Securities.
38
<PAGE>
If the Underwriters create a short position in the Preferred Securities in
connection with the offering, i.e., if they sell more Preferred Securities than
are set forth on the cover page of this Prospectus, the Representatives may
reduce that short position by purchasing Preferred Securities in the open
market.
The Representatives may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Representatives purchase Preferred
Securities in the open market to reduce the Underwriters' short position or to
stabilize the price of the Preferred Securities, they may reclaim the amount of
the selling concession from the Underwriters and selling group members who sold
those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Preferred Securities. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
The Company and the Trust have agreed to indemnify the Underwriters against,
or contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities Act.
Certain of the Underwriters engage in transactions with, and, from time to
time, perform services for, the Company and its affiliates in the ordinary
course of business.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the enforceability of the Trust Agreement and the formation of the
Trust will be passed upon by Richards, Layton & Finger, special Delaware Counsel
to the Company and the Trust. The legality of the Guarantee and the Subordinated
Debentures will be passed upon for the Company by Michael A. McGrail, Esq.,
Senior Counsel of the Company, and Simpson Thacher & Bartlett (a partnership
which includes professional corporations), and for the Underwriters by Sullivan
& Cromwell. Certain matters relating to United States federal income tax
considerations will be passed upon for the Company by Simpson Thacher &
Bartlett. However, all matters pertaining to the organization of the Company
will be passed upon only by Mr. McGrail. As to matters involving the law of the
Commonwealth of Pennsylvania, Simpson Thacher & Bartlett and Sullivan & Cromwell
will rely on the opinion of Mr. McGrail, and as to matters involving the law of
the State of Delaware, Mr. McGrail, Simpson Thacher & Bartlett and Sullivan &
Cromwell will rely on the opinion of Richards Layton & Finger. Mr. McGrail is a
full-time employee of the Company.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1996
and 1995 and for the two years then ended incorporated in this Prospectus by
reference to PP&L's Annual Report on Form 10-K have been so incorporated in
reliance on the report (which contains an explanatory paragraph relating to the
Company's reorganization) of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements, prior to restatement (not presented
separately therein), and related financial statement schedule as of December 31,
1994 and for the year ended December 31, 1994 incorporated in this Prospectus by
reference from the Company's 1996 Annual Report on Form 10-K have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report which
is incorporated herein by reference, and have been so incorporated in reliance
upon such reports given upon the authority of that firm as experts in accounting
and auditing.
Statements made herein and in the documents incorporated by reference in this
Prospectus as to matters of law and legal conclusions (except with respect to
any Delaware law or tax matters) have been reviewed by Michael A. McGrail, Esq.,
Senior Counsel of the Company, and have been made in reliance upon his authority
as an expert.
39
<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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by Reference........................... 4
Available Information..................................................... 4
Summary of Offering....................................................... 5
Risk Factors.............................................................. 8
PP&L Capital Trust II..................................................... 11
Pennsylvania Power & Light Company........................................ 12
Use of Proceeds........................................................... 12
Accounting Treatment...................................................... 13
Selected Financial Data................................................... 13
Capitalization............................................................ 14
Description of Preferred Securities....................................... 14
Description of Subordinated Debentures.................................... 24
Description of Guarantee.................................................. 32
Relationship Among the Preferred Securities, the Subordinated Debentures
and the Guarantee........................................................ 34
Certain Federal Income Tax Consequences................................... 35
Underwriting.............................................................. 38
Validity of Securities.................................................... 39
Experts................................................................... 40
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6,000,000 PREFERRED SECURITIES
PP&L CAPITAL TRUST II
% TRUST ORIGINATED PREFERRED SECURITIES SM ("TOPRS SM")
(LIQUIDATION AMOUNT
$25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY
GUARANTEED, AS SET FORTH HEREIN, BY
PENNSYLVANIA POWER &
LIGHT COMPANY
---------------
PROSPECTUS
---------------
MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
(a) SEC registration fee............................... $ 45,455
(b) Printing fees and expenses......................... 60,000
(c) Legal fees and expenses............................ 75,000
(d) Accounting fees and expenses....................... 28,000
(e) Blue Sky fees and expenses......................... 10,000
(f) New York Stock Exchange Listing Fee................ 66,450
(g) Rating Agency Fees................................. 125,000
(h) Trustees' fees and expenses........................ 7,500
(i) Other.............................................. 12,595
--------
Total............................................. $430,000
========
- ------------------------------------------------------------------
All of the above except the SEC registration fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 7.02 of the By-laws of the Company reads as follows:
"Section 7.02. Indemnification of Directors and Officers.
(a) RIGHT TO INDEMNIFICATION. Except as prohibited by law, every director
and officer of the Company shall be entitled as of right to be indemnified by
the Company against reasonable expense and any liability paid or incurred by
such person in connection with any actual or threatened claim, action, suit
or proceeding, civil, criminal, administrative, investigative or other,
whether brought by or in the right of the Company or otherwise, in which he
or she may be involved, as a party or otherwise, by reason of such person
being or having been a director or officer of the Company or by reason of the
fact that such person is or was serving at the request of the Company as a
director, officer, employee, fiduciary or other representative of another
corporation, partnership, joint venture, trust, employee benefit plan or
other entity (such claim, action, suit or proceeding hereinafter being
referred to as "action"). Such indemnification shall include the right to
have expenses incurred by such person in connection with an action paid in
advance by the Company prior to final disposition of such action, subject to
such conditions as may be prescribed by law. Persons who are not directors or
officers of the Company may be similarly indemnified in respect of service to
the Company or to another such entity at the request of the Company to the
extent the Board of Directors at any time denominates such person as entitled
to the benefits of this Section 7.02. As used herein, "expense" shall include
fees and expenses of counsel selected by such persons; and "liability" shall
include amounts of judgments, excise taxes, fines and penalties, and amounts
paid in settlement.
(b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under paragraph (a) of this
Section 7.02 is not paid in full by the Company within thirty days after a
written claim has been received by the Company, the claimant may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim, and, if successful in whole or in part, the claimant shall also be
entitled to be paid the expense of prosecuting such claim. It shall be a
defense to any such action that the conduct of the claimant was such that
under Pennsylvania law the Company would be prohibited from indemnifying the
claimant for the amount claimed, but the burden of proving such defense shall
be on the Company. Neither the failure of the Company (including its Board of
Directors, independent legal counsel and its shareholders) to have made a
determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because the conduct of the
claimant was not such that indemnification would be prohibited by law, nor an
actual determination by the Company (including its Board of Directors,
independent legal counsel or its shareholders) that the conduct of the
claimant was such that indemnification would be prohibited by law, shall be a
defense to the action or create a presumption that the conduct of the
claimant was such that indemnification would be prohibited by law.
(c) INSURANCE AND FUNDING. The Company may purchase and maintain insurance
to protect itself and any person eligible to be indemnified hereunder against
any liability or expense asserted or incurred by such person in connection
with any action, whether or not the Company would have the power to indemnify
such person against such liability or expense by law or under the provisions
of this Section 7.02. The Company may create a trust fund, grant a security
II-1
<PAGE>
interest, cause a letter of credit to be issued or use other means (whether
or not similar to the foregoing) to ensure the payment of such sums as may
become necessary to effect indemnification as provided herein.
(d) NON-EXCLUSIVITY; NATURE AND EXTENT OF RIGHTS. The right of
indemnification provided for herein (1) shall not be deemed exclusive of any
other rights, whether now existing or hereafter created, to which those
seeking indemnification hereunder may be entitled under any agreement, by-law
or charter provision, vote of shareholders or directors or otherwise, (2)
shall be deemed to create contractual rights in favor of persons entitled to
indemnification hereunder, (3) shall continue as to persons who have ceased
to have the status pursuant to which they were entitled or were denominated
as entitled to indemnification hereunder and shall inure to the benefit of
the heirs and legal representatives of persons entitled to indemnification
hereunder and (4) shall be applicable to actions, suits or proceedings
commenced after the adoption hereof, whether arising from acts or omissions
occurring before or after the adoption hereof. The right of indemnification
provided for herein may not be amended, modified or repealed so as to limit
in any way the indemnification provided for herein with respect to any acts
or omissions occurring prior to the effective date of any such amendment,
modification or repeal."
Directors and officers of the Company may also be indemnified in certain
circumstances pursuant to the statutory provisions of general application
contained in Pennsylvania law.
Reference is also made to the Form of Underwriting Agreement, filed as
Exhibit 1 hereto, which contains provisions for indemnification of the Company
and its directors and officers by the several Underwriters against certain
liabilities for information furnished by the Underwriters.
The Company presently has insurance policies which, among other things,
include liability insurance coverage for officers and directors under which
officers and directors are covered against any "loss" by reason of payment of
damages, judgments, settlements and costs, as well as charges and expenses
incurred in the defense of actions, suits or proceedings. "Loss" is specifically
defined to exclude fines and penalties, as well as matters deemed uninsurable
under the law pursuant to which the insurance policy shall be construed. The
policies also contain other specific exclusions, including illegally obtained
personal profit or advantage, and dishonesty.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Reference is made to the Exhibit Index filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
II-2
<PAGE>
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, PENNSYLVANIA
POWER & LIGHT COMPANY CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT
IT MEETS ALL OF THE REQUIREMENTS FOR FILLING ON FORM S-3 AND HAS DULY CAUSED
THIS AMENDMENT NO. 1 TO 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 6TH DAY OF JUNE, 1997.
PENNSYLVANIA POWER & LIGHT COMPANY
By: /s/ William F. Hecht
--------------------
William F. Hecht, Chairman, President
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
IN THE CAPACITIES INDICATED ON THE 6TH DAY OF JUNE, 1997.
SIGNATURE TITLE
/s/ William F. Hecht Principal Executive
- ------------------------------------------ Officer and Director
WILLIAM F. HECHT, CHAIRMAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
/s/ R.E. Hill Principal Financial
- ------------------------------------------- Officer
R.E. HILL, SENIOR VICE PRESIDENT--FINANCIAL
/s/ J.J. McCabe Principal Accounting
- ------------------------------------------- Officer
J.J. MCCABE, VICE PRESIDENT AND CONTROLLER
FREDERICK M. BERNTHAL, E. ALLEN DEAVER, NANCE K. Directors
DICCIANI, WILLIAM J. FLOOD, ELMER D. GATES, DEREK
C. HATHAWAY, STUART HEYDT, CLIFFORD L. JONES,
RUTH LEVENTHAL, FRANK A. LONG AND NORMAN
ROBERTSON
By /s/ William F. Hecht
--------------------------------
WILLIAM F. HECHT, ATTORNEY-IN-FACT
II-4
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, PP&L CAPITAL
TRUST II CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT
NO. 1 TO 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 6TH DAY OF JUNE, 1997.
PP&L CAPITAL TRUST II
By: Pennsylvania Power & Light Company,
as Depositor
By: /s/ William F. Hecht
----------------------------------
William F. Hecht, Chairman, President
and Chief Executive Officer
II-5
<PAGE>
PENNSYLVANIA POWER AND LIGHT COMPANY
EXHIBIT INDEX
The following Exhibits indicated by an asterisk preceding the Exhibit number
are filed herewith.
* 1.1 Proposed form of Underwriting Agreement for Preferred Securities.
4.1 Form of Junior Subordinated Indenture between the Company and The Chase
Manhattan Bank, as Debenture Trustee (Incorporated by reference to
Exhibit 4.1 of Amendment No. 1 to the Registration Statement on Form S-
3 of PP&L Capital Trust and Pennsylvania Power and Light Company filed
on March 26, 1997).
* 4.2 Certificate of Trust of PP&L Capital Trust II.
* 4.3 Trust Agreement of PP&L Capital Trust II.
* 4.4 Form of Amended and Restated Trust Agreement of PP&L Capital Trust II.
* 4.5 Form of Preferred Security Certificate for PP&L Capital Trust II.
* 4.6 Form of Guarantee Agreement.
* 5.1 Opinion of Michael A. McGrail, Esq., relating to the legality of the
Subordinated Debentures and the Guarantee.
* 5.2 Opinion of Simpson Thacher & Bartlett, relating to the legality of the
Subordinated Debentures and the Guarantee.
* 5.3 Opinion of Richards, Layton & Finger, special Delaware counsel,
relating to the legality of the Preferred Securities of PP&L Capital
Trust II.
* 8.1 Opinion of Simpson Thacher & Bartlett, as to certain United States
federal income tax matters.
*12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges
*12.2 Statement re: Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Dividends.
*23.1 Consent of Price Waterhouse LLP.
*23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.2
hereto).
23.4 Consent of Richards, Layton & Finger, special Delaware counsel
(included in Exhibit 5.3 hereto).
23.5 Consent of Simpson Thacher & Bartlett (included in Exhibit 8.1
hereto).
24.1 Powers of Attorney (previously filed).
*25.1 Statement of Eligibility under the Trust Indenture Act of 1939 of The
Chase Manhattan Bank, as Trustee under the Junior Subordinated
Indenture.
*25.2 Statement of Eligibility under the Trust Indenture Act of 1939 of The
Chase Manhattan Bank, as Property Trustee under the Amended and
Restated Trust Agreement of PP&L Capital Trust II.
*25.3 Statement of Eligibility under the Trust Indenture Act of 1939 of The
Chase Manhattan Bank, as Guarantee Trustee under the Guarantee for PP&L
Capital Trust II.
II-6
<PAGE>
EXHIBIT 1.1
S&C Draft of 6/2/97
6,000,000 PREFERRED SECURITIES
PP&L CAPITAL TRUST II
(a Delaware Trust)
Trust Originated Preferred Securities ("TOPrS")/SM/
UNDERWRITING AGREEMENT
----------------------
June , 1997
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
A.G. EDWARDS & SONS, INC.,
LEGG MASON WOOD WALKER, INCORPORATED,
MORGAN STANLEY & CO. INCORPORATED,
PAINEWEBBER INCORPORATED,
PRUDENTIAL SECURITIES INCORPORATED,
As Underwriters,
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Merrill Lynch World Headquarters,
North Tower,
World Financial Center,
New York, New York 10281.
Dear Sirs:
1. Introductory.
------------
PP&L Capital Trust II (the "Trust"), a statutory business trust
organized under the Business Trust Act (the "Delaware Act") of the State of
Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. (S)(S) 3801 et
--
seq.), and Pennsylvania Power & Light Company, a Pennsylvania corporation (the
- ---
"Company" and, together with the Trust, the "Offerors"), confirm their agreement
(the "Agreement") with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"),
- -----------------------
/SM/ "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE>
A.G. Edwards & Sons, Inc., Legg Mason Wood Walker, Incorporated, Morgan Stanley
& Co. Incorporated, PaineWebber Incorporated and Prudential Securities
Incorporated and the other underwriters named in Schedule A hereto (collectively
the "Underwriters" which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), with respect to the sale by the
Trust and the purchase by the Underwriters, acting severally and not jointly, of
the respective numbers of Trust Originated Preferred Securities (Liquidation
Amount of $25 per Preferred Security) of the Trust ("Preferred Securities") set
forth in Schedule A hereto. The Preferred Securities will be fully, irrevocably
and unconditionally guaranteed by the Company as and to the extent described in
the Prospectus (the "Guarantee") pursuant to the Guarantee Agreement (the
"Guarantee Agreement"), dated as of June , 1997, between the Company and The
Chase Manhattan Bank, as trustee (the "Guarantee Trustee"). The Preferred
Securities and the related Guarantee are referred to herein as the "Securities".
Certain terms of the Securities are set forth in Schedule B hereto.
The Offerors understand that the Underwriters propose to make a public
offering of the Securities. The entire proceeds from the sale of the Securities
will be combined with the entire proceeds from the sale by the Trust to the
Company of its common securities (the "Common Securities"), as guaranteed by the
Company as and to the extent set forth in the Prospectus pursuant to the
Guarantee Agreement, and will be used by the Trust to purchase junior
subordinated deferrable interest debentures (the "Junior Subordinated
Debentures") issued by the Company. The Preferred Securities and the Common
Securities will be issued pursuant to the Amended and Restated Trust Agreement
of the Trust, dated as of June , 1997 (the "Trust Agreement"), among the
Company, as Depositor, John R. Biggar and James E. Abel, as administrative
trustees (each of whom is an employee of the Company) (the "Administrative
Trustees"), The Chase Manhattan Bank, as property trustee (the "Property
Trustee"), and Chase Manhattan Bank Delaware, as Delaware trustee (the "Delaware
Trustee" and, together with the Administrative Trustees and the Property
Trustees, the "Trustees"). The Junior Subordinated Debentures will be issued
pursuant to an indenture, dated as of April 1, 1997 (the "Indenture"), between
the Company and The Chase Manhattan Bank, as trustee (the "Indenture Trustee").
In connection with the foregoing, the Offerors have filed with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-3 (No. 333-27773) for the registration under the Securities
-2-
<PAGE>
Act of 1933, as amended (the "1933 Act"), of the Securities, and the Junior
Subordinated Debentures. A prospectus setting forth the terms of the Securities
and the Junior Subordinated Debentures and of their sale and distribution has
been or will be prepared and will be filed or transmitted for filing pursuant to
Rule 424 under the 1933 Act. Such registration statement (as amended, if
applicable) and the prospectus constituting a part thereof, as from time to time
amended or supplemented pursuant to the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 Act"), or otherwise, are hereinafter referred to as
the "Registration Statement" and the "Basic Prospectus", respectively; and the
Basic Prospectus, as it may be amended or supplemented, is herein referred to as
the "Prospectus" (including, in each case, all documents incorporated or deemed
to be incorporated by reference therein pursuant to Item 12 of Form S-3 under
the 1933 Act and the information, if any, deemed to be part thereof pursuant to
Rule 430A(b) of the published rules and regulations of the Commission under the
1933 Act (the "1933 Act Regulations")), except that, if any revised prospectus
shall be provided to the Underwriters by the Offerors for use in connection with
the offering of the Preferred Securities which differs from the Prospectus on
file at the Commission at the time the Registration Statement becomes effective
(whether or not such revised prospectus is required to be filed by the Offerors
pursuant to Rule 424(b) of the 1933 Act Regulations), the term "Prospectus"
shall refer to such revised prospectus from and after the time it is first
provided to the Underwriters for such use. All references in this Agreement to
financial statements and schedules and other information that is "contained",
"included" or "stated" in the Registration Statement or the Prospectus (and all
other references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information that are or are deemed
to be incorporated by reference in the Registration Statement or the Prospectus,
as the case may be; and all references in this Agreement to amendments or
supplements to the Registration Statement or the Prospectus shall be deemed to
mean and include the filing of any document under the 1934 Act that is or is
deemed to be incorporated by reference in the Registration Statement or the
Prospectus, as the case may be.
2. Representations and Warranties.
------------------------------
(a) The Offerors jointly and severally represent and warrant to, and
agree with, each Underwriter that:
-3-
<PAGE>
(i) The Registration Statement, when it became or becomes effective,
and the Prospectus and any amendment or supplement thereto, when filed or
transmitted for filing with the Commission and on the date of this
Agreement, complied or will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and the Trust
Indenture Act of 1939, as amended (the "1939 Act") and the rules and
regulations of the Commission under the 1939 Act (the "1939 Act
Regulations"), and did not or will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that the representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in
conformity with the information furnished to the Offerors in writing by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement or Prospectus.
(ii) The documents incorporated or deemed to be incorporated by
reference in the Registration Statement or Prospectus, at the time they
were or hereafter are filed with the Commission, complied and will comply
in all material respects with the requirements of the 1933 Act, the 1933
Act Regulations, the 1934 Act and the rules and regulations of the
Commission under the 1934 Act (the "1934 Act Regulations"), as applicable,
and, at the time the Registration Statement and any amendments thereto
become effective and at the Closing Date, will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection shall
not apply to statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Offerors in writing by any Underwriter through Merrill
Lynch expressly for use in the Registration Statement or Prospectus.
(iii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the Commonwealth of
Pennsylvania with corporate power and authority to enter into and perform
its obligations under this Agreement, the Trust Agreement, the Indenture,
and the Guarantee and to
-4-
<PAGE>
purchase, own, and hold the Common Securities issued by the Trust.
(iv) The Trust has been duly created and is validly existing in good
standing as a business trust under the laws of the State of Delaware with
the power and authority to own property and to conduct its business as
described in the Registration Statement and Prospectus and to enter into
and perform its obligations under this Agreement, the Preferred Securities,
the Common Securities and the Trust Agreement; the Trust is not a party to
or otherwise bound by any agreement other than those described in the
Prospectus; the Trust is and will be classified for United States federal
income tax purposes as a grantor trust and not as an association taxable as
a corporation; and the Trust is and will be treated as a consolidated
subsidiary of the Company pursuant to generally accepted accounting
principles.
(v) The Common Securities have been duly authorized by the Trust
Agreement and, when issued and delivered by the Trust to the Company
against payment therefor as described in the Registration Statement and
Prospectus, will be validly issued and (subject to the terms of the Trust
Agreement) fully paid and non-assessable undivided beneficial interests in
the assets of the Trust and will conform in all material respects to the
statements relating thereto contained in the Prospectus; the issuance of
the Common Securities is not subject to preemptive or other similar rights;
and at the Closing Date all of the issued and outstanding Common Securities
of the Trust will be directly owned by the Company free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity.
(vi) This Agreement has been duly authorized, executed and delivered
by each of the Offerors.
(vii) The Trust Agreement has been duly authorized by the Company
and, at the Closing Date, will have been duly executed and delivered by the
Company and, assuming due authorization, execution and delivery of the
Trust Agreement by the Trustees, the Trust Agreement will be a valid and
binding obligation enforceable in accordance with its terms except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency or
reorganization laws relating to or affecting the enforcement of creditors'
rights and by general equity principles (the "Bankruptcy Exceptions"), and
will conform in all material respects
-5-
<PAGE>
to the statements relating thereto contained in the Prospectus; and at the
effective date of the Registration Statement, the Trust Agreement was or
will have been duly qualified under the 1939 Act.
(viii) The Guarantee Agreement has been duly authorized by the
Company and, at the Closing Date, will have been duly executed and
delivered by the Company and, assuming due authorization, execution and
delivery of the Guarantee by the Guarantee Trustee, will constitute a valid
and binding obligation of the Company enforceable in accordance with its
terms except to the extent that enforcement thereof may be limited by the
Bankruptcy Exceptions, and the Guarantee and the Guarantee Agreement will
conform in all material respects to the statements relating thereto
contained in the Prospectus; and at the effective date of the Registration
Statement the Guarantee Agreement was or will have been duly qualified
under the 1939 Act.
(ix) The Preferred Securities have been duly authorized by the Trust
Agreement and, when issued and delivered pursuant to this Agreement, will
be validly issued and (subject to the terms of the Trust Agreement) fully
paid and non-assessable undivided beneficial interests in the Trust, will
be entitled to the benefits of the Trust Agreement and will conform in all
material respects to the statements relating thereto contained in the
Prospectus; the issuance of the Preferred Securities is not subject to
preemptive or other similar rights.
(x) The Indenture has been duly authorized by the Company and, at the
Closing Date, will have been duly executed and delivered by the Company
and, assuming due authorization, execution and delivery by the Indenture
Trustee, will constitute a valid and binding agreement of the Company
enforceable in accordance with its terms except to the extent that
enforcement thereof may be limited by the Bankruptcy Exceptions, and will
conform in all material respects to the statements relating thereto
contained in the Prospectus; and at the effective date of the Registration
Statement, the Indenture was or will have been duly qualified under the
1939 Act.
(xi) The Junior Subordinated Debentures have been duly authorized by
the Company and, at the Closing Date, will have been duly executed by the
Company and, when authenticated in the manner provided for in the Indenture
and delivered against payment therefor as
-6-
<PAGE>
described in the Prospectus, will constitute valid and binding obligations
of the Company enforceable in accordance with their terms except to the
extent that enforcement thereof may be limited by the Bankruptcy
Exceptions; will be in the form contemplated by, and entitled to the
benefits of, the Indenture; and will conform in all material respects to
the statements relating thereto contained in the Prospectus.
(b) Each of the several Underwriters represents and warrants to, and
agrees with, the Offerors, their respective directors and such of their
respective officers who shall have signed the Registration Statement, and to
each other Underwriter, that the information set forth in Schedule C hereto
furnished to the Offerors by or through you on behalf of such Underwriter
expressly for use in the Registration Statement or the Prospectus does not
contain an untrue statement of a material fact and does not omit to state a
material fact in connection with such information required to be stated therein
or necessary to make such information not misleading.
3. Purchase and Sale of Preferred Securities.
-----------------------------------------
On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein contained, the Trust
agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees, to purchase from the Trust the
number of Preferred Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Preferred Securities that such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof at the price per security set forth in Schedule B hereto.
4. Delivery and Payment.
--------------------
Payment of the full purchase price of the Preferred Securities shall
be made by or on behalf of the several Underwriters by the wire transfer of
immediately available funds to the Trust's account (No. ) at The Chase
Manhattan Bank (ABA Routing No. ) Reference: PP&L Capital Trust II by
10:00 A.M., New York Time, on the Closing Date (as hereinafter defined). Such
payment shall be made against delivery to The Depository Trust Company ("DTC")
for the respective accounts of the Underwriters of a global certificate for the
Preferred Securities to be purchased by them. Certificates for the Preferred
Securities shall be in such denominations and registered in such names as
Merrill Lynch may request in
-7-
<PAGE>
writing at least two business days before the Closing Date, or to the extent not
so requested, registered in the names of the several Underwriters in such
authorized denominations as the Offerors may determine. It is understood that
each Underwriter has authorized Merrill Lynch, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Preferred Securities which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the Underwriters, may (but shall not
be obligated to) make payment of the purchase price for the Preferred Securities
to be purchased by any Underwriter whose wire transfer has not been received by
the Closing Date, but such payment shall not relieve such Underwriter from its
obligations hereunder.
At the Closing Date, the Company will pay, or cause to be paid, the
commission payable at such time to the Underwriters set forth in Schedule B
hereto by the wire transfer of immediately available funds to the account of
Merrill Lynch, Pierce, Fenner & Smith Incorporated (No. )at The
Chase Manhattan Bank (ABA Routing No. ) Reference: PP&L Capital Trust
II (No. ).
For the purpose of expediting the checking and packaging of the
certificates evidencing the Preferred Securities, the Offerors will make the
global certificate for the Preferred Securities available for inspection by the
Underwriters at the offices of The Chase Manhattan Bank not later than 10:00
A.M., New York time, on the business day next preceding the Closing Date.
The term "Closing Date" wherever used in this Agreement shall mean the
date set forth in Schedule B hereto, or such other date (i) not later than the
eighth full business day thereafter as may be agreed upon in writing by the
Company, the Trust and the Underwriters, or (ii) as shall be determined by
postponement pursuant to the provisions of Section 10 hereof.
5. Certain Covenants of the Offerors.
---------------------------------
Each of the Offerors jointly and severally covenant with the several
Underwriters as follows:
(a) To notify the Underwriters promptly, and confirm the notice in
writing, (i) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or
for additional information, and (ii) the institution by the Commission of
any stop order proceedings in respect of the Registration Statement,
-8-
<PAGE>
or the initiation of proceedings for that purpose, and to use its best
efforts to prevent the issuance of any such stop order and to obtain as
soon as possible its lifting, if issued;
(b) To file the Prospectus with the Commission pursuant to Rule
424(b) under the 1933 Act not later than the second business day following
the execution and delivery of this Agreement, or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the 1933 Act; to
advise you promptly of any such filing; and to advise you promptly of any
proposal to file or prepare (i) any amendment to the Registration Statement
(including any post-effective amendment), (ii) any amendment or supplement
to the Prospectus (including any revised prospectus which the Offerors
propose for use by the Underwriters in connection with the offering of the
Preferred Securities which differs from the prospectus on file at the
Commission at the time the Registration Statement becomes effective,
whether or not such revised prospectus is required to be filed pursuant to
Rule 424(b) of the 1933 Act Regulations), or (iii) any document that would
as a result thereof be incorporated by reference in the Prospectus whether
pursuant to the 1933 Act, the 1934 Act or otherwise; and will furnish the
Underwriters with copies of any such amendment, supplement or other
document a reasonable amount of time prior to such proposed filing or use,
as the case may be, and will not file any such amendment, supplement or
other document or use any such prospectus to which the Underwriters or
counsel for the Underwriters shall reasonably object in writing;
(c) To use their best efforts, in cooperation with the Underwriters,
to qualify the Preferred Securities (and the Guarantee) and the Junior
Subordinated Debentures for offer and sale under the securities or blue sky
laws of such states and the other jurisdictions of the United States as the
Underwriters may designate, to continue such qualifications in effect so
long as required for the distribution of the Preferred Securities and to
reimburse you for any expenses (including filing fees and fees and
disbursements of counsel) paid by you or on your behalf to qualify the
Preferred Securities for offer and sale, to continue such qualification, to
determine the eligibility of the Preferred Securities for investment and to
print the memoranda relating thereto; provided that none of the Offerors
shall be required to qualify as a foreign corporation in any
-9-
<PAGE>
jurisdiction in which it is not so qualified, to consent to service of
process in any jurisdiction other than with respect to claims arising out
of the offering or sale of the Preferred Securities, or to meet any other
requirement in connection with this paragraph (c) deemed by such Offeror to
be unduly burdensome; and the Company will advise Merrill Lynch promptly of
any order or communication of any public authority known to the Company
suspending or threatening to suspend the qualification of the Preferred
Securities for sale, or the eligibility of the Preferred Securities for
purchase by such institutions, in any jurisdiction;
(d) Promptly to deliver to you two signed copies of the Registration
Statement as originally filed and of all amendments thereto heretofore or
hereafter filed, including conformed copies of all exhibits except those
incorporated by reference, and such number of unsigned copies of the
Registration Statement (but excluding the exhibits), each related
preliminary prospectus, the Prospectus, and any amendments and supplements
thereto, as the Underwriters may reasonably request;
(e) Promptly to furnish to each Underwriter, from time to time during
the period when the Prospectus is required to be delivered under the 1933
Act, such number of copies of the Prospectus (as amended or supplemented)
as such Underwriter may reasonably request for the purposes contemplated by
the 1933 Act or the 1933 Act Regulations;
(f) If, at any time when the Prospectus relating to the Preferred
Securities is required to be delivered under the 1933 Act in connection
with sales of the Preferred Securities, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any
time to amend the Registration Statement or amend or supplement the
Prospectus to comply with the 1933 Act or the 1933 Act Regulations, to
advise the Underwriters of such event or necessity, as the case may be,
and, promptly upon request made by the Underwriters, to prepare and file
with the Commission subject to paragraph (b) above an amendment or
supplement which will correct such statement or omission or an amendment
which will effect such compliance; provided that the expense of preparing
--------
and
-10-
<PAGE>
filing any such amendment or supplement (i) which is necessary in
connection with such a delivery of the Prospectus more than nine months
after the date of this Agreement or (ii) which relates solely to the
activities of any Underwriter shall be borne by the Underwriter or
Underwriters or the dealer or dealers requiring the same; and provided
further that the Underwriters shall, upon inquiry by the Company, advise
the Company whether or not any Underwriter or dealer which shall have been
selected by you retains any unsold Preferred Securities and, for the
purposes of this paragraph (f), the Company shall be entitled to assume
that the distribution of the Preferred Securities has been completed when
it is advised by you that no Underwriter or such dealer retains any
Preferred Securities;
(g) As soon as practicable, the Trust will make generally available
to its security holders an earnings statement of the Company covering a
period of at least twelve months beginning after the "effective date of the
registration statement" within the meaning of Rule 158 under the 1933 Act
which will satisfy the provisions of Section 11(a) of the 1933 Act;
(h) The Offerors will use best efforts to effect the listing of the
Preferred Securities on the New York Stock Exchange; if the Preferred
Securities are exchanged for Junior Subordinated Debentures, the Company
will use its best efforts to effect the listing of the Junior Subordinated
Debentures on the exchange on which the Preferred Securities were then
listed;
(i) During a period of 30 days from the date of this Agreement,
neither the Trust nor the Company will, without the Underwriters' prior
written consent, 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 Junior Subordinated Debentures or any debt
securities substantially similar to the Junior Subordinated Debentures or
equity securities substantially similar to the Preferred Securities (except
for the Junior Subordinated Debentures and the Preferred Securities issued
pursuant to this Agreement); and
(j) The Trust will apply the net proceeds from the sale of the
Preferred Securities for the purposes set forth in the Prospectus.
-11-
<PAGE>
6. Payment of Expenses.
-------------------
The Company will pay or bear (i) all expenses in connection with the
matters herein required to be performed by the Offerors, including all expenses
(except as provided in Section 5(f) hereof) in connection with the preparation
and filing of the Registration Statement and the Prospectus, and any amendment
or supplement thereto, and the furnishing of copies thereof to the Underwriters,
and all audits, statements or reports in connection therewith, and all expenses
in connection with the original issue and delivery of the Preferred Securities
to the Underwriters at the place designated in Section 4 hereof, and all Federal
and State taxes (if any) payable (not including any transfer taxes) upon the
original issue of the Preferred Securities, the Guarantee or the Junior
Subordinated Debentures, any fee charged by securities ratings services for
rating the Preferred Securities, the Guarantee and the Junior Subordinated
Debentures, the fees and expenses incurred in connection with the listing of the
Preferred Securities, and the fee of the National Association of Securities
Dealers, Inc., if any, (ii) all expenses in connection with the printing,
reproduction and delivery of this Agreement and the printing, reproduction and
delivery of such other documents or certificates as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Preferred Securities, the Guarantee and the Junior Subordinated Debentures, and
to reimburse the Underwriters for expenses incurred in distributing any
preliminary prospectus or supplement to the Underwriters, and (iii) any
additional costs of effecting payment of the purchase price of the Preferred
Securities in immediately available funds as compared with New York Clearing
House (next day) funds.
7. Conditions of Underwriters' Obligations.
---------------------------------------
The obligations of the Underwriters hereunder are subject to the
following conditions:
(a) The Underwriters shall have received from Price Waterhouse LLP, a
letter, dated the date of this Agreement, in form and substance
satisfactory to you, to the effect that:
(i) They are independent accountants with respect to the Company
within the meaning of the 1933 Act and the 1933 Act Regulations;
(ii) In their opinion, the consolidated financial statements of
the Company and its subsidiaries audited by them and incorporated by
-12-
<PAGE>
reference in the Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the
1933 Act and the 1934 Act and the published rules and regulations
thereunder with respect to registration statements on Form S-3.
(iii) On the basis of procedures (but not an audit in accordance
with generally accepted auditing standards) consisting of:
(A) Reading the minutes of meetings of the shareowners and
the Board of Directors of the Company and its Executive, Compensation
and Corporate Governance, Finance and Nuclear Oversight Committees
since December 31, 1996 as set forth in the minute books through a
specified date not more than five business days prior to the date of
delivery of such letter;
(B) With respect to the unaudited consolidated balance sheet
as of March 31, 1997, and the unaudited consolidated statements of
income and of cash flows included in the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 ("Form 10-Q")
incorporated by reference in the Registration Statement,
(i) Performing the procedures specified by the American Institute
of Certified Public Accountants for a review of interim financial
information as described in SAS No. 71, Interim Financial Information,
-----------------------------
on the unaudited consolidated balance sheet and the unaudited
consolidated statements of income and of cash flows included in the
Company's Form 10-Q;
(ii) Making inquiries of certain officials of the Company who
have responsibility for financial and accounting matters as to whether
the unaudited consolidated financial statements referred to in (B)(i)
comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the 1934 Act, as it
applies to Form 10-Q, and the related published rules and regulations
thereunder;
(C) Reading the unaudited interim financial data for the
period from the date of the latest balance sheet included in the
Registration
-13-
<PAGE>
Statement to the date of the latest available interim financial data;
and
(D) Making inquiries of certain officials of the Company who
have responsibility for financial and accounting matters regarding the
specific items for which representations are requested below;
nothing has come to their attention as a result of the foregoing
procedures that caused them to believe that (i) the unaudited
consolidated financial statements described in (B)(i), included in the
Form 10-Q and incorporated by reference in the Registration Statement,
do not comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the 1934 Act, as it
applies to Form 10-Q, and the related published rules and regulations
thereunder; or (ii) any material modifications should be made to the
unaudited consolidated financial statements described in (B)(i),
included in the Form 10-Q and incorporated by reference in the
Registration Statement, for them to be in conformity with generally
accepted accounting principles; or (iii) at the date of the latest
available interim financial data and at a specified date not more than
five business days prior to the date of delivery of such letter, there
was any change in the capital stock (except for shares of certain
series of the Company's preferred stocks redeemed for, or purchased
and retired in anticipation of, sinking fund requirements for such
series, or increase in long-term debt of the Company and subsidiaries
consolidated as compared with amounts shown in the latest balance
sheet incorporated by reference in the Registration Statement or (iv)
for the period from the closing date of the latest consolidated income
statement incorporated by reference in the Registration Statement to
the date of the latest available interim financial data there were any
decreases, as compared with the corresponding period in the preceding
year, in net income before dividends on preferred stock of the
Company, except in all instances for changes, increases or decreases
which the Registration Statement, including the documents incorporated
therein by reference, discloses have occurred or may occur, or they
shall state any specific changes or decreases.
-14-
<PAGE>
(iv) The letter shall also state that the information set forth
in Schedule D hereto, which is expressed in dollars (or percentages
derived from such dollar amounts) and has been obtained from
accounting records which are subject to the internal controls of the
Company's accounting system or which has been derived directly from
such accounting records by analysis or computation, is in agreement
with such records or computations made therefrom, except as otherwise
specified in such letter.
(b) The Prospectus shall have been filed with the Commission in
accordance with the 1933 Act Regulations and Section 5(b) of this Agreement
and prior to the Closing Date no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted, or, to the knowledge of the
Offerors, shall be contemplated by the Commission and the Underwriters
shall have received at the Closing Date certificates, dated the Closing
Date, of the Company and of the Trust.
(c) Subsequent to the execution of this Agreement, there shall not
have occurred (i) any change or any development involving a prospective
change not contemplated by the Prospectus in or affecting particularly the
business or properties of the Trust or the Company, which, in the judgment
of Merrill Lynch, materially impairs the investment quality of the
Preferred Securities; (ii) any suspension or limitation of trading in
securities generally on the New York Stock Exchange, or any setting of
minimum prices for trading on such exchange, or any suspension of trading
of any securities of the Company on any exchange or in the over-the-counter
market; (iii) a general banking moratorium declared by Federal or New York
authorities; (iv) any outbreak or escalation of major hostilities in which
the United States is involved, any declaration of war by Congress or any
other substantial national or international calamity or emergency if, in
the reasonable judgment of Merrill Lynch, the effect of any such outbreak,
escalation, declaration, calamity or emergency makes it impractical and
inadvisable to proceed with completion of the sale of and payment for the
Preferred Securities and Merrill Lynch makes a similar determination with
respect to all other underwritings of Trust Originated Preferred Securities
in which it is participating and has the contractual right to make such a
determination; or (v) any decrease
-15-
<PAGE>
in the ratings of the Preferred Securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g)
under the 1933 Act) or such organization shall have publicly announced that
it has under surveillance or review, with possible negative implications,
its rating of the Preferred Securities.
(d) On the Closing Date the Underwriters shall have received:
(1) The favorable opinions, dated as of the Closing Date, of
Michael A. McGrail, Esq., Senior Counsel (or such other counsel for the Company
as may be acceptable to you), Simpson Thacher & Bartlett, special counsel to the
Company, and Richards, Layton & Finger, P.A., special Delaware counsel to the
Offerors, each in form and substance satisfactory to counsel for the
Underwriters, to the cumulative effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
Commonwealth of Pennsylvania with power and authority (corporate and other)
to own its properties and conduct its business as described in the
Prospectus;
(ii) The Trust has been duly created and is validly existing in
good standing as a business trust under the laws of the State of Delaware;
all filings required under the laws of the State of Delaware with respect
to the creation and valid existence of the Trust as a business trust have
been made; the Trust has all necessary power and authority to own property
and to conduct its business as described in the Prospectus and to enter
into and perform its obligations under this Agreement, the Preferred
Securities and the Common Securities;
(iii) The Trust Agreement has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution and
delivery of the Trust Agreement by the Trustees, is a valid and binding
obligation enforceable in accordance with its terms, except to the extent
that enforcement thereof may be limited by the Bankruptcy Exceptions; and
the Trust Agreement has been duly qualified under the 1939 Act;
(iv) The Common Securities have been duly authorized for
issuance and, when issued, delivered and
-16-
<PAGE>
paid for in accordance with the Trust Agreement and as described in the
Prospectus, will be validly issued and fully paid and non-assessable
undivided beneficial interests in the assets of the Trust, and the issuance
of the Common Securities is not subject to preemptive or other similar
rights;
(v) The Preferred Securities have been duly authorized for
issuance and, when issued, delivered and paid for in accordance with this
Agreement, will be validly issued, fully paid and non-assessable undivided
beneficial interests in the assets of the Trust; the holders of the
Preferred Securities will be entitled to the same limitation of personal
liability under Delaware law as is extended to stockholders of private
corporations for profit; and the issuance of the Preferred Securities is
not subject to preemptive or other similar rights. Such counsel may note
that the Preferred Securities holders may be obligated, pursuant to the
Trust Agreement, to (a) provide indemnity and/or security in connection
with and pay taxes or governmental charges arising from transfers of
Preferred Securities and the issuance of replacement Preferred Securities,
and (b) provide security and indemnity in connection with requests of or
directions to the Trustees to exercise their rights and powers under the
Trust Agreement;
(vi) The holders of the Preferred Securities and Common
Securities (other than those holders who reside or are domiciled in the
State of Delaware) will have no liability for income taxes imposed by the
State of Delaware or any taxing authority thereof solely as a result of
their participation in the Trust, and the Trust will not be liable for any
income tax imposed by the State of Delaware or any taxing authority
thereof;
(vii) The statements in the Prospectus under the captions "PP&L
Capital Trust II", "Description of Preferred Securities", "Description of
Subordinated Debentures", "Description of Guarantee" and "Relationship
Among the Preferred Securities, the Subordinated Debentures and the
Guarantee", insofar as they purport to constitute summaries of certain
terms of the Preferred Securities, the Junior Subordinated Debentures, the
Guarantee and the Company agreements with respect thereto, in each case
constitute accurate summaries of the terms of such documents and
securities, in all material respects;
-17-
<PAGE>
(viii) The portions of the information contained in the
Prospectus, which are stated therein to have been made on the authority of
any such counsel, have been reviewed by such counsel and, as to matters of
law and legal conclusions, are correct;
(ix) Each of the Company and PP&L Resources, Inc. are exempt
from the provisions of the Public Utility Holding Company Act of 1935, as
amended, applicable to it as a holding company;
(x) Except as described in the Registration Statement and the
Prospectus, the Company holds all franchises, certificates of public
convenience, licenses and permits necessary to own and to operate its
properties and to carry on the utility business in which it is engaged;
(xi) The Registration Statement has become effective under the
1933 Act and the Prospectus was filed with the Commission pursuant to the
subparagraph of Rule 424(b) specified in such opinion on the date specified
therein, and, to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement or any part
thereof has been issued and no proceeding for that purpose have been
instituted or are pending or contemplated under the 1933 Act, and the
Registration Statement, as of its effective date, and any amendment or
supplement thereto, as of its date, and the Prospectus, as of the date of
this Agreement, and each amendment or supplement thereto, as of its date,
complied as to form in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations, and nothing has come to the
attention of such counsel which would lead such counsel to believe either
that the Registration Statement or any such amendment or supplement, as of
such dates, contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, or that the Prospectus, as of the
date of this Agreement and as of the Closing Date, contained or contains
any untrue statement of a material fact or omitted or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; it being
understood that such counsel need express no opinion as to the financial
statements and other financial data contained or incorporated by reference
in the Registration Statement or the
-18-
<PAGE>
Prospectus and that only Simpson Thacher & Bartlett will pass on federal
income tax consequences;
(xii) The descriptions in the Registration Statement and the
Prospectus of statutes, legal and governmental proceedings and contracts
and other documents are accurate and fairly present the information
required to be shown; and such counsel does not know of any legal or
governmental proceedings required to be described in the Registration
Statement or Prospectus which are not described, or of any contracts or
documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement which are not described and filed as required; it being
understood that such counsel need express no opinion as to the financial
statements and other financial data contained or incorporated by reference
in the Registration Statement or the Prospectus and that only Simpson
Thacher & Bartlett will pass on federal income tax consequences pursuant to
Section 7(d)(3);
(xiii) This Agreement has been duly authorized, executed and
delivered by each of the Trust and the Company;
(xiv) The Guarantee Agreement has been duly authorized, executed
and delivered by the Company; the Guarantee Agreement, assuming it is duly
authorized, executed, and delivered by the Guarantee Trustee, constitutes a
valid and binding obligation of the Company enforceable in accordance with
its terms, except to the extent that enforcement thereof may be limited by
the Bankruptcy Exceptions; and the Guarantee Agreement has been duly
qualified under the 1939 Act;
(xv) The Indenture has been duly executed and delivered by the
Company and, assuming due authorization, execution, and delivery by the
Indenture Trustee, is a valid and binding obligation of the Company
enforceable in accordance with its terms, except to the extent that
enforcement thereof may be limited by the Bankruptcy Exceptions; and the
Indenture has been duly qualified under the 1939 Act;
(xvi) The Junior Subordinated Debentures are in the form
contemplated by the Indenture, have been duly authorized, executed and
delivered by the Company and, when authenticated by the Indenture Trustee
in the manner provided for in the Indenture and delivered
-19-
<PAGE>
against payment therefor, will constitute valid and binding obligations of
the Company enforceable in accordance with their terms, except to the
extent that enforcement thereof may be limited by the Bankruptcy
Exceptions, and are entitled to the benefits of the Indenture;
(xvii) Neither the Company nor the Trust is now, and giving
effect to the transactions contemplated by this Agreement, the Prospectus,
and the application of the proceeds from the sale of the Preferred
Securities will be, an "investment company" within the meaning of the 1940
Act; and
(xviii) No approval, authorization, consent or other order of
any public board or body is legally required for the authorization of the
issuance and sale of the Common Securities or the offering, issuance and
sale of the Preferred Securities, the Junior Subordinated Debentures or the
Guarantee, except (a) such as may be required under the 1933 Act or the
1933 Act Regulations or the securities or "blue sky" laws of any
jurisdiction, (b) the qualification of the Trust Agreement, the Guarantee
Agreement and the Indenture under the 1939 Act and 1939 Act Regulations and
(c) the approvals by the Pennsylvania Public Utility Commission which have
been received.
In rendering their opinion, Simpson Thacher & Bartlett and
Richards, Layton & Finger, P.A. may rely as to matters governed by
Pennsylvania law upon the opinion of Michael A. McGrail, Esq. or such other
counsel referred to in Section 7(d) of this Agreement, and as to matters
governed by Delaware law Simpson Thacher & Bartlett may rely upon the
opinion of Richards, Layton & Finger, P.A. In rendering his opinion,
Michael A. McGrail, Esq., or such other counsel referred to in Section 7(d)
of this Agreement, may rely as to matters governed by Delaware law upon the
opinion of Richards, Layton & Finger, P.A. All such counsel may also state
that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon representations of officers of the
Company and of the Trustees and certificates of public officials; provided
that such certificates have been delivered to the Underwriters.
(2) The favorable opinion, dated as of the Closing Date, of
Pryor, Cashman, Sherman & Flynn, counsel for The Chase Manhattan Bank and Chase
Manhattan Bank Delaware, in their respective capacities as Trustees under
-20-
<PAGE>
the Trust Agreement, the Guarantee Agreement, and the Indenture, in form and
substance satisfactory to counsel for the Underwriters, to the effect that:
(i) Such Trustees are banking corporations with trust powers,
duly organized, validly existing and in good standing under the laws of
their respective jurisdictions of incorporation, with all necessary power
and authority to execute and deliver, and to carry out and perform their
respective obligations under the terms of, the Trust Agreement, the
Guarantee Agreement and the Indenture;
(ii) The execution, delivery and performance of the Trust
Agreement, the Guarantee Agreement and the Indenture have been duly
authorized by all necessary corporate action on the part of such Trustees,
and constitute valid and binding obligations of such Trustees in accordance
with their terms, except as enforcement thereof may be limited by the
Bankruptcy Exceptions;
(iii) The execution, delivery and performance of the Trust
Agreement, the Guarantee Agreement and the Indenture by such Trustees do
not conflict with or constitute a breach of the Articles of Incorporation
or Bylaws or other governing instruments of such Trustees; and
(iv) No consent, approval or authorization of, or registration
with or notice to, any state or federal banking authority is required for
the execution, delivery or performance by the Trustees, the Trust
Agreement, the Guarantee Agreement or the Indenture.
Such opinion may be conditioned on, among other things, the
initial and continuing accuracy of the facts, financial and other
information, covenants and representations set forth in certificates of
officers of the Company and the Trust and other documents deemed necessary
for such opinion.
(3) The opinion of Simpson Thacher & Bartlett, special tax
counsel to the Company and the Trust, generally to the effect that the
statements made in the Prospectus under the caption "Certain Federal Income Tax
Consequences," insofar as they purport to constitute summaries of matters of
United States federal tax law and regulations or legal conclusions with respect
thereto,
-21-
<PAGE>
constitute accurate summaries of the matters described therein in all material
respects.
(4) The favorable opinion or opinions, dated as of the Closing
Date, of Sullivan & Cromwell, counsel for the Underwriters, with respect to the
incorporation and legal existence of the Company, the validity of the Guarantee
and the Junior Subordinated Debentures, this Agreement, the Registration
Statement, the Prospectus and other related matters as the Underwriters may
require, and the Company shall have furnished to such counsel such documents as
they request for the purpose of enabling them to pass upon such matters. In
rendering such opinion, Sullivan & Cromwell may rely as to matters governed by
Pennsylvania law upon the opinion of Michael A. McGrail, Esq. or such other
counsel for the Company referred to in Section 7(d), and as to matters governed
by Delaware law upon the opinion of Richards, Layton & Finger, P.A.
(e) The Underwriters shall have received a certificate, dated the
Closing Date, of the President or a Vice President and a financial or
accounting officer of the Company and a certificate of an Administrative
Trustee of the Trust in which such officers or trustee, as the case may be,
to the best of their knowledge after reasonable investigation, shall state
that (i) the representations and warranties of the Company or the Trust, as
the case may be, in this Agreement are true and correct (except for
immaterial details) as of the Closing Date, (ii) the Company and or Trust,
as the case may be, has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the
Closing Date, (iii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending by the Commission, and (iv) subsequent
to the date of the latest financial statements in the Prospectus, there has
been no material adverse change in the financial position or results of
operations of the Company or the Trust, as the case may be, except as set
forth or contemplated in the Prospectus or as described in such
certificate.
(f) The Underwriters shall have received a letter from Price
Waterhouse LLP, dated the Closing Date, which meets the requirements of
Section 7(a) of this Agreement, except that the specified date referred to
in paragraph (D) of Section 7(a)(iii) will be a date not more than five
days prior to the Closing Date for the purposes of this Section 7(f).
-22-
<PAGE>
(g) At the Closing Date, the Preferred Securities and the Junior
Subordinated Debentures shall be rated in one of the four highest rating
categories for long term debt ("Investment Grade") by any nationally
recognized statistical rating agency, and the Company or the Trust shall
have delivered to the Underwriters a letter, dated the Closing Date, from
such nationally recognized statistical rating agency, or other evidence
satisfactory to the Underwriters, confirming that the Preferred Securities
and the Junior Subordinated Debentures have Investment Grade ratings.
(h) At the Closing Date, the Preferred Securities shall have been
approved for listing on the New York Stock Exchange subject to notice of
issuance.
The Company will furnish the Underwriters as promptly as practicable
after the Closing Date with such conformed copies of such opinions,
certificates, letters and documents as the Underwriters may reasonably request.
In case any such condition shall not have been satisfied, this
Agreement may be terminated by the Underwriters upon notice in writing or by
telegram to the Offerors without liability or obligation of any party, except as
provided in Sections 5(c), 6, 9, 11 and 13 hereof.
8. Conditions of Offeror's Obligations.
-----------------------------------
The obligations of the Offerors to sell and deliver the Preferred
Securities on the Closing Date are subject to the following conditions:
(a) At the Closing Date no stop order suspending the effectiveness of
the Registration Statement shall be in effect or proceeding therefor shall
have been instituted or, to the knowledge of the Offerors, shall be
contemplated.
(b) At or before the Closing Date, the Pennsylvania Utility
Commission and any other regulatory authority whose consent or approval
shall be required for the issue and the sale of the Securities, the
Guarantee and the Junior Subordinated Debentures as herein provided shall
have taken all requisite action, or all requisite action shall be deemed in
fact and law to have been taken, to authorize such issue and sale on the
terms set forth in the Prospectus.
If either of the foregoing conditions shall not have been satisfied,
then the Offerors shall be entitled, by
-23-
<PAGE>
notice in writing or by telegram to the Underwriters, to terminate this
Agreement without any liability of any party, except as provided in Sections
5(c), 6, 9, 11 and 13 hereof.
9. Indemnification and Contribution.
--------------------------------
(a) The Offerors agree that they will jointly and severally
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act,
against any and all loss, expense, claim, damage or liability to which, jointly
or severally, such Underwriter or such controlling person may become subject,
under the 1933 Act or otherwise, insofar as such loss, expense, claim, damage or
liability (or actions in respect thereof) arises out of or is based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, the Prospectus, any related preliminary prospectus,
or any amendment or supplement to any thereof, or arises out of or is based upon
the omission or alleged omission to state therein any material fact required to
be stated therein or necessary to make the statements therein not misleading;
and, except as hereinafter in this Section provided, the Offerors agree to
reimburse each Underwriter and each person who controls any Underwriter as
aforesaid for any reasonable legal or other expenses as incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such loss, expense, claim, damage or liability; provided, however,
-------- -------
that the Offerors shall not be liable in any such case to the extent that any
such loss, expense, claim, damage or liability arises out of or is based on an
untrue statement or alleged untrue statement or omission or alleged omission
made in any such document in reliance upon, and in conformity with, written
information specified in Schedule B hereto furnished to the Trust or the Company
by any Underwriter through Merrill Lynch expressly for use in any such document;
and provided further, that with respect to any untrue statement or alleged
-------- -------
untrue statement or omission or alleged omission made in any preliminary
prospectus or supplement, the indemnity agreement contained in this subsection
(a) shall not inure to the benefit of any Underwriter from whom the person
asserting any such loss, expense, claim, damage or liability purchased the
Securities concerned (or to the benefit of any person controlling such
Underwriter), if a copy of the Prospectus (not including documents incorporated
by reference therein) or of the Prospectus as then amended or supplemented (not
including documents incorporated by reference therein) was not sent or given to
such person at or prior to the written confirmation of the sale of such
Securities to such person and any untrue statement or
-24-
<PAGE>
alleged untrue statement or omission or alleged omission of a material fact
contained in any preliminary prospectus or supplement thereto was corrected in
the Prospectus, provided that the Company has delivered the Prospectus to the
several Underwriters in requisite quantity on a timely basis to permit such
sending or delivery.
(b) The Company agrees to indemnify the Trust against all loss,
expense, claim, damage or liability as due from the Trust under Section 9(a)
hereunder.
(c) Each Underwriter severally agrees that it will indemnify and hold
harmless the Offerors, their officers, directors and Trustees, and each of them,
and each person, if any, who controls the Offerors within the meaning of Section
15 of the 1933 Act, against any loss, expense, claim, damage or liability to
which it or they may become subject, under the 1933 Act or otherwise, insofar as
such loss, expense, claim, damage or liability (or actions in respect thereof)
arises out of or is based on any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, the Prospectus, any
related preliminary prospectus, or any amendment or supplement to any thereof,
or arises out of or is based upon the omission or alleged omission to state
therein any material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, and only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any such documents in reliance upon, and in
conformity with, written information specified in Schedule B hereto furnished to
the Trust or the Company by any Underwriter through Merrill Lynch expressly for
use in any such document; and, except as hereinafter in this Section provided,
each Underwriter agrees to reimburse the Offerors, their officers, directors and
Trustees, and each of them, and each person, if any, who controls the Offerors
within the meaning of Section 15 of the 1933 Act, for any reasonable legal or
other expenses incurred by it or them in connection with investigating or
defending any such loss, expense, claim, damage or liability.
(d) Upon receipt of notice of the commencement of any action against
an indemnified party, the indemnified party shall, with reasonable promptness,
if a claim in respect thereof is to be made against an indemnifying party under
its agreement contained in this Section 9, notify such indemnifying party in
writing of the commencement thereof; but the omission so to notify an
indemnifying party shall not relieve it from any liability which it may have to
the indemnified party otherwise than under its agreement
-25-
<PAGE>
contained in this Section 9. In the case of any such notice to an indemnifying
party, it shall be entitled to participate at its own expense in the defense, or
if it so elects, to assume the defense, of any such action, but, if it elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the indemnified party and to any other indemnifying party,
defendant in the suit. In the event that any indemnifying party elects to
assume the defense of any such action and retain such counsel, the indemnified
party shall bear the fees and expenses of any additional counsel retained by it.
No indemnifying party shall be liable in the event of any settlement of any such
action effected without its consent except as provided in Section 9(f) hereof.
Each indemnified party agrees promptly to notify each indemnifying party of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of the Securities.
(e) If any Underwriter or person entitled to indemnification by the
terms of subsection (a) of this Section 9 shall have given notice to the
Offerors of a claim in respect thereof pursuant to Section 9(d) hereunder, and
if such claim for indemnification is thereafter held by a court to be
unavailable for any reason other than by reason of the terms of this Section 9
or if such claim is unavailable under controlling precedent, such Underwriter or
person shall be entitled to contribution from the Offerors to liabilities and
expenses, except to the extent that contribution is not permitted under Section
11(f) of the 1933 Act. In determining the amount of contribution to which such
Underwriter or person is entitled, there shall be considered the relative
benefits received by such Underwriter or person and the Offerors from the
offering of the Securities (taking into account the portion of the proceeds of
the offering realized by each), the Underwriter or person's relative knowledge
and access to information concerning the matter with respect to which the claim
was asserted, the opportunity to correct and prevent any statement or omission,
and any other equitable considerations appropriate under the circumstances. The
Offerors and the Underwriters agree that it would not be equitable if the amount
of such contribution were determined by pro rata or per capita allocation (even
if the Underwriters were treated as one entity for such purpose).
(f) No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or
-26-
<PAGE>
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 9 (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party and all liability arising out of such litigation,
investigation, proceeding or claim, and (ii) does not include a statement as to
or an admission of fault, culpability or the failure to act by or on behalf of
any indemnified party.
(g) The indemnity and contribution provided for in this Section 9 and
the representations and warranties of the Company, the Trust and the several
Underwriters set forth in this Agreement shall remain operative and in full
force and effect regardless of (i) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter, the Company, its
directors or officers, the Trust or any person controlling the Trust or any
Trustee, (ii) acceptance of any Preferred Securities and payment therefor under
this Agreement, and (iii) any termination of this Agreement.
10. Default of Underwriters.
-----------------------
If one or more of the Underwriters shall fail at the Closing Date to
purchase the Preferred Securities which it or they are obligated to purchase
under this Agreement (the "Defaulted Securities"), Merrill Lynch shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Default Securities in such amounts as may be agreed upon
and upon the terms herein set forth in this Agreement. If, however, Merrill
Lynch shall not have completed such arrangements within such 24-hour period,
then: (i) if the number of Defaulted Securities does not exceed 10% of the
number of Preferred Securities to be purchased on such date, each of the non-
defaulting Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or (ii) if the number of Defaulted Securities
exceeds 10% of the number of Securities to be purchased on such date, this
Agreement shall terminate without liability on the part of any non-defaulting
Underwriter. In the event of any such default which does not result in a
termination of this Agreement, either Merrill Lynch or the Company shall have
the right to postpone the Closing Date for a period not exceeding seven days in
order to effect any required changes in the
-27-
<PAGE>
Registration Statement or Prospectus or in an any other documents or
arrangements, and the Offerors will promptly file any amendments to the
Registration Statement or supplements to the Prospectus which may thereby be
necessary. As used in this Agreement, the term "Underwriter" includes for all
purposes of this Agreement any person substituted for an Underwriter under this
Section 10.
Nothing in this Section 10 shall relieve an Underwriter from liability
for its default.
11. Survival of Certain Representations and Obligations.
---------------------------------------------------
The respective indemnities, agreements, representations and warranties
of the Company and the Trust and of or on behalf of the Underwriters set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made by
or on behalf of any Underwriter or the Offerors or any of their respective
officers, directors, Trustees or any controlling person, and will survive
delivery of and payment for the Preferred Securities. If for any reason the
purchase of the Preferred Securities by the Underwriters is not consummated, the
Company shall remain responsible for the expenses to be paid or reimbursed by it
pursuant to Sections 5(c) and 6, and the respective obligations of the Company,
the Trust and the Underwriters pursuant to Section 9 hereof shall remain in
effect.
12. Notices.
-------
The Offerors shall be entitled to act and rely upon any statement,
request, notice or agreement on behalf of each of the Underwriters if the same
shall have been made or given by the Underwriters jointly or by Merrill Lynch.
All statements, requests, notices, consents and agreements hereunder shall be in
writing, or by telegraph subsequently confirmed in writing, and, if to the
Company or the Trust, shall be sufficient in all respects if delivered or mailed
to the Company, attention of its Treasurer, at Two North Ninth Street,
Allentown, Pennsylvania 18101, and, if to an Underwriter, shall be sufficient in
all respects if delivered or mailed to c/o Merrill Lynch, Merrill Lynch World
Headquarters, North Tower, World Financial Center, New York, New York 10281-
1201, attention of Richard Vaccari, Managing Director; provided, however, that
any notice to an Underwriter pursuant to Section 9 hereof will also be delivered
or mailed to such Underwriter at the address, if
-28-
<PAGE>
any, of such Underwriter furnished to the Company in writing for the purpose of
communications hereunder.
13. Parties in Interest.
-------------------
This Agreement shall each inure solely to the benefit of the Company,
the Trust and the Underwriters and, to the extent provided in Section 9 hereof,
to any person who controls any Underwriter, to the officers and directors of the
Company and the Trust and the Trustees of the Trust, and to any person who
controls the Company or the Trust, and their respective successors. No other
person, partnership, association or corporation shall acquire or have any right
under or by virtue of this Agreement. The term "successor" shall not include
any assignee of an Underwriter (other than a person substituted for an
Underwriter under Section 10 hereof or one who shall acquire all or
substantially all of an Underwriter's business and properties), nor shall it
include any purchaser of Securities from any Underwriter merely because of such
purchase.
14. Applicable Law.
--------------
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.
-29-
<PAGE>
15. Counterparts.
------------
This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose, whereupon
this letter shall constitute a binding agreement between the Company and the
Trust and the several Underwriters in accordance with its terms.
Yours very truly,
PENNSYLVANIA POWER & LIGHT COMPANY
By:
--------------------------------
Name: John R. Biggar
Title: Vice President - Finance
PP&L CAPITAL TRUST II
By:
--------------------------------
Name: John R. Biggar
Title: Administrative Trustee
By:
--------------------------------
Name: James E. Abel
Title: Administrative Trustee
-30-
<PAGE>
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the date
first above written.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
A.G. EDWARDS & SONS, INC.,
LEGG MASON WOOD WALKER, INCORPORATED,
MORGAN STANLEY & CO. INCORPORATED,
PAINE WEBBER INCORPORATED,
PRUDENTIAL SECURITIES INCORPORATED,
By MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:
-------------------------------
Name: Robert D. Craig
Title: Vice President
For itself and each of the other
Underwriters named in Schedule A hereto.
-31-
<PAGE>
SCHEDULE A
NUMBER
OF
NAME OF UNDERWRITER SECURITIES
------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................
A.G. Edwards & Sons, Inc...............
Legg Mason Wood Walker, Incorporated...
Morgan Stanley & Co. Incorporated......
PaineWebber Incorporated...............
Prudential Securities Incorporated ....
_________
Total.................................. 6,000,000
-32-
<PAGE>
SCHEDULE B
----------
Certain Information Regarding The
Securities And The Sale Thereof
-------------------------------
1. Title of Securities: % Trust Originated Preferred Securities/SM/
-------------------
("TOPrS"/SM/)
2. (a) Title of Senior Subordinated Debentures:
---------------------------------------
% Junior Subordinated Deferrable Interest Debentures due July 1,
2027
(b) Aggregate Principal Amount of Junior Subordinated Debentures: $
------------------------------------------------------------
4. Liquidation Amount per Security: $25
-------------------------------
5. Initial Public Offering Price per Security: $25 plus accrued
------------------------------------------
distributions, if any, from the date of issuance
6. Proceeds Per Security to be Paid to the Trust: $25, plus accrued
---------------------------------------------
distributions, if any, from the date of issuance
7. Compensation Payable to Underwriters: $
------------------------------------
8. Closing Date: June , 1997; 9:30 a.m. New York Time
------------
-33-
<PAGE>
SCHEDULE C
----------
Information Represented and
Warranted by the Underwriters
Pursuant to Section 2(b) of
Underwriting Agreement.
-----------------------------
1. The first sentence in the last paragraph or the cover page of the
Prospectus (page 1).
2. The stabilization legend on page 2 of the Prospectus.
3. Under the caption "Underwriting" in the Prospectus, the following:
(a) The first paragraph of text following the table.
(b) The last two sentences in the fourth paragraph following the table.
(c) The second sentence in the fifth paragraph following the table.
(d) The twelfth paragraph following the table.
-34-
<PAGE>
SCHEDULE D
----------
Additional Matters to be Included
in Accountants' Comfort Letter Pursuant to
Section 7(a)(iv) of Underwriting Agreement
__________________________________________
<TABLE>
<CAPTION>
PROSPECTUS CAPTION PAGE ITEMS
- ------------------ ---- -----
<S> <C> <C>
"SELECTED FINANCIAL 14 "Ratio of Earnings to
DATA" Combined Fixed Charges
and Preferred Dividend
Requirements" and
supporting calculations
shown on Exhibit 12.2 to
the Registration
Statement; and
"CAPITALIZATION" 15 Dollar amounts and
percentages in "As
Adjusted" and
"Percentage" columns
after giving effect to
the transactions
described in the
paragraph preceding the
table and the footnotes
thereto.
<CAPTION>
FORM 10-K CAPTION PAGE ITEMS
- ----------------- ---- -----
<S> <C> <C>
"REVIEW OF THE 26 Sentence following table
FINANCIAL CONDITION with respect to increases
AND RESULTS OF in total operating
OPERATIONS OF PP&L revenues
RESOURCES, INC. AND
PENNSYLVANIA POWER &
LIGHT COMPANY --
"Operating Revenues"
"REVIEW OF THE 32 The Company's actual
FINANCIAL CONDITION construction expenditures
AND RESULTS OF during the year ended
OPERATIONS OF PP&L 1996.
RESOURCES, INC. AND
PENNSYLVANIA POWER &
LIGHT COMPANY --
Capital Expenditure
Requirements"
</TABLE>
-35-
<PAGE>
<TABLE>
<S> <C> <C>
"SELECTED FINANCIAL 80 The Company's times
AND OPERATING DATA OF interest earned before
PENNSYLVANIA POWER & income taxes for 1995 and
LIGHT COMPANY -- 1996.
"Financial Ratios"
</TABLE>
-36-
<PAGE>
EXHIBIT 4.2
CERTIFICATE OF TRUST OF
PP&L CAPITAL TRUST II
THIS Certificate of Trust of PP&L Capital Trust II (the "Trust"),
dated as of May 15, 1997, is being duly executed and filed by Chase Manhattan
Bank Delaware, a Delaware banking corporation, as trustee, to create a business
trust under the Delaware Business Trust Act (12 Del. C. Section 3801 et seq.).
1. Name. The name of the business trust being created hereby is PP&L
----
Capital Trust II.
2. Delaware Trustee. The name and business address of the trustee of
----------------
the Trust in the State of Delaware is Chase Manhattan Bank Delaware, 1201 Market
Street, 9th Floor, Wilmington, Delaware 19801.
3. Effective Date. This Certificate of Trust shall be effective upon
--------------
its filing with the Secretary of State.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
CHASE MANHATTAN BANK DELAWARE,
as trustee
By:
Name:
Title:
<PAGE>
EXHIBIT 4.3
TRUST AGREEMENT
---------------
This TRUST AGREEMENT, dated as of May 15, 1997, is between
Pennsylvania Power & Light Company, a Pennsylvania corporation, as "Depositor"
and Chase Manhattan Bank Delaware, a Delaware banking corporation as "Trustee".
The Depositor and the Trustee hereby agree as follows:
1. The trust created hereby shall be known as PP&L Capital Trust II,
in which name the Trustee, or the Depositor to the extent provided herein, may
conduct the business of the Trust, make and execute contracts, and sue and be
sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to
the Trustee the sum of $10. The Trustee hereby acknowledges receipt of such
amount in trust from the Depositor, which amount shall constitute the initial
trust estate. The Trustee hereby declares that it will hold the trust estate in
trust for the Depositor. It is the intention of the parties hereto that the
Trust created hereby constitute a business trust under Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. (S)3801, et seq. (the "Business Trust Act"), and
-- ---
that this document constitutes the governing instrument of the Trust. The
Trustee is hereby authorized and directed to execute and file a certificate of
trust with the Delaware Secretary of State in the form attached hereto.
3. The Depositor and the Trustee will enter into an amended and
restated Trust Agreement, satisfactory to each such party and substantially in
the form to be included as Exhibit 4.4 to the 1933 Act Registration Statement
(as defined below), to provide for the contemplated operation of the Trust
created hereby and the issuance of the Preferred Securities and Common
Securities referred to therein. Prior to the execution and delivery of such
amended and restated Trust Agreement, the Trustee shall not have any duty or
obligation hereunder or with respect to the trust estate, except as otherwise
required by applicable law or as may be necessary to obtain prior to such
execution and delivery any licenses, consents or approvals required by
applicable law or otherwise.
4. The Depositor and the Trustee hereby authorize and direct the
Depositor, as the sponsor of the Trust,
(i) to file with the Securities and Exchange Commission (the
"Commission") and execute, in each case on behalf of the Trust, (a) the
Registration Statement on Form S-3 (the "1933 Act Registration Statement"),
including any pre-effective or post-effective amendments to such 1933 Act
Registration Statement (including the prospectus and the exhibits contained
therein), relating to the registration under the Securities Act of 1933, as
amended, of the Preferred Securities of the Trust and certain other securities
and (b) a Registration Statement on Form 8-A (the "1934 Act Registration
Statement") (including all pre-effective and post-effective amendments thereto)
relating to the registration of the Preferred Securities of the Trust under
Section 12 of the Securities Exchange Act of 1934, as amended;
<PAGE>
2
(ii) to file with one or more national securities exchange (each, an
"Exchange") or the National Association of Securities Dealers ("NASD") and
execute on behalf of the Trust a listing application or applications and all
other applications, statements, certificates, agreements and other instruments
as shall be necessary or desirable to cause the Preferred Securities to be
listed on any such Exchange or the NASD's Nasdaq National Market ("NASDAQ");
(iii) to file and execute on behalf of the Trust such applications,
reports, surety bonds, irrevocable consents, appointments of attorney for
service of process and other papers and documents as the Depositor, on behalf of
the Trust, may deem necessary or desirable to register the Preferred Securities
under the securities or "Blue Sky" laws of any jurisdiction; and
(iv) to execute on behalf of the Trust such Underwriting Agreements
with one or more underwriters relating to the offering of the Preferred
Securities as the Depositor, on behalf of the Trust, may deem necessary or
desirable.
In the event that any filing referred to in clauses (i), (ii) and
(iii) above is required by the rules and regulations of the Commission, any
Exchange, the NASD or state securities or Blue Sky laws, to be executed on
behalf of the Trust by a Trustee, the Depositor and any Trustee appointed
pursuant to Section 6 hereof are hereby authorized to join in any such filing
and to execute on behalf of the Trust any and all of the foregoing.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of Trustees initially shall be one (1) and thereafter
the number of Trustees shall be such number as shall be fixed from time to time
by a written instrument signed by the Depositor which may increase or decrease
the number of Trustees; provided, however, that to the extent required by the
Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware and otherwise meets
the requirements of applicable Delaware law. Subject to the foregoing, the
Depositor is entitled to appoint or remove without cause any Trustee at any
time. The Trustee may resign upon thirty days' prior notice to the Depositor.
7. This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws principles).
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be
duly executed as of the day and year first above written.
PENNSYLVANIA POWER & LIGHT
COMPANY, as Depositor
By:
Name: John R. Biggar
Title: Vice President - Finance
CHASE MANHATTAN BANK DELAWARE, as Trustee
By: _________________
Name:
Title:
<PAGE>
EXHIBIT 4.4
AMENDED AND RESTATED
TRUST AGREEMENT
among
PENNSYLVANIA POWER & LIGHT COMPANY, as Depositor,
THE CHASE MANHATTAN BANK
as Property Trustee,
CHASE MANHATTAN BANK DELAWARE,
as Delaware Trustee,
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
and
THE SEVERAL HOLDERS OF THE TRUST SECURITIES
Dated as of ___________ __, 1997
PP&L CAPITAL TRUST II
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
Defined Terms................................1
Section 1.1 Definitions......................................................1
ARTICLE II
Continuation of the Trust..........................10
Section 2.1 Name............................................................10
Section 2.2 Office of the Delaware Trustee; Principal Place of Business.....10
Section 2.3 Initial Contribution of Trust Property; Organizational Expenses.10
Section 2.4 Issuance of the Preferred Securities............................11
Section 2.5 Issuance of the Common Securities; Subscription and Purchase of
Debentures...................................................11
Section 2.6 Continuation of Trust...........................................11
Section 2.7 Authorization to Enter into Certain Transactions................12
Section 2.8 Assets of Trust.................................................16
Section 2.9 Title to Trust Property.........................................16
ARTICLE III
Payment Account...............................16
Section 3.1 Payment Account.................................................16
ARTICLE IV
Distributions; Redemption...........................17
Section 4.1 Distributions...................................................17
Section 4.2 Redemption......................................................18
Section 4.3 Subordination of Common Securities..............................20
Section 4.4 Payment Procedures..............................................20
Section 4.5 Tax Returns and Reports.........................................21
Section 4.6 Payment of Expenses of the Trust................................21
Section 4.7 Payments under Indenture or Pursuant to Direct Actions..........21
i
<PAGE>
ARTICLE V
Trust Securities Certificates.........................21
Section 5.1 Initial Ownership...............................................21
Section 5.2 The Trust Securities Certificates...............................22
Section 5.3 Execution and Delivery of Trust Securities Certificates.........22
Section 5.4 Registration of Transfer and Exchange of Preferred Securities
Certificates..................................................22
Section 5.5 Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates..................................................23
Section 5.6 Persons Deemed Securityholders..................................23
Section 5.7 Access to List of Securityholders' Names and Addresses..........24
Section 5.8 Maintenance of Office or Agency.................................24
Section 5.9 Appointment of Paying Agent.....................................24
Section 5.10 Ownership of Common Securities by Depositor.................... 25
Section 5.11 Book-Entry Preferred Securities Certificates; Common Securities
Certificate....................................................25
Section 5.12 Notices to Clearing Agency.....................................26
Section 5.13 Definitive Preferred Securities Certificates...................26
Section 5.14 Rights of Securityholders......................................27
Section 5.15 CUSIP Numbers..................................................29
ARTICLE VI
Acts of Securityholders; Meetings; Voting....................29
Section 6.1 Limitations on Voting Rights....................................29
Section 6.2 Notice of Meetings..............................................30
Section 6.3 Meetings of Preferred Securityholders...........................30
Section 6.4 Voting Rights...................................................31
Section 6.5 Proxies, etc....................................................31
Section 6.6 Securityholder Action by Written Consent........................31
Section 6.7 Record Date for Voting and Other Purposes.......................32
Section 6.8 Acts of Securityholders.........................................32
Section 6.9 Inspection of Records...........................................33
ARTICLE VII
Representations and Warranties........................33
Section 7.1 Representations and Warranties of Property Trustee..............33
Section 7.2 Representations and Warranties of Delaware Trustee..............34
Section 7.3 Representations and Warranties of Depositor.....................35
ii
<PAGE>
ARTICLE VIII
The Trustees..................................35
Section 8.1 Certain Duties and Responsibilities..............................35
Section 8.2 Certain Notices..................................................37
Section 8.3 Certain Rights of Property Trustee...............................37
Section 8.4 Not Responsible for Recitals or Issuance of Securities...........40
Section 8.5 May Hold Securities..............................................40
Section 8.6 Compensation; Indemnity; Fees....................................40
Section 8.7 Corporate Property Trustee Required; Eligibility of Trustees.....41
Section 8.8 Conflicting Interests............................................42
Section 8.9 Co-Trustees and Separate Trustee.................................42
Section 8.10 Resignation and Removal; Appointment of Successor................44
Section 8.11 Acceptance of Appointment by Successor...........................45
Section 8.12 Merger, Conversion, Consolidation or Succession to Business......46
Section 8.13 Preferential Collection of Claims Against Depositor or Trust.....46
Section 8.14 Reports by Property Trustee......................................47
Section 8.15 Reports to the Property Trustee..................................47
Section 8.16 Evidence of Compliance with Conditions Precedent.................47
Section 8.17 Number of Trustees...............................................47
Section 8.18 Delegation of Power..............................................48
ARTICLE IX
Termination, Liquidation and Merger.......................48
Section 9.1 Termination Upon Expiration Date.................................48
Section 9.2 Early Termination................................................48
Section 9.3 Termination......................................................49
Section 9.4 Liquidation......................................................49
Section 9.5 Mergers, Consolidations, Amalgamations or Replacements of the
Trust...........................................................51
ARTICLE X
Miscellaneous Provisions...........................52
Section 10.1 Limitation of Rights of Securityholders.........................52
Section 10.2 Liability of the Common Securityholder..........................52
Section 10.3 Amendment.......................................................52
Section 10.4 Separability....................................................53
Section 10.5 Governing Law...................................................53
Section 10.6 Payments Due on Non-Business Day................................54
iii
<PAGE>
Section 10.7 Successors......................................................54
Section 10.8 Headings........................................................54
Section 10.9 Reports, Notices and Demands....................................54
Section 10.10 Agreement Not to Petition.......................................55
Section 10.11 Trust Indenture Act; Conflict with Trust Indenture Act..........55
Section 10.12 Acceptance of Terms of Trust Agreement, Guarantee and
Indenture......................................................55
Section 10.13 Counterparts....................................................56
iv
<PAGE>
PP&L CAPITAL TRUST II
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Trust Agreement
Act Section Section
- ---------------------- ------------------
(S) 310 (a)(1)........................................ 8.7
(a)(2)........................................ 8.7
(a)(3)........................................ 8.9
(a)(4)........................................ 2.7(a)(ii)
(b)........................................... 8.8
(S) 311 (a)........................................... 8.13
(b)........................................... 8.13
(S) 312 (a)........................................... 5.7
(b)........................................... 5.7
(c)........................................... 5.7
(S) 313 (a)........................................... 8.14(a)
(a)(4)........................................ 8.14(b)
(b)........................................... 8.14(b)
(c)........................................... 10.9
(d)........................................... 8.14(c)
(S) 314 (a)........................................... 8.15
(b)........................................... Not Applicable
(c)(1)........................................ 8.16
(c)(2)........................................ 8.16
(c)(3)........................................ Not Applicable
(d)........................................... Not Applicable
(e)........................................... 1.1, 8.16
(S) 315 (a)........................................... 8.1(a), 8.3(a)
(b)........................................... 8.2, 10.9
(c)........................................... 8.1(a)
(d)........................................... 8.1, 8.3
(e)........................................... Not Applicable
(S) 316 (a)........................................... Not Applicable
(a)(1)(A)..................................... Not Applicable
(a)(1)(B)..................................... Not Applicable
(a)(2)........................................ Not Applicable
(b)........................................... 5.14
(c)........................................... 6.7
(S) 317 (a)(1)........................................ Not Applicable
(a)(2)........................................ Not Applicable
(b)........................................... 5.9
(S) 318 (a)........................................... 10.11
- ------------
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed
to be a part of the Trust Agreement.
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of __________ __, 1997,
among (i) Pennsylvania Power & Light Company, a Pennsylvania corporation
(including any successors or assigns, the "Depositor"), (ii) The Chase Manhattan
Bank, a New York banking corporation, as property trustee (in such capacity, the
"Property Trustee" and, in its separate corporate capacity and not in its
capacity as Property Trustee, the "Bank"), (iii) Chase Manhattan Bank Delaware,
a banking corporation organized under the laws of the State of Delaware, as
Delaware trustee (the "Delaware Trustee"), (iv) John R. Biggar, an individual,
and James E. Abel, an individual, each of whose address is c/o Pennsylvania
Power & Light Company, Two North Ninth Street, Allentown, Pennsylvania 18101
(each an "Administrative Trustee" and collectively the "Administrative
Trustees") (the Property Trustee, the Delaware Trustee and the Administrative
Trustees referred to collectively as the "Trustees") and (v) the several
Holders, as hereinafter defined.
WITNESSETH
WHEREAS, the Depositor and the Delaware Trustee have heretofore duly
declared and established a business trust pursuant to the Delaware Business
Trust Act by the entering into that certain Trust Agreement, dated as of May 15,
1997 (the "Original Trust Agreement"), and by the execution and filing with the
Secretary of State of the State of Delaware of the Certificate of Trust, filed
on May 16, 1997, a copy of which is attached as Exhibit A (the "Certificate of
Trust"); and
WHEREAS, the parties hereto desire to amend and restate the Original Trust
Agreement in its entirety as set forth herein to provide for, among other
things, (i) the issuance of the Common Securities by the Trust to the Depositor,
(ii) the issuance and sale of the Preferred Securities by the Trust pursuant to
the Underwriting Agreement and (iii) the acquisition by the Trust from the
Depositor of all of the right, title and interest in the Debentures;
NOW THEREFORE, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, each party, for the benefit of the
other parties and for the benefit of the Securityholders, hereby amends and
restates the Original Trust Agreement in its entirety and agrees as follows:
ARTICLE I
Defined Terms
Section 1.1 Definitions.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them
in this Article and include the plural as well as the singular;
<PAGE>
2
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) unless the context otherwise requires, any reference to an "Article"
or a "Section" refers to an Article or a Section, as the case may be, of this
Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of Additional Interest (as
defined in the Indenture) paid by the Depositor on a Like Amount of Debentures
for such period.
"Administrative Trustee" means each of the individuals identified as an
"Administrative Trustee" in the preamble to this Trust Agreement solely in such
individual's capacity as Administrative Trustee of the Trust formed and
continued hereunder and not in such individual's individual capacity, or such
Administrative Trustee's successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank" has the meaning specified in the preamble to this Trust Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in the
premises judging such Person a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjudication or
composition of or in respect of such Person under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar law, or appointing
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of such Person or of any substantial part of its property or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days; or
(b) the institution by such Person of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar
<PAGE>
3
law, or the consent by it to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
similar official) of such Person or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or the admission
by it in writing of its inability to pay its debts generally as they become due
and its willingness to be adjudicated a bankrupt, or the taking of corporate
action by such Person in furtherance of any such action.
"Bankruptcy Laws" has the meaning specified in Section 10.10.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Depositor to have been duly adopted by the
Depositor's Board of Directors, the Finance Committee of the Depositor's Board
of Directors or such other committee of the Board of Directors or officers of
the Depositor to which authority to act on behalf of the Board of Directors has
been delegated, and to be in full force and effect on the date of such
certification, and delivered to the Trustees.
"Book-Entry Preferred Securities Certificates" means a beneficial interest
in the Preferred Securities Certificates, ownership and transfers of which shall
be made through book entries by a Clearing Agency as described in Section 5.11.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a day
on which banking institutions in The City of New York are authorized or required
by law or executive order to remain closed, or (c) a day on which the Property
Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture
Trustee is closed for business.
"Certificate Depository Agreement" means the agreement among the Trust, the
Depositor and The Depository Trust Company, as the initial Clearing Agency,
dated as of the Closing Date, relating to the Trust Securities Certificates,
substantially in the form attached as Exhibit B, as the same may be amended and
supplemented from time to time.
"Certificate of Trust" has the meaning specified in the recitals hereof, as
amended from time to time.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. The
Depository Trust Company will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
4
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as amended,
or, if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Securities Certificate" means a certificate evidencing ownership of
Common Securities, substantially in the form attached as Exhibit C.
"Common Security" means an undivided beneficial ownership interest in the
assets of the Trust, having a Liquidation Amount of $25 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution to the extent provided herein.
"Corporate Trust Office" means (i) when used with respect to the Property
Trustee, the principal corporate trust office of the Property Trustee located in
New York, New York, and (ii) when used with respect to the Debenture Trustee,
the principal corporate trust office of the Debenture Trustee located in New
York, New York.
"Debenture Event of Default" means an "Event of Default" as defined in the
Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption of such Debentures
under the Indenture.
"Debenture Tax Event" means a "Tax Event" as defined in the Indenture.
"Debenture Trustee" means The Chase Manhattan Bank, a New York banking
corporation, as trustee under the Indenture, and any successor trustee appointed
as provided therein.
"Debentures" means the $154,639,200 aggregate principal amount of the
Depositor's _____% Junior Subordinated Deferrable Interest Debentures, Series B
due July 1, 2027 issued pursuant to the Indenture.
"Definitive Preferred Securities Certificates" means either or both (as the
context requires) of (a) Preferred Securities Certificates issued as Book-Entry
Preferred Securities Certificates as provided in Section 5.11(a) and (b)
Preferred Securities Certificates issued in certificated, fully registered form
as provided in Section 5.13.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. 3801, et seq., as it may be amended from time to time.
"Delaware Trustee" means the Person identified as the "Delaware Trustee" in
the preamble to this Trust Agreement solely in its capacity as Delaware Trustee
of the Trust
<PAGE>
5
heretofore created and continued hereunder and not in its individual capacity,
or its successor in interest in such capacity, or any successor trustee
appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 4.1(a).
"Distributions" means amounts payable in respect of the Trust Securities as
provided in Section 4.1.
"Early Termination Event" has the meaning specified in Section 9.2.
"Event of Default" means any one of the following events (whatever the
reason for such event 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):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of 30
days; or
(c) default by the Trust in the payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(d) default in the performance, or breach of any covenant or warranty of
the Trustees in this Trust Agreement (other than a covenant or warranty a
default in the performance or breach of which is dealt with in clause (b) or (c)
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 Trustees and the
Depositor by the Holders of at least 25% in aggregate Liquidation Amount of the
Outstanding Preferred Securities, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee if a successor Property Trustee has not been appointed within 90 days
thereof.
"Expiration Date" has the meaning specified in Section 9.1.
"Guarantee" means the Guarantee Agreement executed and delivered by the
Depositor and The Chase Manhattan Bank, as trustee, contemporaneously with the
execution and delivery of this Trust Agreement, for the benefit of the Holders
of the Trust Securities, as amended from time to time.
"Indemnified Person" has the meaning specified in Section 8.6(c).
<PAGE>
6
"Indenture" means the Junior Subordinated Indenture, dated as of April 1,
1997, between the Depositor and the Debenture Trustee, as trustee, as amended or
supplemented from time to time.
"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 1940 Act, which Change in 1940 Act Law becomes effective on or after
the date of original issuance of the Preferred Securities under this Trust
Agreement.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of any Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture the proceeds of which will be used to pay the Redemption Price of such
Trust Securities, (b) with respect to a distribution of Debentures to Holders of
Trust Securities in connection with a dissolution or liquidation of the Trust,
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the Holder to whom such Debentures are distributed, and (c)
with respect to any distribution of Additional Amounts to Holders of Trust
Securities, Debentures having a principal amount equal to the Liquidation Amount
of the Trust Securities in respect of which such distribution is made.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be distributed
to Holders of Trust Securities in connection with a termination and liquidation
of the Trust pursuant to Section 9.4(a).
"Liquidation Distribution" has the meaning specified in Section 9.4(d).
"Majority in Liquidation Amount of the Preferred Securities" or "Majority
in Liquidation Amount of the Common Securities" means, except as provided by the
Trust Indenture Act, Preferred Securities or Common Securities, as the case may
be, representing more than 50% of the aggregate Liquidation Amount of all then
Outstanding Preferred Securities or Common Securities, as the case may be.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Officers' Certificate" means a certificate signed by the Chairman or a
Vice Chairman of the Board of Directors, President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Depositor, and delivered to the
<PAGE>
7
appropriate Trustee. One of the officers signing the compliance certificate
given pursuant to the first sentence of Section 8.15 shall be the principal
executive, financial or accounting officer of the Depositor. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Trust Agreement shall include:
(a) a statement by each officer signing the Officers' Certificate that such
officer has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by such officer in rendering the Officers' Certificate;
(c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Trust, the Property Trustee or the Depositor, and who shall be
reasonably acceptable to the Property Trustee.
"Original Trust Agreement" has the meaning specified in the recitals to
this Trust Agreement.
"Outstanding" when used with respect to Trust Securities, means, as of the
date of determination, all Trust Securities theretofore executed and delivered
under this Trust Agreement, except:
(a) Trust Securities theretofore cancelled by the Securities Registrar or
delivered to the Securities Registrar for cancellation;
(b) Trust Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Property Trustee or any Paying
Agent; provided that, if such Trust Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Trust Agreement; and
(c) Trust Securities which have been paid or in exchange for or in lieu of
which other Preferred Securities have been executed and delivered pursuant to
this Trust Agreement, including pursuant to Sections 5.4, 5.5, 5.11 and 5.13;
provided, however, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Preferred Securities have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Preferred Securities owned by the Depositor, any Administrative Trustee or any
Affiliate of the Depositor or of any Administrative Trustee shall be disregarded
and deemed not to be Outstanding, except that (a)
<PAGE>
8
in determining whether any Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Preferred Securities that such Trustee actually knows to be so owned shall be so
disregarded and (b) the foregoing shall not apply at any time when all of the
outstanding Preferred Securities are owned by the Depositor, one or more of the
Administrative Trustees and/or any such Affiliate. Preferred Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Administrative Trustees the
pledgee's right so to act with respect to such Preferred Securities and that the
pledgee is not the Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of Book-Entry
Preferred Securities as reflected in the records of the Clearing Agency or, if a
Clearing Agency Participant is not the beneficial owner, then as reflected in
the records of a Person maintaining an account with such Clearing Agency
(directly or indirectly, in accordance with the rules of such Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed pursuant
to Section 5.9 and shall initially be the Property Trustee.
"Payment Account" means a segregated non-interest-bearing corporate trust
account maintained by the Property Trustee with the Bank in its corporate trust
department for the benefit of the Securityholders in which all amounts paid in
respect of the Debentures will be held and from which the Property Trustee,
through the Paying Agent, shall make payments to the Securityholders in
accordance with Sections 4.1 and 4.2.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof or any other entity of
whatever nature.
"Preferred Security" means an undivided beneficial ownership interest in
the assets of the Trust, having a Liquidation Amount of $25 and having the
rights provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Preferred Securities Certificate" means a certificate evidencing ownership
of Preferred Securities, substantially in the form attached as Exhibit D.
"Property Trustee" means the Person identified as the "Property Trustee" in
the preamble to this Trust Agreement solely in its capacity as Property Trustee
of the Trust heretofore created and continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be redeemed,
the date fixed for such redemption by or pursuant to this Trust Agreement;
provided that each Debenture Redemption Date and the stated maturity of the
Debentures shall be a Redemption Date for a Like Amount of Trust Securities.
<PAGE>
9
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a Like Amount of
Debentures, allocated on a pro rata basis (based on Liquidation Amounts) among
the Trust Securities.
"Relevant Trustee" shall have the meaning specified in Section 8.10.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.4.
"Securityholder" or "Holder" means a Person in whose name a Trust Security
or Trust Securities is registered in the Securities Register; any such Person
shall be a beneficial owner within the meaning of the Delaware Business Trust
Act; provided, however, that in determining whether the Holders of the requisite
amount of Preferred Securities have voted on any matter provided for in this
Trust Agreement, then for the purpose of any such determination, so long as
Definitive Preferred Securities Certificates have not been issued, the term
Securityholders or Holders as used herein shall refer to the Owners.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced proposed change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which proposed
change, pronouncement or decision is announced on or after the date of original
issuance of the Preferred Securities under this Trust Agreement, there is more
than an insubstantial risk that (i) the Trust is, or will be within 90 days
after the date of such Opinion of Counsel, subject to United States federal
income tax with respect to income received or accrued on the Debentures, (ii)
interest payable by the Depositor on the Debentures is not, or within 90 days
after the date of such Opinion of Counsel, will not be, deductible by the
Depositor, in whole or in part, for United States federal income tax purposes or
(iii) the Trust is, or will be within 90 days after the date of such Opinion of
Counsel, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Trust" means the Delaware business trust created and continued hereby and
identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as the
same may be modified, amended or supplemented in accordance with the applicable
provisions hereof, including (i) all exhibits hereto and (ii) for all purposes
of this Trust Agreement and any such modification, amendment or supplement, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this Trust Agreement and any such modification, amendment or supplement,
respectively.
<PAGE>
10
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures, (b) any cash on deposit in, or
owing to, the Payment Account and (c) all proceeds and rights in respect of the
foregoing.
"Trust Security" means any one of the Common Securities or the Preferred
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware Trustee
and the Administrative Trustees.
"Underwriting Agreement" means the Underwriting Agreement, dated as of
June __, 1997, among the Trust, the Depositor and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, for itself and on behalf of the underwriters named
therein.
ARTICLE II
Continuation of the Trust
Section 2.1 Name.
The Trust continued hereby shall be known as "PP&L Capital Trust II," as
such name may be modified from time to time by the Administrative Trustees
following written notice to the Holders of Trust Securities and the other
Trustees, in which name the Trustees engage in the transactions contemplated
hereby, make and execute contracts and other instruments on behalf of the Trust
and sue and be sued.
Section 2.2 Office of the Delaware Trustee; Principal Place of Business.
The address of the Delaware Trustee in the State of Delaware is c/o Chase
Manhattan Bank Delaware, 1201 Market Street, 9th Floor, Wilmington, Delaware
19801, Attention: Corporate Trust Department, or such other address in the
State of Delaware as the Delaware Trustee may designate by written notice to the
Securityholders and the Depositor. The principal executive office of the Trust
is c/o Pennsylvania Power & Light Company, Two North Ninth Street, Allentown,
Pennsylvania 18101, Attention: Treasurer.
Section 2.3 Initial Contribution of Trust Property; Organizational
Expenses.
The Property Trustee acknowledges receipt in trust from the Depositor in
connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust
<PAGE>
11
Property. The Depositor shall pay organizational expenses of the Trust as they
arise or shall, upon request of any Trustee, promptly reimburse such Trustee for
any such expenses paid by such Trustee. The Depositor shall make no claim upon
the Trust Property for the payment of such expenses.
Section 2.4 Issuance of the Preferred Securities.
The Depositor, both on its own behalf and on behalf of the Trust and
pursuant to the Original Trust Agreement, has executed and delivered the
Underwriting Agreement. Contemporaneously with the execution and delivery of
this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 5.2 and deliver to the Underwriters named in
the Underwriting Agreement Preferred Securities Certificates, registered in the
name of the nominee of the initial Clearing Agency, in an aggregate amount of
6,000,000 Preferred Securities having an aggregate Liquidation Amount of
$150,000,000, against receipt of an aggregate purchase price plus accrued
distributions from _________ __, 1997 of such Preferred Securities of
$150,000,000, which amount, if any, such Administrative Trustee shall promptly
deliver to the Property Trustee.
Section 2.5 Issuance of the Common Securities; Subscription and Purchase
of Debentures.
Contemporaneously with the execution and delivery of this Trust Agreement,
an Administrative Trustee, on behalf of the Trust, shall execute in accordance
with Section 5.2 and deliver to the Depositor Common Securities Certificates,
registered in the name of the Depositor, in an aggregate amount of 185,568
Common Securities having an aggregate Liquidation Amount of $4,639,200 against
payment by the Depositor of an aggregate purchase price therefor of $4,639,200
which amount such Administrative Trustee shall promptly deliver to the Property
Trustee. Contemporaneously therewith, an Administrative Trustee, on behalf of
the Trust, shall subscribe to and purchase from the Depositor Debentures,
registered in the name of the Property Trustee on behalf of the Trust and having
an aggregate principal amount equal to $154,639,200 and, in satisfaction of the
purchase price plus accrued interest, if any, from __________ __, 1997 for such
Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the
Depositor the sum of $154,639,200 (being the sum of the amounts delivered to the
Property Trustee pursuant to (i) the second sentence of Section 2.4 and (ii) the
first sentence of this Section 2.5).
Section 2.6 Continuation of Trust.
The exclusive purposes and functions of the Trust are (a) to issue and sell
Trust Securities, (b) to use the proceeds from such sale to acquire the
Debentures and (c) to engage in those activities necessary or incidental
thereto. The Depositor hereby appoints the Property Trustee and Administrative
Trustees and reaffirms the appointment of the Delaware Trustee as trustees of
the Trust, to have all the rights, powers and duties to the extent set forth
herein, and the Trustees hereby accept such appointment. The Property Trustee
hereby declares that it will hold the Trust Property in trust upon and subject
to the conditions set forth herein for the benefit of the Trust and the
Securityholders. The Administrative Trustees shall have all rights,
<PAGE>
12
powers and duties set forth herein and in accordance with applicable law with
respect to accomplishing the purposes of the Trust. The Delaware Trustee shall
not be entitled to exercise any powers, nor shall the Delaware Trustee have any
of the duties and responsibilities, of the Property Trustee or the
Administrative Trustees set forth herein. The Delaware Trustee shall be one of
the Trustees of the Trust for the sole and limited purpose of fulfilling the
requirements of Section 3807 of the Delaware Business Trust Act and for taking
such actions as are required to be taken by a Delaware trustee under the
Delaware Business Trust Act. In the event the Delaware Trustee shall at any time
be required to take any action or perform any duty hereunder with respect to the
Trust, the Delaware Trustee shall be entitled to all of the same rights as the
Property Trustee listed in Section 8.3.
Section 2.7 Authorization to Enter into Certain Transactions.
(a) The Trustees shall conduct the affairs of the Trust in accordance with
the terms of this Trust Agreement. Subject to the limitations set forth in
paragraph (b) of this Section, Article VIII and in accordance with the following
provisions (i) and (ii), the Trustees shall have the authority to enter into all
transactions and agreements determined by the Trustees to be appropriate in
exercising the authority, express or implied, otherwise granted to the Trustees
under this Trust Agreement, and to perform all acts in furtherance thereof,
including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee shall
have the power and authority to act on behalf of the Trust with respect to
the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute, deliver
and perform on behalf of the Trust, the Certificate Depository
Agreement and such other agreements as may be necessary or desirable
in connection with the purposes and function of the Trust;
(C) assisting in the registration of the Preferred Securities
under the Securities Act of 1933, as amended, and under state
securities or blue sky laws and the qualification of this Trust
Agreement as a trust indenture under the Trust Indenture Act;
(D) assisting in the listing, if any, of the Preferred
Securities upon such national securities exchange or exchanges or
automated quotation system or systems as shall be determined by the
Depositor, with the registration of the Preferred Securities under the
Securities Exchange Act of 1934, as amended, and with the preparation
and filing of all periodic and other reports and other documents
pursuant to the foregoing;
(E) assisting in the sending of notices (other than notices of
default) and other information regarding the Trust Securities and the
Debentures to the Securityholders in accordance with this Trust
Agreement;
<PAGE>
13
(F) consent to the appointment of a Paying Agent and Securities Registrar
in accordance with this Trust Agreement;
(G) registering issuance and transfer of the Trust Securities in
accordance with this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the winding
up of the affairs of and liquidation of the Trust and the execution
and filing of the certificate of cancellation with the Secretary of
State of the State of Delaware;
(I) execution and delivery of closing certificates, if any,
pursuant to the Underwriting Agreement and application for a taxpayer
identification number for the Trust;
(J) unless otherwise determined by the Depositor, the Property
Trustee or the Administrative Trustees, or as otherwise required by
the Delaware Business Trust Act or the Trust Indenture Act, to execute
on behalf of the Trust (either acting alone or together with any or
all of the Administrative Trustees) any documents that the
Administrative Trustees have the power to execute pursuant to this
Trust Agreement;
(K) to the extent provided in this Trust Agreement, the winding
up of the affairs of and liquidation of the Trust and the preparation,
execution and filing of the certificate of cancellation with the
Secretary of State of the State of Delaware;
(L) to duly prepare and file all applicable tax returns and tax
information reports that are required to be filed with respect to the
Trust on behalf of the Trust;
(M) to take all action that may be necessary or appropriate for
the preservation and the continuation of the Trust's valid existence,
rights, franchises and privileges as a statutory business trust under
the laws of the State of Delaware and of each other jurisdiction in
which such existence is necessary to protect the limited liability of
the Holders of the Preferred Securities or to enable the Trust to
effect the purposes for which the trust was created; and
(N) the taking of any action incidental to the foregoing as the
Trustees may from time to time determine is necessary or advisable to
give effect to the terms of this Trust Agreement for the benefit of
the Securityholders (without consideration of the effect of any such
action on any particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have the
power, duty and authority to act on behalf of the Trust with respect to the
following matters:
<PAGE>
14
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any other payments
made in respect of the Debentures and holding of such amounts in the
Payment Account;
(D) the distribution through the Paying Agent of amounts
distributable to the Securityholders in respect of the Trust
Securities;
(E) the exercise of all of the rights, powers and privileges of
a holder of the Debentures;
(F) the sending of notices of default and other information
regarding the Trust Securities and the Debentures to the
Securityholders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in accordance with
the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the winding
up of the affairs of and liquidation of the Trust and the execution
and filing of the certificate of cancellation with the Secretary of
State of the State of Delaware;
(I) after an Event of Default (other than under paragraph (b),
(c), (d) or (e) of the definition of such term if such Event of
Default is by or with respect to the Property Trustee) the taking of
any action incidental to the foregoing as the Property Trustee may
from time to time determine is necessary or advisable to give effect
to the terms of this Trust Agreement and protect and conserve the
Trust Property for the benefit of the Holders (without consideration
of the effect of any such action on any particular Holder); and
(J) any of the duties, powers or the authority of the
Administrative Trustees set forth in Section 2.7(a)(i)(E) herein; and
in the event of a conflict between the action of the Administrative
Trustees and the action of the Property Trustee, the action of the
Property Trustee shall prevail.
(b) So long as this Trust Agreement remains in effect, the Trust (or the
Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement, (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of
any of the Trust Property or interests therein, including to Securityholders,
except as expressly provided herein, (iii) take any action that would reasonably
be expected to cause the Trust to fail or cease to qualify as a "grantor trust"
for United States federal income tax purposes, (iv)
<PAGE>
15
incur any indebtedness for borrowed money or issue any other debt, (v) take or
consent to any action that would result in the placement of a Lien on any of the
Trust Property, (vi) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of Trust
Securities pursuant to the terms of this Trust Agreement and of the Securities;
(vii) acquire any assets other than the Trust Property, (viii) possess any power
or otherwise act in such a way as to vary the Trust Property, (ix) possess any
power or otherwise act in such a way as to vary the terms of the Securities in
any way whatsoever (except to the extent expressly authorized in this Trust
Agreement or by the terms of the Trust Securities) or (x) issue any securities
or other evidences of beneficial ownership of, or beneficial interest in, the
Trust other than the Trust Securities. The Administrative Trustees shall at the
sole cost and expense of the Trust defend all claims and demands of all Persons
at any time claiming any Lien on any of the Trust Property adverse to the
interest of the Trust or the Securityholders in their capacity as
Securityholders.
(c) In connection with the issue and sale of the Preferred Securities, the
Depositor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (and any actions
taken by the Depositor in furtherance of the following prior to the date of this
Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the Commission
and the execution on behalf of the Trust of a registration statement on the
appropriate form in relation to the Preferred Securities, including any
amendments thereto and the taking of any action necessary or desirable to
sell the Preferred Securities in a transaction or a series of transactions
pursuant thereto;
(ii) the determination of the states in which to take
appropriate action to qualify or register for sale all or part of the
Preferred Securities and the determination of any and all such acts, other
than actions which must be taken by or on behalf of the Trust, and the
advice to the Trustees of actions they must take on behalf of the Trust,
and the preparation for execution and filing of any documents to be
executed and filed by the Trust or on behalf of the Trust, as the Depositor
deems necessary or advisable in order to comply with the applicable laws of
any such states in connection with the sale of the Preferred Securities;
(iii) the preparation for filing by the Trust and execution on
behalf of the Trust of an application to the New York Stock Exchange or any
other national securities exchange or the Nasdaq National Market or any
other automated quotation system for listing upon notice of issuance of any
Preferred Securities and filing with such exchange or self-regulatory
organization such notifications and documents as may be necessary from time
to time to maintain such listing;
(iv) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities; and
<PAGE>
16
(v) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Trustees are
authorized and directed to conduct the affairs of the Trust and to operate the
Trust so that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act, or fail to be classified as a
grantor trust for United States federal income tax purposes and so that the
Debentures will be treated as indebtedness of the Depositor for United States
federal income tax purposes; provided, however, that neither the Property
Trustee nor the Delaware Trustee are required to take any action pursuant to
this paragraph (d) that is not otherwise required of such Trustee pursuant to
the terms of this Trust Agreement. The Depositor, the Property Trustee and the
Administrative Trustees are, however, authorized to take any action, not
inconsistent with applicable law, the Certificate of Trust or this Trust
Agreement, that each of the Depositor, the Property Trustee and any
Administrative Trustee determines in its discretion to be necessary or desirable
for such purposes, as long as such action does not adversely affect in any
material respect the interests of the Holders of the Preferred Securities.
Section 2.8 Assets of Trust.
The assets of the Trust shall consist solely of the Trust Property.
Section 2.9 Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee in trust for the benefit of the Trust and the
Securityholders in accordance with this Trust Agreement.
ARTICLE III
Payment Account
Section 3.1 Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall establish
the Payment Account. The Property Trustee and any agent of the Property Trustee
shall have exclusive control and sole right of withdrawal with respect to the
Payment Account for the purpose of making deposits in and withdrawals from the
Payment Account in accordance with this Trust Agreement. All monies and other
property deposited or held from time to time in the Payment Account shall be
held by the Property Trustee in the Payment Account for the exclusive benefit of
the Securityholders and for distribution as herein provided, including (and
subject to) any priority of payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest or premium on, and any
other payments or
<PAGE>
17
proceeds with respect to, the Debentures. Amounts held in the Payment Account
shall not be invested by the Property Trustee.
ARTICLE IV
Distributions; Redemption
Section 4.1 Distributions.
(a) The Trust Securities represent undivided beneficial ownership
interests in the Trust Property, and Distributions (including of Additional
Amounts) will be made on the Trust Securities at the rate and on the dates that
payments of interest (including of Additional Interest, as defined in the
Indenture) are made on the Debentures. Accordingly:
(i) Distributions on the Trust Securities shall be cumulative,
and will accumulate whether or not there are funds of the Trust available
for the payment of Distributions. Distributions shall accumulate from
__________ __, 1997, and, except in the event (and to the extent) that the
Depositor exercises its right to defer the payment of interest on the
Debentures pursuant to the Indenture, shall be payable quarterly in arrears
on January 1, April 1, July 1 and October 1 of each year, commencing on
October 1, 1997. If any date on which a Distribution is otherwise payable
on the Trust Securities is not a Business Day, then the payment of such
Distribution shall be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such
delay) with the same force and effect as if made on such date (each date on
which Distributions are payable in accordance with this Section 4.1(a), a
"Distribution Date").
(ii) Distributions on the Trust Securities shall be payable at
a rate of _____% per annum of the Liquidation Amount of the Trust
Securities. The amount of Distributions payable for any full Distribution
period shall be computed by dividing the per annum rate by four. The amount
of Distributions for any partial Distribution period shall be computed on
the basis of the number of days elapsed in a 360-day year of twelve 30-day
months. The amount of Distributions payable for any period shall include
the Additional Amounts, if any.
(iii) Distributions on the Trust Securities shall be made by
the Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand
and available in the Payment Account for the payment of such Distributions.
(b) Distributions on the Trust Securities with respect to a Distribution
Date shall be payable to the Holders thereof as they appear on the Securities
Register for the Trust Securities on the relevant record date, which shall be
one Business Day prior to such Distribution Date; provided, however, that in the
event that the Preferred Securities do not
<PAGE>
18
remain in book-entry-only form, the relevant record date shall be the 15th day
of the month prior to the relevant Distribution Date (whether or not such record
date is a Business Day).
Section 4.2 Redemption.
(a) On each Debenture Redemption Date and on the stated maturity of the
Debentures, the Trust will be required to redeem a Like Amount of Trust
Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by first-
class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior
to the Redemption Date to each Holder of Trust Securities to be redeemed, at
such Holder's address appearing in the Security Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to
be redeemed, the identification and the aggregate Liquidation Amount of the
particular Trust Securities to be redeemed;
(v) that on the Redemption Date the Redemption Price will
become due and payable upon each such Trust Security to be redeemed and
that Distributions thereon will cease to accumulate on and after said date
except as provided in Section 4.2(d) below; and
(vi) if the Preferred Securities are no longer in book-entry-
only form, the place and address where the Holders shall surrender their
Preferred Securities Certificates.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption or payment at stated maturity of Debentures. Redemptions of the Trust
Securities shall be made and the Redemption Price shall be payable on each
Redemption Date only to the extent that the Trust has funds then on hand and
available in the Payment Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of any
Preferred Securities, then, by 12:00 noon, New York City time, on the Redemption
Date, subject to Section 4.2(c), the Property Trustee will, so long as the
Preferred Securities are in book-entry-only form, irrevocably deposit with the
Clearing Agency for the Preferred Securities funds sufficient to pay the
applicable Redemption Price and will give such Clearing Agency irrevocable
instructions and authority to pay the Redemption Price to the Holders thereof.
If
<PAGE>
19
the Preferred Securities are no longer in book-entry-only form, the Property
Trustee, subject to Section 4.2(c), will irrevocably deposit with the Paying
Agent 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 Preferred Securities
Certificates. Notwithstanding the foregoing, Distributions payable on or prior
to the Redemption Date for any Trust Securities called for redemption shall be
payable to the Holders of such Trust Securities as they appear on the Securities
Register for the Trust Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of
Securityholders holding Trust Securities so called for redemption will cease,
except the right of such Securityholders to receive the Redemption Price and any
Distribution payable on or prior to the Redemption Date, but without interest
thereon, and such Trust Securities will cease to be Outstanding. In the event
that any date on which any Redemption Price is payable is not a Business Day,
then payment of the Redemption Price payable on such date 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 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 such date. In the event that payment of the Redemption Price in respect of
any Trust Securities called for redemption is improperly withheld or refused and
not paid either by the Trust or by the Depositor pursuant to the Guarantee,
Distributions on such Trust Securities will continue to accumulate, at the then
applicable rate, from the Redemption Date originally established by the Trust
for such Trust Securities to the date such Redemption Price is actually paid, in
which case the actual payment date will be the date fixed for redemption for
purposes of calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall be made
to the recordholders thereof as they appear on the Securities Register for the
Trust Securities on the relevant record date, which shall be one Business Day
prior to the relevant Redemption Date; provided, however, that in the event that
the Preferred Securities do not remain in book-entry-only form, the relevant
record date shall be the date fifteen days prior to the relevant Redemption
Date.
(f) Subject to Section 4.3(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. The particular Preferred Securities to be redeemed
shall be selected on a pro rata basis (based upon Liquidation Amounts) not more
than 60 days prior to the Redemption Date by the Property Trustee from the
Outstanding Preferred Securities not previously called for redemption, by such
method as the Property Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $25 or an
integral multiple of $25 in excess thereof) of the Liquidation Amount of
Preferred Securities of a denomination larger than $25. The Property Trustee
shall promptly notify the Securities Registrar in writing of the Preferred
Securities selected for redemption and, in the case of any Preferred Securities
selected for partial redemption, the Liquidation Amount thereof to be redeemed.
For all purposes of this Trust
<PAGE>
20
Agreement, unless the context otherwise requires, all provisions relating to the
redemption of Preferred Securities shall relate, in the case of any Preferred
Securities redeemed or to be redeemed only in part, to the portion of the
aggregate Liquidation Amount of Preferred Securities that has been or is to be
redeemed.
Section 4.3 Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts, if applicable)
on, and the Redemption Price of, the Trust Securities, as applicable, shall be
made, subject to Section 4.2(f), pro rata among the Common Securities and the
Preferred Securities based on the Liquidation Amount of the Trust Securities;
provided, however, that if on any Distribution Date or Redemption Date any Event
of Default resulting from a Debenture Event of Default shall have occurred and
be continuing, no payment of any Distribution (including Additional Amounts, if
applicable) on, or Redemption Price of, any Common Security, and no other
payment on account of the redemption, liquidation or other acquisition of Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions (including Additional Amounts, if applicable) on all
Outstanding Preferred Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the Redemption Price the full amount
of such Redemption Price on all Outstanding Preferred Securities then called for
redemption, shall have been made or provided for, and all funds immediately
available to the Property Trustee shall first be applied to the payment in full
in cash of all Distributions (including Additional Amounts, if applicable) on,
or the Redemption Price of, Preferred Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting from
any Debenture Event of Default, the Holder of the Common Securities shall be
deemed to have waived any right to act with respect to any such Event of Default
under this Trust Agreement until the effect of all such Events of Default with
respect to the Preferred Securities has been cured, waived or otherwise
eliminated. Until any such Event of Default under this Trust Agreement with
respect to the Preferred Securities has been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the Holders of
the Preferred Securities and not the Holder of the Common Securities, and only
the Holders of the Preferred Securities will have the right to direct the
Property Trustee to act on their behalf.
Section 4.4 Payment Procedures.
Payments of Distributions (including Additional Amounts, if applicable) or
the Redemption Price, Liquidation Amount or any other amounts in respect of the
Preferred Securities shall be made by check mailed to the address of the Person
entitled thereto as such address shall appear on the Securities Register or, if
the Preferred Securities are held by a Clearing Agency, such Distributions shall
be made to the Clearing Agency in immediately available funds, which shall
credit the relevant Persons' accounts at such Clearing Agency on the applicable
Distribution Dates. Payments in respect of the Common Securities shall be made
in such manner as shall be mutually agreed in writing between the Property
Trustee and the Common Securityholder.
<PAGE>
21
Section 4.5 Tax Returns and Reports.
The Administrative Trustees shall prepare (or cause to be prepared), at the
Depositor's expense, and file all United States federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
Form required to be filed in respect of the Trust in each taxable year of the
Trust and (b) prepare and furnish (or cause to be prepared and furnished) to
each Securityholder the appropriate Internal Revenue Service form and the
information required to be provided on such form. The Administrative Trustees
shall provide the Depositor and the Property Trustee with a copy of all such
returns and reports promptly after such filing or furnishing. The Trustees shall
comply with United States federal withholding and backup withholding tax laws
and information reporting requirements with respect to any payments to
Securityholders under the Trust Securities.
Section 4.6 Payment of Expenses of the Trust.
Pursuant to Sections 6.7 and 10.6 of the Indenture, the Depositor, as
borrower, has agreed to pay to the Trust, and reimburse the Trust for, the full
amount of any costs, expenses or liabilities of the Trust (other than
obligations of the Trust to pay the Holders of any Preferred Securities or other
similar interests in the Trust the amounts due such Holders pursuant to the
terms of the Preferred Securities or such other similar interests, as the case
may be), including, without limitation, any taxes, duties or other governmental
charges of whatever nature (other than withholding taxes) imposed on the Trust
by the United States or any other taxing authority. Such payment obligation
includes any such costs, expenses or liabilities of the Trust that are required
by applicable law to be satisfied in connection with a termination of the Trust.
Section 4.7 Payments under Indenture or Pursuant to Direct Actions.
Any amount payable hereunder to any Holder of Preferred Securities shall be
reduced by the amount of any corresponding payment such Holder (or an Owner with
respect to the Holder's Preferred Securities) has directly received pursuant to
Section 5.8 of the Indenture or Section 5.14 of this Trust Agreement.
ARTICLE V
Trust Securities Certificates
Section 5.1 Initial Ownership.
Upon the creation of the Trust and the contribution by the Depositor
pursuant to Section 2.3 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are Outstanding, the Depositor shall
be the sole beneficial owner of the Trust.
<PAGE>
22
Section 5.2 The Trust Securities Certificates.
The Preferred Securities Certificates shall be issued in minimum
denominations of $25 Liquidation Amount and integral multiples of $25 in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of $25 Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be (i) executed on behalf of the Trust by manual or facsimile
signature of at least one Administrative Trustee and (ii) authenticated by the
Property Trustee by manual signature of an authorized officer thereof. Trust
Securities Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust or the Property Trustee, shall be
validly issued and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the delivery of such Trust Securities Certificates or did
not hold such offices at the date of delivery of such Trust Securities
Certificates. A transferee of a Trust Securities Certificate shall become a
Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Sections 5.4, 5.11
and 5.13.
Section 5.3 Execution and Delivery of Trust Securities Certificates.
On the Closing Date, the Administrative Trustees shall cause Trust
Securities Certificates, in an aggregate Liquidation Amount as provided in
Sections 2.4 and 2.5, to be executed on behalf of the Trust, and the Property
Trustee shall cause such Trust Certificates to be authenticated and delivered to
or upon the written order of the Depositor, signed by its chairman of the board,
its president, any executive vice president or any vice president, treasurer or
assistant treasurer or controller without further corporate action by the
Depositor, in authorized denominations.
Section 5.4 Registration of Transfer and Exchange of Preferred Securities
Certificates.
The Property Trustee shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 5.8, a register or registers for the
purpose of registering Trust Securities Certificates and transfers and exchanges
of Trust Securities Certificates (the "Securities Register") in which the
transfer agent and registrar (the "Securities Registrar"), subject to such
reasonable regulations as it may prescribe, shall provide for the registration
of Preferred Securities Certificates and Common Securities Certificates (subject
to Section 5.10 in the case of the Common Securities Certificates) and
registration of transfers and exchanges of Preferred Securities Certificates as
herein provided. The Property Trustee shall at all times be the Securities
Registrar.
Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 5.8, the
Administrative Trustees or any one of them shall execute on behalf of the Trust
and deliver to the Property Trustee, and the Property Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Preferred Securities Certificates in authorized denominations of
<PAGE>
23
a like aggregate Liquidation Amount dated the date of authentication by the
Property Trustee. The Securities Registrar shall not be required to register
the transfer of any Preferred Securities that have been called for redemption
during a period beginning at the opening of business 15 days before the day of
selection for such redemption.
At the option of a Holder, Preferred Securities Certificates may be
exchanged for other Preferred Securities Certificates in authorized
denominations of the same class and of a like aggregate Liquidation Amount upon
surrender of the Preferred Securities Certificates to be exchanged at the office
or agency maintained pursuant to Section 5.8.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to an Administrative Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Preferred Securities Certificate surrendered for registration
of transfer or exchange shall be cancelled and subsequently disposed of by the
Property Trustee in accordance with such Person's customary practice.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Preferred
Securities Certificates.
Section 5.5 Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.
If (a) any mutilated Trust Securities Certificate shall be surrendered to
the Securities Registrar, or if the Securities Registrar shall receive evidence
to its satisfaction of the destruction, loss or theft of any Trust Securities
Certificate and (b) there shall be delivered to the Securities Registrar and the
Administrative Trustees such security or indemnity as may be required by them to
save each of the Securities Registrar and the Trustees harmless, then in the
absence of notice that such Trust Securities Certificate shall have been
acquired by a bona fide purchaser, the Administrative Trustees, or any one of
them, on behalf of the Trust shall execute by manual or facsimile signature and
the Property Trustee shall authenticate and make available for delivery, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust
Securities Certificate, a new Trust Securities Certificate of like class, tenor
and denomination. In connection with the issuance of any new Trust Securities
Certificate under this Section, the Administrative Trustees or the Securities
Registrar may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Trust Securities Certificate issued pursuant to this Section shall constitute
conclusive evidence of an undivided beneficial interest in the Trust Property,
as if originally issued, whether or not the lost, stolen or destroyed Trust
Securities Certificate shall be found at any time.
Section 5.6 Persons Deemed Securityholders.
The Trustees and the Securities Registrar shall treat each Person in whose
name any Trust Securities Certificate shall be registered in the Securities
Register as the owner of such
<PAGE>
24
Trust Securities Certificate for the purpose of receiving Distributions and for
all other purposes whatsoever, and none of the Trustees shall be bound by any
notice to the contrary.
Section 5.7 Access to List of Securityholders' Names and Addresses.
Each Holder and each Owner shall be deemed to have agreed not to hold the
Depositor or the Trustees accountable by reason of the disclosure of its name
and address, regardless of the source from which such information was derived.
Section 5.8 Maintenance of Office or Agency.
The Property Trustee shall designate, with the consent of the
Administrative Trustees, which consent shall not be unreasonably withheld, an
office or offices or agency or agencies where Preferred Securities Certificates
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Trustees in respect of the Trust Securities
Certificates may be served. The Property Trustee initially designates The Chase
Manhattan Bank, Global Trust Services, 450 W. 33rd Street, 15th Floor, New York,
New York 10001-2697, as its principal corporate trust office for such purposes.
The Property Trustee shall give prompt written notice to the Depositor, the
Administrative Trustees and to the Securityholders of any change in the location
of the Securities Register or any such office or agency.
Section 5.9 Appointment of Paying Agent.
The Paying Agent shall make Distributions to Securityholders from the
Payment Account and shall report the amounts of such Distributions to the
Property Trustee (if the Paying Agent is not the Property Trustee) and the
Administrative Trustees. Any Paying Agent shall have the revocable power to
withdraw funds from the Payment Account solely for the purpose of making the
Distributions referred to above. The Administrative Trustees may revoke such
power and remove the Paying Agent if such Trustees determine in their sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Trust Agreement in any material respect. The Paying Agent shall
initially be the Property Trustee, and any co-paying agent chosen by the
Property Trustee (which may be the Depositor), and acceptable to the
Administrative Trustees and the Depositor. Any Person acting as Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to the
Administrative Trustees, the Property Trustee (if the Paying Agent is not the
Property Trustee) and the Depositor. In the event that the Property Trustee
shall no longer be the Paying Agent or a successor Paying Agent shall resign or
its authority to act be revoked, the Administrative Trustees shall appoint a
successor that is acceptable to the Property Trustee and the Depositor to act as
Paying Agent (which shall be a bank or trust company). The Administrative
Trustees shall cause such successor Paying Agent or any additional Paying Agent
appointed by the Administrative Trustees to execute and deliver to the Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Securityholders in trust for the benefit of the Securityholders entitled
thereto until such sums shall be paid to such Securityholders.
<PAGE>
25
The Paying Agent shall return all unclaimed funds to the Property Trustee and
upon resignation or removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Property Trustee. The provisions of
Sections 8.1, 8.3 and 8.6 herein shall apply to the Property Trustee also in its
role as Paying Agent, for so long as the Property Trustee shall act as Paying
Agent and, to the extent applicable, to any other paying agent appointed
hereunder, and any Paying Agent shall be bound by the requirements with respect
to paying agents of securities issued pursuant to the Trust Indenture Act. Any
reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise.
Section 5.10 Ownership of Common Securities by Depositor.
On the Closing Date, the Depositor shall acquire and thereafter shall
retain beneficial and record ownership of the Common Securities. To the fullest
extent permitted by law, other than a transfer in connection with a
consolidation or merger of the Depositor into another Person, or any conveyance,
transfer or lease by the Depositor of its properties and assets substantially as
an entirety to any Person, pursuant to Section 8.1 of the Indenture, any
attempted transfer of the Common Securities shall be void. The Administrative
Trustees shall cause each Common Securities Certificate issued to the Depositor
to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE TO ANY PERSON
EXCEPT TO THE DEPOSITOR OR AN AFFILIATE OF THE DEPOSITOR IN COMPLIANCE WITH
APPLICABLE LAW AND SECTION 5.10 OF THE TRUST AGREEMENT".
Section 5.11 Book-Entry Preferred Securities Certificates; Common
Securities Certificate.
(a) The Preferred Securities Certificates, upon original issuance, will be
issued in the form of a typewritten Preferred Securities Certificate or
Certificates representing Book-Entry Preferred Securities Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Trust. Such Preferred Securities Certificate or Certificates
shall initially be registered on the Securities Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Owner will receive a
Definitive Preferred Securities Certificate representing such Owner's interest
in such Preferred Securities, except as provided in Section 5.13. Unless and
until Definitive Preferred Securities Certificates have been issued to Owners
pursuant to Section 5.13:
(i) the provisions of this Section 5.11(a) shall be in full
force and effect;
(ii) the Securities Registrar and the Trustees shall be
entitled to deal with the Clearing Agency for all purposes of this Trust
Agreement relating to the Book-Entry Preferred Securities Certificates
(including the payment of the Liquidation Amount of and Distributions on
the Preferred Securities evidenced by Book-Entry Preferred Securities
Certificates and the giving of instructions or directions to Owners of
Preferred Securities evidenced by Book-Entry Preferred Securities
Certificates) as the sole Holder of Preferred Securities evidenced by Book-
Entry Preferred Securities Certificates and shall have no obligations to
the Owners thereof;
<PAGE>
26
(iii) to the extent that the provisions of this Section 5.11
conflict with any other provisions of this Trust Agreement, the provisions
of this Section 5.11 shall control; and
(iv) the rights of the Owners of the Book-Entry Preferred
Securities Certificates shall be exercised only through the Clearing Agency
and shall be limited to those established by law and agreements between
such Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Certificate Depository Agreement, unless and
until Definitive Preferred Securities Certificates are issued pursuant to
Section 5.13, the initial Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit payments on
the Preferred Securities to such Clearing Agency Participants.
(b) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a typewritten Common
Securities Certificate.
Section 5.12 Notices to Clearing Agency.
To the extent that a notice or other communication to the Holders of
Preferred Securities is required under this Trust Agreement, unless and until
Definitive Preferred Securities Certificates shall have been issued to Owners
pursuant to Section 5.13, the Trustees shall give all such notices and
communications specified herein to be given to the Clearing Agency and shall
have no obligations to the Owners.
Section 5.13 Definitive Preferred Securities Certificates.
If (a) the Depositor advises the Trustees in writing that the Clearing
Agency is no longer willing or able to properly discharge its responsibilities
with respect to the Preferred Securities Certificates, and the Depositor is
unable to locate a qualified successor, (b) the Depositor at its option advises
the Trustees in writing that it elects to terminate the book-entry system
through the Clearing Agency or (c) after the occurrence of a Debenture Event of
Default, Owners of Preferred Securities Certificates representing beneficial
interests aggregating at least a majority of the Liquidation Amount advise the
Administrative Trustees in writing that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interest of the Owners of
Preferred Securities Certificates, then the Administrative Trustees shall notify
other Trustees and the Clearing Agency, and the Clearing Agency, in accordance
with its customary rules and procedures, shall notify all Clearing Agency
Participants for whom it holds Preferred Securities of the occurrence of any
such event and of the availability of the Definitive Preferred Securities
Certificates to Owners of such class or classes, as applicable, requesting the
same. Upon surrender to the Administrative Trustees of the typewritten Preferred
Securities Certificate or Certificates representing the Book-Entry Preferred
Securities Certificates by the Clearing Agency, accompanied by registration
instructions, the Administrative Trustees, or any one of them, shall execute,
and the Property Trustee shall authenticate and deliver, the Definitive
Preferred Securities Certificates in accordance with the instructions of the
Clearing Agency. Neither the Securities Registrar nor the Trustees shall be
liable for any delay in delivery of such instructions and
<PAGE>
27
may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Preferred Securities Certificates,
the Trustees shall recognize the Holders of the Definitive Preferred Securities
Certificates as Securityholders. The Definitive Preferred Securities
Certificates shall be typewritten, printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Administrative
Trustees that meets the requirements of any stock exchange or automated
quotation system on which the Preferred Securities are then listed or approved
for trading, as evidenced by the execution thereof by the Administrative
Trustees or any one of them.
Section 5.14 Rights of Securityholders.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 2.9, and
the Securityholders shall not have any right or title therein other than the
undivided beneficial ownership interest in the assets of the Trust conferred by
their Trust Securities. The Securityholders shall have no right to call for any
partition or division of property, profits or rights of the Trust except as
described below. The Trust Securities shall be personal property giving only the
rights specifically set forth therein and in this Trust Agreement. The Trust
Securities shall have no preemptive or similar rights and when issued and
delivered to Securityholders against payment of the purchase price therefor will
be fully paid and nonassessable by the Trust. The Holders of the Preferred
Securities, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if, upon a
Debenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of at least 25% in Liquidation Amount of the Preferred Securities then
Outstanding shall have such right by a notice in writing to the Depositor and
the Debenture Trustee; and upon any such declaration such principal amount of
and the accrued interest on all of the Debentures shall become immediately due
and payable as set forth in the Indenture, provided that the payment of
principal, premium and interest on such Debentures shall remain subordinated to
the extent provided in the Indenture.
At any time after a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as in the Indenture
provided, the Holders of at least a Majority in Liquidation Amount of the
Preferred Securities, by written notice to the Property Trustee, the Depositor
and the Debenture Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Depositor has paid or deposited with the Debenture
Trustee a sum sufficient to pay
(A) all overdue installments of interest (including any
Additional Interest (as defined in the Indenture)) on all of the
Debentures,
<PAGE>
28
(B) the principal of (and premium, if any, on) any Debentures
which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Debentures,
and
(C) all sums paid or advanced by the Debenture Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Debenture Trustee and the Property Trustee, their
agents and counsel and all other amounts due to the Debentures Trustee
under Section 6.7 of the Indenture or to the Property Trustee under
Section 8.6 hereof; and
(ii) all Events of Default with respect to the Debentures,
other than the non-payment of the principal of the Debentures which has
become due solely by such acceleration, have been cured or waived as
provided in Section 5.13 of the Indenture.
The Holders of at least a Majority in Liquidation Amount of the Preferred
Securities may, on behalf of the Holders of all the Preferred Securities, waive
any past default under the Indenture, except a default in the payment of
principal, premium or interest (unless all Events of Default with respect to the
Debentures, other than the non-payment of the principal of the Debentures which
has become due solely by such acceleration, have been cured or annulled as
provided in Section 5.3 of the Indenture and the Depositor has paid or deposited
with the Debenture Trustee a sum sufficient to pay all overdue installments of
interest (including any Additional Interest (as defined in the Indenture)) on
the Debentures, the principal of (and premium, if any, on) any Debentures which
have become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Debentures, and all sums paid or advanced by
the Debenture Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Debenture Trustee and the Property
trustee, their agents and counsel and all other amounts due to the Debentures
Trustee under Section 6.7 of the Indenture or to the Property Trustee under
Section 8.6 hereof) 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 Debenture. No such rescission shall affect any
subsequent default or impair any right consequent thereon.
Upon receipt by the Property Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, by Holders of the Preferred
Securities all or part of which is represented by Book-Entry Preferred
Securities Certificates, a record date shall be established for determining
Holders of Outstanding Preferred Securities entitled to join in such notice,
which record date shall be at the close of business on the day the Property
Trustee receives such notice. The Holders of Outstanding Preferred Securities on
such record date, or their duly designated proxies, and only such Persons, shall
be entitled to join in such notice, whether or not such Holders remain Holders
after such record date; provided, that, unless such declaration of acceleration,
or rescission and annulment, as the case may be, shall have become effective by
virtue of the requisite percentage having joined in such notice prior to the day
which is 90 days after such record date, such notice of declaration of
acceleration, or rescission and annulment, as the case may be, shall
automatically and without further action by any Holder be canceled and of no
further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of
a Holder, from giving, after expiration of such 90-day period,
<PAGE>
29
a new written notice of declaration of acceleration, or rescission and annulment
thereof, as the case may be, that is identical to a written notice which has
been canceled pursuant to the proviso to the preceding sentence, in which event
a new record date shall be established pursuant to the provisions of this
Section 5.14(b).
(c) For so long as any Preferred Securities remain Outstanding, to the
fullest extent permitted by law and subject to the terms of this Trust Agreement
and the Indenture, upon a Debenture Event of Default specified in Section 5.1(1)
or 5.1(2) of the Indenture, any Holder of Preferred Securities shall have the
right to institute a proceeding directly against the Depositor, pursuant to
Section 5.8 of the Indenture, for enforcement of payment to such Holder of any
amounts payable in respect of Debentures having an aggregate principal amount
equal to the Liquidation Amount of the Preferred Securities of such Holder (a
"Direct Action"). Except as set forth in Section 5.14(b) and this Section
5.14(c), the Holders of Preferred Securities shall have no right to exercise
directly any right or remedy available to the holders of, or in respect of, the
Debentures.
Section 5.15 CUSIP Numbers.
The Administrative Trustees in issuing the Preferred Securities may use
"CUSIP" numbers (if then generally in use), and, if so, the Property Trustee
shall use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to the
- --------
correctness of such numbers either as printed on the Preferred Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Preferred Securities, and any
such redemption shall not be affected by any defect in or omission of such
numbers. The Administrative Trustees will promptly notify the Property Trustee
of any change in the CUSIP numbers.
ARTICLE VI
Acts of Securityholders; Meetings; Voting
Section 6.1 Limitations on Voting Rights.
(a) Except as provided in this Section, in Sections 5.14, 8.10 and 10.3
and in the Indenture and as otherwise required by law, no Holder of Preferred
Securities shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Trust or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Trust Securities Certificates, be construed so as to constitute the
Securityholders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee on behalf
of the Trust, the Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
execute any trust or power conferred on the Debenture Trustee with respect to
such Debentures, (ii) waive any past default which is waivable under Section
5.13 of the Indenture, (iii) exercise any right to
<PAGE>
30
rescind or annul a declaration that the principal of all the Debentures shall be
due and payable or (iv) consent to any amendment, modification or termination of
the Indenture or the Debentures, where such consent shall be required, without,
in each case, obtaining the prior approval of the Holders of at least a majority
in Liquidation Amount of the Preferred Securities, provided, however, that where
a consent under the Indenture would require the consent of each holder of
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior written consent of each Holder of Preferred
Securities. The Trustees shall not revoke any action previously authorized or
approved by a vote of the Holders of Preferred Securities, except by a
subsequent vote of the Holders of Preferred Securities. The Property Trustee
shall notify all Holders of the Preferred Securities of any notice of default
received from the Debenture Trustee with respect to the Debentures. In addition
to obtaining the foregoing approvals of the Holders of the Preferred Securities,
prior to taking any of the foregoing actions, the Administrative Trustees, at
the request of the Property Trustee, shall, at the expense of the Depositor,
obtain an Opinion of Counsel experienced in such matters to the effect that such
action shall not cause the Trust to fail to be classified as a grantor trust for
United States federal income tax purposes.
(c) If any proposed amendment to this Trust Agreement provides for, or the
Trustees otherwise propose to effect, (i) any action that would adversely affect
in any material respect the powers, preferences or special rights of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise, or (ii) the dissolution, winding-up or termination of the Trust,
other than pursuant to the terms of this Trust Agreement, then the Holders of
Outstanding Preferred Securities as a class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a Majority in Liquidation
Amount of the Preferred Securities. Notwithstanding any other provision of this
Trust Agreement, no amendment to this Trust Agreement may be made if, as a
result of such amendment, it would cause the Trust to fail to be classified as a
grantor trust for United States federal income tax purposes.
Section 6.2 Notice of Meetings.
Notice of all meetings of the Preferred Securityholders, stating the time,
place and purpose of the meeting, shall be given by the Property Trustee, at the
request of the Administrative Trustees, pursuant to Section 10.9 to each
Preferred Securityholder of record, at such Holder's registered address, at
least 15 days and not more than 90 days before the meeting. At any such meeting,
any business properly before the meeting may be so considered whether or not
stated in the notice of the meeting. Any adjourned meeting may be held as
adjourned without further notice.
Section 6.3 Meetings of Preferred Securityholders.
No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Preferred
Securityholders to vote on any matter upon the written request of the Preferred
Securityholders of record of 25% of the Outstanding Preferred Securities (based
upon their Liquidation Amount), and the Administrative Trustees or the Property
Trustee may, at any time in their discretion, call a meeting of Preferred
<PAGE>
31
Securityholders to vote on any matters as to which Preferred Securityholders are
entitled to vote.
The Holders of at least a Majority in Liquidation Amount of the Preferred
Securities, present in person or by proxy, shall constitute a quorum at any
meeting of Preferred Securityholders.
If a quorum is present at a meeting, an affirmative vote by the Preferred
Securityholders of record present, in person or by proxy, holding Preferred
Securities representing at least a Majority in Liquidation Amount of the
Preferred Securities present, either in person or by proxy, at such meeting
shall constitute the action of the Preferred Securityholders, unless this Trust
Agreement requires a greater number of affirmative votes.
Section 6.4 Voting Rights.
Securityholders shall be entitled to one vote for each $25 of Liquidation
Amount represented by their Outstanding Trust Securities in respect of any
matter as to which such Securityholders are entitled to vote.
Section 6.5 Proxies, etc.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Only Securityholders of record shall be entitled to vote. When Trust Securities
are held jointly by several Persons, any one of them may vote at any meeting in
person or by proxy in respect of such Trust Securities, but if more than one of
them shall be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Trust Securities. A proxy purporting to
be executed by or on behalf of a Securityholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. No proxy shall be valid more than three years
after its date of execution.
Section 6.6 Securityholder Action by Written Consent.
Any action which may be taken by Securityholders at a meeting may be taken
without a meeting if Securityholders holding more than a majority of all
Outstanding Trust Securities (based upon their Liquidation Amount) entitled to
vote in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to the
action in writing.
<PAGE>
32
Section 6.7 Record Date for Voting and Other Purposes.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any Distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees or the Property Trustee may from time
to time fix a date, not more than 90 days prior to the date of any meeting of
Securityholders or the payment of a Distribution or other action, as the case
may be, as a record date for the determination of the identity of the
Securityholders of record for such purposes.
Section 6.8 Acts of Securityholders.
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Trust Agreement to be given, made or
taken by Securityholders or Owners may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Securityholders
or Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
Owners signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor
of the Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which any Trustee receiving the same deems sufficient.
The ownership of Trust Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
<PAGE>
33
Without limiting the foregoing, a Securityholder entitled hereunder to take
any action hereunder with regard to any particular Trust Security may do so with
regard to all or any part of the Liquidation Amount of such Trust Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.
If any dispute shall arise among the Securityholders and the Trustees with
respect to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder or
Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
Section 6.9 Inspection of Records.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection by Securityholders
during normal business hours for any purpose reasonably related to such
Securityholder's interest as a Securityholder.
ARTICLE VII
Representations and Warranties
Section 7.1 Representations and Warranties of Property Trustee.
The initial Property Trustee represents and warrants to the Trust and to
the Depositor at the date of this Trust Agreement, and each successor Property
Trustee represents and warrants to the Trust and the Depositor at the time of
the successor Property Trustee's acceptance of its appointment as Property
Trustee, that:
(a) the Property Trustee is a banking corporation or a national
banking association with the trust powers, duly organized, validly existing
and in good standing under the laws of the United States with trust power
and authority to execute and deliver, and to carry out and perform its
obligations under the terms of this Trust Agreement;
(b) the execution, delivery and performance by the Property Trustee
of this Trust Agreement has been duly authorized by all necessary corporate
action on the part of the Property Trustee. This Trust Agreement has been
duly executed and delivered by the Property Trustee, and it constitutes a
legal, valid and binding obligation of the Property Trustee, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether considered in a proceeding
in equity or at law);
<PAGE>
34
(c) the execution, delivery and performance of this Trust Agreement
by the Property Trustee does not conflict with or constitute a breach of
the charter or by-laws of the Property Trustee;
(d) no consent, approval or authorization of, or registration with or
notice to, any state of federal banking authority governing the trust
powers of the Property Trustee is required for the execution, delivery or
performance by the Property Trustee of this Trust Agreement; and
(e) there are no proceedings pending or, to the best of the Property
Trustee's knowledge, threatened against or affecting the Property Trustee
in any court or before any governmental authority, agency or arbitration
board or tribunal which, individually or in the aggregate, would question
the right, power and authority of the Property Trustee to enter into or
perform its obligations as one of the Trustees under this Trust Agreement.
Section 7.2 Representations and Warranties of Delaware Trustee.
The Delaware Trustee represents and warrants to the Trust and to the
Depositor at the date of this Trust Agreement, and each successor Delaware
Trustee represents and warrants to the Trust and the Depositor at the time of
the successor Delaware Trustee's acceptance of its appointment as Delaware
Trustee, that:
(a) the Delaware Trustee is duly organized, validly existing and in
good standing under the laws of the State of Delaware, with power and
authority or execute and deliver, and to carry out and perform its
obligations under the terms of, this Trust Agreement;
(b) the Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and this Trust Agreement by all
necessary action on the part of the Delaware Trustee. This Trust Agreement
under Delaware law constitutes a legal, valid and binding obligation of the
Delaware Trustee, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, reorganization, moratorium, insolvency,
and other similar laws affecting creditors' rights generally and to general
principles of equity (regardless of whether considered in a proceeding in
equity or at law);
(c) no consent, approval or authorization of, or registration with or
notice to, any state or federal banking authority governing the trust
powers of the Delaware Trustee is required for the execution, delivery or
performance by the Delaware Trustee of this Trust Agreement;
(d) the Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware and, in either case, a
Person that satisfied for the Trust the requirements of Section 3807 of the
Business Trust Act;
<PAGE>
35
(e) the execution, delivery and performance of this Trust Agreement
by the Delaware Trustee will not (i) violate the charter or by-laws of the
Delaware Trustee, (ii) violate any provision of, or constitute, with or
without notice or lapse of time, a default under, or result in the creation
or imposition of, any Lien on any properties included in the Trust Property
pursuant to the provisions of, any indenture, mortgage, credit agreement,
license or other agreement or instrument to which the Delaware Trustee is a
party or by which it is bound, or (iii) violate any law, governmental rule
or regulation of the State of Delaware governing the banking, trust or
general powers of the Delaware Trustee (as appropriate in context) or any
order, judgment or decree applicable to the Property Trustee or the
Delaware Trustee; and
(f) there are no proceedings pending or, to the best of the Delaware
Trustee's knowledge, threatened against or affecting the Delaware Trustee
in any court or before any governmental authority, agency or arbitration
board or tribunal which, individually or in the aggregate, would question
the right, power and authority of the Delaware Trustee, to enter into or
perform its obligations as one of the Trustees under this Trust Agreement.
Section 7.3 Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued at the Closing Date on behalf
of the Trust have been duly authorized and will have been, duly and validly
executed, issued and delivered by the Trustees pursuant to the terms and
provisions of, and in accordance with the requirements of, this Trust Agreement
and the Securityholders will be, as of such date, entitled to the benefits of
this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by the
Trust (or the Trustees on behalf of the Trust) under the laws of the State of
Delaware or any political subdivision thereof in connection with the execution,
delivery and performance by the Property Trustee or the Delaware Trustee, as the
case may be, of this Trust Agreement.
ARTICLE VIII
The Trustees
Section 8.1 Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustees shall be as provided
by this Trust Agreement and, in the case of the Property Trustee, by the Trust
Indenture Act. Notwithstanding the foregoing, no provision of this Trust
Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or
<PAGE>
36
powers, if they shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to them. Whether or not therein expressly so provided, every
provision of this Trust Agreement relating to the conduct or affecting the
liability of or affording protection to the Trustees shall be subject to the
provisions of this Section. Nothing in this Trust Agreement shall be construed
to release an Administrative Trustee from liability for its own gross negligent
action, its own gross negligent failure to act, or its own willful misconduct.
To the extent that, at law or in equity, an Administrative Trustee has duties
(including fiduciary duties) and liabilities relating thereto to the Trust or to
the Securityholders, such Administrative Trustee shall not be liable to the
Trust or to any Securityholder for such Trustee's good faith reliance on the
provisions of this Trust Agreement. The provisions of this Trust Agreement, to
the extent that they restrict the duties and liabilities of the Administrative
Trustees otherwise existing at law or in equity, are agreed by the Depositor and
the Securityholders to replace such other duties and liabilities of the
Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in respect
of the Trust Securities shall be made only from the revenue and proceeds from
the Trust Property and only to the extent that there shall be sufficient revenue
or proceeds from the Trust Property to enable the Property Trustee or a Paying
Agent to make payments in accordance with the terms hereof. Each Securityholder,
by its acceptance of a Trust Security, agrees that it will look solely to the
revenue and proceeds from the Trust Property to the extent legally available for
distribution to it as herein provided and that the Trustees are not personally
liable to it for any amount distributable in respect of any Trust Security or
for any other liability in respect of any Trust Security. This Section 8.1(b)
does not limit the liability of the Trustees expressly set forth elsewhere in
this Trust Agreement or, in the case of the Property Trustee, in the Trust
Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve the
Property Trustee or the Delaware Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) such Trustee shall not be liable for any error of judgment
made in good faith by an authorized officer of such Trustee, unless it
shall be proved that such Trustee was negligent in ascertaining the
pertinent facts;
(ii) such Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in Liquidation
Amount of the Preferred Securities relating to the time, method and place
of conducting any proceeding for any remedy available to such Trustee, or
exercising any trust or power conferred upon the Property Trustee under
this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and the
Payment Account shall be to deal with such property in a similar manner as
the Property Trustee deals with similar property for its own account,
subject to the protections and limitations on
<PAGE>
37
liability afforded to the Property Trustee under this Trust Agreement and
the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree in writing
with the Depositor; and money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the Payment
Account maintained by the Property Trustee pursuant to Section 3.1 and
except to the extent otherwise required by law; and
(v) such Trustee shall not be responsible for monitoring the
compliance by the Administrative Trustees or the Depositor with their
respective duties under this Trust Agreement, nor shall such Trustee be
liable for the default or misconduct of the Administrative Trustees or the
Depositor.
(d) The Administrative Trustees shall not be responsible for monitoring
the compliance by the other Trustees or the Depositor with their respective
duties under this Trust Agreement, nor shall any Administrative Trustee be
liable for the default or misconduct of any other Administrative Trustee, the
other Trustees or the Depositor.
Section 8.2 Certain Notices.
Within ten Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit, in
the manner and to the extent provided in Section 10.9, notice of such Event of
Default to the Securityholders, the Administrative Trustees and the Depositor,
unless such Event of Default shall have been cured or waived.
Within five Business Days after the receipt of notice of the Depositor's
exercise of its right to defer the payment of interest on the Debentures
pursuant to the Indenture, the Property Trustee shall transmit, in the manner
and to the extent provided in Section 10.9, notice of such exercise to the
Securityholders and the Administrative Trustees, unless such exercise shall have
been revoked.
Section 8.3 Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action,
(ii) in construing any of the
<PAGE>
38
provisions of this Trust Agreement the Property Trustee finds the same ambiguous
or inconsistent with any other provisions contained herein or (iii) the Property
Trustee is unsure of the application of any provision of this Trust Agreement,
then, except as to any matter as to which the Preferred Securityholders are
entitled to vote under the terms of this Trust Agreement, the Property Trustee
shall deliver a notice to the Depositor requesting written instructions of the
Depositor as to the course of action to be taken and the Property Trustee shall
take such action, or refrain from taking such action, as the Property Trustee
shall be instructed in writing to take, or to refrain from taking, by the
Depositor; provided, however, that if the Property Trustee does not receive such
instructions of the Depositor within ten Business Days after it has delivered
such notice, or such reasonably shorter period of time set forth in such notice
(which to the extent practicable shall not be less than two Business Days), it
may, but shall be under no duty to, take or refrain from taking such action not
inconsistent with this Trust Agreement as it shall deem advisable and in the
best interests of the Securityholders, in which event the Property Trustee shall
have no liability except for its own bad faith, negligence or willful
misconduct;
(c) any direction or act of the Depositor contemplated by this Trust
Agreement shall be sufficiently evidenced by an Officers' Certificate and any
direction or act of an Administrative Trustee contemplated by this Trust
Agreement shall be sufficiently evidenced by a certificate executed by such
Administrative Trustee and setting forth such direction or act;
(d) whenever in the administration of this Trust Agreement, the Property
Trustee shall deem it desirable that a matter be established before undertaking,
suffering or omitting any action hereunder, the Property Trustee (unless other
evidence is herein specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by the Depositor or the Administrative
Trustees;
(e) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;
(f) the Property Trustee may consult with counsel of its selection (which
counsel may be counsel to the Depositor or any of its Affiliates, and may
include any of its employees) and the advice of such counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon and in
accordance with such advice; the Property Trustee shall have the right at any
time to seek instructions concerning the administration of this Trust Agreement
from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Securityholders pursuant to this Trust Agreement, unless
such Securityholders shall have offered to the Property Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
<PAGE>
39
provided that, nothing contained in this Section 8.3(g) shall be taken to
relieve the Property Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this Trust
Agreement;
(h) the Property Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Securityholders, but the
Property Trustee may make such further inquiry or investigation into such facts
or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through its agents or
attorneys and the Property Trustee shall not be responsible for any misconduct
or negligence on the part of, or for the supervision of, any such agent or
attorney appointed by the Property Trustee with due care;
(j) whenever in the administration of this Trust Agreement the Property
Trustee shall deem it desirable to receive written instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the Property
Trustee (i) may request written instructions from the Holders of the Trust
Securities (which written instructions may only be given by the Holders of the
same proportion in Liquidation Amount of the Trust Securities as would be
entitled to direct the Property Trustee under the terms of the Trust Securities
in respect of such remedy, right or action), (ii) may refrain from enforcing
such remedy or right or taking such other action until such written instructions
are received and (iii) shall be protected in acting in accordance with such
written instructions;
(k) except as otherwise expressly provided by this Trust Agreement, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under the provisions of this Trust Agreement;
(l) without prejudice to any other rights available to the Property
Trustee under applicable law, when the Property Trustee incurs expenses or
renders services in connection with a Bankruptcy Event, such expenses (including
the fees and expenses of its counsel) and the compensation for such services are
intended to constitute expenses of administration under any bankruptcy law or
law relating to creditors rights generally;
(m) the Property Trustee shall not be charged with knowledge of an Event
of Default unless a Responsible Officer of the Property Trustee obtains actual
knowledge of such event or the Property Trustee receives written notice of such
event from Holders holding more than a Majority in Liquidation Amount of the
Preferred Securities; and
(n) any action taken by the Property Trustee or its agents hereunder shall
bind the Trust and the Holders of such Securities, and the signature of the
Property Trustee or one of its agents shall by itself be sufficient and
effective to perform any such action and no third party shall be required to
inquire as to the authority of the Property Trustee to so act or as to
<PAGE>
40
its compliance with any of the terms and provisions of this Trust Agreement,
both of which shall be conclusively evidenced by the Property Trustee's or its
agent's taking such action.
No provision of this Trust Agreement shall be deemed to impose any duty or
obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
Section 8.4 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust and the Depositor, and the
Trustees do not assume any responsibility for their correctness. The Trustees
shall not be accountable for the use or application by the Depositor of the
proceeds of the Debentures.
Section 8.5 May Hold Securities.
Any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 8.8 and 8.13, and except as provided in the
definition of the term "Outstanding" in Article I, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
Section 8.6 Compensation; Indemnity; Fees.
Pursuant to Sections 6.7 and 10.6 of the Indenture, the Depositor, as
borrower, agrees:
(a) to pay to the Trustees from time to time such compensation as shall be
agreed in writing with the Depositor for all services rendered by them hereunder
(which compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation and the expenses and
disbursements of their agents and counsel), except any such expense,
disbursement or advance as may be attributable to their negligence or bad faith;
and
(c) to the fullest extent permitted by applicable law, to indemnify and
hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee, (iii) any
officer, director, shareholder, employee, representative or agent of any
Trustee, and (iv) any employee or agent of the Trust or its Affiliates (referred
to herein as an "Indemnified Person"), from and against any and all
<PAGE>
41
loss, damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason of the creation,
operation or termination of the Trust or any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Trust Agreement, except
that no Indemnified Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such Indemnified Person by reason of
negligence or willful misconduct with respect to such acts or omissions. When
the Property Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 5.1(4) or Section 5.1(5) of the Indenture,
the expenses (including the reasonable charges and expenses of its counsel) and
the compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section 8.6 shall survive the resignation or removal
of each Trustee and the termination of this Trust Agreement.
No Trustee may claim any lien or charge on any Trust Property as a result
of any amount due pursuant to this Section 8.6.
The Depositor and any Trustee (in the case of the Property Trustee, subject
to Section 8.8 hereof) may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of Trust
Securities shall have no rights by virtue of this Trust Agreement in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture, even if competitive with the business of the Trust, shall
not be deemed wrongful or improper. Neither the Depositor nor any Trustee shall
be obligated to present any particular investment or other opportunity to the
Trust even if such opportunity is of a character that, if presented to the
Trust, could be taken by the Trust, and the Depositor or any Trustee shall have
the right to take for its own account (individually or as a partner or
fiduciary) or to recommend to others any such particular investment or other
opportunity. Any Trustee may engage or be interested in any financial or other
transaction with the Depositor or any Affiliate of the Depositor, or may act as
depository for, trustee or agent for, or act on any committee or body of holders
of, securities or other obligations of the Depositor or its Affiliates.
Section 8.7 Corporate Property Trustee Required; Eligibility of Trustees.
(a) There shall at all times be a Property Trustee hereunder with respect
to the Trust Securities. The Property Trustee shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has a combined capital
and surplus of at least $50,000,000. If any such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this Section and to
the extent permitted by the Trust Indenture Act, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Property Trustee with respect to the
<PAGE>
42
Trust Securities shall cease to be eligible in accordance with the provisions of
this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article. At the time of appointment, the Property
Trustee must have securities rated in one of the three highest rating categories
by a nationally recognized statistical rating organization.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to the
Trust Securities. The Delaware Trustee shall either be (i) a natural person who
is at least 21 years of age and a resident of the State of Delaware or (ii) a
legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law and that shall
act through one or more persons authorized to bind such entity.
Section 8.8 Conflicting Interests.
(a) If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
(b) The Guarantee Agreement and the Indenture shall be deemed to be
specifically described in this Trust Agreement for the purposes of clause (i) of
the first proviso contained in Section 310(b) of the Trust Indenture Act.
Section 8.9 Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property may
at the time be located, the Depositor and the Administrative Trustees, by agreed
action of the majority of such Trustees, shall have power to appoint, and upon
the written request of the Administrative Trustees, the Depositor shall for such
purpose join with the Administrative Trustees in the execution, delivery and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Property Trustee either to act as co-
trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section. If the Depositor does not join
in such appointment within 15 days after the receipt by it of a request so to
do, or in case a Debenture Event of Default has occurred and is continuing, the
Property Trustee alone shall have power to make such appointment. Any co-trustee
or separate trustee appointed pursuant to this Section shall either be (i) a
natural person who is at least 21 years of age and a resident of the United
States or
<PAGE>
43
(ii) a legal entity with its principal place of business in the United States
that shall act through one or more persons authorized to bind such entity.
Should any written instrument from the Depositor be required by any co-
trustee or separate trustee so appointed for more fully confirming to such co-
trustee or separate trustee such property, title, right, or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by law,
but to such extent only, be appointed subject to the following terms, namely:
(a) The Trust Securities shall be executed by one or more Administrative
Trustees and delivered by the Property Trustee and all rights, powers, duties
and obligations hereunder in respect of the custody of securities, cash and
other personal property held by, or required to be deposited or pledged with,
the Property Trustee specified hereunder shall be exercised solely by such
Property Trustee and not by such co-trustee or separate trustee.
(b) The rights, powers, duties and obligations hereby conferred or imposed
upon the Property Trustee in respect of any property covered by such appointment
shall be conferred or imposed upon and exercised or performed by the Property
Trustee or by the Property Trustee and such co-trustee or separate trustee
jointly, as shall be provided in the instrument appointing such co-trustee or
separate trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Property Trustee shall be
incompetent or unqualified to perform such act, in which event such rights,
powers, duties and obligations shall be exercised and performed by such co-
trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing executed
by it, with the written concurrence of the Depositor, may accept the resignation
of or remove any co-trustee or separate trustee appointed under this Section,
and, in case a Debenture Event of Default has occurred and is continuing, the
Property Trustee shall have power to accept the resignation of, or remove, any
such co-trustee or separate trustee without the concurrence of the Depositor.
Upon the written request of the Property Trustee, the Depositor shall join with
the Property Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such resignation or
removal. A successor to any co-trustee or separate trustee so resigning or
removed may be appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be personally liable
by reason of any act or omission of the Property Trustee or any other trustee
hereunder.
(e) The Property Trustee shall not be liable by reason of any act of a co-
trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be deemed
to have been delivered to each such co-trustee and separate trustee.
<PAGE>
44
Section 8.10 Resignation and Removal; Appointment of Successor.
No resignation or removal of any Trustee (the "Relevant Trustee") and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee may
resign at any time by giving written notice thereof to the Securityholders. If
the instrument of acceptance by the successor Trustee required by Section 8.11
shall not have been delivered to the Relevant Trustee within 30 days after the
giving of such notice of resignation, the Relevant Trustee may petition, at the
expense of the Trust, any court of competent jurisdiction for the appointment of
a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be continuing,
any Trustee may be removed at any time by Act of the Common Securityholder. If a
Debenture Event of Default shall have occurred and be continuing, the Property
Trustee or the Delaware Trustee, or both of them, may be removed at such time by
Act of the Holders of a majority in Liquidation Amount of the Preferred
Securities, delivered to the Relevant Trustee (in its individual capacity and on
behalf of the Trust). An Administrative Trustee may be removed by the Common
Securityholder at any time. If the instrument of acceptance by the successor
Trustee required by Section 8.11 shall not have been delivered to the Relevant
Trustee within 30 days after such removal, the Relevant Trustee may petition, at
the expense of the Trust, any court of competent jurisdiction for the
appointment of a successor Relevant Trustee.
If any Trustee shall resign, be removed or become incapable of acting as
Trustee, or if a vacancy shall occur in the office of any Trustee for any cause,
at a time when no Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees, and the retiring Trustee shall comply with the applicable requirements
of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign,
be removed or become incapable of continuing to act as the Property Trustee or
the Delaware Trustee, as the case may be, at a time when a Debenture Event of
Default shall have occurred and be continuing, the Preferred Securityholders, by
Act of the Securityholders of a majority in Liquidation Amount of the Preferred
Securities then Outstanding delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of Section 8.11. If an
Administrative Trustee shall resign, be removed or become incapable of acting as
Administrative Trustee, at a time when a Debenture Event of Default shall have
occurred and be continuing, the Common Securityholder by Act of the Common
Securityholder delivered to the Administrative Trustee shall promptly appoint a
successor Administrative Trustee or Administrative Trustees and such successor
Administrative Trustee or Trustees shall comply with the applicable requirements
of Section 8.11. If no successor Relevant Trustee shall have been so appointed
by the Common Securityholder or the Preferred Securityholders and accepted
appointment in the manner required by Section 8.11, any Securityholder who has
been a Securityholder of Trust Securities for at least six months may, on behalf
of himself
<PAGE>
45
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Relevant Trustee.
The Property Trustee shall give notice of each resignation and each removal
of a Trustee and each appointment of a successor Trustee to all Securityholders
in the manner provided in Section 10.9 and shall give notice to the Depositor.
Each notice shall include the name of the successor Relevant Trustee and the
address of its Corporate Trust Office if it is the Property Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes, in the opinion of the Depositor, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by (a) the unanimous act of the remaining Administrative Trustees
if there were at least two of them prior to such vacancy or (b) otherwise by the
Depositor (with the successor in each case being a Person who satisfies the
eligibility requirement for Administrative Trustees or Delaware Trustee, as the
case may be, set forth in Section 8.7).
Section 8.11 Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Relevant Trustee, the
retiring Relevant Trustee and each successor Relevant Trustee with respect to
the Trust Securities shall execute and deliver an amendment hereto wherein each
successor Relevant Trustee shall accept such appointment and which (a) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust and (b) shall add to or change any of the
provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the Trust by more than one Relevant Trustee, it
being understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on written request of the Trust or any successor Relevant Trustee such retiring
Relevant Trustee shall duly assign, transfer and deliver to such successor
Relevant Trustee all Trust Property, all proceeds thereof and money held by such
retiring Relevant Trustee hereunder with respect to the Trust Securities and the
Trust.
Upon written request of any such successor Relevant Trustee, the Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the first or second preceding paragraph, as the case may
be.
No successor Relevant Trustee shall accept its appointment unless at the
time of such acceptance such successor Relevant Trustee shall be qualified and
eligible under this Article.
<PAGE>
46
Section 8.12 Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural Person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Relevant Trustee shall be a party, or
any Person succeeding to all or substantially all the corporate trust business
of such Relevant Trustee, shall be the successor of such Relevant Trustee
hereunder, provided such Person shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper or any further act on
the part of any of the parties hereto.
Section 8.13 Preferential Collection of Claims Against Depositor or Trust.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due Distributions)
shall be entitled and empowered, to the fullest extent permitted by law, by
intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any Distributions
owing and unpaid in respect of the Trust Securities and to file such other
papers or documents as may be necessary or advisable in order to have the claims
of the Property Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Property Trustee, its agents and
counsel and any other amounts due to the Property Trustee or the Delaware
Trustee pursuant to Section 8.6) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement adjustment or compensation affecting the Trust
Securities or the rights of any Holder thereof or to authorize the Property
Trustee to vote in respect of the claim of any Holder in any such proceeding.
<PAGE>
47
Section 8.14 Reports by Property Trustee.
(a) The Property Trustee shall transmit to Securityholders such reports
concerning the Property Trustee and its actions under this Trust Agreement as
may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto. If required by Section 313(a) of the Trust
Indenture Act, the Property Trustee shall, within sixty days after each May 15
following the date of this Trust Agreement deliver to Securityholders a brief
report, dated as of such May 15, which complies with the provisions of such
Section 313(a).
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Property Trustee with each national securities
exchange, the Nasdaq National Market or such other interdealer quotation system
or self-regulatory organization upon which the Trust Securities are listed or
traded, if any, with the Commission and with the Depositor. The Depositor will
promptly notify the Property Trustee of any such listing or trading.
Section 8.15 Reports to the Property Trustee.
Each of the Depositor and the Administrative Trustees shall provide to the
Property Trustee such documents, reports and information as required by Section
314 of the Trust Indenture Act (if any) and the compliance certificate required
by Section 314(a) of the Trust Indenture Act in the form, in the manner and at
the times required by Section 314 of the Trust Indenture Act. Delivery of such
reports, information and documents to the Property Trustee is for informational
purposes only and the Property Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Trust's compliance with any of its
covenants hereunder (as to which the Property Trustee is entitled to rely
exclusively on Officers' Certificates).
Section 8.16 Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrative Trustees shall provide to the
Property Trustee such evidence of compliance with any conditions precedent, if
any, provided for in this Trust Agreement that relate to any of the matters set
forth in Section 314 (c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) of the Trust
Indenture Act shall be given in the form of an Officers' Certificate.
Section 8.17 Number of Trustees.
(a) The number of Trustees shall be four, provided that the Holder of all
of the Common Securities by written instrument may increase or decrease the
number of Administrative Trustees. The Property Trustee and the Delaware Trustee
may be the same Person.
<PAGE>
48
(b) If a Trustee ceases to hold office for any reason and the number of
Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy, incompetence
or incapacity to perform the duties of a Trustee shall not operate to dissolve,
terminate or annul the Trust. Whenever a vacancy in the number of Administrative
Trustees shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 8.10, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Trust Agreement.
Section 8.18 Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
2.7(a), including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) The Administrative Trustees shall have power to delegate from time to
time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrative Trustees or otherwise as the Administrative Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable
law or contrary to the provisions of this Trust Agreement, as set forth herein.
ARTICLE IX
Termination, Liquidation and Merger
Section 9.1 Termination Upon Expiration Date.
Unless earlier terminated, the Trust shall automatically terminate on
December 31, 2051 (the "Expiration Date"), following the distribution of the
Trust Property in accordance with Section 9.4.
Section 9.2 Early Termination.
The first to occur of any of the following events is an "Early Termination
Event":
(a) the occurrence of a Bankruptcy Event in respect of, or the dissolution
or liquidation of, the Holder of the Common Securities;
<PAGE>
49
(b) the written direction to the Property Trustee from the Depositor at
any time to terminate the Trust and, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, distribute Debentures to
Securityholders in exchange for the Preferred Securities (which direction is
optional and wholly within the discretion of the Depositor);
(c) the redemption of all of the Preferred Securities in connection with
the redemption of all of the Debentures; and
(d) the entry of an order for dissolution of the Trust by a court of
competent jurisdiction.
Section 9.3 Termination.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 9.4, or upon the
redemption of all of the Trust Securities pursuant to Section 4.2, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; and (c) the
discharge of all administrative duties of the Administrative Trustees, including
the performance of any tax reporting obligations with respect to the Trust or
the Securityholders.
Section 9.4 Liquidation.
(a) If an Early Termination Event specified in clause (a), (b) or (d) of
Section 9.2 occurs or upon the Expiration Date, the Trust shall be liquidated by
the Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction or the making of reasonable provisions for the
payment of liabilities to creditors of the Trust as provided by applicable law,
to each Securityholder a Like Amount of Debentures, subject to Section 9.4(d).
Notice of liquidation shall be given by the Property Trustee by first-class
mail, postage prepaid mailed not less than 30 nor more than 60 days prior to the
Liquidation Date to each Holder of Trust Securities at such Holder's address
appearing in the Securities Register. All such notices of liquidation shall:
(i) state the CUSIP Number of the Trust Securities;
(ii) state the Liquidation Date;
(iii) state that from and after the Liquidation Date, the
Trust Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Debentures; and
(iv) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for Debentures, or
if Section 9.4(d)
<PAGE>
50
applies receive a Liquidation Distribution, as the Administrative Trustees
or the Property Trustee shall deem appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect the
liquidation of the Trust and distribution of the Debentures to Securityholders,
the Administrative Trustees shall establish a record date for such distribution
(which shall be not more than 45 days prior to the Liquidation Date) and, either
itself acting as exchange agent or through the appointment of the Property
Trustee as a separate exchange agent, shall establish such procedures as it
shall deem appropriate to effect the distribution of Debentures in exchange for
the Outstanding Trust Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation
Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii)
certificates representing a Like Amount of Debentures will be issued to Holders
of Trust Securities Certificates, upon surrender of such certificates to the
Administrative Trustees or their agent for exchange, (iii) the Depositor shall
use its best efforts to have the Debentures listed on the New York Stock
Exchange or on such other exchange, interdealer quotation system or self-
regulatory organization as the Preferred Securities are then listed or traded,
(iv) any Trust Securities Certificates not so surrendered for exchange will be
deemed to represent a Like Amount of Debentures, accruing interest at the rate
provided for in the Debentures from the last Distribution Date on which a
Distribution was made on such Trust Securities Certificates until such
certificates are so surrendered (and until such certificates are so surrendered,
no payments of interest or principal will be made to Holders of Trust Securities
Certificates with respect to such Debentures) and (v) all rights of
Securityholders holding Trust Securities will cease, except the right of such
Securityholders to receive Debentures upon surrender of Trust Securities
Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 9.4, whether because of an order for dissolution entered by a court of
competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Administrative Trustees not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
dissolved, wound-up or terminated, by the Administrative Trustees. In such
event, on the date of the dissolution, winding-up or other termination of the
Trust, Securityholders will be entitled to receive out of the assets of the
Trust available for distribution to Securityholders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an amount
equal to the Liquidation Amount per Trust Security plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such dissolution, winding-up or termination, the
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then, subject to the next succeeding sentence, the amounts payable
by the Trust on the Trust Securities shall be paid on a pro rata basis (based
upon Liquidation Amounts). The Holder of the Common Securities will be entitled
to receive Liquidation Distributions upon any such dissolution, winding-up or
termination pro rata (determined as aforesaid) with Holders of Preferred
Securities, except that, if a Debenture Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities.
<PAGE>
51
Section 9.5 Mergers, Consolidations, Amalgamations or Replacements of the
Trust.
The Trust may not merge, consolidate, amalgamate with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any other Person, except pursuant to this
Article IX. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Holders of at least a
Majority in Liquidation Amount of the Preferred Securities, the Property Trustee
or the Delaware Trustee, the Trust may merge, consolidate, amalgamate with or
into, or 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) a trustee of such successor entity possessing substantially
the same powers and duties as the Property Trustee is appointed to hold the
Debentures, (iii) the Successor Securities are listed or traded, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed or traded, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Depositor has received an
Opinion of Counsel 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 1940 Act and (viii) the Depositor
or its permitted transferee 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.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
Holders of all of the Preferred Securities, consolidate, amalgamate or merge
with or into, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to any other Person or permit any other
Person 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>
52
ARTICLE X
Miscellaneous Provisions
Section 10.1 Limitation of Rights of Securityholders.
Except as provided in Section 9.2, the death, incapacity, liquidation,
dissolution, termination or bankruptcy of any Person having an interest,
beneficial or otherwise, in Trust Securities shall not operate to terminate this
Trust Agreement, nor entitle the legal representatives or heirs of such Person
or any Securityholder for such Person, to claim an accounting, take any action
or bring any proceeding in any court for a partition or winding up of the
arrangements contemplated hereby, nor otherwise affect the rights, obligations
and liabilities of the parties hereto or any of them.
Section 10.2 Liability of the Common Securityholder.
The Holder of the Common Securities shall be liable for all of the debts
and obligations of the Trust (other than with respect to the Securities) to the
extent not satisfied out of the Trust's assets.
Section 10.3 Amendment.
(a) This Trust Agreement may be amended from time to time by the Property
Trustee, the Administrative Trustees and the Depositor, without the consent of
any Securityholders, (i) to cure any ambiguity, correct or supplement any
provision herein which may be inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions arising under
this Trust Agreement, which shall not be inconsistent with the other provisions
of this Trust Agreement, or (ii) to modify, eliminate or add to any provisions
of this Trust Agreement to such extent as shall be necessary to ensure that the
Trust will be classified for United States federal income tax purposes as a
grantor trust at all times that any Trust Securities are Outstanding or to
ensure that the Trust will not be required to register as an investment company
under the 1940 Act; provided, however, that in the case of clause (i) or clause
(ii), such action shall not adversely affect in any material respect the
interests of any Securityholder, and any amendments of this Trust Agreement
shall become effective when notice thereof is given to the Securityholders.
(b) Except as provided in Section 10.3(c) hereof, any provision of this
Trust Agreement may be amended by the Trustees and the Depositor with (i) the
consent of Trust Securityholders representing not less than a majority (based
upon Liquidation Amounts) of the Trust Securities then Outstanding and (ii)
receipt by the Trustees of an Opinion of Counsel to the effect that such
amendment or the exercise of any power granted to the 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 affect the Trust's exemption from
status as an investment company under the 1940 Act.
<PAGE>
53
(c) In addition to and notwithstanding any other provision in this Trust
Agreement, without the consent of each affected Securityholder (such consent
being obtained in accordance with Section 6.3 or 6.6 hereof), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this
paragraph (c) of this Section 10.3 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an investment company under the 1940 Act or fail or cease to be
classified as a grantor trust for United States federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor and the Administrative Trustees, this Trust
Agreement may not be amended in a manner which imposes any additional obligation
on the Depositor and the Administrative Trustees.
(f) In the event that any amendment to this Trust Agreement is made, the
Administrative Trustees shall promptly provide to the Depositor a copy of such
amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which affects its
own rights, duties or immunities under this Trust Agreement. The Property
Trustee shall be entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is in compliance
with this Trust Agreement and that all conditions precedent to the execution and
delivery of such amendment have been satisfied.
Section 10.4 Separability.
In case any provision in this Trust Agreement or in the Trust Securities
Certificates shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 10.5 Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST, THE DEPOSITOR AND THE TRUSTEES WITH RESPECT TO THIS
TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES).
<PAGE>
54
Section 10.6 Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day that
is not a Business Day, then such payment need not be made on such date but may
be made on the next succeeding day that is a Business Day (except as otherwise
provided in Sections 4.1(a) and 4.2(d)), with the same force and effect as
though made on the date fixed for such payment, and no Distributions shall
accumulate on such unpaid amount shall accrue thereon for the period after such
date.
Section 10.7 Successors.
This Trust Agreement shall be binding upon and shall inure to the benefit
of any successor to the Depositor, the Trust and the Trustees, including any
successor by operation of law. Except in connection with a consolidation, merger
or sale involving the Depositor that is permitted under Article VIII of the
Indenture and pursuant to which the assignee agrees in writing to perform the
Depositor's obligations hereunder, the Depositor shall not assign its
obligations hereunder.
Section 10.8 Headings.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
Section 10.9 Reports, Notices and Demands.
Any report, notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
any Securityholder or the Depositor may be given or served in writing by deposit
thereof, first-class postage prepaid, in the United States mail, hand delivery
or facsimile transmission, in each case, addressed, (a) in the case of a
Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to Pennsylvania Power
& Light Company, Two North Ninth Street, Allentown, Pennsylvania 18101,
Attention: Treasurer, facsimile no.: (610) 774-5106. Such notice, demand or
other communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any provision of this
Trust Agreement is required or permitted to be given or served to or upon the
Trust, the Property Trustee, the Delaware Trustee or the Administrative Trustees
shall be given in writing addressed (until another address is published by the
Trust) as follows: (a) with respect to the Property Trustee to The Chase
Manhattan Bank, Global Trust Services, 450 W. 33rd Street, 15th Floor, New York,
New York 10001-2697, Attention: Corporate Trust Administration; (b) with respect
to the Delaware Trustee, to Chase Manhattan Bank Delaware, 1201 Market Street,
9th Floor, Wilmington, Delaware 19801, with a copy to the Property Trustee at
the address set forth in Clause (a); and (c) with respect to the Administrative
Trustees, to them at
<PAGE>
55
the address above for notices to the Depositor, marked "Attention Administrative
Trustees of PP&L Capital Trust II." Such notice, demand or other communication
to or upon the Trust or the Property Trustee shall be deemed to have been
sufficiently given or made only upon actual receipt of the writing by the Trust
or the Property Trustee.
Section 10.10 Agreement Not to Petition.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in
the commencement of any proceeding against the Trust under any Bankruptcy Law.
In the event the Depositor takes action in violation of this Section 10.10, the
Property Trustee agrees, for the benefit of Securityholders, that at the expense
of the Depositor, it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Depositor against the Trust
or the commencement of such action and raise the defense that the Depositor has
agreed in writing not to take such action and should be stopped and precluded
therefrom and such other defenses, if any, as counsel for the Trustee or the
Trust may assert. The provisions of this Section 10.10 shall survive the
termination of this Trust Agreement.
Section 10.11 Trust Indenture Act; Conflict with Trust Indenture Act.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required or deemed to be part of this Trust Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee for
the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with the duties
imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act through
operation of Section 318(c) thereof, such imposed duties shall control. If any
provision of this Trust Agreement modifies or excludes any provision of the
Trust Indenture Act which may be so modified or excluded, the latter provision
shall be deemed to apply to this Trust Agreement as so modified or excluded, as
the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Trust Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
Section 10.12 Acceptance of Terms of Trust Agreement, Guarantee and
Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY
OR ON BEHALF OF A SECURITYHOLDER OR ANY
<PAGE>
56
BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT,
SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL
OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND
PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS
AND OTHER TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE
AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND
PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS
BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.
Section 10.13 Counterparts.
This Trust Agreement may contain more than one counterpart of the signature
page and this Trust Agreement may be executed by the affixing of the signature
of each of the Trustees of one of such counterpart signature pages. All of such
counterpart signature pages shall be read as though one, and they shall have the
same force and effect as though all of the signers had signed a single signature
page.
Pennsylvania Power & Light Company
By:_____________________________________
Name:
Title:
The Chase Manhattan Bank,
as Property Trustee
By:_____________________________________
Name:
Title:
Chase Manhattan Bank Delaware,
as Delaware Trustee
By:_____________________________________
Name:
Title:
<PAGE>
57
_________________________________
John R. Biggar
as Administrative Trustee
_________________________________
James E. Abel
as Administrative Trustee
<PAGE>
EXHIBIT 4.5
This Preferred Security is registered in the name of The Depository Trust
Company (the "Depositary") or a nominee of the Depositary. This Preferred
Security is exchangeable for Preferred Securities registered in the name of a
person other than the Depositary or its nominee only in the limited
circumstances described in the Trust Agreement and no transfer of this Preferred
Security (other than a transfer of this Preferred Security as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary) may be registered except in
such limited circumstances.
Unless this Preferred Security is presented by an authorized representative
of the Depositary to PP&L Capital Trust II or its agent for registration of
transfer, exchange or payment, and any Preferred Security issued is registered
in the name of Cede & Co. or such other name as requested by an authorized
representative of the Depositary and any payment hereon is made to Cede & Co. or
to such other entity as is requested by an authorized representative of the
Depositary, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.
CERTIFICATE NO.: NUMBER OF PREFERRED SECURITIES:
P-1 6,000,000
CUSIP NO. ____________________
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
PP&L CAPITAL TRUST II
_______% TRUST ORIGINATED PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
PP&L Capital Trust II, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that Cede & Co.(the
"Holder") is the registered owner of preferred securities in the aggregate
liquidation amount of $150,000,000 of the Trust representing an undivided
beneficial ownership interest in the assets of the Trust and designated the PP&L
Capital Trust II ______% Trust Originated Preferred Securities (liquidation
amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer as provided in Section 5.4 of the Trust
Agreement (as defined below). The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities are set forth in, and this certificate and the Preferred Securities
represented hereby are issued and shall in all respects be
<PAGE>
2
subject to, the terms and provisions of, the Amended and Restated Trust
Agreement of the Trust dated as of ________ __, 1997, as the same may be amended
from time to time (the "Trust Agreement") including the designation of the terms
of Preferred Securities as set forth therein. The Holder is entitled to the
benefits of the Guarantee Agreement entered into by Pennsylvania Power & Light
Company, a Pennsylvania corporation ("PP&L"), and The Chase Manhattan Bank, a
New York banking corporation ("Chase"), as guarantee trustee, dated as of
_______ __, 1997, (the "Guarantee"), to the extent provided therein. The Trust
will furnish a copy of the Trust Agreement and the Guarantee to the Holder
without charge upon written request to the Trust at its principal place of
business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder and by acceptance hereof
agrees to the provisions of (i) the Guarantee and (ii) the Junior Subordinated
Indenture entered into by PP&L and Chase, as trustee, dated as of April 1, 1997.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate.
Dated: _______ __, 1997 PP&L Capital Trust II
By:___________________________
Name:
Administrative Trustee
This is one of the Securities referred to in the within mentioned Trust
Agreement.
THE CHASE MANHATTAN BANK,
as Property Trustee
By: ________________________________
Authorized Officer
<PAGE>
3
ASSIGNMENT
For Value Received, the undersigned assigns and transfers this Preferred
Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Preferred Securities Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:
Signature:
(Sign exactly as your name appears on the other side of this Preferred
Security Certificate)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.1
<PAGE>
EXHIBIT 4.6
GUARANTEE AGREEMENT
BETWEEN
PENNSYLVANIA POWER & LIGHT COMPANY
(AS GUARANTOR)
AND
THE CHASE MANHATTAN BANK
(AS TRUSTEE)
RELATING TO
PP&L CAPITAL TRUST II
DATED AS OF
____ __, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I. DEFINITIONS............................................... 1
Section 1.1. Definitions............................................ 1
ARTICLE II. TRUST INDENTURE ACT....................................... 4
Section 2.1. Trust Indenture Act; Application.......................... 4
Section 2.2. List of Holders........................................... 4
Section 2.3. Reports by the Guarantee Trustee.......................... 4
Section 2.4. Periodic Reports to the Guarantee Trustee................. 5
Section 2.5. Evidence of Compliance with Conditions Precedent.......... 5
Section 2.6. Events of Default; Waiver................................. 5
Section 2.7. Event of Default; Notice.................................. 5
Section 2.8. Conflicting Interests..................................... 6
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE
TRUSTEE................................................... 6
Section 3.1. Powers and Duties of the Guarantee Trustee................ 6
Section 3.2. Certain Rights of Guarantee Trustee....................... 7
Section 3.3. Indemnity................................................. 9
ARTICLE IV. GUARANTEE TRUSTEE......................................... 9
Section 4.1. Guarantee Trustee; Eligibility............................ 9
Section 4.2. Appointment, Removal and Resignation of the Guarantee
Trustee................................................... 10
ARTICLE V. GUARANTEE................................................. 10
Section 5.1. Guarantee................................................. 10
Section 5.2. Waiver of Notice and Demand............................... 10
Section 5.3. Obligations Not Affected.................................. 11
Section 5.4. Rights of Holders......................................... 11
Section 5.5. Guarantee of Payment...................................... 12
Section 5.6. Subrogation............................................... 12
Section 5.7. Independent Obligations................................... 12
ARTICLE VI. COVENANTS AND SUBORDINATION............................... 12
Section 6.1. Subordination............................................. 12
Section 6.2. Pari Passu Guarantees..................................... 13
<PAGE>
ARTICLE VII. TERMINATION............................................... 13
Section 7.1. Termination............................................... 13
ARTICLE VIII. MISCELLANEOUS............................................. 13
Section 8.1. Successors and Assigns.................................... 13
Section 8.2. Amendments................................................ 13
Section 8.3. Notices................................................... 14
Section 8.4. Benefit................................................... 15
Section 8.5. Interpretation............................................ 15
Section 8.6. Governing Law............................................. 15
-ii-
<PAGE>
CROSS-REFERENCE TABLE*
Section of
Trust Indenture Act Section of
of 1939, as amended Guarantee Agreement
- ------------------- -------------------
310(a)...................................................4.1(a)
310(b)...................................................4.1(c), 2.8
310(c)...................................................Inapplicable
311(a)...................................................2.2(b)
311(b)...................................................2.2(b)
311(c)...................................................Inapplicable
312(a)...................................................2.2(a)
312(b)...................................................2.2(b)
313......................................................2.3
314(a)...................................................2.4
314(b)...................................................Inapplicable
314(c)...................................................2.5
314(d)...................................................Inapplicable
314(e)...................................................1.1, 2.5, 3.2
314(f)...................................................2.1, 3.2
315(a)...................................................3.1(d)
315(b)...................................................2.7
315(c)...................................................3.1
315(d)...................................................3.1(d)
316(a)...................................................1.1, 2.6, 5.4
316(b)...................................................5.3
316(c)...................................................8.2
317(a)...................................................Inapplicable
317(b)...................................................Inapplicable
318(a)...................................................2.1(b)
318(b)...................................................2.1
318(c)...................................................2.1(a)
- ----------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of ______ __, 1997, is executed and
delivered by PENNSYLVANIA POWER & LIGHT COMPANY, a Pennsylvania corporation (the
"Guarantor"), having its principal office at Two North Ninth Street, Allentown,
Pennsylvania 18101, and THE CHASE MANHATTAN BANK, a New York banking
corporation, as trustee (the "Guarantee Trustee"), for the benefit of the
Holders (as defined herein) from time to time of the Preferred Securities and
Common Securities (each as defined herein and together, the "Securities") of
PP&L Capital Trust II, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as of
_____ __, 1997 (the "Trust Agreement"), among the Guarantor, as Depositor, the
Property Trustee and the Delaware Trustee named therein, the Administrative
Trustees named therein and the Holders from time to time of undivided beneficial
interests in the assets of the Issuer, the Issuer is issuing $150,000,000
aggregate Liquidation Amount (as defined in the Trust Agreement) of its ____%
Trust Originated Preferred Securities, (Liquidation Amount $25 per preferred
security) (the "Preferred Securities") representing undivided beneficial
ownership interests in the assets of the Issuer and having the terms set forth
in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the issuance of the Issuer's
Common Securities (as defined herein), will be used to purchase the Debentures
(as defined in the Trust Agreement) of the Guarantor, which Debentures will be
deposited with The Chase Manhattan Bank, as Property Trustee under the Trust
Agreement, as trust assets; and
WHEREAS, as an incentive for the Holders to purchase Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, to pay to the Holders of the Securities the Guarantee Payments (as
defined herein) and to make certain other payments on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Securities, which purchase the Guarantor hereby acknowledges shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the
benefit of the Holders from time to time of the Securities.
ARTICLE I. DEFINITIONS
Section 1.1. Definitions.
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
or otherwise defined terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Trust Agreement as in effect on the date
hereof.
<PAGE>
2
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Board of Directors" means any of the board of directors of the Guarantor,
the Finance Committee of that board or any other committee of that board duly
authorized to act hereunder or any officers of the Guarantor to which that board
or any such committee shall have delegated its authority.
"Common Securities" means the common securities representing undivided
beneficial ownership interests in the assets of the Issuer that will be issued
to the Guarantor.
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Guarantee Agreement; provided, however, that,
except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 90 days after receipt of such notice.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Securities, to the extent not paid or made by
or on behalf of the Issuer: (i) any accumulated and unpaid Distributions (as
defined in the Trust Agreement) required to be paid on the Securities, to the
extent the Issuer shall have funds on hand available therefor at such time, (ii)
the redemption price, including all accrued and unpaid Distributions to the date
of redemption (the"Redemption Price"), with respect to any Securities called for
redemption by the Issuer, to the extent the Issuer shall have funds on hand
available therefor at such time, and (iii) upon a voluntary or involuntary
termination, winding up or liquidation of the Issuer, unless Debentures are
distributed to the Holders, the lesser of (a) the aggregate of the Liquidation
Amount plus accrued and unpaid Distributions to the date of payment or (b) the
amount of assets of the Issuer remaining available for distribution to Holders
on liquidation of the Issuer after satisfaction of liabilities to creditors of
the Issuer as required by applicable law (in either case, the "Liquidation
Distribution").
"Guarantee Trustee" means The Chase Manhattan Bank, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement, and thereafter means each such
Successor Guarantee Trustee.
"Holder" means any holder, as registered on the books and records of the
Issuer, of any Securities; provided, however, that in determining whether the
holders of the requisite percentage of Securities have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or
any Affiliate of the Guarantor.
"Indenture" means the Junior Subordinated Indenture dated as of April 1,
1997, as supplemented and amended, between the Guarantor and The Chase Manhattan
Bank, as trustee.
<PAGE>
3
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in aggregate Liquidation Amount of the Securities" means, except
as provided by the Trust Indenture Act, a vote by the Holder(s), voting
separately as a class, of more than 50% of the aggregate Liquidation Amount of
all then outstanding Securities issued by the Issuer.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chairman or a Vice Chairman of the Board of Directors of such
Person or the President or a Vice President of such Person, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee Agreement shall include:
(a) a statement by each officer signing the Officers' Certificate that such
officer has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by such officer in rendering the Officers' Certificate;
(c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" when used with respect to the Guarantee Trustee means
any officer of the Guarantee Trustee assigned by the Guarantee Trustee from time
to time to administer this Guarantee Agreement.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
<PAGE>
4
ARTICLE II. TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act through the operation of Section 318(c)
thereof, such imposed duties shall control.
Section 2.2. List of Holders.
(a) The Guarantor will furnish or cause to be furnished to the Guarantee
Trustee:
(i) semi-annually, not more than 15 days after January 15 and July 15
in each year, a list, in such form as the Guarantee Trustee may reasonably
require, of the names and addresses of the Holders as of such January 1 and
July 1, and
(ii) at such other times as the Guarantee Trustee may request in
writing, within 30 days after the receipt by the Guarantor of any such
request, a list of similar form and content as of a date not more than 15
days prior to the time such list is furnished,
; provided, however, that no such list need be furnished to the Trustee at
any time when the Trustee is serving as Securities Registrar.
(b) The Guarantee Trustee shall comply with its obligations under Section
311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
Section 2.3. Reports by the Guarantee Trustee.
The Guarantee Trustee shall transmit to Holders such reports concerning the
Guarantee Trustee and its actions under this Guarantee Agreement as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant thereto. If required by Section 313(a) of the Trust Indenture
Act, the Guarantee Trustee shall, within sixty days after each May 15 following
the date of this Guarantee Agreement deliver to Holders a brief report, dated as
of such May 15, which complies with the provisions of such Section 313(a).
<PAGE>
5
Section 2.4. Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee, the Securities and
Exchange Commission and the Holders such documents, reports and information, if
any, as required by Section 314 of the Trust Indenture Act and the compliance
certificate (signed by the principal executive, principal financial or principal
accounting officer of the Guarantor) required by Section 314 of the Trust
Indenture Act, in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act. Delivery of such reports, information and
documents to the Guarantee Trustee is for informational purposes only and the
Guarantee Trustee's receipt of such shall not constitute constructive notice of
any information contained therein, including the Guarantor's compliance with any
of its covenants hereunder (as to which the Guarantee Trustee is entitled to
rely exclusively on Officers' Certificates).
Section 2.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of an
Officers' Certificate.
Section 2.6. Events of Default; Waiver.
The Holders of at least a Majority in aggregate Liquidation Amount of the
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent therefrom.
Section 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default, transmit by mail, first class postage prepaid, to the Holders,
notice of any such Events of Default actually known to the Guarantee Trustee,
unless such defaults have been cured before the giving of such notice, provided,
that, except in the case of a default in the payment of a Guarantee Payment, the
Guarantee Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer charged with the administration of this
Guarantee Agreement shall have obtained written notice, of such Event of
Default.
<PAGE>
6
Section 2.8. Conflicting Interests.
The Trust Agreement and the Indenture shall be deemed to be specifically
described in this Guarantee Agreement for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
Section 3.1. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee for the
benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee Agreement to any Person except a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment to act as
Guarantee Trustee hereunder. The right, title and interest of the Guarantee
Trustee shall automatically vest in any Successor Guarantee Trustee, upon
acceptance by such Successor Guarantee Trustee of its appointment hereunder, and
such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee Agreement for the benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee Agreement, and no implied covenants shall be read into this Guarantee
Agreement against the Guarantee Trustee. If an Event of Default has occurred
and is continuing, the Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Guarantee Agreement, and use the same degree of care
and skill in its exercise thereof, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to relieve
the Guarantee Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee shall be
determined solely by the express provisions of this Guarantee Agreement,
and the Guarantee Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Guarantee
Agreement; and
(B) in the absence of bad faith on the part of the Guarantee Trustee,
the Guarantee Trustee may conclusively rely, as to the truth of the
statements and the correctness of the
<PAGE>
7
opinions expressed therein, upon any certificates or opinions furnished to
the Guarantee Trustee and conforming to the requirements of this Guarantee
Agreement; but in the case of any such certificates or opinions that by any
provision hereof or of the Trust Indenture Act are specifically required to
be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under
a duty to examine the same to determine whether or not they conform to the
requirements of this Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was negligent
in ascertaining the pertinent facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in aggregate
Liquidation Amount of the Securities relating to the time, method and place
of conducting any proceeding for any remedy available to the Guarantee
Trustee, or exercising any trust or power conferred upon the Guarantee
Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers, if the Guarantee Trustee shall
have reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this Guarantee
Agreement or adequate indemnity against such risk or liability is not
reasonably assured to it.
Section 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document reasonably believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee Agreement, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting to take any action
hereunder, the Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
<PAGE>
8
request and rely upon an Officers' Certificate which, upon receipt of such
request from the Guarantee Trustee, shall be promptly delivered by the
Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel of its
selection, and the written advice or opinion of such legal counsel with
respect to legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be taken
by it hereunder in good faith and in accordance with such advice or
opinion. Such legal counsel may be legal counsel to the Guarantor or any of
its Affiliates and may be one of its employees. The Guarantee Trustee shall
have the right at any time to seek instructions concerning the
administration of this Guarantee Agreement from any court of competent
jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Guarantee Agreement at the
request or direction of any Holder unless such Holder shall have provided
to the Guarantee Trustee such adequate security and indemnity as would
satisfy a reasonable person in the position of the Guarantee Trustee
against the costs, expenses (including attorneys' fees and expenses) and
liabilities that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by the
Guarantee Trustee; provided that nothing contained in this Section
3.2(a)(v) shall be taken to relieve the Guarantee Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise the rights
and powers vested in it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
its agents or attorneys, and the Guarantee Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed by it with due care hereunder.
(viii) Whenever in the administration of this Guarantee Agreement the
Guarantee Trustee shall deem it desirable to receive written instructions
with respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (A) may request instructions from the
Holders, (B) may refrain from enforcing such remedy or right or taking such
other action until such written instructions are received, and (C) shall be
protected in acting in accordance with such written instructions.
(ix) The Guarantee Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Guarantee Agreement.
<PAGE>
9
(b) No provision of this Guarantee Agreement shall be deemed to impose any
duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
Section 3.3. Indemnity.
The Guarantor agrees to indemnify the Guarantee Trustee for, and to hold it
harmless against, any loss, liability or expense incurred without negligence or
willful misconduct on the part of the Guarantee Trustee, arising out of or in
connection with the acceptance or administration of this Guarantee Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. This Section 3.3 shall survive the resignation or removal of
the Guarantee Trustee and the termination of this Guarantee Agreement.
ARTICLE IV. GUARANTEE TRUSTEE
Section 4.1. Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust Indenture Act
to act as such and has a combined capital and surplus of at least
$50,000,000, and shall be a corporation meeting the requirements of Section
310(a) of the Trust Indenture Act. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then, for the purposes of this Section
4.1 and to the extent permitted by the Trust Indenture Act, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to so
act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 4.2.
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.
<PAGE>
10
Section 4.2. Appointment, Removal and Resignation of the Guarantee
Trustee.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Guarantee Trustee and delivered to the
Guarantor. If an instrument of acceptance by a Successor Guarantee Trustee
shall not have been delivered to the Guarantee Trustee within 30 days after such
removal, the Guarantee Trustee being removed may petition any court of competent
jurisdiction for the appointment of a Successor Guarantee Trustee.
(c) The Guarantee Trustee appointed hereunder shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Guarantee Trustee.
ARTICLE V. GUARANTEE
Section 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by or on behalf of the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim which the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
Section 5.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
<PAGE>
11
Section 5.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee Agreement shall in no way be affected or impaired by reason of
the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Securities to be performed or
observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions (other than an extension of time for payment of
Distributions that results from the extension of any interest payment period on
the Debentures as provided in the Indenture), Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Securities or the
extension of time for the performance of any other obligation under, arising out
of, or in connection with, the Securities;
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Securities, or any action
on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor (other than payment of
the underlying obligation), it being the intent of this Section 5.3 that the
obligations of the Guarantor hereunder shall be absolute and unconditional under
any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the foregoing.
Section 5.4. Rights of Holders.
The Guarantor expressly acknowledges that: (i) this Guarantee Agreement
will be deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iii) the Holders of a Majority in aggregate
Liquidation Amount of the Securities have the right to direct
<PAGE>
12
the time, method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee in respect of this Guarantee Agreement or exercising
any trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly against
the Guarantor to enforce its rights under this Guarantee Agreement without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer or any
other Person.
Section 5.5. Guarantee of Payment
This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without duplication of amounts theretofore paid
by the Issuer) or upon the distribution of Debentures to Holders as provided in
the Trust Agreement.
Section 5.6. Subrogation.
The Guarantor shall be subrogated to all rights (if any) of the Holders
against the Issuer in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement; provided, however, that the Guarantor
shall not (except to the extent required by mandatory provisions of law) be
entitled to enforce or exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee Agreement, if, at the time of any such
payment, any amounts are due and unpaid under this Guarantee Agreement. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
Section 5.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Securities and that the
Guarantor shall be liable as principal and as debtor hereunder to make Guarantee
Payments pursuant to the terms of this Guarantee Agreement notwithstanding the
occurrence of any event referred to in subsections (a) through (g), inclusive,
of Section 5.3 hereof.
ARTICLE VI. COVENANTS AND SUBORDINATION
Section 6.1. Subordination.
The obligations of the Guarantor under this Guarantee Agreement will
constitute unsecured obligations of the Guarantor and will rank subordinate and
junior in right of payment to all Senior Debt (as defined in the Indenture) of
the Guarantor.
<PAGE>
13
Section 6.2. Pari Passu Guarantees.
The obligations of the Guarantor under this Guarantee Agreement shall rank
pari passu with the obligations of the Guarantor under any similar guarantee
agreements issued by the Guarantor on behalf of the holders of preferred
securities issued by any Trust (as defined in the Indenture).
ARTICLE VII. TERMINATION
Section 7.1. Termination.
This Guarantee Agreement shall terminate and be of no further force and
effect upon (i) full payment of the Redemption Price (as defined in the Trust
Agreement) of all Securities, (ii) the distribution of Debentures to the Holders
in exchange for all of the Securities or (iii) full payment of the amounts
payable in accordance with the Trust Agreement upon liquidation of the Issuer.
Notwithstanding the foregoing, this Guarantee Agreement will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
is required to repay any sums paid with respect to Securities or this Guarantee
Agreement.
ARTICLE VIII. MISCELLANEOUS
Section 8.1. Successors and Assigns.
All guarantees and agreements contained in this Guarantee Agreement shall
bind the successors, assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders of the Securities then
outstanding. Except in connection with a consolidation, merger or sale involving
the Guarantor or a conveyance, transfer or lease of the Guarantor's properties
that is permitted under Article VIII of the Indenture and pursuant to which the
successor or assignee agrees in writing to perform the Guarantor's obligations
hereunder, the Guarantor shall not assign its obligations hereunder and any
purported assignment other than in accordance with this provision shall be void.
Section 8.2. Amendments.
Except with respect to any changes which do not adversely affect the rights
of the Holders or the Guarantee Trustee in any material respect (in which case
no consent of the Holders or the Guarantee Trustee, as the case may be, will be
required), this Guarantee Agreement may only be amended with the prior approval
of the Holders of not less than a Majority in aggregate Liquidation Amount of
the Securities. The provisions of Article VI of the Trust Agreement concerning
meetings of the Holders shall apply to the giving of such approval.
<PAGE>
14
Section 8.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:
(a) if given to the Guarantor, to the address set forth below or such other
address or facsimile number or to the attention of such other Person as the
Guarantor may give notice to the Holders:
Pennsylvania Power & Light Company
Two North Ninth Street
Allentown, Pennsylvania 18101
Facsimile No.: (610) 774-5106
Attention: Treasurer
(b) if given to the Issuer, in care of the Guarantee Trustee, at the
Issuer's (and the Guarantee Trustee's) address set forth below or such other
address as the Guarantee Trustee on behalf of the Issuer may give notice to the
Holders:
PP&L Capital Trust II
c/o Pennsylvania Power & Light Company
Two North Ninth Street
Allentown, Pennsylvania 18101
Facsimile No.: (610) 774-5106
Attention: Treasurer
with a copy to:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Facsimile No.: (212) 946-8158
Attention: Global Trust Services
(c) if given to the Guarantee Trustee, at the address set forth below or
such other address or facsimile number or to the attention of such other Person
as the Guarantee Trustee may give notice to the Holders:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Facsimile No.: (212) 946-8158
Attention: Global Trust Services
<PAGE>
15
(d) if given to any Holder, at the address set forth on the books and
records of the Issuer.
All notices hereunder shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver; provided, however, that any
notice mailed to the Guarantee Trustee shall be deemed received only upon
receipt by the Guarantee Trustee.
Section 8.4. Benefit.
This Guarantee Agreement is solely for the benefit of the Holders and is
not separately transferable from the Securities.
Section 8.5. Interpretation.
In this Guarantee Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not defined in
the preamble hereto have the respective meanings assigned to them in Section
1.1;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;
(d) all references in this Guarantee Agreement to Articles and Sections are
to Articles and Sections of this Guarantee Agreement unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa; and
(g) the masculine, feminine or neuter genders used herein shall include the
masculine, feminine and neuter genders.
Section 8.6. Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
<PAGE>
16
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
Pennsylvania Power & Light Company
By:_______________________________
Name:
Title:
The Chase Manhattan Bank,
as Guarantee Trustee
By:_______________________________
Name:
Title:
<PAGE>
Exhibit 5.1
[LETTERHEAD OF
PENNSYLVANIA POWER & LIGHT COMPANY]
June 6, 1997
Pennsylvania Power & Light Company
Two North Ninth Street
Allentown, Pennsylvania 18101
Ladies and Gentlemen:
I am Senior Counsel of Pennsylvania Power & Light Company ("PP&L") and,
as such, am familiar with the affairs of PP&L and its subsidiaries.
With respect to the Registration Statement on Form S-3 (Registration No.
333-27773), as amended (the "Registration Statement"), filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Act"), relating to (i) the issuance by PP&L Capital Trust II, a statutory
business trust created under the Business Trust Act of the State of Delaware
(the "Trust"), of its Trust Originated Preferred Securities (the "Preferred
Securities"), (ii) in connection therewith, the deposit by PP&L with the Trust
as trust assets of its Junior Subordinated Deferrable Interest Debentures (the
"Junior Subordinated Debentures") and (iii) the guarantee (the "Guarantee") of
the Preferred Securities by PP&L to the extent described in the Prospectus
forming a part of the Registration Statement, I wish to advise you as follows:
I am of the opinion that PP&L is a corporation validly organized and
existing under the laws of the Commonwealth of Pennsylvania and is duly
qualified to carry on the business which it is now conducting in that
Commonwealth.
I am further of the opinion that the Preferred Securities, the Trust
Agreement (as defined in the Registration Statement), the Junior Subordinated
Debentures and the Guarantee have been duly authorized by PP&L.
I am a member of the Bar of the Commonwealth of Pennsylvania, and I do
not express any opinion herein concerning any law other than the law of the
Commonwealth of Pennsylvania. In so far as this opinion letter relates to any
matters
<PAGE>
2
governed by the laws of the State of Delaware, I have relied on the opinion of
Richards, Layton & Finger, to be filed as an exhibit to the Registration
Statement.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of my name in the Registration Statement
and in the Prospectus constituting a part thereof under the captions "Validity
of Securities" and "Experts." I also hereby give my consent to both the use of
my name by and the reliance on this opinion by Simpson Thacher & Bartlett and
Richards, Layton & Finger in their opinions, filed as Exhibits 5.2 and 5.3,
respectively, to the Registration Statement.
Very truly yours,
/s/ Michael A. McGrail
Michael A. McGrail
<PAGE>
Exhibit 5.2
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, N.Y. 10017-3954
(212) 455-2000
Fax: (212) 455-2502
June 6, 1997
Pennsylvania Power & Light Company
Two North Ninth Street
Allentown, Pennsylvania 18101
Ladies and Gentlemen:
We have acted as counsel for Pennsylvania Power & Light Company, a
Pennsylvania corporation (the "Company"), and PP&L Capital Trust II, a statutory
business trust created under the Business Trust Act of the State of Delaware
(the "Trust"), in connection with the preparation and filing with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"), of a Registration Statement on Form S-3 (Registration No.
333-27773), as amended (the "Registration Statement"), relating to (i) the
issuance by the Trust of its Trust Originated Preferred Securities ("TOPrS")
(the "Preferred Securities") and (ii) in connection therewith, the deposit by
the Company with the Trust as trust assets of its Junior Subordinated Deferrable
Interest Debentures (the "Junior Subordinated Debentures"). Concurrently with
the delivery of Junior Subordinated Debentures to the Trust, the Company will
make a cash contribution to the Trust, the proceeds of which will be used by the
Trust to purchase as trust assets additional Junior Subordinated Debentures.
The Junior Subordinated Debentures are to be issued under an Indenture (the
"Indenture"), to be entered into by and between the Company and The Chase
Manhattan Bank, as trustee. The Preferred Securities will be guaranteed (the
"Guarantee") by the Company to the extent described in the Prospectus forming a
part of the Registration Statement.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such corporate records, certificates of public officials
and other instruments and have made such other and further investigations, as we
have deemed relevant or necessary as a basis for the opinions hereinafter set
forth.
Based on the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that:
<PAGE>
Pennsylvania Power & Light
Company -2- June 6, 1997
1. Assuming that the Indenture and the Junior Subordinated Debentures
have been duly authorized, when (i) the Registration Statement has become
effective under the Act, (ii) the Indenture has been duly executed and
delivered and qualified under the Trust Indenture Act of 1939, as amended,
(iii) the terms of the Junior Subordinated Debentures have been duly
established in accordance with the Indenture and (iv) the Junior
Subordinated Debentures have been duly executed and authenticated in
accordance with the Indenture and duly issued and delivered to the Trust as
contemplated by the Registration Statement and upon payment therefor, the
Junior Subordinated Debentures will constitute valid and binding obligations
of the Company enforceable against the Company in accordance with their
terms.
2. Assuming that the Guarantee has been duly authorized, when (i) the
Registration Statement has become effective under the Act, (ii) the
Guarantee has been duly executed and delivered and (iii) the Preferred
Securities have been duly issued and delivered as contemplated by the
Registration Statement and upon payment therefor, the Guarantee will
constitute a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.
Our opinions set forth in paragraphs 1 and 2 above are subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the law of the State of
New York and the federal law of the United States. Insofar as this opinion
letter relates to any matters governed by the laws of the Commonwealth of
Pennsylvania, we have relied on the opinion of Michael A. McGrail, Esq., to be
filed as an exhibit to the Registration Statement.
We hereby consent to the filing of this opinion letter as an exhibit to
the Registration Statement and to the use of our name under the heading
"Validity of Securities" in the Prospectus forming a part of the Registration
Statement.
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
<PAGE>
EXHIBIT 5.3
June 6, 1997
PP&L Capital Trust II
c/o Pennsylvania Power & Light Company
2 North Ninth Street
Allentown, PA 18101
RE: PP&L Capital Trust II
---------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Pennsylvania Power &
Light Company, a Pennsylvania corporation (the "Company"), and PP&L Capital
Trust II, a Delaware business trust (the "Trust"), in connection with the
matters set forth herein. At your request, this opinion is being
furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals
or copies of the following:
(a) The Certificate of Trust of the Trust, dated May 15,1997 as filed
with the office of the Secretary of State of the State of Delaware (the
"Secretary of State") on May 16, 1997;
(b) The Trust Agreement of the Trust, dated as of May 15, 1997
between the Company and the trustees of the Trust named therein;
(c) The Registration Statement (the "Registration Statement") on Form
S-3, including a prospectus with respect to the Trust (the "Prospectus"),
relating to the Trust Originated Preferred Securities of the Trust representing
preferred undivided beneficial interests in the assets of the Trust (each, a
"Security" and collectively, the "Securities"), filed by the Company and the
Trust with the Securities and Exchange Commission on or about May 23, 1997;
<PAGE>
PP&L Capital Trust
June 6, 1997
Page 2
(d) A form of Amended and Restated Trust Agreement for the Trust, to
be entered into between the Company, the trustees of the Trust named therein,
and the holders, from time to time, of the undivided beneficial interests in the
assets of the Trust ("the Trust Agreement"), attached as an exhibit to the
Registration Statement; and
(e) A Cerificate of Good standing for the Trust, dated June__, 1997,
obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed in paragraphs (a) through (e) above. In particular, we
have not reviewed any document (other than the documents listed in paragraphs
(a) through (e) above) that is referred to in or incorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual investigation of our own
but rather have relied solely upon the foregoing documents, the statements and
information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust
Agreement and the Certificate of Trust are in full force and effect and have not
been amended, (ii) except to the extent provided in paragraph 1 below, the due
organization or due formation, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the laws of the
jurisdiction governing its creation, organization or formation, (iii) the legal
capacity of natural persons who are parties to the documents examined by us,
(iv) that each of the parties to the documents examined by us has the power and
authority to execute and deliver, and to perform its obligations under, such
documents, (v) the due authorization, execution and delivery by all parties
thereto of all documents examined by us, (vi) the receipt by each Person to whom
a Security is to be issued by the Trust (collectively, the "Security Holders")
of a certificate for such Security in the form prescribed by the Trust Agreement
and the payment for such Security, in accordance with the Trust Agreement and
the Registration Statement, and (vii) that the Securities are issued and sold to
the Security Holders in accordance with the Trust Agreement and the Registration
Statement. We have not participated in the preparation of the Registration
Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws
<PAGE>
PP&L Capital Trust
June 6, 1997
Page 3
of the State of Delaware), and we have not considered and express no opinion on
the laws of any other jurisdiction, including federal laws and rules and
regulations relating thereto. Our opinions are rendered only with respect to
Delaware laws and rules, regulations and orders thereunder which are currently
in effect.
Based upon the foregoing, and upon our examination of such questions
of law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1 The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act.
2. The Securities of the Trust will represent valid and, subject to
the qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Security Holders, as beneficial owners of the Trust, will be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware. We note that the Security Holders may be obligated to
make payments as set forth in the Trust Agreement.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. We hereby
consent to the use of our name under the heading "Validity of Securities" in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above, without
our prior written consent, this opinion may not be furnished or quoted to, or
relied upon by, any other person for any purpose.
Very truly yours,
/s/ Richards, Layton & Finger
Richards, Layton & Finger
<PAGE>
EXHIBIT 8.1
June 6, 1997
Re: Issuance and Sale of Trust Originated
Preferred Securities by PP&L Capital Trust
------------------------------------------
Pennsylvania Power & Light Company
Two North Ninth Street
Allentown, Pennsylvania 18101
PP&L Capital Trust II
c/o Pennsylvania Power & Light
Two North Ninth Street
Allentown, Pennsylvania 18101
Ladies and Gentlemen:
We have acted as special tax counsel ("Tax Counsel") to Pennsylvania
Power & Light Company, a Pennsylvania corporation (the "Company"), and PP&L
Capital Trust II, a statutory business trust organized under the Business Trust
Act of the State of Delaware (the "Trust"), in connection with the preparation
and filing by the Company and the Trust with the Securities and Exchange
Commission of a Registration Statement on Form S-3 (Registration No. 333-27773)
(as amended, the "Registration Statement") under the Securities Act of 1933, as
amended, and with respect to: (i) the issuance and sale of the junior
subordinated deferrable interest debentures (the "Subordinated Debentures") by
the Company pursuant to the Junior Subordinated Indenture (the "Indenture"),
between the Company and The Chase Manhattan Bank, a New York banking
corporation, as trustee (the "Debenture Trustee") and (ii) the issuance and sale
of Trust Originated
<PAGE>
-2- June 6, 1997
Preferred Securities (the "Preferred Securities") and Trust Common Securities
(collectively, the "Trust Securities") pursuant to the Amended and Restated
Trust Agreement, among the Company, as Depositor, The Chase Manhattan Bank, as
Property Trustee, Chase Manhattan Bank Delaware, as Delaware Trustee, and the
Administrative Trustees named therein (the "Trust Agreement"). The Preferred
Securities will be offered for sale to investors pursuant to the Registration
Statement.
The Trust Securities are guaranteed by the Company with respect to the
payment of distributions and payments upon liquidation, redemption and otherwise
pursuant to, and to the extent set forth in, the Guarantee Agreement (the
"Guarantee Agreement") between the Company and The Chase Manhattan Bank, as
trustee (in such capacity, the "Guarantee Trustee"), for the benefit of the
holders of the Trust Securities.
All capitalized terms used in this opinion letter and not otherwise
defined herein shall have the meaning ascribed to such terms in the Registration
Statement.
In delivering this opinion letter, we have reviewed and relied upon: (i)
the Registration Statement, (ii) a form of the Indenture; (iii) a form of the
Subordinated Debentures; (iv) a form of the Trust Agreement; (v) a form of the
Guarantee Agreement; and (vi) forms of the Trust Securities, in the case of each
"form", as such form was filed as an exhibit to the Registration Statement.
Further, we have relied upon certain other statements and representations
contained in the Company's letter of representation attached hereto as Exhibit
A. We also have examined and relied upon originals or copies, certified or
otherwise identified to our satisfaction, of such records of the
<PAGE>
-3- June 6, 1997
Company and the Trust and such other documents, certificates and records as we
have deemed necessary or appropriate as a basis for the opinions set forth
herein.
In our examination of such material, we have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals
and the conformity to original documents of all copies of documents submitted to
us. In addition, we also have assumed that the transactions related to the
issuance of the Subordinated Debentures and Trust Securities will be consummated
in accordance with the terms of the documents and forms of documents described
herein.
On the basis of the foregoing and assuming that the Trust was formed and
will be maintained in compliance with the terms of the Trust Agreement, we
hereby confirm (i) our opinions set forth in the Registration Statement under
the caption "Certain Federal Income Tax Consequences" and (ii) that, subject to
the qualifications set forth therein, the discussion set forth in the
Registration Statement under such caption is an accurate summary of the United
States federal income tax matters described therein.
We express no opinion with respect to the transactions referred to
herein or in the Registration Statement other than as expressly set forth
herein. Moreover, we note that there is no authority directly on point dealing
with securities such as the Preferred Securities or transactions of the type
described herein and that our opinion is not binding on the Internal Revenue
Service ("IRS") or the courts, either of which could take a contrary position.
Nevertheless, we believe that if challenged, the opinions we express herein
would be sustained by a court with jurisdiction in a properly presented case.
<PAGE>
-4- June 6, 1997
Our opinion is based upon the Code, the Treasury regulations promulgated
thereunder and other relevant authorities and law, all as in effect on the date
hereof. Consequently, future changes in the law may cause the tax treatment of
the transactions referred to herein to be materially different from that
described above.
We are admitted to practice law only in the State of New York and the
opinions we express herein are limited solely to matters governed by the federal
law of the United States.
We hereby consent to the use of this opinion for filing as Exhibit 8.1
to the Registration Statement and the use of our name in the Registration
Statement under the captions "Certain Federal Income Tax Consequences" and
"Validity of Securities".
Very truly yours,
/s/ Simpson Thacher & Bartlett
Simpson Thacher & Bartlett
<PAGE>
EXHIBIT 12.1
PENNSYLVANIA POWER & LIGHT COMPANY AND SUBSIDIARIES CONSOLIDATED
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Millions of Dollars)
<TABLE>
<CAPTION>
12 Months
Ended
March 1997 1996 1995 1994 1993 1992
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt.................... $ 206 $ 207 $ 213 $ 214 $ 226 $ 240
Interest on short-term debt
and other interest........................... 10 11 18 18 13 12
Amortization of debt discount expense
and premium - net............................ 2 2 2 2 2 1
Interest on capital lease
obligations
Charged to expense......................... 13 13 15 12 9 10
Capitalized................................ 3 2 2 1 1 2
Estimated interest component of
operating rentals............................ 8 8 8 6 5 5
Proportionate share of fixed charges
of 50-percent-or-less-owned
persons...................................... 1 1 1 1 1 2
---------------------------------------------------------------------------
Total fixed charges...................... $ 243 $ 244 $ 259 $ 254 $ 257 $ 272
===========================================================================
Earnings, as defined:
Net income................................... $ 352 $ 357 $ 352 $ 243 $ 348 $ 346
Less undistributed income of less
than 50-percent-owned persons.............. - - - - - -
---------------------------------------------------------------------------
352 357 352 243 348 346
Add (Deduct):
Federal income taxes......................... 174 189 195 199 163 145
State income taxes........................... 60 64 62 77 64 65
Deferred income taxes........................ 28 10 15 (45) 22 33
Investment tax credit - net.................. (10) (10) (11) (12) (14) (14)
Income taxes on other income and
deductions - net........................... (1) (2) 26 (38) (1) 0
Amortization of capitalized
interest on capital leases................. 3 4 6 9 12 13
Total fixed charges as above
(excluding capitalized interest
on capital lease obligations).............. 241 243 257 253 256 271
---------------------------------------------------------------------------
Total earnings.......................... $ 847 $ 855 $ 902 $ 686 $ 850 $ 859
===========================================================================
Ratio of earnings to fixed
charges...................................... 3.49 3.50 3.48 2.70 3.31 3.15
============================================================================
</TABLE>
<PAGE>
EXHIBIT 12.2
PENNSYLVANIA POWER & LIGHT COMPANY AND SUBSIDIARIES CONSOLIDATED
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND DIVIDENDS ON PREFERRED AND PREFERENCE STOCK
(Millions of Dollars)
<TABLE>
<CAPTION>
12 Months
Ended
March 1997 1996 1995 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt............... $ 206 $ 207 $ 213 $ 214 $ 226 $ 240
Interest on short-term debt
and other interest...................... 10 11 18 18 13 12
Amortization of debt discount expense
and premium - net....................... 2 2 2 2 2 1
Interest on capital lease obligations
Charged to expense.................... 13 13 15 12 9 10
Capitalized........................... 3 2 2 1 1 2
Estimated interest component of
operating rentals....................... 8 8 8 6 5 5
Proportionate share of fixed charges
of 50-percent-or-less-owned persons..... 1 1 1 1 1 2
-------------------------------------------------------------------------------
Total fixed charges................. $ 243 $ 244 $ 259 $ 254 $ 257 $ 272
Dividends on preferred and preference stock (a) 47 47 50 49 55 66
-------------------------------------------------------------------------------
Combined fixed charges and dividends on
prefered and preference stock........... $ 290 $ 291 $ 309 $ 303 $ 312 $ 338
===============================================================================
Earnings, as defined:
Net income.............................. $ 352 $ 357 $ 352 $ 243 $ 348 $ 346
Less undistributed income of less
than 50-percent-owned persons......... - - - - - -
-------------------------------------------------------------------------------
352 357 352 243 348 346
Add (Deduct):
Federal income taxes.................... 174 189 195 199 163 145
State income taxes...................... 60 64 62 77 64 65
Deferred income taxes................... 28 10 15 (45) 22 33
Investment tax credit - net............. (10) (10) (11) (12) (14) (14)
Income taxes on other income and
deductions - net...................... (1) (2) 26 (38) (1) 0
Amortization of capitalized
interest on capital leases.............. 3 4 6 9 12 13
Total fixed charges as above
(excluding capitalized interest
on capital lease obligations)........... 241 243 257 253 256 271
-------------------------------------------------------------------------------
Total earnings..................... $ 847 $ 855 $ 902 $ 686 $ 850 $ 859
===============================================================================
Ratio of earnings to fixed
charges................................. 2.92 2.93 2.92 2.26 2.72 2.54
===============================================================================
</TABLE>
(a) Represents the pre-tax earnings which would be required to cover preferred
and preference stock dividends.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
February 3, 1997 appearing on page 41 of Pennsylvania Power & Light Company's
Annual Report on Form 10-K for the year ended December 31, 1996. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Philadelphia, Pennsylvania
June 6, 1997
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Pennsylvania Power & Light Company and PP&L Capital Trust II on form S-3 of our
report dated February 3, 1995 on the consolidated statements of income,
shareowners' common equity, and cash flows of Pennsylvania Power & Light Company
and its subsidiaries for the year ended December 31, 1994, prior to restatement,
appearing in the Annual Report on Form 10-K of Pennsylvania Power & Light
Company for the year ended December 31, 1996 and to the reference to us under
the heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
June 6, 1997
<PAGE>
EXHIBIT 25.1
___________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
________________________________________
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
_____________________________________________
PENNSYLVANIA POWER & LIGHT COMPANY
(Exact name of obligor as specified in its charter)
PENNSYLVANIA 23-0959590
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
TWO NORTH NINTH STREET
ALLENTOWN, PENNSYLVANIA 18101
(Address of principal executive offices) (Zip Code)
______________________________________
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES, SERIES B OF
PENNSYLVANIA POWER & LIGHT COMPANY
(Title of the indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
2
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-
50010, which is incorporated by reference. On July 14, 1996, in connection with
the merger of Chemical Bank and The Chase Manhattan Bank (National Association),
Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 2ND day of JUNE, 1997.
THE CHASE MANHATTAN BANK
By /s/ Michael A. Smith
---------------------------
Michael A. Smith
Vice President
3
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and
currency and coin................................ $ 11,721
Interest-bearing balances........................ 3,473
Securities:........................................
Held to maturity securities........................
2,965
Available for sale securities...................... 35,903
Federal Funds sold and securities purchased under
agreements to resell............................. 24,025
Loans and lease financing receivables:
Loans and leases, net of unearned income $123,957
Less: Allowance for loan and lease losses 2,853
Less: Allocated transfer risk reserve............ 13
--------
Loans and leases, net of unearned income,
allowance, and reserve........................... 121,091
Trading Assets..................................... 54,340
Premises and fixed assets (including capitalized
leases).......................................... 2,875
Other real estate owned............................ 302
Investments in unconsolidated subsidiaries and
associated companies............................. 139
Customers' liability to this bank on acceptances
outstanding...................................... 2,270
Intangible assets.................................. 1,535
Other assets....................................... 10,283
--------
TOTAL ASSETS....................................... $270,922
========
</TABLE>
-4-
<PAGE>
LIABILITIES
<TABLE>
<CAPTION>
Deposits
<S> <C> <C>
In domestic offices...................................... $ 84,776
Noninterest-bearing................... $32,492
Interest-bearing...................... 52,284
-------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's................................................ 69,171
Noninterest-bearing .....................$ 4,181
Interest-bearing ........................ 64,990
Federal funds purchased and securities sold under agree-
ments to repurchase........................................ 32,885
Demand notes issued to the U.S. Treasury................... 1,000
Trading liabilities........................................ 42,538
Other Borrowed money (includes mortgage indebtedness
and obligations under calitalized leases):
With a remaining maturity of one year or less............ 4,431
With a remaining maturity of more than one year.......... 466
Bank's liability on acceptances executed and
outstanding .............................................. 2,270
Subordinated notes and debentures.......................... 5,911
Other liabilities.......................................... 11,575
TOTAL LIABILITIES.......................................... 255,023
-------
EQUITY CAPITAL
<CAPTION>
Perpetual Preferred stock and related surplus 0
Common stock............................................... 1,211
Surplus (exclude all surplus related to preferred stock).. 10,283
Undivided profits and capital reserves..................... 4,941
Net unrealized holding gains (Losses)
on available-for-sale securities........................... (552)
Cumulative foreign currency translation adjustments........ 16
TOTAL EQUITY CAPITAL....................................... 15,899
--------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL................................. $270,922
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR. )
-5-
<PAGE>
EXHIBIT 25.2
___________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
________________________________________
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
_____________________________________________
PP&L CAPITAL TRUST II
(Exact name of obligor as specified in its charter)
DELAWARE APPLIED FOR
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
C/O PENNSYLVANIA POWER & LIGHT COMPANY
TWO NORTH NINTH STREET
ALLENTOWN, PENNSYLVANIA 18101
(Address of principal executive offices) (Zip Code)
________________________________________________
PREFERRED SECURITIES OF PP&L CAPITAL TRUST II
(Title of the indenture securities)
___________________________________________________
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-
50010, which is incorporated by reference. On July 14, 1996, in connection with
the merger of Chemical Bank and The Chase Manhattan Bank (National Association),
Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 2ND DAY OF JUNE, 1997.
THE CHASE MANHATTAN BANK
By /s/ Michael A. Smith
------------------------------
Michael A. Smith
Vice President
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and
currency and coin................................ $ 11,721
Interest-bearing balances........................ 3,473
Securities:........................................
Held to maturity securities........................
2,965
Available for sale securities...................... 35,903
Federal Funds sold and securities purchased under
agreements to resell............................. 24,025
Loans and lease financing receivables:
Loans and leases, net of unearned income $123,957
Less: Allowance for loan and lease losses 2,853
Less: Allocated transfer risk reserve............ 13
--------
Loans and leases, net of unearned income,
allowance, and reserve........................... 121,091
Trading Assets..................................... 54,340
Premises and fixed assets (including capitalized
leases).......................................... 2,875
Other real estate owned............................ 302
Investments in unconsolidated subsidiaries and
associated companies............................. 139
Customers' liability to this bank on acceptances
outstanding...................................... 2,270
Intangible assets.................................. 1,535
Other assets....................................... 10,283
--------
TOTAL ASSETS....................................... $270,922
========
</TABLE>
-4-
<PAGE>
LIABILITIES
<TABLE>
<CAPTION>
Deposits
<S> <C> <C>
In domestic offices...................................... $ 84,776
Noninterest-bearing................... $32,492
Interest-bearing...................... 52,284
-------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's................................................ 69,171
Noninterest-bearing .....................$ 4,181
Interest-bearing ........................ 64,990
Federal funds purchased and securities sold under agree-
ments to repurchase........................................ 32,885
Demand notes issued to the U.S. Treasury................... 1,000
Trading liabilities........................................ 42,538
Other Borrowed money (includes mortgage indebtedness
and obligations under calitalized leases):
With a remaining maturity of one year or less............ 4,431
With a remaining maturity of more than one year.......... 466
Bank's liability on acceptances executed and
outstanding .............................................. 2,270
Subordinated notes and debentures.......................... 5,911
Other liabilities.......................................... 11,575
TOTAL LIABILITIES.......................................... 255,023
-------
EQUITY CAPITAL
<CAPTION>
Perpetual Preferred stock and related surplus 0
Common stock............................................... 1,211
Surplus (exclude all surplus related to preferred stock).. 10,283
Undivided profits and capital reserves..................... 4,941
Net unrealized holding gains (Losses)
on available-for-sale securities........................... (552)
Cumulative foreign currency translation adjustments........ 16
TOTAL EQUITY CAPITAL....................................... 15,899
--------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL................................. $270,922
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR. )
-5-
<PAGE>
EXHIBIT 25.3
___________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
________________________________________
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
_____________________________________________
PENNSYLVANIA POWER & LIGHT COMPANY
(Exact name of obligor as specified in its charter)
DELAWARE 23-0959590
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
TWO NORTH NINTH STREET
ALLENTOWN, PENNSYLVANIA 18101
(Address of principal executive offices) (Zip Code)
____________________________________
PENNSYLVANIA POWER & LIGHT COMPANY
GUARANTEE WITH RESPECT TO PREFERRED SECURITIES
(Title of the indenture securities)
_________________________________________________
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-
50010, which is incorporated by reference. On July 14, 1996, in connection with
the merger of Chemical Bank and The Chase Manhattan Bank (National Association),
Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 2ND DAY OF JUNE, 1997.
THE CHASE MANHATTAN BANK
By /s/ Michael A. Smith
----------------------------
Michael A. Smith
Vice President
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and
currency and coin................................ $ 11,721
Interest-bearing balances........................ 3,473
Securities:........................................
Held to maturity securities........................
2,965
Available for sale securities...................... 35,903
Federal Funds sold and securities purchased under
agreements to resell............................. 24,025
Loans and lease financing receivables:
Loans and leases, net of unearned income $123,957
Less: Allowance for loan and lease losses 2,853
Less: Allocated transfer risk reserve............ 13
--------
Loans and leases, net of unearned income,
allowance, and reserve........................... 121,091
Trading Assets..................................... 54,340
Premises and fixed assets (including capitalized
leases).......................................... 2,875
Other real estate owned............................ 302
Investments in unconsolidated subsidiaries and
associated companies............................. 139
Customers' liability to this bank on acceptances
outstanding...................................... 2,270
Intangible assets.................................. 1,535
Other assets....................................... 10,283
--------
TOTAL ASSETS....................................... $270,922
--------
</TABLE>
-4-
<PAGE>
LIABILITIES
<TABLE>
<CAPTION>
Deposits
<S> <C> <C>
In domestic offices...................................... $ 84,776
Noninterest-bearing................... $32,492
Interest-bearing...................... 52,284
-------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's................................................ 69,171
Noninterest-bearing .....................$ 4,181
Interest-bearing ........................ 64,990
Federal funds purchased and securities sold under agree-
ments to repurchase........................................ 32,885
Demand notes issued to the U.S. Treasury................... 1,000
Trading liabilities........................................ 42,538
Other Borrowed money (includes mortgage indebtedness
and obligations under calitalized leases):
With a remaining maturity of one year or less............ 4,431
With a remaining maturity of more than one year.......... 466
Bank's liability on acceptances executed and
outstanding .............................................. 2,270
Subordinated notes and debentures.......................... 5,911
Other liabilities.......................................... 11,575
TOTAL LIABILITIES.......................................... 255,023
-------
EQUITY CAPITAL
<CAPTION>
Perpetual Preferred stock and related surplus 0
Common stock............................................... 1,211
Surplus (exclude all surplus related to preferred stock).. 10,283
Undivided profits and capital reserves..................... 4,941
Net unrealized holding gains (Losses)
on available-for-sale securities........................... (552)
Cumulative foreign currency translation adjustments........ 16
TOTAL EQUITY CAPITAL....................................... 15,899
--------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL................................. $270,922
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR. )
-5-
