Filed Pursuant to Rule 424(b)(5)
Registration No. 333-48809
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 2, 1998)
[LOGO]
$200,000,000
PP&L, INC.
RESET PUT SECURITIES 6-1/8% (REPS(SM)*) SERIES DUE 2006
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INTEREST PAYABLE MAY 1 AND NOVEMBER 1
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PP&L, Inc. (the "Company") will issue its First Mortgage
Bonds, 6-1/8% REset Put Securities Series Due 2006 (the "REPS").
The REPS will mature on May 1, 2006, but will be required to be
put by the existing holders on May 1, 2001, through either (i)
the exercise of the Call Option (as defined herein) by the
Callholder (as defined below), or (ii) in the event the
Callholder does not purchase the REPS pursuant to its Call
Option, the automatic exercise of the Mandatory Put (as defined
herein) by Bankers Trust Company, as Trustee, on behalf of the
holders. The "Callholder" will be Morgan Stanley & Co.
International Limited. If the Callholder, or any successor,
purchases the REPS pursuant to the Call Option, the REPS will be
purchased by the Callholder from the holders thereof on May 1,
2001 (the "Coupon Reset Date"), at 100% of the principal amount
thereof, and the interest rate on the REPS will be reset (the
"Coupon Reset Rate") by the Calculation Agent (as defined herein)
effective on the Coupon Reset Date pursuant to the Coupon Reset
Process (as defined herein). If the Callholder for any reason
fails to purchase the REPS on the Coupon Reset Date, the Trustee
will exercise the Mandatory Put on behalf of the holders of the
REPS, and the Company will be required to repurchase the REPS
from the holders thereof on the Coupon Reset Date at 100% of the
principal amount thereof. See "Certain Terms of the REPS--Call
Option; Mandatory Put." The REPS will be represented by one or
more fully registered global securities ("Global Securities")
registered in the name of The Depository Trust Company as
Depository, or its nominee. Beneficial interests in the Global
Securities will be shown on, and transfer thereof will be
effected through, records maintained by the Depository or its
participants. Except as described herein, REPS in definitive
form will not be issued. See "Certain Terms of the REPS--Book-
Entry System."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE 99.94% AND ACCRUED INTEREST, IF ANY
----------------
Underwriting
Discounts
Price to and Proceeds to
Public(1) Commissions(2) Company(1)(3)(4)
--------- --------------- ----------------
Per REPS . . . 99.94% .35% 101.04%
Total . . . . . $199,880,000 $700,000 $202,080,000
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(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) Before deduction of expenses payable by the Company
estimated at $305,000.
(4) Represents consideration for the REPS, including
consideration for the Call Option (as defined herein).
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* REPS is a service mark of Morgan Stanley Dean Witter & Co.
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The REPS are offered, subject to prior sale, when, as and if
accepted by the Underwriters and subject to certain other
conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in
part. It is expected that delivery of the REPS will be made in
book-entry form through the facilities of The Depository Trust
Company on or about May 5, 1998, against payment therefor in
immediately available funds.
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MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
FIRST CHICAGO CAPITAL MARKETS, INC.
April 28, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE
PRICE OF THE REPS. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT
IN CONNECTION WITH THE OFFERING OF THE REPS, AND MAY BID FOR, AND
PURCHASE THE REPS, IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
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 Supplement and the accompanying Prospectus and, if
given or made, such information or representations must not be
relied upon as having been authorized by the Company or the
Underwriters. This Prospectus Supplement and the accompanying
Prospectus do not constitute an offer to sell, or a solicitation
of an offer to buy, the shares in any jurisdiction where, or to
any person to whom, it is unlawful to make such an offer or
solicitation. Neither delivery of this Prospectus Supplement and
the accompanying Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has
been no change in the facts set forth in this Prospectus
Supplement and the accompanying Prospectus or in the affairs of
the Company since the date hereof.
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TABLE OF CONTENTS
Prospectus Supplement
Page
----
Application of Proceeds . . . . . . . . . . . . . . . . . . . S-3
Recent Developments . . . . . . . . . . . . . . . . . . . . . S-3
Certain Terms of the REPS . . . . . . . . . . . . . . . . . . S-3
Certain United States Federal
Income Tax Considerations . . . . . . . . . . . . . . . . . S-9
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . S-12
Prospectus
Page
----
Available Information . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Documents by Reference . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Ratio of Earnings to Fixed Changes . . . . . . . . . . . . . . 3
Application of Proceeds . . . . . . . . . . . . . . . . . . . . 3
Description of Bonds . . . . . . . . . . . . . . . . . . . . . 3
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Validity of Bonds . . . . . . . . . . . . . . . . . . . . . . . 7
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . 7
S-2
<PAGE>
APPLICATION OF PROCEEDS
The net proceeds from the sale of the REPS will be added to
the Company's general funds. Such proceeds will be used (a) to
retire on or about May 12, 1998 $116 million principal amount of
unsecured, variable-rate term loans currently bearing interest at
approximately 6.2% per annum, and (b) for general corporate
purposes. Pending those uses, such proceeds will be invested by
the Company in short-term money market instruments or used to
retire short-term debt. At April 15, 1998, the Company had $295
million of short-term debt outstanding at interest rates of
approximately 5.8%.
RECENT DEVELOPMENTS
On April 24, 1998, the Company's parent, PP&L Resources,
Inc. ("Resources"), reported net income for the first quarter of
1998 of $100.5 million, or 60 cents per share. Resources'
reported net income for the first quarter of 1997 was $116.8
million, or 72 cents per share. Resources reported that much of
the decline could be attributed to much warmer weather during the
first quarter of 1998, as compared to the first quarter of 1997.
When both periods are adjusted for the effects of weather,
Resources' earnings per share were 71 cents for the first quarter
of 1998, versus 76 cents per share in the first quarter of 1997.
CERTAIN TERMS OF THE REPS
The following description of the particular terms of the
REPS supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of
the Bonds set forth under "Description of the Bonds" in the
accompanying Prospectus, to which general description reference
is hereby made. The following summary of certain terms and
provisions of the REPS and the Mortgage does not purport to be
complete and is qualified in its entirety by reference to the
actual provisions of the REPS and the Mortgage. Capitalized
terms used but not defined herein shall have the meanings given
to them in the accompanying Prospectus, the REPS or the Mortgage,
as the case may be.
GENERAL
The REPS will be issued as a series of First Mortgage Bonds,
under the Mortgage, and will be limited in aggregate principal
amount to $200,000,000.
INTEREST RATE AND INTEREST PAYMENT DATES
The REPS will bear interest at the rate of 6-1/8% from and
including the date of issuance to but excluding May 1, 2001 (the
"Coupon Reset Date"). Interest on the REPS will be payable semi-
annually on May 1 and November 1 of each year, commencing
November 1, 1998 (each, an "Interest Payment Date"). Interest
will be calculated based on a 360-day year consisting of twelve
30-day months. On each Interest Payment Date, interest will be
payable to the persons in whose name the REPS are registered on
the fifteenth calendar day (whether or not a Business Day)
immediately preceding the related Interest Payment Date (each, a
"Record Date"). "Business Day" means any day other than a
Saturday, a Sunday or a day on which banking institutions in The
City of New York are authorized or obligated by law, executive
decree or governmental decree to be closed.
If Morgan Stanley & Co. International Limited as Callholder
(the "Callholder") elects to purchase the REPS pursuant to the
Call Option (as defined below), the Calculation Agent (as defined
below) will reset the interest rate for the REPS effective on the
Coupon Reset Date, pursuant to the Coupon Reset Process described
below; provided, however, that the annual interest rate on the
REPS will never exceed 9% (the "Maximum Rate"). In such
circumstance, (i) the REPS will be purchased from the holders by
S-3
<PAGE>
the Callholder at a price equal to 100% of the principal amount
thereof on the Coupon Reset Date, on the terms and subject to the
conditions described herein (interest accrued to the Coupon Reset
Date will be paid by the Company on such date to holders on the
most recent Record Date), and (ii) on and after the Coupon Reset
Date, the REPS will bear interest at the rate determined by the
Calculation Agent in accordance with the procedures set forth
under "--Coupon Reset Process if the REPS are Called" below.
FINAL MATURITY DATE
The REPS will mature on May 1, 2006 (the "Final Maturity
Date"). On May 1, 2001, however, holders of the REPS will be
required to sell their REPS at a price equal to 100% of the
principal amount thereof (i) to the Callholder, if the Callholder
purchases the REPS pursuant to the Call Option, or (ii) if the
Callholder does not exercise the Call Option or fails for any
reason to pay the Call Price (as defined below) to the Trustee,
when required, to the Company upon the exercise of the Mandatory
Put (as defined below), by the Trustee for and on behalf of the
holders of the REPS. See "Call Option; Mandatory Put" below.
CALL OPTION; MANDATORY PUT
(i) Call Option. Pursuant to the terms of the REPS, the
Callholder has the right to purchase the REPS, in whole but not
in part, on the Coupon Reset Date (the "Call Option"), at a price
equal to 100% of the principal amount thereof (the "Call Price"),
by giving irrevocable notice to the Trustee (the "Call Notice").
The Callholder will be required to give the Call Notice to the
Trustee, in writing, prior to 4:00 p.m., New York City time, no
later than fifteen calendar days prior to the Coupon Reset Date.
If the Callholder exercises the Call Option by giving the Call
Notice, then, (i) not later than 2:00 p.m., New York City time on
the Business Day prior to the Coupon Reset Date, the Callholder
will pay the amount of the Call Price in immediately available
funds to the Trustee for payment of the Call Price to the holders
of the REPS on the Coupon Reset Date and (ii) the holders of the
REPS will be required to deliver, and will be deemed to have
delivered, the REPS against payment therefor on the Coupon Reset
Date through the facilities of the Depository (as hereinafter
defined). The Callholder is not required to exercise the Call
Option, and no holder of the REPS or any interest therein will
have any right or claim against the Callholder as a result of the
Callholder's decision whether or not to exercise the Call Option
or performance or nonperformance of its obligations with respect
thereto.
The Call Option provides for certain circumstances under
which the Call Option may be terminated. If the Call Option is
terminated or if the Callholder fails to pay the Call Price to
the Trustee at or prior to the required time, the Trustee will
exercise the Mandatory Put as described below.
(ii) Mandatory Put. If the Callholder does not purchase the
REPS on the Coupon Reset Date for any reason, the Trustee will be
obligated to exercise on behalf of the holders of the REPS the
right to require the Company to purchase the REPS, in whole but
not in part (the "Mandatory Put"), on the Coupon Reset Date at a
price equal to 100% of the principal amount thereof (the "Put
Price"), and by its purchase of REPS, each holder irrevocably
agrees that the Trustee shall exercise the Mandatory Put for and
on its behalf as provided herein. If the Trustee exercises the
Mandatory Put, then the Company shall deliver the Put Price in
immediately available funds to the Trustee by no later than 12:00
noon, New York City time, on the Coupon Reset Date, and the
holders of the REPS will be required to deliver, and will be
deemed to have delivered, the REPS to the Company against payment
therefor on the Coupon Reset Date through the facilities of the
Depository. No holder of the REPS or any interest therein has
the right to consent or object to the exercise of the Trustee's
duties under the Mandatory Put.
The transactions described above will be executed on the
Coupon Reset Date through the Depository in accordance with the
procedures of the Depository, and the accounts of the
Depository's Participants (as hereinafter defined) will be
debited and credited and the REPS delivered by book-entry as
necessary to effect the purchases and sales thereof. For further
information with respect to transfers and settlement through
Depository, see "Book-Entry System" herein.
S-4
<PAGE>
COUPON RESET PROCESS IF THE REPS ARE CALLED
Pursuant to a Calculation Agency Agreement, Morgan Stanley &
Co. Incorporated has been appointed the calculation agent for the
REPS (in such capacity as calculation agent, the "Calculation
Agent," which term shall include any successor in such capacity).
If the Callholder exercises the Call Option, then the following
steps (the "Coupon Reset Process") will be taken in order to
determine the interest rate to be paid on the REPS from and
including such Coupon Reset Date to but excluding the Final
Maturity Date (the "Coupon Reset Rate"); provided, however, that
the Coupon Reset Rate will not exceed the Maximum Rate. The
Company and the Calculation Agent will use reasonable efforts to
cause the actions contemplated below to be completed in as timely
a manner as possible.
(a) The Company will provide the Calculation Agent
with (i) a list (the "Dealer List") no later than five
Business Days prior to the Coupon Reset Date, containing the
names and addresses of three dealers, one of which shall be
Morgan Stanley & Co. Incorporated, from which the Company
desires the Calculation Agent to obtain Bids (as defined
below) for the purchase of the REPS and (ii) such other
material reasonably requested by the Calculation Agent to
facilitate a successful Coupon Reset Process.
(b) Within one Business Day following receipt by the
Calculation Agent of the Dealer List, the Calculation Agent
will provide to each dealer ("Dealer") on the Dealer List
(i) a copy of this Prospectus Supplement and the
accompanying Prospectus, (ii) a copy of the form of REPS and
(iii) a written request that each Dealer submit a Bid to the
Calculation Agent by 12:00 noon, New York City time, on the
third Business Day prior to the Coupon Reset Date (the "Bid
Date"). The time on the Bid Date upon which Bids will be
requested may be changed by the Calculation Agent to as late
as 3:00 p.m., New York City time. "Bid" means an
irrevocable written offer given by a Dealer for the purchase
of the REPS, settling on the Coupon Reset Date, quoted by
such Dealer as a stated yield to maturity on the REPS
("Yield to Maturity"). Each Dealer will also be provided
with (i) the name of the Company, (ii) an estimate of the
Purchase Price (stated as a U.S. dollar amount and
calculated by the Calculation Agent in accordance with
paragraph (c) below), (iii) the principal amount and Final
Maturity Date of the REPS and (iv) the method by which
interest will be calculated on the REPS.
(c) The purchase price to be paid by any Dealer for
the REPS (the "Purchase Price") will be equal to (i) the
principal amount of the REPS, plus (ii) a premium (the
"Premium") which shall be equal to the excess, if any, of
(A) the discounted present value to the Coupon Reset Date of
a bond with a maturity of May 1, 2006 which has an interest
rate of 5.72%, semi-annual interest payments on each May 1
and November 1, commencing November 1, 2001, and a principal
amount equal to the principal amount of the REPS, and
assuming a discount rate equal to the Treasury Rate over (B)
the principal amount of the REPS. The "Treasury Rate" means
the per annum rate equal to the offer side yield to maturity
of the current on-the-run five-year United States Treasury
Security per Telerate page 500 (or any successor or
substitute page as may replace such page on such service) at
11:00 a.m., New York City time, on the Bid Date (or such
other time or date that may be agreed upon by the Company
and the Calculation Agent) or, if such rate does not appear
on Telerate page 500 (or any successor or substitute page as
may replace such page on such service), at such time, such
rate on GovPX End-of-Day Pricing at 3:00 p.m., New York City
time, on the Bid Date (or such other time or date that may
be agreed upon by the Company and the Calculation Agent).
(d) The Calculation Agent will provide written notice
to the Company by 12:30 p.m., New York City time on the Bid
Date (or within 1/2 hour following the deadline for
submission of Bids, if the deadline has been extended as
provided above) setting forth (i) the names of each of the
Dealers from which the Calculation Agent received Bids on
the Bid Date, (ii) the Bid submitted by each such Dealer and
(iii) the Purchase Price as determined pursuant to paragraph
S-5
<PAGE>
(c) above. Unless the Call Option has terminated, the
Calculation Agent will thereafter select from the Bids
timely received the Bid with the lowest Yield to Maturity
(the "Selected Bid") and set the Coupon Reset Rate to be the
lesser of the Maximum Rate and the rate required to produce
a semi-annual bond equivalent yield on the REPS equal to the
Yield to Maturity indicated by the Selected Bid and assuming
a purchase price of 100% plus the Premium on the Coupon
Reset Date and payment of the REPS on the Final Maturity
Date; provided, however, that if any two or more of the
lowest Bids submitted are equivalent, the Company shall in
its sole discretion select any of such equivalent Bids, and
such selected Bid shall be the Selected Bid. The
Calculation Agent will notify the Dealer that submitted the
Selected Bid by 4:00 p.m., New York time, on the Bid Date.
(e) Immediately after calculating the Coupon Reset
Rate for the REPS, the Calculation Agent will provide
written notice to the Company and the Trustee, setting forth
the Coupon Reset Rate. The Coupon Reset Rate for the REPS
will be effective from and including the Coupon Reset Date.
(f) The Callholder will sell the REPS to the Dealer
that made the Selected Bid at the Purchase Price, such sale
to be settled on the Coupon Reset Date in immediately
available funds.
If at any time prior to the sale of the REPS on the Bid Date
(i) an Event of Default has occurred and is continuing under any
of clauses (a), (b), (c), (d) and (g) of Section 65 of the
Mortgage (as described in clauses (a), (b), (c) and (e) under
"Description of Bonds--Defaults and Notice Thereof " in the
accompanying Prospectus) or a Cross-Default (as defined below)
has occurred and is continuing, the Callholder may terminate the
Call Option by written notice to the Company and the Trustee; and
(ii) if an Event of Default under clauses (e) or (f) of Section
65 of the Mortgage (as described in clause (d) under "Description
of Bonds--Defaults and Notices Thereof" in the accompanying
Prospectus) has occurred and is continuing, the Call Option will
immediately and automatically terminate. If, following the
exercise of the Call Option (x) the Calculation Agent determines
that a Market Disruption Event (as defined below) has occurred
and is continuing, and as a result thereof, the Callholder fails
to pay the Call Price by 2:00 p.m., New York City time on the
Business Day immediately preceding the Coupon Reset Date, or (y)
fewer than two Dealers have submitted Bids in a timely manner
substantially as provided above, the exercise of such Call Option
will be automatically revoked, the Call Option will immediately
terminate and the Trustee will exercise the Mandatory Put on
behalf of the holders. "Cross-Default" means the occurrence or
existence of (a) a default, event of default or other similar
condition or event (however described) in respect of the Company
(after giving effect to any applicable notice requirement or
grace period), in one or more agreements or instruments relating
to any obligation (whether present or future, contingent or
otherwise, as principal or surety or otherwise) for the payment
or repayment of any money ("Specified Indebtedness"),
individually or collectively, in an aggregate amount of not less
than $100,000,000 which has resulted in such Specified
Indebtedness becoming, or becoming capable at such time of being
declared, due and payable under such agreements or instruments,
before it would otherwise have been due and payable or (b) a
default by the Company in making one or more payments on the due
date thereof in an aggregate amount of not less than $100,000,000
under such agreements or instruments (after giving effect to any
applicable notice requirement or grace period). "Market
Disruption Event" means any of the following if such events occur
and are continuing on any day from and including the date of the
Call Notice to and including the Bid Date in the judgment of the
Calculation Agent: (i) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange or
the establishment of minimum prices on such exchange; (ii) a
general moratorium on commercial banking activities declared by
either federal or New York State authorities; (iii) any material
adverse change in the existing financial, political or economic
conditions in the United States of America; (iv) an outbreak or
escalation of major hostilities involving the United States of
America or the declaration of a national emergency or war by the
United States; or (v) any material disruption of the U.S.
government securities market, U.S. corporate bond market or U.S.
federal wire system; provided, in each case, that in the judgment
of the Calculation Agent the effect of the foregoing makes it
impractical to conduct the Coupon Reset Process.
S-6
<PAGE>
The Calculation Agency Agreement provides that the
Calculation Agent may resign at any time as Calculation Agent,
such resignation to be effective ten Business Days after the
delivery to the Company and the Trustee of notice of such
resignation. In such case, the Company may appoint a successor
Calculation Agent.
The Calculation Agent, in its individual capacity, and its
officers, employees and shareholders, may buy, sell, hold and
deal in the REPS and may exercise any vote or join in any action
which any holder of the REPS may be entitled to exercise or take
as if it were not the Calculation Agent. The Calculation Agent,
in its individual capacity, may also engage in any transaction
with the Company as if it were not the Calculation Agent.
BOOK-ENTRY SYSTEM
The Company has established a depositary arrangement with
The Depository Trust Company ("DTC"), pursuant to which DTC will
act as securities depository for the REPS. The REPS will be
issued as fully registered securities registered in the name of
Cede & Co. (DTC's partnership nominee). DTC and any other
depository which may replace DTC as depository for the REPS are
sometimes referred to herein as the "Depository."
Except under the limited circumstances described below, REPS
represented by Global Securities will not be exchangeable for
securities in certificated form.
So long as the Depository or its nominee is the registered
owner of a Global Security, the Depository or its nominee, as the
case may be, will be considered the sole holder of the REPS
represented thereby for all purposes under the Mortgage.
Payments of principal of and premium, if any, and any interest on
individual REPS represented by a Global Security will be made to
the Depository or its nominee, as the case may be, as the
registered holder of such Global Security. Except as set forth
below, owners of beneficial interests in a Global Security will
not be entitled to have any of the individual securities
represented by such Global Security registered in their names,
will not receive or be entitled to receive physical delivery of
any such security and will not be considered the registered
holders thereof under the Mortgage, including, without
limitation, for purposes of consenting to any amendment thereof
or supplement thereto as described in the Prospectus.
Accordingly, each beneficial owner must rely on the procedures of
the Depository and, if such beneficial owner is not a
Participant, on the procedures of the Participant through which
such beneficial owner owns its interest in order to exercise any
rights of a holder under such Global Security or the Mortgage.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in
certificated form. Such limits and laws may impair the ability
to transfer beneficial interests in a Global Security
representing REPS.
The following is based on information furnished by 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 of DTC ("Direct
Participants") include securities brokers and dealers
(including the Underwriters), banks, trust companies,
clearing corporations and certain other organizations. 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 DTC's system is also available to others
S-7
<PAGE>
such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable
to DTC and its Participants are on file with the Commission.
Purchases of REPS under DTC's system must be made by or
through Direct Participants, which will receive a credit for
the REPS on DTC's records. The ownership interest of each
actual purchaser of each REPS represented by a Global
Security ("Beneficial Owner") is in turn to be recorded on
the records of Direct Participants and Indirect
Participants. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial
Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic
statements of their holdings, from the Direct Participants
or Indirect Participants through which such Beneficial Owner
entered into the transaction. Transfers of ownership
interests in REPS 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 therein, except in
the event that use of the book-entry system for such REPS is
discontinued.
To facilitate subsequent transfers, all Global
Securities which are deposited with, or on behalf of, DTC
are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Global Securities with, or on
behalf of, DTC and their registration in the name of Cede &
Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Global
Securities; DTC's records reflect only the identity of the
Direct Participants to whose accounts such Global 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.
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 will be governed by
arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to
time.
Redemption notices shall be sent to Cede & Co. If less
than all of the REPS are being redeemed, DTC's practice is
to determine by lot the amount of the interest of each
Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with
respect to the Offering Securities. Under its usual
procedures, DTC mails an Omnibus Proxy to the Company as
soon as possible after the applicable record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts the
Global Securities are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on
the REPS will be made to DTC. DTC's practice is to credit
Direct Participants' accounts on the applicable payment date
in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not
receive payment on such date. Payments by Participants to
Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held
for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of such
Participant and not of DTC, the Trustee or the Company,
subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal,
premium, if any, and interest to DTC is the responsibility
of the Company and the Trustee, disbursement of such
payments to Direct Participants shall be the responsibility
of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct Participants
and Indirect Participants.
S-8
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A Beneficial Owner shall give notice of any option to
elect to have its REPS purchased or tendered, through its
Participant, to the Trustee and to the Company, and shall
effect delivery of such REPS by causing the Direct
Participant to transfer the Participant's interest in the
Global Security or Securities representing such REPS, on
DTC's records, to the Trustee. The requirement for physical
delivery of REPS in connection with an optional tender or
mandatory purchase will be deemed satisfied when the
ownership rights in the Global Security or Securities
representing such REPS are transferred by Direct
Participants on DTC's records.
DTC may discontinue providing its services as
securities depository with respect to the REPS at any time
by giving reasonable notice to the Company or the Trustee.
Under such circumstances, in the event that a successor
securities depository is not obtained, certificates for the
REPS are required to be printed and delivered in exchange
for REPS represented by the Global Securities held by DTC.
The Company may discontinue use of the system of
book-entry transfers through DTC (or a successor securities
depository). In that event, certificates for the REPS will
be printed and delivered.
The information in this section concerning DTC and DTC's
system has been obtained from DTC. The Company believes such
information to be reliable, but the Company takes no
responsibility for the accuracy thereof.
Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership
interests in a Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership
interests.
SATISFACTION OF MORTGAGE. Upon the Company's making due
provision for the payments of all of the bonds and paying all
other sums due under the Mortgage, the Mortgage shall cease to be
of further effect and may be satisfied and discharged. (See
Article XVIII of the Mortgage.)
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States
federal income tax consequences of the purchase, ownership and
disposition of the REPS as of the date hereof and represents the
opinion of Reid & Priest LLP, counsel to the Company, insofar as
it relates to matters of law or legal conclusions. The following
summary is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations, rulings and decisions
now in effect, all of which are subject to change (including
changes in effective dates) or possible differing
interpretations. Unless otherwise stated, this summary deals
only with United States Holders (defined below) who are initial
purchasers and who hold the REPS as capital assets within the
meaning of Code Section 1221. This summary does not purport to
deal with persons in special tax situations, such as financial
institutions, tax-exempt entities, insurance companies, regulated
investment companies, dealers in securities or currencies,
persons holding the REPS as a hedge against currency risk or a
position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. In
addition, this discussion only addresses the federal income tax
consequences of the REPS until the Coupon Reset Date. PERSONS
CONSIDERING THE PURCHASE OF THE REPS SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE APPLICATION OF UNITED STATES FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
REPS ARISING UNDER ANY OTHER TAX JURISDICTION.
Prospective investors should note that no rulings have been
or are expected to be sought from the Internal Revenue Service
(the "Service") with respect to any of the Federal income tax
considerations discussed below, and no assurance can be given
that the Service will not take contrary positions.
S-9
<PAGE>
As used herein, the term "United States Holder" means a
beneficial owner of the REPS that is for United States federal
income tax purposes (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 of any
political subdivision thereof (other than a partnership that is
not treated as a United Stated person under any applicable
Treasury Regulations), (iii) an estate whose income is subject to
United States federal income tax regardless of its source, or
(iv) a trust if a court within the Unites States is able to
exercise primary supervision over the administration of the trust
and one or more United States persons have the authority to
control all substantial decisions of the trust. As used herein,
the term "Non-United States Holder" means a beneficial owner of
the REPS that is not a United States Holder.
UNITED STATES HOLDERS
INTEREST
For United States federal income tax purposes, the REPS will
be regarded as indebtedness of the Company. However, the tax
accounting treatment of interest payable on the REPS is not
entirely certain. The Company intends to treat the REPS as
maturing on the Coupon Reset Date. Based on this treatment,
interest on the REPS will generally be taxable to a United States
Holder as ordinary income at the time it is paid or accrued in
accordance with the United States Holder's regular method of
accounting.
SALE OR DISPOSITION OF THE REPS
Upon the sale, exchange, or retirement of REPS, the United
States Holder generally will recognize gain or loss equal to the
difference between the amount realized on the sale, exchange or
retirement (excluding amounts attributable to accrued but unpaid
interest on the REPS that the United States Holder has not
previously included in gross income) and such United States
Holder's adjusted tax basis in the REPS. A United States
Holder's adjusted tax basis in the REPS will equal the issue
price of the REPS, which will be the first price at which a
substantial amount of the REPS are sold for money (excluding
sales to bond houses, brokers or similar persons or organizations
acting in the capacity as underwriters, placement agents or
wholesalers). Pursuant to the Taxpayer Relief Act of 1997, in
the case of an individual holder, any capital gain recognized on
the disposition of the REPS will generally be subject to U.S.
Federal income tax at a stated maximum rate of (i) 20%, if the
United States Holder's holding period in the REPS was more than
18 months at the time of such sale, exchange, redemption or other
disposition, (ii) 28%, if the United States Holder's holding
period in such REPS was more than one year, but not more than 18
months at the time of such sale, exchange, redemption, or other
disposition, or (iii) at ordinary graduated rates if the United
States Holder's holding period in such REPS was one year or less
at the time of the sale, exchange, redemption, or other
disposition. The ability to use capital losses to offset
ordinary income in determining taxable income is generally
limited.
ALTERNATE FEDERAL INCOME TAX TREATMENT
There can be no assurance that the Service will agree with,
or a court will uphold, the Company's treatment of the REPS as
maturing on the Coupon Reset Date, and it is possible that the
Service will assert an alternate treatment. For example, the
Service may seek to treat the REPS as maturing on the Final
Maturity Date. In such case, Treasury regulations relating to
contingent payment debt obligations could be read to be
applicable. The effect of such regulations would be to require
United States Holders, regardless of their regular method of
accounting, to accrue income based on the "comparable yield" of
the REPS (i.e., the yield at which the Company would issue a
fixed rate debt instrument maturing on the Final Maturity Date,
with terms and conditions otherwise similar to those of the REPS)
which will likely be higher than the stated interest rate on the
REPS prior to the Coupon Reset Date. As a result, United States
Holders would accrue income in excess of cash payments actually
received, and any gain or loss upon the sale, exchange or
retirement of the REPS would be treated as other than long-term
capital gain or loss.
S-10
<PAGE>
NON-UNITED STATES HOLDERS
A Non-United States Holder will generally not be subject to
United States federal income tax on payments of interest
(including accruals under Treasury Regulations relating to
contingent payment debt obligations) on the REPS, provided that
such interest payments are not effectively connected with a U.S.
trade or business of the Holder, unless (i) such Non-United
States Holder owns, directly or indirectly, more than 10% of the
total combined voting power of the Company, (ii) the Non-United
States Holder is a controlled foreign corporation that is related
to the Company through stock ownership, or (iii) the Non-United
States Holder is a bank receiving interest described in Code
section 881(c)(3)(A). A Non-United States Holder qualifying
under the above conditions will not be subject to withholding on
payments of interest if such person provides the Company with a
statement certifying that such person is not a United States
person (on Form W-8 or a substantially similar form signed under
penalties of perjury) or a financial institution holding the REPS
on behalf of the beneficial owner certifies, under penalties of
perjury, that such financial institution has received such
statement and furnishes the Company with a copy thereof.
A Non-United States Holder generally will not be subject to
United States federal income tax on any gain recognized upon the
sale, redemption or other disposition of the REPS unless (i) such
gain is effectively connected with a U.S. trade or business of
the holder, (ii) in the case of an individual, such Non-United
States Holder is present in the United States for 183 or more
days in the taxable year of the sale, redemption or other
disposition, or (iii) the REPS are treated as subject to the
Treasury regulations relating to contingent payment debt
instruments discussed above.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Generally, information reporting will apply to certain
payments of principal and interest on the REPS (including
proceeds of a sale of the REPS to United States Holders, other
than certain exempt recipients within the meaning of applicable
Treasury regulations. United States Holders generally will not
be subject to backup withholding tax of 31% unless (i) the payee
fails to provide his or her taxpayer identification number to the
payor, (ii) the payee fails to provide certification as to exempt
status, or (iii) certain other conditions exist.
Non-United States Holders will not be subject to information
or backup withholding on payments made by the Company or its
paying agent if such Non-United States Holder certifies to the
Company that such person is not a United States person on Form W-
8 or a substantially similar form signed under penalties of
perjury by the beneficial owner of the REPS, and the Company has
no actual knowledge that the beneficial owner is a United States
person.
In addition, backup withholding and information reporting
will not apply to payments of principal or interest on the REPS
paid or collected by a foreign office of a custodian, nominee or
other foreign agent on behalf of a Non-United States Holder, or
if a foreign office of a broker pays the proceeds of the sale of
REPS to a Non-United States Holder. If, however, such nominee,
custodian, agent or broker is, for United States federal income
tax purposes, a United States person, a controlled foreign
corporation or a foreign person that derives 50% or more of its
gross income for certain periods from the conduct of a U.S. trade
or business, or, beginning on January 1, 2000, if such nominee,
custodian, agent or broker is a foreign partnership in which one
or more United States persons own, in the aggregate, more than
50% of the income or capital interests or if such partnership is
engaged in a U.S. trade or business, such payments will not be
subject to backup withholding but will be subject to information
reporting unless (i) such custodian, nominee, agent or broker has
documentary evidence that the beneficial owner is not a United
States person and certain other conditions are met, or (ii) the
beneficial owner otherwise establishes an exemption.
Payments of principal or interest on the REPS paid to a Non-
United States Holder by a United States office of a custodian,
nominee or agent, or payment of the proceeds of a sale of REPS by
S-11
<PAGE>
the United States office of a broker will be subject to backup
withholding and information reporting unless (i) the Non-United
States Holder provides the statement described above that such
holder is not a United States person and the payor does not have
actual knowledge to the contrary, or (ii) the beneficial owner
otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will
be allowed as a credit or a refund against such holder's United
States federal income tax liability, provided that certain
required information is provided to the Service.
UNDERWRITING
Subject to the terms and conditions of the Underwriting
Agreement between the Company and the Underwriters named below,
the Company has agreed to sell to each of the Underwriters, and
each of the Underwriters has severally agreed to purchase, the
principal amounts of the REPS set forth opposite its name below:
NAME PRINCIPAL AMOUNT
---- ----------------
Morgan Stanley & Co. Incorporated . . . . . $ 70,000,000
Credit Suisse First Boston Corporation . . 50,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . 50,000,000
First Chicago Capital Markets, Inc. . . . . 30,000,000
------------
Total . . . . . . . . . . . . . $200,000,000
=============
The Underwriting Agreement provides that the obligations of
the Underwriters are subject to certain conditions precedent.
The nature of the underwriting commitment is such that the
Underwriters purchasing the REPS will be obligated to purchase
all of the REPS if any of the REPS are purchased.
The Company has been advised by the Underwriters that the
Underwriters propose to offer the REPS to the public initially at
the public offering price set forth on the cover page of this
Prospectus Supplement and to certain dealers at such price less a
concession of .250% of the principal amount of the REPS. The
Underwriters and such dealers may reallow a discount of .125% of
such principal amount on sales to certain other dealers. The
public offering price and concessions and discounts to dealers
may be changed by the Underwriters.
The Company does not intend to apply for listing of any of
the REPS on a national securities exchange, but has been advised
by the Underwriters that they presently intend to make a market
in the REPS, as permitted by applicable laws and regulations.
The Underwriters are not obligated, however, to make a market in
the REPS and any such market-making may be discontinued at any
time at the sole discretion of the Underwriters. Accordingly, no
assurance can be given as to the liquidity of, or trading markets
for, the REPS.
In order to facilitate the offering of the REPS, the
Underwriters may engage in transactions that stabilize, maintain
or otherwise affect the prices of the REPS. Specifically, the
Underwriters may overallot in connection with the offering,
creating a short position in the REPS for their own account. In
addition, to cover overallotments or to stabilize the price of
the REPS, the Underwriters may bid to stabilize the price of the
REPS in the open market. Finally, the underwriting syndicate may
reclaim selling concessions allowed to an underwriter or a dealer
for distributing the REPS in the offering, if the syndicate
repurchases previously distributed REPS in transactions to cover
syndicate short positions, in stabilization transactions or
otherwise. Any of these activities may stabilize or maintain the
S-12
<PAGE>
market prices of the REPS above independent market levels. The
Underwriters are not required to engage in these activities, and
may end any of these activities at any time.
In the ordinary course of their businesses, Morgan Stanley &
Co. Incorporated and certain of the other Underwriters and their
affiliates have engaged and may in the future engage in
investment and commercial banking transactions with the Company
and certain of its affiliates.
The Company has agreed to indemnify the several Underwriters
against certain civil liabilities, including liabilities under
the Securities Act of 1933.
S-14
<PAGE>
$200,000,000
PP&L, INC.
FIRST MORTGAGE BONDS
PP&L, Inc. (the "Company" or "PP&L") expects to offer from
time to time up to $200,000,000 aggregate principal amount of its
First Mortgage Bonds ("Bonds") at prices and on terms to be
determined at the time of each sale. For each series of Bonds
for which this Prospectus is delivered ("Offered Bonds"), there
will be an accompanying Prospectus Supplement ("Prospectus
Supplement") that will set forth the aggregate principal amount,
interest rate or rates (which may be fixed or variable) and
payment dates, maturity date or dates, initial public offering
price, the net proceeds to the Company, redemption provisions,
provisions for repayment or redemption at the option of the
holder and other specific provisions for and terms of the Offered
Bonds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Bonds will be sold in accordance with the plan of
distribution described in "Plan of Distribution" herein.
This Prospectus may not be used to consummate sales of Bonds unless
accompanied by a Prospectus Supplement.
The date of this Prospectus is April 2, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and in accordance therewith files reports, proxy statements
and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Suite 1400, 500 West Madison
Street, Chicago, IL 60601; and Seven World Trade Center, Suite
1300, New York, NY 10048. The Commission maintains a web site on
the Internet that contains reports, proxy and information
statements and other information regarding registrants, including
the Company; the address of such site is http://www.sec.gov.
Copies of this material can also be obtained at prescribed rates
from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. Certain securities of the Company are listed on the New
York and Philadelphia Stock Exchanges. Reports, proxy statements
and other information concerning the Company can be inspected and
copied at the respective offices of those exchanges at 20 Broad
Street, New York, NY, and at 1900 Market Street, Philadelphia,
PA. In addition, reports, proxy statements and other information
concerning the Company can be inspected at the offices of the
Company, Two North Ninth Street, Allentown, PA.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant
to the Exchange Act are hereby incorporated by reference herein
and made a part hereof:
(1) The Company's Annual Report on Form 10-K for the year
ended December 31, 1997; and
(2) The Company's Current Report on Form 8-K dated February
2, 1998.
All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to
the termination of the offering made by this Prospectus shall be
deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the date of filing of such documents (such
documents, and the documents referred to above, being hereinafter
referred to as "Incorporated Documents"). Any statement
contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed Incorporated Document or in the accompanying
Prospectus Supplement modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
COPIES OF THE DOCUMENTS REFERRED TO ABOVE (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE THEREIN) WILL BE FURNISHED UPON REQUEST
WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS
DELIVERED. WRITTEN OR TELEPHONE REQUESTS SHOULD BE DIRECTED TO
PP&L, INC., TWO NORTH NINTH STREET, ALLENTOWN, PA 18101,
ATTENTION: INVESTOR SERVICES DEPARTMENT (800/345-3085).
2
<PAGE>
THE COMPANY
The Company, incorporated under the laws of the Commonwealth
of Pennsylvania in 1920, provides electricity delivery services
in eastern and central Pennsylvania. The Company provides
electricity delivery services to approximately 1.2 million
customers in a 10,000 square mile territory in 29 counties of
eastern and central 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. PP&L also offers
electricity and other services to retail and wholesale customers
throughout Pennsylvania and neighboring states. All of the
outstanding shares of common stock of the Company are owned by
PP&L Resources, Inc., a Pennsylvania corporation. The Company's
general offices are located at Two North Ninth Street, Allentown,
Pennsylvania 18101, and its telephone number is 610-774-5151.
RATIO OF EARNINGS TO FIXED CHARGES
Year Ended December 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
3.47 3.50 3.48 2.70 3.31
APPLICATION OF PROCEEDS
The Company plans to issue and sell up to $200 million
aggregate principal amount of Bonds on terms to be determined at
the time of sale. The net proceeds from the sale of the Bonds
will be added to the Company's general funds and used for general
corporate purposes, including the retirement of $116 million of
unsecured notes bearing interest at variable rates that would
otherwise mature in 2001, or the reduction of short-term debt
incurred to provide interim financing. Pending such use, the net
proceeds will be invested by the Company in short-term money
market instruments.
DESCRIPTION OF BONDS
GENERAL. The Bonds will be issued under a Mortgage and Deed
of Trust, dated as of October 1, 1945, as supplemented (the
"Mortgage"), of which Bankers Trust Company (as successor to
Morgan Guaranty Trust Company of New York) is Trustee, and rank
on a parity with other series of the Company's First Mortgage
Bonds. Principal and interest will be payable in New York City at
the office or agency of the Company, which initially will be the
principal office of the Trustee. Interest also will be payable at
the general offices of the Company in Allentown, Pennsylvania.
Statements herein concerning the Bonds and the Mortgage are
brief summaries and do not purport to be complete. They are
subject to the detailed provisions of the Bonds and the Mortgage.
References to article and section numbers herein are references
to article and section numbers of the Mortgage. The Bonds do not
have any sinking or improvement fund or other provision for
amortization prior to maturity.
3
<PAGE>
FORM AND EXCHANGES. The Bonds will be issued in fully
registered form in denominations of $1,000 and multiples thereof.
Exchanges and transfers of the Bonds may be made at the principal
office of the Trustee or at the offices of such other companies
as the Company may designate from time to time. The Company does
not presently plan to designate any other company for such
purpose. There will be no charge by the Company for any exchange
or transfer of the Bonds.
MATURITY, INTEREST RATE AND PAYMENT DATES. See the
accompanying Prospectus Supplement.
REDEMPTION AND PURCHASE OF THE BONDS. See the accompanying
Prospectus Supplement.
MAINTENANCE AND REPLACEMENT FUND. The Mortgage provides for
an annual Maintenance and Replacement Fund requirement equal to
15 1/2% of adjusted gross operating revenues (calculated in
accordance with the Mortgage). Such requirement may be met by
depositing cash with the Trustee; certifying expenditures for
maintenance and repairs of mortgaged property, for gross property
additions, and for certain automotive equipment; or by taking
credit for bonds and qualified prior lien bonds retired. Such
cash may be withdrawn on similar bases. The Company has the
right (without any consent or other action by the holders of any
series of bonds) to make such amendments to the Mortgage as shall
be necessary to delete the Maintenance and Replacement Fund
requirement. (See Section 39.)
The Company has agreed not to apply any cash deposited with
the Trustee pursuant to the Maintenance and Replacement Fund to
the redemption of the Bonds so long as any bonds of other series
Outstanding at the date of original issue of any series of the
Bonds remain Outstanding.
SPECIAL PROVISIONS FOR RETIREMENT OF THE BONDS. If, during
any twelve-month period, mortgaged property is disposed of by
order of or to any governmental authority, resulting in the
receipt of $10 million or more of proceeds, the Company (subject
to certain conditions) must apply such proceeds (less certain
deductions) to the retirement of bonds of any series. In that
event, the Bonds will be redeemable at special redemption prices
that will be set forth in the accompanying Prospectus Supplement,
and the Bonds may be subject to special call or put options as
described in the accompanying Prospectus Supplement. (See
Section 64.)
SECURITY. The Bonds, together with all other bonds now or
hereafter issued under the Mortgage, will be secured by the
Mortgage, which constitutes, in the opinion of counsel for the
Company, a first mortgage lien on all of the Company's properties
(except those referred to below), subject to: (1) leases of minor
portions of the Company's property to others for uses which, in
such counsel's opinion, do not interfere with its business; (2)
leases of certain property of the Company not used in its
electric utility business; (3) minor defects, irregularities and
deficiencies in titles of properties and rights-of-way, which do
not materially impair the use of such property and rights-of-way
for the purposes of the Company; and (4) other excepted
encumbrances. In general, there are excepted from the lien of the
Mortgage all cash and securities; equipment, apparatus, materials
or supplies held for sale or other disposition; aircraft,
automobiles and other vehicles; timber, minerals, mineral rights
and royalties; and receivables, contracts, leases and operating
agreements.
The Mortgage contains provisions for including
after-acquired property within the lien thereof, subject to any
pre-existing liens and to certain limitations in the case of
consolidation, merger or sale of substantially all of the
Company's assets.
4
<PAGE>
ISSUANCE OF ADDITIONAL BONDS. Bonds of any series may be
issued from time to time on the bases of: (1) 60% of property
additions to electric, gas, steam or hot water property, acquired
after June 30, 1945, but not including natural gas production
property and after adjustments for retirements of funded property
other than property for supplying water; (2) retirement or
cancellation of bonds or qualified prior lien bonds; and (3)
deposit of cash. With certain exceptions in the case of (2)
above, the issuance of bonds is subject to an earnings coverage
test which requires adjusted net earnings before income taxes for
twelve out of the preceding fifteen months of at least twice the
annual interest requirements on all bonds at the time
outstanding, including those being issued, and on all
indebtedness of prior rank. In computing adjusted net earnings,
an amount equal to 15 1/2% of the adjusted gross operating revenues
(calculated as provided in the Mortgage) must be used in lieu of
actual expenditures for maintenance and repairs and provisions
for property retirement. The issuance of bonds on the basis of
property additions subject to liens is restricted. It is
expected that the Bonds will be issued against unfunded property
additions, which were in excess of $1.85 billion at December 31,
1997. The issuance tests contained in the Mortgage are not
expected to limit the Company's ability to issue the Bonds. (See
Articles V, VI and VII.)
The Company has reserved the right to amend the Mortgage
without any consent or other action by holders of any outstanding
series of bonds (including the Bonds): (1) to include nuclear
fuel (and similar or analogous devices or substances) as property
additions; and (2) to make available as property additions
various forms of space satellites, space stations and other
analogous facilities, various fuel transportation facilities
(primarily railroad cars and other railroad equipment, tankers
and other vessels), and generally, electric, gas and energy or
fuel property (including property for the development of
electricity, gas and fuel or energy in any form) and water and
steam heat property. Such property could be located anywhere if
duly subjected to the lien of the Mortgage and useful in
connection with the energy, fuel or water business. Excepted
property would continue to include property used principally for
the production or gathering of natural gas.
The amount of the obligations secured by prior liens on
mortgaged property may be increased, provided that, if any
property subject to such prior lien shall have been made the
basis of a credit under the Mortgage, all the additional
obligations are deposited with the Trustee or the trustee or
other holder of a qualified lien.
RELEASE AND SUBSTITUTION OF PROPERTY. Property may be
released upon the bases of: (1) the deposit of cash, or, to a
limited extent, purchase money mortgages; (2) property additions,
after adjustments in certain cases to offset retirements and
after making adjustments for qualified prior lien bonds
outstanding against property additions; and (3) waiver of the
right to issue bonds without applying any earnings tests. Cash
may be withdrawn upon the bases stated in (2) and (3) above. The
Company has reserved the right (without any consent or other
action by holders of any series of bonds created after September
30, 1989, including the Bonds) to amend the release provisions of
the Mortgage to permit releases of funded property at the lower
of cost or fair value at the time of funding and to permit
release of unfunded property on the basis of an engineer's
certificate stating that the Company has at least one dollar
($1.00) of unfunded property after deducting the cost of the
property then being released. (See Article XI.)
DIVIDEND COVENANT. No cash dividends on common stock may be
paid unless after such payments the amount remaining in earned
surplus plus the provisions made subsequent to September 30, 1945
for depreciation and retirement of property shall equal the
Maintenance and Replacement Fund requirements of the Mortgage for
such period, less maintenance expenditures. (See Section 39.)
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MODIFICATION OF MORTGAGE. Bondholders' rights may be
modified with the consent of the holders of 66 % of the bonds.
If less than all series of bonds are affected, the consent of the
holders of 66 % of each series affected is also required. The
Company has reserved the right (without any consent or other
action by holders of any series of bonds created after 1991,
including the Bonds) to substitute for the foregoing provisions
the following: Bondholders' rights may be modified with the
consent of the holders of a majority of the bonds, but if less
than all series of the bonds are so affected, only the consent of
a majority of the affected bonds is required. In general, no
modification of the terms of payment of principal or interest and
no modification affecting the lien or reducing the percentage
required for modification is effective against any bondholder
without his consent. (See Article XIX.)
DEFAULTS AND NOTICE THEREOF. Defaults are: (a) default in
payment of principal; (b) default for 60 days in payment of
interest or of installments of funds for retirement of bonds; (c)
certain defaults with respect to qualified lien bonds; (d)
certain events of bankruptcy, insolvency or reorganization; and
(e) default for 90 days after notice by the Trustee in other
covenants. The Trustee may withhold notice of default (except in
payment of principal, interest or any fund for retirement of
bonds), if it thinks it is in the interests of the bondholders.
Holders of 25% of the bonds may declare the principal and
interest due on default, but a majority may annul such
declaration if such default has been cured. No holder of bonds
may enforce the lien of the Mortgage unless (1) such holder has
given the Trustee written notice of a default; (2) holders of 25%
of the bonds have requested the Trustee to act and offered it
reasonable opportunity to act and indemnity satisfactory to the
Trustee against the costs, expenses and liabilities to be
incurred thereby; and (3) the Trustee has failed to act. The
Trustee is not required to risk its funds or incur personal
liability if there is reasonable ground for believing that the
repayment is not reasonably assured. The holders of a majority of
the bonds may direct the time, method and place of conducting any
proceedings for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee. (See
Article XIII.)
EVIDENCE TO BE FURNISHED TO THE TRUSTEE. Compliance with
Mortgage provisions is evidenced by written statements of the
Company's officers or persons selected or paid by the Company. In
certain major matters, the accountant, appraiser, engineer or
counsel must be independent. Various certificates and other
papers are required to be filed annually and in certain events,
including an annual certificate with reference to compliance with
the terms of the Mortgage and absence of Defaults.
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CERTAIN TAX MATTERS. In the opinion of Michael A. McGrail,
Esq., Senior Counsel of the Company, Bonds owned by individuals
residing in Pennsylvania are subject to the 4 mills ($4.00 on
each $1,000 of principal amount) Pennsylvania corporate loans
tax. Such tax will be withheld from interest payments to such
individuals. Counsel for the Company is also of the opinion that
the Bonds are exempt from existing personal property taxes in
Pennsylvania.
EXPERTS
The consolidated financial statements of the Company
incorporated in this Prospectus by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997
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have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority
of said 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 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.
VALIDITY OF THE BONDS
The validity of the Bonds will be passed upon for the
Company by Michael A. McGrail, Esq., Senior Counsel of the
Company, and Reid & Priest LLP, New York, New York, and for any
agent, underwriter or dealer by Sullivan & Cromwell, New York,
New York. However, all matters pertaining to the organization of
the Company and titles and the lien of the Mortgage will be
passed upon only by Mr. McGrail. As to matters involving the law
of the Commonwealth of Pennsylvania, Reid & Priest LLP and
Sullivan & Cromwell will rely on the opinion of Mr. McGrail. Mr.
McGrail is a full-time employee of the Company.
PLAN OF DISTRIBUTION
The Company may sell the Bonds in any of three ways: (1)
through underwriters or dealers; (2) directly to a limited number
of purchasers or to a single purchaser; or (3) through agents.
The Prospectus Supplement with respect to the Offered Bonds will
set forth the terms of the offering and the proceeds to the
Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public
offering price, any discounts or concessions allowed or reallowed
or paid to dealers and any securities exchanges on which such
offered bonds may be listed. Any initial public offering price
and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Bonds will
be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The Offered Bonds
may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or
directly by one or more firms acting as underwriters. The
underwriter or underwriters with respect to the Offered Bonds
will be named in the Prospectus Supplement relating to such
offering, and compensation payable to such underwriters will be
set forth in the Prospectus Supplement. If an underwriting
syndicate is used, the managing underwriter or underwriters will
be set forth on the cover page of the Prospectus Supplement. Any
underwriting agreement will provide that the obligations of the
underwriters will be subject to certain conditions precedent and
that the underwriters will be obligated to purchase all of the
Offered Bonds if any are purchased. The Company will agree to
indemnify any underwriters against certain civil liabilities,
including liabilities under the Securities Act of 1933.
Bonds may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved
in an offer or sale in respect of which this Prospectus is
delivered will be named and any commissions payable by the
Company to such agent will be set forth in the Prospectus
Supplement relating thereto. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
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No dealer, salesman or other person has been authorized to
give any information or to make any representation not contained
in this Prospectus or in the accompanying Prospectus Supplement
and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or
any underwriter. This Prospectus and the accompanying Prospectus
Supplement do not constitute an offer to sell or a solicitation
of an offer to buy any of the securities offered hereby in any
jurisdiction in which it is unlawful to make such an offer or
solicitation.
Neither the delivery of this Prospectus and the accompanying
Prospectus Supplement nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no
change in the affairs of the Company since the date of the
accompanying Prospectus Supplement.
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