<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PP&L, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
PP&L, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
PP&L, Inc.
Notice of Annual Meeting
April 23, 1999
and
Proxy Statement
(including appended
1998 Financial Statements)
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
The Annual Meeting of Shareowners of PP&L, Inc. ("PP&L" or "the Company") will
be held at Lehigh University's Stabler Arena, at the Goodman Campus Complex
located in Lower Saucon Township, outside Bethlehem, Pennsylvania, on Friday,
April 23, 1999, at 1:30 p.m., preceding the Annual Meeting of Shareowners of
PP&L Resources, Inc. The Annual Meeting will be held for the purposes stated
below and more fully described in the accompanying Proxy Statement, and to
transact such other business as may properly come before the Meeting or any
adjournments thereof:
1. The election of three directors for a term of three years.
2. The approval of amendments to the Company's Articles of Incorporation.
The Board of Directors is not aware of any other matters to be presented for
action at the Annual Meeting. If any other business should properly come before
the Meeting, it is the intention of the Board of Directors that the persons
named as Proxies will vote in accordance with their best judgment.
This year, the Board of Directors is only soliciting Proxies from the holders
of the Company's 4- 1/2% Preferred Stock. Holders of 4- 1/2% Preferred Stock
should, after reading the Proxy Statement, mark, sign, date and return their
Proxies as soon as possible, to assure representation at the Meeting. Holders of
Series Preferred Stock will not be asked for a Proxy.
Only Shareowners of record at the close of business on Friday, February 26,
1999, will be entitled to vote at the Annual Meeting or any adjournments
thereof. All Shareowners are invited to attend the Meeting in person. If the
Annual Meeting is interrupted or delayed for any reason, the Shareowners
attending the adjourned Meeting shall constitute a quorum and may act upon such
business as may properly come before the Meeting.
By Order of the Board of Directors.
LOGO
Robert J. Grey
Secretary
March 12, 1999
<PAGE>
PROXY STATEMENT
The Company's principal executive offices are located at Two North Ninth
Street, Allentown, Pennsylvania 18101, telephone number (610) 774-5151. This
Proxy Statement and the accompanying Proxy, solicited on behalf of the Board of
Directors, were first released to Shareowners on or about March 12, 1999.
This year the Board of Directors is only soliciting Proxies from the
holders of the Company's 4- 1/2% Preferred Stock. Holders of 4- 1/2% Preferred
Stock should, after reading the Proxy Statement, mark, sign, date and return
their Proxies as soon as possible, to assure representation at the meeting. WE
ARE NOT ASKING THE HOLDERS OF SERIES PREFERRED STOCK FOR A PROXY AND SUCH
SHAREHOLDERS ARE REQUESTED NOT TO SEND US A PROXY.
OUTSTANDING STOCK AND VOTING RIGHTS
The Board of Directors has established Friday, February 26, 1999, as the
record date for Shareowners entitled to vote at the Annual Meeting (the "Record
Date"). The transfer books of the Company will not be closed. The Company's
Restated Articles of Incorporation (the "Articles") divide its voting stock into
four classes: 4- 1/2% Preferred Stock, Series Preferred Stock, Preference Stock
and Common Stock. There were no shares of Preference Stock outstanding on the
Record Date. Each currently outstanding share of each class of stock entitles
the holder to one vote upon any business properly presented to the Annual
Meeting. A total of 161,964,127 shares was outstanding on the Record Date,
consisting of 157,300,382 shares of Common Stock (all owned by PP&L Resources,
Inc. ("PP&L Resources")), 530,189 shares of 4- 1/2% Preferred Stock and
4,133,556 shares of Series Preferred Stock.
As of February 15, 1999, the following are the only entities known by the
Company to own more than five percent of any class or series of preferred stock
entitled to vote at the Annual Meeting.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND SHARES PERCENT OF
ADDRESS OF BENEFICIALLY CLASS
TITLE BENEFICIAL OWNER OWNED OR SERIES
<S> <C> <C> <C>
4-1/2% PP&L Resources, Inc. [282,438] [53.27%]
Preferred Stock Two North Ninth Street
Allentown, PA 18101
3.35 % Series PP&L Resources, Inc. 21,178 50.69%
Preferred Stock Two North Ninth Street
Allentown, PA 18101
4.40% Series PP&L Resources, Inc. 111,097 48.56%
Preferred Stock Two North Ninth Street
Allentown, PA 18101
4.60% Series PP&L Resources, Inc. 34,386 54.58%
Preferred Stock Two North Ninth Street
Allentown, PA 18101
5.95% Series PP&L Resources, Inc. 290,000 96.67%
Preferred Stock Two North Ninth Street
Allentown, PA 18101
6.05% Series PP&L Resources, Inc. 250,000 100.00%
Preferred Stock Two North Ninth Street
Allentown, PA 18101
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
6.125% Series PP&L Resources, Inc. 834,500 72.57%
Preferred Stock Two North Ninth Street
Allentown, PA 18101
6.15% Series PP&L Resources, Inc. 152,500 61.00%
Preferred Stock Two North Ninth Street
Allentown, PA 18101
6.33% Series PP&L Resources, Inc. 954,000 95.40%
Preferred Stock Two North Ninth Street
Allentown, PA 18101
6.75% Series PP&L Resources, Inc. 759,230 89.32%
Preferred Stock Two North Ninth Street
Allentown, PA 18101
</TABLE>
Execution of the Proxy will not affect a Shareowner's right to attend the
Annual Meeting and vote in person. Any Shareowner giving a Proxy has the right
to revoke it at any time before it is voted by giving notice in writing to the
Secretary. Shares represented by Proxy will be voted in accordance with the
instructions given. In the absence of instructions to the contrary, the Proxy
solicited hereby will be voted FOR the election of directors, and FOR the
proposed amendment to the Articles of Incorporation. Abstentions and broker non-
votes are not counted as either "yes" or "no" votes for Proposal 1; abstentions
and broker non-votes will have the same effect as votes against Proposal 2.
To preserve voter confidentiality, the Company voluntarily limits access to
Shareowner voting records to certain designated employees. These employees sign
a confidentiality agreement which prohibits them from disclosing the manner in
which a Shareowner has voted to any Company employee or to any other person
(except to the Judges of Election or the person in whose name the shares are
registered), unless otherwise required by law.
With respect to Proposal 1, the election of directors, Shareowners have the
unconditional right of cumulative voting. Shareowners may vote in this manner
by multiplying the number of shares registered in their respective names on the
Record Date by the total number of directors to be elected at the Annual Meeting
and casting all of such votes for one nominee or distributing them among any two
or more nominees. The nominees receiving the highest number of votes, up to the
number of directors to be elected, will be elected. Authority to vote for any
individual nominee can be withheld by striking a line through that person's name
in the list of nominees on the accompanying Proxy. Shares will be voted for the
remaining nominees on a pro rata basis.
With respect to Proposal 2, the proposed amendment to the Articles (the
"Proposed Amendment"), the following affirmative votes are required: (i) of the
holders of not less than two-thirds of the number of shares of the 4- 1/2%
Preferred Stock outstanding; (ii) of the holders of not less than two-thirds of
the number of shares of the Series Preferred Stock outstanding; (iii) of the
holders of not less than two-thirds of the number of shares of 4- 1/2% Preferred
Stock and Series Preferred Stock outstanding (voting as a single class); and
(iv) of the holders of a majority of the number of shares of 4- 1/2% Preferred
Stock, Series Preferred Stock and Common Stock outstanding (voting as a single
class). PP&L RESOURCES HAS ADVISED THE COMPANY THAT IT INTENDS TO VOTE ALL OF
THE OUTSTANDING SHARES OF COMMON STOCK, 4- 1/2% PREFERRED STOCK AND SERIES
PREFERRED STOCK OWNED BY IT IN FAVOR OF PROPOSAL 2. AS A RESULT, THE RECEIPT OF
THE VOTES REQUIRED TO APPROVE PROPOSAL 2 IS ASSURED, EXCEPT FOR THE REQUIREMENT
FOR THE AFFIRMATIVE VOTE OF THE HOLDERS OF NOT LESS THAN TWO-THIRDS OF THE
NUMBER OF SHARES OF THE 4- 1/2% PREFERRED STOCK OUTSTANDING. ACCORDINGLY,
PROXIES ARE ONLY BEING SOLICITED FROM THE HOLDERS OF THE 4- 1/2% PREFERRED
STOCK. THE COMPANY IS NOT SOLICITING PROXIES FROM THE HOLDERS OF SERIES
PREFERRED STOCK. There are no rights of appraisal in connection with Proposal 2.
<PAGE>
SPECIAL CASH PAYMENT
Subject to the terms and conditions set forth in this Proxy Statement, if
(but only if) Proposal 2 (the Proposed Amendment) is approved and adopted, the
Company will make a cash payment of $1.00 per share (the "Special Cash Payment")
to each owner of 4- 1/2% Preferred Stock, other than PP&L Resources ("4- 1/2%
Preferred Shareowner"), who votes in favor of Proposal 2 at the Annual Meeting,
in person by ballot or by proxy. This payment will be made for each share of 4-
1/2% Preferred Stock held by such owner as of the Record Date which is so voted.
SPECIAL CASH PAYMENTS WILL BE MADE TO THE 4- 1/2% PREFERRED SHAREOWNERS AS OF
THE RECORD DATE ONLY IN RESPECT OF EACH SHARE OF 4- 1/2% PREFERRED STOCK WHICH
IS VOTED FOR THE ADOPTION OF THE PROPOSED AMENDMENT AND ONLY IF THE PROPOSED
AMENDMENT IS APPROVED AND ADOPTED . If the Proposed Amendment is approved and
adopted, Special Cash Payments will be paid out of the Company's general funds
by check mailed promptly after the Proposed Amendment has become effective.
As described under "Certain Federal Income Tax Consequences," in order to
prevent federal income tax backup witholding with respect to the Special Cash
Payment, a United States 4- 1/2% Preferred Shareowner (as defined) must provide
the Company with the owner's correct Taxpayer Identification Number and certify
that the owner is not subject to backup withholding of federal income tax by
completing the Form W-9 included in the Proxy.
Only owners of 4- 1/2% Preferred Stock on the Record Date (or their legal
representatives or attorneys-in-fact) are entitled to vote at the Annual Meeting
and to receive the Special Cash Payments. Any beneficial owner of shares of 4-
1/2% Preferred Stock who is not the registered owner of such shares as of the
Record Date (as would be the case for any beneficial owner whose shares are
registered in the name of such owner's broker, dealer, commercial bank, trust
company or other nominee) must arrange with the record owner of such 4- 1/2%
Preferred Stock to execute and deliver a proxy form on such beneficial owner's
behalf. If a beneficial owner of shares intends to attend the Annual Meeting and
vote in person, such beneficial owner must obtain a legal proxy form from his or
her broker, dealer, commercial bank, trust company or other nominee.
IF A 4- 1/2% PREFERRED SHAREOWNER VOTES AGAINST THE PROPOSED AMENDMENT OR
ABSTAINS FROM ANY SUCH VOTE, SUCH OWNER SHALL NOT BE ENTITLED TO THE SPECIAL
CASH PAYMENT EVEN IF THE PROPOSED AMENDMENT IS APPROVED AND ADOPTED. THE SPECIAL
CASH PAYMENT WILL NOT BE MADE TO ANY OWNER OF SERIES PREFERRED STOCK, REGARDLESS
OF THE OUTCOME OF THE VOTING ON THE PROPOSED AMENDMENT.
PROPOSAL 1: ELECTION OF DIRECTORS
PP&L has a classified Board of Directors, currently consisting of nine
directors divided into three classes. These classes consist of three directors
whose terms will expire at the 1999 Annual Meeting, three directors whose terms
will expire at the 2000 Annual Meeting, and three directors whose terms will
expire at the 2001 Annual Meeting. The directors of the Company also serve as
the directors of PP&L Resources.
The nominees this year are Frederick M. Bernthal, William J. Flood and Frank
A. Long. All of the nominees are currently serving as directors. Dr. Bernthal
was elected by the Board of Directors effective March 1, 1997, and Messrs. Flood
and Long were elected by the Shareowners at the 1996 Annual Meeting. If elected
by the Shareowners, the above nominees would serve until the 2002 Annual Meeting
and until their successors shall be elected and qualified. Following their
election, there would be nine members of the Board of Directors, consisting of
three classes: three directors whose terms would expire at the 2000 Annual
Meeting, four directors whose terms would expire at the 2001 Annual Meeting, and
three directors whose terms would expire at the 2002 Annual Meeting.
The Board of Directors has no reason to believe that any of the nominees will
become unavailable for election, but, if any nominee should become unavailable
prior to the meeting, the accompanying Proxy will be voted for the election of
such other person as the Board of Directors may recommend in place of that
nominee.
THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREOWNERS VOTE FOR PROPOSAL 1
<PAGE>
NOMINEES FOR DIRECTORS:
LOGO
FREDERICK M. BERNTHAL, 56, is President of Universities Research
Association (URA), Washington, D.C., a position he has held since
1994. URA is a consortium of 87 major research universities, and is
management and operations contractor on behalf of the U.S.
Department of Energy for the Fermi National Accelerator Laboratory.
Dr. Bernthal served from 1990 to 1994 as Deputy Director of the
National Science Foundation, from 1988 to 1990 as Assistant
Secretary of State for Oceans, Environment and Science, and from
1983 to 1988 as a member of the U.S. Nuclear Regulatory Commission.
He received a B.S. in chemistry from Valparaiso University, and a
Ph.D. in nuclear chemistry from the University of California at
Berkeley. Dr. Bernthal, a member of the Audit and Corporate
Responsibility Committee of PP&L Resources and the Nuclear
Oversight Committee of PP&L, has been a director since March 1,
1997.
LOGO
WILLIAM J. FLOOD, 63, is Secretary-Treasurer of Highway Equipment &
Supply Co. (HESCO), Harrisburg, Pa., supplier of heavy equipment
for highway construction, industry and general contractors. Mr.
Flood received a B.A. from Dartmouth College and joined HESCO in
1960. He is a director of HESCO, Penn State Geisinger Health
System, Hescorp, Inc. and PNC Bank (Northeast PA). A member of the
Audit and Corporate Responsibility of PP&L Resources and the
Nuclear Oversight Committee of PP&L, Mr. Flood has been a director
since 1990.
LOGO
FRANK A. LONG, 58, is Executive Vice President of PP&L Resources
and Executive Vice President and Chief Operating Officer of PP&L.
Mr. Long received a B.S. in Electrical Engineering from
Northeastern University, and joined PP&L in 1963. Senior Vice
President-System Power & Engineering from 1990 until 1993, he was
named to his present PP&L position in 1993 and to his PP&L
Resources position in February 1995. Mr. Long is a member of the
Pennsylvania Electric Association Executive Committee, and a
director of the Smart Discovery Center and the Visiting Nurses
Northeast. Mr. Long has been a director since 1993.
DIRECTORS CONTINUING IN OFFICE:
LOGO
E. ALLEN DEAVER, 63, retired in January 1998 as Executive Vice
President and a director of Armstrong World Industries, Inc.,
Lancaster, Pa., a manufacturer of interior furnishings and
specialty products. He graduated from the University of Tennessee
with a B.S. in Mechanical Engineering and joined Armstrong in 1960.
He is a director of the Internacional de Ceramica S.A. (Mexico),
Penn State Geisinger Health System and Donsco, Inc. Mr. Deaver,
chair of the Compensation and Corporate Governance Committees of
PP&L Resources and PP&L and a member of the Executive and Finance
Committees of PP&L Resources and PP&L, has been a director since
1991; his term ends in 2000.
LOGO
ELMER D. GATES, 69, is Vice Chairman of Fuller Company, Bethlehem,
Pa., a company involved in the design and manufacture of plants,
machinery and equipment used in the cement, paper, power and
processing industries. He has a B.S. in Mechanical Engineering from
Clarkson College. Mr. Gates is a former director of Ambassador
Bank, a director of SI Handling Systems, Inc., a director of the
Lehigh Valley Economic Development Corporation and president of the
Lehigh Valley Partnership. Mr. Gates, chair of the Finance
Committee of PP&L Resources and PP&L and a member of the
Compensation and Corporate Governance and Executive Committees of
PP&L Resources and PP&L, has been a director since 1989; his term
ends in 2000.
<PAGE>
LOGO
WILLIAM F. HECHT, 55, is Chairman, President and Chief Executive
Officer of both PP&L Resources and PP&L. Mr. Hecht received a B.S.
and M.S. in Electrical Engineering from Lehigh University, and
joined PP&L in 1964. He was elected President and Chief Operating
Officer in 1991 and was named to his present PP&L position in 1993,
and to his PP&L Resources position in February 1995. Mr. Hecht is a
director of a number of civic and charitable organizations. He is
chair of the Executive Committee of PP&L Resources and PP&L and
chair of the Corporate Leadership Council, an internal committee
comprised of the senior officers of PP&L Resources. Mr. Hecht has
been a director since 1990; his term ends in 2001.
LOGO
STUART HEYDT, 59, is Chief Executive Officer of the Penn State
Geisinger Health System, a not-for-profit corporation involved in
health care and related services. Dr. Heydt, who specializes in
maxillofacial surgery, attended Dartmouth College and received an
M.D. from the University of Nebraska. He is past president of the
American College of Physician Executives and a director of Bucknell
University, Wilkes University, PNC Bank (Northeast PA). He is chair
of the Audit and Corporate Responsibility Committee of PP&L
Resources and a member of the Compensation and Corporate Governance
and Executive Committees of PP&L Resources and PP&L. Dr. Heydt has
been a director since 1991; his term ends in 2001.
LOGO
NORMAN ROBERTSON, 71, served as Senior Vice President and Chief
Economist of Mellon Bank N.A., Pittsburgh, Pa., until his
retirement in 1992. Mr. Robertson received a B.S. in Economics from
the University of London, England, and attended the London School
of Economics. Mr. Robertson is an independent economic advisor to
Smithfield Trust Company, a private investment management firm. He
is also an Adjunct Professor of Economics at Carnegie Mellon
University. Mr. Robertson, a member of the Executive, Finance and
Compensation and Corporate Governance Committees of PP&L Resources
and PP&L, has been a director since 1969; his term ends in 2000.
LOGO
MARILYN WARE, 55, is Chairman of American Water Works Company, Inc.
of Voorhees, New Jersey, a position she has held since 1988.
American Water Works is the largest water utility holding company
in the country. In addition, she is a director of CIGNA Corp and
served as a director of Penn Fuel Gas, Inc. from 1990 to 1998. She
attended American University and the University of Pennsylvania.
Ms. Ware has been a director since January 1998. She is a member of
the Finance Committee of PP&L Resources and PP&L and the Audit and
Corporate Responsibility Committee of PP&L Resources; her term ends
in 2001.
FORMER DIRECTOR:
LOGO
NANCE K. DICCIANI, Senior Vice President, Business Group Executive
and Director, European Region, Rohm and Haas Company, Philadelphia,
Pa., a specialty chemical company, resigned from the Board
effective December 31, 1998, due to conflicting professional time
commitments. A director since 1994, Dr. Dicciani provided a
business perspective which we valued highly.
<PAGE>
GENERAL INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
Director Attendance at Board Meetings
The Board of Directors held eleven meetings during 1998. Each director
attended at least 75% of the meetings held by the Board and its Committees
during the year. The average attendance of directors at Board and Committee
meetings held during 1998 was 97%.
COMPENSATION OF DIRECTORS
Directors who are Company employees receive no separate compensation for
service on the Board of Directors or Committees of the Board of Directors. Non-
employee directors receive a retainer of $39,000 per year, of which a minimum of
$21,000 is allocated to a deferred stock account under the Directors Deferred
Compensation Plan ("DDCP"); a fee of $1,000 for attending Board of Directors
meetings, Committee meetings and other meetings at the Company's request; and a
fee of $150 for participating in meetings held by telephone conference call.
Only one attendance fee is paid when the Boards of PP&L Resources and PP&L meet
on the same day, and when "dual" committee meetings are held on the same day.
Also, only one retainer is paid for service on the Boards of both PP&L Resources
and PP&L.
Non-employee directors may elect to defer all or any part of the retainer and
fees, pursuant to the DDCP. Under this Plan, these directors can defer
compensation into a cash account or a deferred stock account. Payment of these
amounts and applicable interest or dividends can be deferred until after the
director's retirement from the Board of Directors, at which time they can
receive these funds in one or more annual installments for a period of up to ten
years.
Under the terms of the DDCP, any increase in the annual retainer is
automatically allocated to each director's deferred stock account. As with the
DDCP benefits, this additional deferred stock together with applicable dividends
is available to the directors after retirement from the Board, at which time
they can receive this stock in one or more annual installments for a period of
up to ten years.
CERTAIN TRANSACTIONS INVOLVING DIRECTORS OR EXECUTIVE OFFICERS
The SEC requires disclosure of certain business transactions or relationships
between PP&L Resources or its subsidiaries, and other organizations with which
any of PP&L's directors or executive officers is affiliated as an owner,
partner, director, or executive officer.
From time to time, when it has been appropriate and reasonable, the Company
and its subsidiaries have engaged in transactions with, or have used products or
services of, organizations with which PP&L's directors or executive officers are
affiliated. It is expected that the Company will continue to do so.
On August 21, 1998, PP&L Resources acquired Penn Fuel Gas, Inc. pursuant to an
Agreement and Plan of Merger, dated as of June 26, 1997. As a result of the
merger, Ms. Ware and certain family members and trusts of which Ms. Ware is the
beneficiary or trustee acquired an aggregate of 5,330,913 shares of Common Stock
of PP&L Resources.
During 1998, PP&L paid Highway Equipment & Supply Co. (HESCO) $246,270 for
certain equipment and materials. Mr. Flood is secretary-treasurer and a
principal owner of HESCO.
STOCK OWNERSHIP
As noted above, all the Common Stock of PP&L is owned by PP&L Resources. No
directors or executive officers own any PP&L preferred stock.
<PAGE>
BOARD COMMITTEES
The Board of Directors has four standing committees--the Executive,
Compensation and Corporate Governance, Finance, and Nuclear Oversight
Committees. Each non-employee director usually serves on one or more of these
and PP&L Resources' Board committees. (PP&L Resources' committees include the
Executive, Audit and Corporate Responsibility, Compensation and Corporate
Governance and Finance Committees. PP&L Resources' Audit and Corporate
Responsibility Committee provides audit oversight to PP&L.) All but the
Executive Committee are composed entirely of directors who are not Company
employees.
EXECUTIVE COMMITTEE. The Executive Committee exercises during the periods
between Board meetings all of the powers of the Board of Directors, except that
the Executive Committee may not elect directors, change the membership of or
fill vacancies in the Executive Committee, fix the compensation of the
directors, change the Bylaws, or take any action restricted by the Pennsylvania
Business Corporation Law or the Bylaws (including actions committed to another
Board committee). The Executive Committee of PP&L met three times in 1998. The
members of the Executive Committee for both the Company and PP&L Resources are
Mr. Hecht (chair), Dr. Heydt, and Messrs. Deaver, Gates and Robertson.
COMPENSATION AND CORPORATE GOVERNANCE COMMITTEE. The principal functions of
the Compensation and Corporate Governance Committee are to review and evaluate
at least annually the performance of the chief executive officer and other
senior officers of the Company, and to set their remuneration, including
incentive awards; to review the fees paid to outside directors for their
services on the Board of Directors and its Committees; and to review
management's succession planning. For those individuals who are senior officers
of both the Company and PP&L Resources, the Compensation and Corporate
Governance Committees of both companies act jointly to set remuneration for
services to both companies. Another principal committee function is to develop
and review criteria for the qualifications of Board members, to establish and
administer programs for evaluating the performance of Board members and to
identify and recommend to the Board of Directors candidates for election to the
Board. This committee met three times in 1998. The members of the Compensation
and Corporate Governance Committee for both the Company and PP&L Resources are
Mr. Deaver (chair), Messrs. Gates and Robertson and Dr. Heydt.
Nominees for directors may be proposed by Shareowners in accordance with the
procedures set forth in the Bylaws. Recommendations for the 2000 Annual Meeting
must be received by November 15, 1999. Shareowners interested in recommending
nominees for directors should submit their recommendations in writing to the
Chair of the Compensation and Corporate Governance Committee, c/o Secretary, Two
North Ninth Street, Allentown, Pennsylvania 18101.
FINANCE COMMITTEE. The principal functions of the Finance Committee are to
approve specific Company financings and corporate financing policies, to review
the Company's annual capital and operating budgets, financing plans and overall
financial strategy, and to declare dividends when the Board is not regularly
scheduled to meet or does not meet. The Finance Committee met three times during
1998. The members of the Finance Committee for both the Company and PP&L
Resources are Mr. Gates (chair), Messrs. Deaver and Robertson, and Ms. Ware.
NUCLEAR OVERSIGHT COMMITTEE. The principal functions of the Nuclear Oversight
Committee are to assist the Board of Directors in the fulfillment of its
responsibilities for oversight of the Company's nuclear function, to advise
Company management on nuclear matters, and to provide advice and recommendations
to the Board of Directors concerning the future direction of the Company and
management performance related to the nuclear function. The Nuclear Oversight
Committee met three times in 1998. The members of the Nuclear Oversight
Committee are Dr. Bernthal (chair), and Messrs. Flood and Gates.
RETIREMENT PLANS FOR EXECUTIVE OFFICERS
PP&L officers upon retirement are eligible for benefits under the PP&L
Retirement Plan and the Supplemental Executive Retirement Plan ("SERP"). The
following table shows the estimated annual retirement benefits for executive
officers payable under these Plans:
<PAGE>
ESTIMATED ANNUAL RETIREMENT BENEFITS
AT NORMAL RETIREMENT AGE OF 65
OFFICERS HIRED BEFORE 1/1/98
----------------------------
<TABLE>
<CAPTION>
FIVE YEAR YEARS OF SERVICE
AVE. ANNUAL
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS
- -------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
$ 250,000 84,774 118,524 131,024 143,524
300,000 105,024 145,524 160,524 175,524
350,000 125,274 172,524 190,024 207,524
400,000 145,524 199,524 219,524 239,524
450,000 165,774 226,524 249,024 271,524
500,000 186,024 253,524 278,524 303,524
550,000 206,274 280,524 308,024 335,524
600,000 226,524 307,524 337,524 367,524
650,000 246,774 334,524 367,024 399,524
700,000 267,024 361,524 396,524 431,524
750,000 287,274 388,524 426,024 463,524
800,000 307,524 415,524 455,524 495,524
850,000 327,774 459,000 485,024 527,524
900,000 348,024 469,524 514,524 559,524
950,000 368,274 496,524 544,024 591,524
1,000,000 405,000 540,000 590,000 640,000
1,050,000 425,250 567,000 619,500 672,000
</TABLE>
Benefits under both the Retirement Plan and the SERP benefit formulas are
based on length of service and the average compensation for the highest 60
consecutive months in the final 120 months of employment. For purposes of
calculating benefits under the Retirement Plan, the compensation used is base
salary less amounts deferred pursuant to the Officers Deferred Compensation
Plan. Base salary, including any amounts deferred, is listed in the Summary
Compensation Table which follows. (Of the officers listed in that Table, Mr.
Hecht deferred $52,000 of compensation for each of 1996, 1997 and 1998; Mr. Long
deferred $31,200 for each of 1996, 1997; and 1998; and Mr. Grey deferred $600
for 1996.) For purposes of calculating benefits under the SERP, the compensation
used is base salary, bonus and the value of any restricted stock grant for the
year in which earned, as listed in the Table, as well as dividends paid on
restricted stock.
Benefits payable under the Retirement Plan are subject to limits set forth in
the Internal Revenue Code and are not subject to any deduction for Social
Security benefits or other offset. They are computed on the basis of the life
annuity form of pension at the normal retirement age of 65. Benefits payable
under the SERP are computed on the same basis; are offset by Retirement Plan
benefits, the maximum Social Security benefit payable at 65, and in some cases,
by pensions received from prior employment; and are reduced for retirement prior
to age 60.
As of January 1, 1999, the years of credited service under the Retirement Plan
for Messrs. Hecht, Long, Byram, Grey and Biggar were 28.8, 31.4, 22.3, 3.7, and
24.2 respectively. The years of credited service under the SERP for each of
these officers are three years less than under the Retirement Plan (except in
the case of Mr. Byram, who is entitled to nine months of additional credited
service under the SERP, and Mr. Grey, who is entitled to 15.4 years of
additional credited service).
<PAGE>
For officers hired on or after January 1, 1998, benefits under the SERP are
based on a new formula, as follows: (i) restricted stock grants are not included
in compensation for purposes of calculating benefits under the SERP; (ii) the
percentage of pay provided as a retirement benefit is changed from 2.7% for the
first 20 years of service plus 1.0% for the next 10 years, to 2.0% for the first
20 years and 1.5% for the next 10 years; and (iii) credit for years of service
will commence as of the employee's date of hire instead of at age 30.
The following table shows the estimated annual retirement benefits for
executive officers payable under the new SERP:
ESTIMATED ANNUAL RETIREMENT BENEFITS
AT NORMAL RETIREMENT AGE OF 65
OFFICERS HIRED ON OR AFTER 1/1/98
---------------------------------
<TABLE>
<CAPTION>
FIVE YEAR Years of Service
AVE. ANNUAL
COMPENSATION 15 Years 20 Years 25 Years 30 Years
------------------ --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
$ 250,000 75,000 100,000 118,750 137,500
300,000 90,000 120,000 142,500 165,000
350,000 105,000 140,000 166,250 192,500
400,000 120,000 160,000 190,000 220,000
450,000 135,000 180,000 213,750 247,500
500,000 150,000 200,000 237,500 275,000
550,000 165,000 220,000 261,250 302,500
600,000 180,000 240,000 285,000 330,000
650,000 195,000 260,000 308,750 357,500
700,000 210,000 280,000 332,500 385,000
750,000 225,000 300,000 356,250 412,500
800,000 240,000 320,000 380,000 440,000
850,000 255,000 340,000 403,750 467,500
900,000 270,000 360,000 427,500 495,000
950,000 285,000 380,000 451,250 522,500
1,000,000 300,000 400,000 475,000 550,000
1,050,000 315,000 420,000 498,750 577,500
</TABLE>
For existing officers, effective January 1, 1998, benefits under the SERP
are calculated under the greater of the old formula or the new formula, except
that compensation for purposes of the old formula includes restricted stock
grants only to the extent earned through December 31, 2001 and will be frozen as
of December 31, 2001, and compensation for purposes of the new formula includes
restricted stock grants only to the extent earned through December 31, 1997.
In addition, in the event of a change in control or certain circumstances that
may lead to a change in control, the Compensation and Corporate Governance
Committee of the Board of Directors may change or eliminate the restriction
period applicable to any outstanding restricted stock awards under the Incentive
Compensation Plan.
<PAGE>
SUMMARY COMPENSATION TABLE
The following table summarizes all compensation for the Chief Executive
Officer and the next four most highly compensated executive officers for the
last three fiscal years, for service for both PP&L and PP&L Resources.
Compensation amounts for these officers are the same as those shown in the PP&L
Resources' proxy statement; they are not additive. Messrs. Hecht and Long also
served as directors but received no separate remuneration in that capacity.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Long-Term
ANNUAL COMPENSATION Compensation
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER ANNUAL RESTRICTED ALL OTHER
- ---------------------------------------------- SALARY/1/ BONUS/1/ COMPENSATION/2/ STOCK AWARD/3/ COMPENSATION/4/
Name and YEAR ($) ($) ($) ($) ($)
PRINCIPAL POSITION
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William F. Hecht 1998 644,604 267,998 0 193,320 6,001
Chairman, President and 1997 609,550 107,360 0 281,435 4,704
Chief Executive Officer 1996 531,194 138,600 0 138,920 4,418
Frank A. Long 1998 439,735 157,872 0 115,290 6,048
Executive Vice President 1997 414,704 85,698 0 167,599 4,750
and Chief Operating Officer 1996 367,555 82,688 14,424 82,800 4,462
Robert G. Byram 1998 279,847 81,200 10,770 62,910 5,185
Senior Vice President -- 1997 264,967 50,880 0 91,630 3,916
Generation and Chief 1996 246,944 48,195 0 48,300 3,673
Nuclear Officer
Robert J. Grey 1998 279,674 81,200 0 62,910 3,907
Senior Vice President, 1997 249,900 48,000 0 86,488 2,682
General Counsel and 1996 231,878 44,415 0 44,620 2,250
Secretary
John R. Biggar/5/ 1998 196,571 57,515 750 43,470 4,850
Senior Vice President and 1997 160,528 16,129 0 32,491 3,582
Chief Financial Officer 1996 158,524 16,035 0 17,480 2,250
- ---------------------------------------------------------------------------------------------------------------------------------
/1/ Salary and bonus data include deferred compensation.
/2/ Includes longevity pay (which is compensation for vacation earned, but not taken) and fees earned by Mr. Biggar for serving
as a director of Safe Harbor, an affiliate of PP&L ($750 in 1998).
/3/ The dollar value of restricted common stock awards was calculated by multiplying the number of shares awarded by the closing
price per share on the date of the grant. As of December 31, 1998, the officers listed in this table held the following number
of shares of restricted common stock, with the following values: Mr. Hecht -- 34,720 shares ($967,820); Mr. Long-- 20,310
shares ($566,141); Mr. Byram-- 11,440 shares ($318,890); Mr. Grey-- 8,090 shares ($225,509), and Mr. Biggar-- 3,300 shares
($91,988). These year-end data do not include awards made in January 1999 for 1998 performance, or awards which had originally
been restricted and for which the restriction periods have lapsed or been lifted. Dividends are paid currently on restricted
stock awards. All outstanding restricted stock awards have a restriction period of three years.
/4/ Includes Company contributions to the Officers' Deferred Savings Plan and the ESOP accounts.
/5/ Mr. Biggar became Senior Vice President and Chief Financial Officer,
effective January 28, 1998.
</TABLE>
CHANGE IN CONTROL AGREEMENTS
Effective as of January 1, 1998, PP&L Resources entered into agreements with
each of the named executive officers, which agreements provide benefits to the
officers upon certain terminations of employment following a change in control
of PP&L Resources (as such term is defined in the agreements). The benefits
provided under these agreements replace any other severance benefits provided to
these officers by PP&L Resources, including any benefits under the Executive
Retirement Security Plan ("ERSP") (which was terminated effective January 1,
1998) or any prior severance agreement.
<PAGE>
Each of the agreements continues in effect until December 31, 1999, and
generally are automatically extended for additional one-year periods. Upon the
occurrence of a change in control, the agreements will expire no earlier than
thirty-six months after the month in which the change in control occurs. Each
agreement provides that the officer will be entitled to the severance benefits
described below if PP&L Resources terminates the officer's employment following
a change in control for any reason other than death, disability, retirement or
"cause," or if the officer terminates employment for "good reason" (as such
terms are defined in the agreement).
The benefits consist of a lump sum payment equal to three times the sum of
(a) the officer's base salary in effect immediately prior to date of
termination, or if higher, immediately prior to the first occurrence of an event
or circumstance constituting good reason, (b) the highest annual bonus in
respect of the last three fiscal years ending immediately prior to the fiscal
year in which the change in control occurs, or if higher, the fiscal year
immediately prior to the fiscal year in which first occurs an event or
circumstance constituting good reason. (This bonus amount would include the
value of restricted stock awards for calendar years prior to 1998.) In
addition, under the terms of each agreement, PP&L Resources would provide the
officer and dependents with continuation of welfare benefits (reduced to the
extent the officer receives comparable benefits), and would pay the officer
unpaid incentive compensation that has been allocated or awarded, a lump sum
payment having an actuarial present value equal to the additional pension
benefits the officer would have received had the officer continued to be
employed by PP&L Resources for an additional thirty-six months, outplacement
services for up to three years and a gross-up payment for any excise tax imposed
under the Internal Revenue Code. In addition, under the agreements, PP&L
Resources would provide post-retirement health care and life insurance benefits
to officers who would have become eligible for such benefits within the thirty-
six month period following the change in control.
JOINT REPORT OF THE COMPENSATION AND CORPORATE
GOVERNANCE COMMITTEES REGARDING EXECUTIVE COMPENSATION
GENERALLY
PP&L Resources, Inc. (the "Company") is the parent holding company of PP&L,
Inc., and PP&L, Inc. is its principal subsidiary. The members of the Company's
Compensation and Corporate Governance Committee--all independent outside
directors--and Board of Directors also serve in the same capacity for PP&L, Inc.
Certain senior officers of the Company are also senior officers of PP&L, Inc.
For those individuals, references below to the Committee and Board of Directors
refer to the Committee and Board of Directors of both the Company and PP&L, Inc.
and discussions of their compensation include compensation earned for services
to both the Company and PP&L, Inc.
During 1998, the Committee reviewed and evaluated the performance and
leadership of the Chief Executive Officer and the other senior officers who are
members of the Company's Corporate Leadership Council ("senior officers"), which
provides strategic direction for the Company and its subsidiaries. The Committee
established the compensation and benefit practices for these individuals as
senior officers of the Company and its subsidiaries, including PP&L, Inc. and
PP&L Global, Inc. (a subsidiary of the Company which invests in and develops
world-wide power projects) ("PP&L Global"). These officers include: William F.
Hecht, Chairman, President and Chief Executive Officer of the Company; Frank A.
Long, Executive Vice President of the Company; John R. Biggar, Senior Vice
President and Chief Financial Officer of the Company1; Robert G. Byram, Senior
Vice President--Generation and Chief Nuclear Officer of PP&L, Inc.; Robert D.
Fagan, President of PP&L Global; Robert J. Grey, Senior Vice President, General
Counsel and Secretary of the Company; and Terry H. Hunt, Senior Vice President--
Strategic Planning of the Company. Except for Mr. Fagan, these individuals are
also senior officers of PP&L, Inc.2
1 Mr. Biggar became an executive officer of the Company and a member of the
Corporate Leadership Council effective as of January 28, 1998.
2 Mr. Fagan has no position with PP&L, Inc., but is a member of the Corporate
Leadership Council and a "senior officer" of the Company by virtue of his
position as President of PP&L Global.
<PAGE>
For 1998, the Company had in place two major components of executive
compensation for the senior officers--base salary and incentive compensation.
Base salaries reflect the value of the various Company positions relative to
similar positions--both within the Company and in other companies--and
individual executive performance. Incentive compensation is based on corporate
performance.3 For 1998, the incentive program had two separate components. Under
a short-term incentive plan, cash awards were made to the senior officers based
on the achievement of key corporate financial and operational goals. Under a
long-term incentive plan, restricted Company stock was granted to the senior
officers based on the achievement of certain strategic goals designed to
position the Company for success in the new competitive environment. Incentive
goals and performance targets were developed by the Committee, and all awards
were granted by the Committee.
BASE SALARIES
In general, the Committee's objective is to provide salary levels that are
sufficiently competitive with comparable companies to enable the Company to
attract and retain high-quality executive talent. To meet this objective, the
Committee regularly reviews salary information for similar companies. In
addition, the Committee annually reviews the performance of each executive to
determine the appropriate level of base salary adjustment for that individual.
In December 1997, the Committee reviewed salary ranges for the senior officers
by comparing these salary levels with levels within the utility industry
generally, and, more specifically, with executive compensation levels at 16
comparable utilities.4 All of the comparison companies were included in the EEI
(Edison Electric Institute) Index of Investor-owned Electric Utilities. The 16
utilities used for comparison purposes were selected based on their similarity
to PP&L, Inc. in terms of annual revenues, service area and other measures of
size.
After reviewing salary data for executive positions at comparable utilities,
the Committee reviewed the actual salaries and performance appraisals of each of
the senior officers. In the case of the Chief Executive Officer, the Committee
considered directors' individual appraisals of his performance in determining
his salary. The Committee then solicited input and recommendations from the
Chief Executive Officer regarding the performance and individual salaries of the
other senior officers.
Upon completion of this review, the Committee established the 1998 salaries of
the senior officers. As of January 1998, Mr. Hecht's total compensation was
about 24% less than the average total compensation of the chief executive
officers of the comparable companies. Also, the total compensation of the senior
officers as a group was approximately 15% less than the average paid to their
counterparts at these companies. Considering this information and individual
performance, the salary of each of the senior officers was increased, effective
as of January 1, 1998.
INCENTIVE AWARDS
In establishing the second component of executive compensation--incentive
awards--the Committee annually reviews the Company's performance in relation to
specific corporate financial, operational and strategic objectives. This
component of compensation is intended to relate executive compensation directly
to corporate performance and shareowner value. This program achieves the
Company's objective of placing a large portion of executive compensation "at
risk" by basing up to 40-50% of the senior officers' total compensation on the
achievement of key corporate goals. The incentive awards are made in the form of
cash and restricted Company stock.
3 Because of his position as President of PP&L Global, Mr. Fagan's incentive
compensation is based on separate goals established for that position.
4 Mr. Fagan's salary was compared with those of similar subsidiary positions in
both regulated and non-regulated companies.
<PAGE>
CASH AWARDS
Cash awards are made available to officers for the achievement of specific,
independent goals established for each calendar year. For 1998, maximum annual
awards based on accountability level were established for each officer according
to the following table:
Maximum Awards
(Percent of Base Salary)
Chief Executive Officer 60 %
Executive Vice President 50 %
Sr. Vice President 40 %
Annual awards are determined by applying these target percentages to the
percentage of goal attainment. The performance goals for each year are
established by the Committee, and the Committee reviews actual results at each
year-end to determine the appropriate goal attainment percentage to apply to the
salary targets.
The following were the goal categories for 1998:
I. Financial--PP&L Resources, Inc. --based on the Company's net income and
total return on common stock and the financial performance of subsidiary energy
trading and marketing operations.
II. Operational--PP&L, Inc.--based on customer satisfaction indices, retail
marketing efforts, the performance of PP&L, Inc.'s power plants, cost control,
safety and environmental performance and affirmative action results.
III. Operational--PP&L Global, Inc.--based on PP&L Global's net income.
The weightings for each of these general categories varied by the level of the
individual officers to reflect the different levels of influence they have on
attainment of the goals, as follows:
<TABLE>
<CAPTION>
Goal Category
Officer Level Financial Operational-- Operational--
PP&L PP&L Global
<S> <C> <C> <C>
Chief Executive Officer 45% 30% 25%
Executive Vice President 35 45 20
Sr. Vice President 30 55 15
</TABLE>
When the level of goal attainment in each of the above categories is measured
at the end of each year and the category weightings shown above are multiplied
by the annual award target for each position, each officer's cash award is
determined for the prior year's performance.
RESTRICTED STOCK AWARDS
Under the terms of the Company's Incentive Compensation Plan, restricted
Company stock also is made available to officers based on the achievement of
strategic objectives designed to position the Company to continue to provide
value to its shareowners. Goals for 1998 were related to success in the
Pennsylvania retail market, transactions which increase the Company's and PP&L
Global's domestic and international business presence, the outcome of PP&L,
Inc.'s restructuring proceeding and the financial initiatives related thereto,
and the establishment of a corporate risk management program. Annual awards are
based on the achievement of these strategic goals. The 1998 award targets for
individual officers varied by accountability level, as follows:
Maximum Awards
(Percent of Base Salary)
Chief Executive Officer 40 %
Executive Vice President 35 %
Sr. Vice President 30 %
<PAGE>
Awards are made in the form of restricted stock equivalent to the dollar value
of the percentage applied to base pay in effect at the end of the year. This
stock award encourages increased stock ownership on the part of the officers and
aligns the interests of management and shareowners.
The Committee determines the applicable restriction period for the stock at
the time of grant, which, under the terms of the Incentive Compensation Plan,
must be at least three years and not more than ten years from the date of grant.
That is, the officer can be divested of this stock during the restriction period
if he or she terminates employment with the Company. The Plan also provides
that, upon retirement, death or disability of an officer, the outstanding
restricted stock awards made to that officer will be prorated. In such cases,
the Committee may provide the officer with the entire award rather than the
prorated portion.
In this way, grants of restricted stock serve as an incentive for senior
management to continue their employment with the Company and, therefore,
contribute to continuity in top management. In the past, the grants of
restricted stock made under the Incentive Compensation Plan have been restricted
for a period of three years.
The 1998 incentive awards made to the five most highly compensated executive
officers are shown in the Summary Compensation Table. The Committee based the
awards for these officers solely on the corporate goals achieved. In January
1999, the Committee reviewed performance achieved during 1998 for the financial
and operational goals under the short-term incentive plan. During 1998, the
Company achieved 45% of its financial goals, 80% of its operational goals for
PP&L, Inc. and 100% of its operational goals for PP&L Global. As a result of the
weighting system described above, the senior officers received the following
short-term incentive awards as a percent of base salary: Mr. Hecht--41.6%; Mr.
Long--35.9%; Mr. Biggar--28.7%, Mr. Byram--29.0%; and Mr. Grey--29.0%. Mr. Fagan
received a 1998 short-term incentive award of 67.5% of base salary, based on
separate goals related to PP&L Global's staffing and organization, strategic
planning and strategic acquisition efforts, budgetary control and the
establishment of certain financial capabilities, policies and programs, and
investment and commitments in international projects.
In January 1999, the Committee also reviewed the Company's performance on the
established strategic goals under the long-term incentive plan. During 1998, the
Company achieved 78% of these strategic goals. Applying the maximum targets set
forth above, the senior officers received the following long-term incentive
awards as a percent of base salary: Mr. Hecht--31.2%; Mr. Long--27.3%; Mr.
Biggar--22.6%, Mr. Byram--23.4%; and Mr. Grey--23.4%. Mr. Fagan's 1998 long-term
incentive award equal to 50.0% of his base salary (1/3 cash and 2/3 in
restricted stock) was based on an established formula emphasizing PP&L Global's
committed equity investment and cash flow.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In establishing Mr. Hecht's 1998 salary, the Committee reviewed the salaries
of the chief executive officers of the 16 comparison utilities referenced above.
In conducting this review, the Committee concluded that Mr. Hecht's 1997 salary
was about at the average earned by incumbents in similar positions at those
utilities. As a result of this review and Mr. Hecht's performance, the Committee
set his 1998 salary at $645,000, effective January 1, 1998, in order to maintain
this relationship with market conditions.
Based on the Company's performance in 1998 on the specific corporate financial
and operational goals discussed above, Mr. Hecht received a cash award equal to
approximately 41.6% of his year-end salary. Based on the Company's performance
in 1998 on the strategic goals discussed above, Mr. Hecht received a restricted
stock award equal to approximately 31.2% of his year-end salary.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
provides that publicly held corporations may not deduct in any taxation year
certain compensation in excess of $1,000,000 paid to the chief executive officer
and the next four most highly compensated executive officers. Section 162(m) did
not apply to the Company's 1998 executive compensation. In this regard, the
Company is proposing that its shareowners at the 1999 Annual Meeting approve (i)
the amendment of the Incentive Compensation Plan to effectuate its new stock
option program and to enable the Company to make stock option awards
<PAGE>
and other stock-based awards under that Plan that are deductible under Section
162(m) and (ii) the adoption of a Short-Term Incentive Plan under which cash
awards to officers under the existing short-term incentive program could be
deductible under Section 162(m).
The Compensation and Corporate
Governance Committee
E. Allen Deaver, Chair
Elmer D. Gates
Stuart Heydt
Norman Robertson
PROPOSAL 2: PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION
DESCRIPTION OF PROPOSED AMENDMENT
At the Annual Meeting, Shareowners will vote upon the Proposed Amendment to
remove in their entirety the following sections of Article VI of the Company's
Articles: (1) Section 2(C) of Division A, (2) Section 2(B) of Division B, and
(3) Section 1(C) of Division E. The full text of the Amended and Restated
Articles are set forth on Schedule A to this Proxy Statement.
The Proposed Amendment would have the effect of removing limitations on the
Company's ability to:
* increase the authorized number of shares of 4- 1/2% Preferred Stock or Series
Preferred Stock or issue additional shares of 4- 1/2% Preferred Stock or
Series Preferred Stock or issue Senior Stock,
* merge or consolidate with another corporation unless such transaction has
been approved by the Securities and Exchange Commission under the Public
Utility Holding Company Act of 1935,
* incur unsecured indebtedness in an amount in excess of 20% of the sum of the
outstanding secured indebtedness of the Company plus capital and surplus of
the Company (the "Unsecured Debt Limitation"), and
* pay dividends on the Common Stock aggregating an amount in excess of (a) 75%
of the current year's earnings otherwise available for Common Stock, if after
such payment, the ratio of the aggregate of capital for Common Stock and
surplus to the total capitalization of the Company, including surplus, will
be less than 25% or (b) 50% of the current year's earnings otherwise
available for Common Stock, if after such payment, the ratio of the aggregate
of capital for Common Stock and surplus to the total capitalization,
including surplus, will be less than 20% (the "Common Stock Dividend
Limitation").
THE FOREGOING STATEMENTS ARE SUMMARIES OF THE SUBSTANCE OR GENERAL EFFECT OF THE
PROVISIONS OF THE ARTICLES AND ARE QUALIFIED IN THEIR ENTIRETY BY THE FULL TEXT
OF SUCH PROVISIONS SET FORTH IN SCHEDULE A.
REASONS FOR THE PROPOSED AMENDMENT
The electric utility industry has become, and will continue to be,
increasingly competitive as the result of various business, regulatory and
technological developments. Recent federal and state regulatory actions
designed to promote retail and wholesale competition include, among other
things, initiatives to allow customers to choose their electricity supplier. In
fact, as a result of the Pennsylvania Electricity Customer Choice and
Competition Act, all of Pennsylvania's retail electric customers, including
PP&L's customers, will be able to choose their electric supplier in the near
future. Such competition already exists for wholesale electric customers. The
Company believes that significant financial and operational flexibility will be
necessary to succeed in this competitive marketplace. This is especially true
because the restrictions that would be eliminated by the Proposed Amendment
generally do not burden PP&L's new competitors (e.g., power marketers,
independent power producers, exempt wholesale generators and owners of
cogeneration facilities) or even many other public utility companies.
<PAGE>
The elimination of the Unsecured Debt Limitation is important to the
Company's financial strategy for the new competitive environment. This
financial strategy involves, among other things, a reduction in the Company's
permanent capitalization and a temporary use of a higher degree of leverage.
The elimination of the Unsecured Debt Limitation from the Articles will allow
the Company to utilize more fully various unsecured debt alternatives and thus
improve its ability to take full advantage of changing conditions in the capital
markets. This additional flexibility will, for example, permit the Company to
issue long-term debt when, because of mortgage coverage restrictions or other
reasons, it may be unattractive or not possible to issue any additional first
mortgage bonds. In addition, elimination of the Unsecured Debt Limitation will
afford the Company greater flexibility in the issuance of short-term debt to
meet interim cash requirements with what is usually the least expensive form of
capital.
PP&L Resources currently holds a sufficient number of shares of 4- 1/2%
Preferred Stock and Series Preferred Stock to waive any potential exceedances of
the Unsecured Debt Limitation provisions of the Articles proposed to be
eliminated by the Proposed Amendment. If the Proposed Amendment is not approved,
PP&L Resources has informed the Company that it intends to use its ability to
waive the limitations imposed by such provisions from time to time depending on
the financial and strategic requirements of the Company and PP&L Resources.
PP&L believes that the elimination of the Common Stock Dividend Limitation
will be beneficial to its ability to pay dividends to PP&L Resources due to its
new financial strategy and the new competitive industry environment which may
increase the volatility of the Company's revenue and income streams.
Except for actions that may be taken as a result of the elimination of the
Unsecured Debt Limitation and the Common Stock Dividend Limitation, as discussed
above, the Company does not currently anticipate taking any actions that would
be prohibited by the other provisions of the Articles proposed to be eliminated
by the Proposed Amendment.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
considerations with respect to the receipt of Special Cash Payments in
connection with the approval and adoption of the Proposed Amendment. This
summary is based on the Internal Revenue Code of 1986, as amended to the date
hereof (the "Code"), administrative pronouncements, judicial decisions and
existing and proposed Treasury Regulations, changes to any of which subsequent
to the date of the Proxy Statement may adversely affect the tax consequences
described herein, possibly on a retroactive basis. This summary is addressed to
4- 1/2% Preferred Shareowners who hold shares of 4- 1/2% Preferred Stock as
capital assets within the meaning of Section 1221 of the Code. This summary
does not discuss all of the tax consequences that may be relevant to a 4- 1/2%
Preferred Shareowner in light of such 4- 1/2% Preferred Shareowner's particular
circumstances or to 4- 1/2% Preferred Shareowners subject to special rules
(including certain financial institutions, tax-exempt organization, insurance
companies, dealers in securities or currencies, 4- 1/2% Preferred Shareowners
who acquired their shares pursuant to the exercise of stock options or other
compensation arrangements with the Company or 4- 1/2% Preferred Shareowners
holding shares as part of a hedging, integrated or conversion transaction,
constructive sale or a straddle for tax purposes). OWNERS OF 4- 1/2%
PREFERRED STOCK SHOULD CONSULT THEIR TAX ADVISORS WITH REGARD TO THE APPLICATION
OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS, AS
WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR
FOREIGN TAXING JURISDICTION.
As used herein, the term "United States 4- 1/2% Preferred Shareowner" means a
beneficial owner of a share of 4- 1/2% Preferred Stock that is for United States
federal income tax purposes (i) a citizen or resident of the United States or
any political subdivision thereof; (ii) a corporation or partnership created or
organized in or under the laws of the United States or of 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) a trust which
is subject to the supervision of a court within the United States and the
control of one or more United States persons as described in section 7701(a)(30)
of the Code. As used herein, the term "Non-United States 4- 1/2% Preferred
Shareowner" means an owner of a share of 4- 1/2% Preferred Stock that is not a
United States 4- 1/2% Preferred Shareowner.
<PAGE>
SPECIAL CASH PAYMENTS
United States 4- 1/2% Preferred Shareowners. There is no direct authority
concerning the federal income tax consequences of the receipt of Special Cash
Payments. The Company will, for information reporting purposes, treat Special
Cash Payments as ordinary, non-dividend income to recipient United States 4-
1/2% Preferred Shareowners.
Non-United States 4- 1/2% Preferred Shareowners. The Company will treat
Special Cash Payments paid to Non-United States 4- 1/2% Preferred Shareowners as
subject to withholding of United States federal income tax at a rate of 30%.
However, a Special Cash Payment that is effectively connected with the conduct
of a trade or business by a Non-United States 4- 1/2% Preferred Shareowner
within the United States will not be subject to such withholding tax (provided
such Non-United States 4- 1/2% Preferred Shareowner provides two originals of
Internal Revenue Service Form 4224 (or successor form) stating that such Special
Cash Payments are so effectively connected), but instead will be subject to
United States Federal income tax on a net income basis at applicable graduated
individual or corporate rates. Any such effectively connected Special Cash
Payments received by a foreign corporation may be subject to an additional
"branch profits tax" at a 30% rate (or such lower rate as may be specified by an
applicable income tax treaty). A Non-United States 4- 1/2% Preferred Shareowner
eligible for a reduced rate of United States withholding tax pursuant to an
income tax treaty may obtain a refund of any excess amounts withheld by filing
an appropriate claim for refund with the Internal Revenue Service.
BACKUP WITHHOLDING
ANY UNITED STATES 4- 1/2% PREFERRED SHAREOWNER WHO VOTES IN FAVOR OF THE
PROPOSED AMENDMENT AND WHO FAILS TO COMPLETE AND SIGN THE FORM W-9 THAT IS
INCLUDED IN THE PROXY (OR, IN THE CASE OF A NON-UNITED STATES 4- 1/2% PREFERRED
SHAREOWNER, FORM W-8, OBTAINABLE FROM THE COMPANY) MAY BE SUBJECT TO A REQUIRED
FEDERAL INCOME TAX BACKUP WITHHOLDING OF 31% OF THE SPECIAL CASH PAYMENT. To
prevent United States federal income tax backup withholding with respect to the
Special Cash Payment, a United States 4- 1/2% Preferred Shareowner must provide
the Company with the owner's correct Taxpayer Identification Number ("TIN") and
certify that the owner is not subject to backup withholding of federal income
tax by completing the Form W-9 included in the Proxy. Certain 4- 1/2% Preferred
Shareowners (including, among others, all corporations and Non-United States 4-
1/2% Preferred Shareowners) are exempt from backup withholding. For a corporate
United States 4- 1/2% Preferred Shareowner to qualify for such exemption, such
owner must provide the Company with a properly completed and executed Form W-9
attesting to its exempt status. In order for a Non-United States 4- 1/2%
Preferred Shareowner to qualify as an exempt recipient, the foreign owner must
submit a Form W-8, Certificate of Foreign Status, signed under penalties of
perjury, attesting to that owner's exempt status. A copy of the Form W-8 may be
obtained from the Company. Any Special Cash Payments paid to Non-United States
4- 1/2% Preferred Shareowners that are subject to the 31% backup withholding
will not be subject to the 30% withholding tax discussed above under "Special
Cash Payments--Non-United States 4- 1/2% Preferred Shareowners."
The amount of any backup withholding from a payment to a 4- 1/2% Preferred
Shareowner will be allowed as a credit against such owner's United States
federal income tax liability and may entitle such owner to a refund, provided
that the required information is furnished to the Internal Revenue Service.
INDEPENDENT ACCOUNTANTS
Upon the recommendation of PP&L Resources' Audit and Corporate Responsibility
Committee, which is composed of directors who are not employees of the Company
or its Affiliates, the Board of Directors of PP&L Resources appointed
PricewaterhouseCoopers LLP to serve as independent accountants for the year
ending December 31, 1999, for PP&L Resources and its subsidiaries, including the
Company. This appointment is subject to reconsideration by the Board if it is
not ratified by the Shareowners of PP&L Resources.
<PAGE>
MISCELLANEOUS
The Board of Directors is not aware of any other matters to be presented for
action at the meeting. If any other matter requiring a vote of the Shareowners
should arise, it is intended that the persons named as Proxies will vote in
accordance with their best judgment.
METHOD AND EXPENSE OF SOLICITATION OF PROXIES
The cost of soliciting proxies on behalf of the Board of Directors will be
paid by the Company. In addition to the solicitation by mail, a number of
regular employees may solicit proxies in person or by telephone, telegraph or
facsimile. The company has retained Innisfree M&A Incorporated to assist in the
solicitation of proxies for the Annual Meeting. It is expected that the
remuneration to Innisfree for its services will be $7,500.00. Brokers, dealers,
banks and their nominees who hold shares for the benefit of others will be asked
to send proxy material to the beneficial owners of the shares, and the Company
will reimburse them for their expenses.
PROPOSALS FOR 2000 ANNUAL MEETING
To be included in the proxy material for the 2000 Annual Meeting, any proposal
intended to be presented at that meeting by a Shareowner must be received by the
Secretary no later than November 15, 1999.
ANNUAL FINANCIAL STATEMENTS
The Company's annual financial statements and related management discussion
are appended to this document.
By Order of the Board of Directors.
Robert J. Grey
Secretary
March 12, 1999
<PAGE>
SCHEDULE A
PP&L, INC.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
ARTICLE I. The name of the Corporation is
PP&L, INC.
ARTICLE II. The location and post office address of the registered office of
the Corporation in this Commonwealth is
Two North Ninth Street
Allentown, Pennsylvania 18101
ARTICLE III. The purpose or purposes for which the Corporation is
incorporated under the Business Corporation Law of the Commonwealth of
Pennsylvania are to engage in, and do any lawful act concerning, any or all
lawful business for which a corporation may be incorporated under said
Business Corporation Law, including but not limited to:
1. The supply of light, heat or power to the public by means of
electricity or by any other means.
2. The production, generation, manufacture, transmission, storage,
distribution or furnishing of artificial or natural gas, electricity or
steam or air conditioning or refrigerating services, or any combination
thereof to or for the public.
3. The diverting, pumping or impounding of water for the development or
furnishing of hydroelectric power to or for the public.
4. The transportation of artificial or natural gas, electricity,
petroleum or petroleum products or water or any combination of such
substances for the public.
5. The diverting, developing, pumping, impounding, distributing or
furnishing of water from either surface or subsurface sources to or for the
public.
6. Manufacturing, processing, owning, using and dealing in personal
property of every class and description, engaging in research and
development, the furnishing of services, and acquiring, owning, using and
disposing of real property of every nature whatsoever.
ARTICLE IV. The term for which the Corporation is to exist is perpetual.
ARTICLE V. The aggregate number of shares which the Corporation shall have
authority to issue is 185,629,936 shares, divided into 629,936 shares of 4
1/2% Preferred Stock, par value $100 per share; 10,000,000 shares of Series
Preferred Stock, par value $100 per share; 5,000,000 shares of Preference
Stock, without nominal or par value; and 170,000,000 shares of Common Stock,
without nominal or par value.
ARTICLE VI. The designations, preferences, qualifications, limitations,
restrictions, and the special or relative rights in respect of the shares of
each class shall be as follows:
DIVISION A -- 4 1/2% PREFERRED STOCK
Section 1. Dividend Rate. The 4 1/2% Preferred Stock shall be entitled to
dividends, as provided in Division C, at the rate of four and one-half percent
(4 1/2%) per annum, such dividends to be cumulative from the date of issuance
thereof.
Section 2. Restrictions on Certain Corporate Action. (A) Upon the vote of a
majority of all the Directors of the Corporation and of a majority of the
total number of shares of stock then issued and outstanding and entitled to
vote, the Corporation may from time to time create or authorize one or more
other classes of stock with such designations, rights, privileges,
limitations, preferences, voting powers, prohibitions, restrictions or
qualifications of the voting and other rights and powers and terms as to
redemption as may be determined by
1
<PAGE>
said vote, which may be the same or different from the designations, rights,
privileges, limitations, preferences, voting powers, prohibitions,
restrictions or qualifications of the classes of stock of the Corporation then
authorized; provided, however, that no new class of stock shall hereafter be
created or authorized which is entitled to dividends or shares in distribution
of assets on a parity with or in priority to the 4% Preferred Stock, nor shall
there be created or authorized any securities convertible into shares of any
such stock, unless the holders of record of not less than two-thirds of the
number of shares of 4 1/2% Preferred Stock then outstanding shall consent
thereto in writing or by voting therefor in person or by proxy at the meeting
of shareholders at which the creation or authorization of such new class of
stock or such convertible securities is considered. Any such vote may
authorize any shares of any class then authorized but unissued to be issued as
shares of such new class or classes.
(B) The expressed rights, privileges, terms and conditions of the 4 1/2%
Preferred Stock then outstanding shall not be amended, altered, changed or
repealed in a manner substantially prejudicial to the holders thereof unless
the holders of record of not less than two-thirds of the number of shares of
the 4 1/2% Preferred Stock then outstanding shall consent thereto in writing
or by voting therefor in person or by proxy at the meeting of shareholders at
which such amendment, alteration, change or repeal is considered.
DIVISION B -- SERIES PREFERRED STOCK
Section 1. Division into Series. (A) All shares of Series Preferred Stock
shall be identical except that the dividend rate, the amount to which such
shares shall be entitled upon redemption and upon liquidation, the sinking
fund, if any, as well as the provisions, if any, with respect to
convertibility may vary between different series. The Series Preferred Stock
may be divided into, and issued from time to time, in one or more series, each
of such series to have such distinctive designation, terms, relative rights,
privileges, limitations, preferences and voting powers and such prohibitions,
restrictions, and qualifications of the voting and other rights and powers as
are fixed and determined in this Article VI or in a resolution or resolutions
providing for the issue of such series adopted by the Board of Directors as
provided in this Division B.
(B) Authority is hereby expressly granted to the Board of Directors to
establish one or more series of Series Preferred Stock and with respect to
each series to fix and determine by resolution or resolutions providing for
the issue of such series:
(1) the number of shares to constitute such series and the distinctive
designation thereof to distinguish the shares thereof from the shares of
all other series and classes;
(2) the dividend rate on the shares of such series, and the date or dates
from which dividends shall be cumulative;
(3) the amount to which shares of such series shall be entitled upon
redemption;
(4) the amount to which shares of such series shall be entitled upon
liquidation;
(5) the amount of the sinking fund, if any, for the purchase or
redemption of shares of such series; and
(6) the terms and conditions, if any, upon which the shares of such
series may be converted into other securities of the Corporation.
Section 2. Restrictions on Certain Corporate Action. (A) Upon the vote of a
majority of all of the Directors of the Corporation and of a majority of the
total number of shares of stock then issued and outstanding and entitled to
vote, the Corporation may from time to time create or authorize one or more
classes of stock in addition to the Series Preferred Stock, the 4 1/2%
Preferred Stock, the Preference Stock and the Common Stock, with such
designations, rights, privileges, limitations, preferences, voting powers,
prohibitions, restrictions or qualifications of the voting and other rights
and powers and terms as to redemption as may be determined by said vote, which
may be the same or different from the designations, rights, privileges,
limitations, preferences, voting powers, prohibitions, restrictions or
qualifications of the classes of stock of the Corporation then authorized;
provided, however, that no new class of stock shall hereafter be created or
authorized which is entitled to dividends or shares in distribution of assets
on a parity with or in priority to the Series Preferred Stock, nor shall there
be created or authorized any securities convertible into shares of any such
stock, unless the holders of record of not
2
<PAGE>
less than two-thirds of the number of shares of the Series Preferred Stock and
the 4 1/2% Preferred Stock then outstanding (consenting or voting as a single
class separate from the holders of the Preference Stock and the Common Stock)
shall consent thereto in writing or by voting therefor in person or by proxy
at the meeting of shareholders at which the creation or authorization of such
new class of stock or such convertible securities is considered. Any such vote
may authorize any shares of any class then authorized but unissued to be
issued as shares of such new class or classes.
(B) The provisions of this Section 2 of this Division B requiring the
approval of a specified percentage of the holders of the Series Preferred
Stock and the 4 1/2% Preferred Stock voting or consenting as a class shall be
construed as in addition to and not in substitution for, any provisions of
Division A of this Article VI requiring the approval of the holders of a
specified percentage of the 4 1/2% Preferred Stock.
(C) The expressed rights, privileges, terms and conditions of the Series
Preferred Stock then outstanding, insofar as they are set forth in the
foregoing subsections of this Section 2 shall not be amended, altered, changed
or repealed in a manner substantially prejudicial to the holders thereof
unless (1) the holders of record of not less than two-thirds of the number of
shares of the Series Preferred Stock and the 4 1/2% Preferred Stock then
outstanding (consenting or voting as a single class separate from the holders
of the Preference Stock and the Common Stock) shall consent thereto in writing
or by voting therefor in person or by proxy at the meeting of shareholders at
which such amendment, alteration, change or repeal is considered, and (2) the
expressed rights, privileges, terms and conditions of the 4 1/2% Preferred
Stock, are, at the same time, similarly amended, altered, changed or repealed.
The expressed rights, privileges, terms and conditions of the Series Preferred
Stock then outstanding, other than those set forth in the foregoing
subsections of this Section 2, shall not be amended, altered, changed or
repealed in a manner substantially prejudicial to the holders thereof unless
the holders of record of not less than two-thirds of the number of shares of
the Series Preferred Stock then outstanding shall consent thereto in writing
or by voting therefor in person or by proxy at the meeting of shareholders at
which such amendment, alteration, change or repeal is considered.
Section 3. Variations Among Series of Series Preferred Stock. (A) 4.60%
Series Preferred Stock. The terms of the "4.60% Series Preferred Stock," in
the respects in which the shares of such series may vary from shares of other
series of the Series Preferred Stock shall be as follows: the dividend rate
shall be 4.60% per annum, and dividends on each share of such series shall be
cumulative from the date or dates of initial issue of shares of such series:
the redemption price shall be $103 per share at any time; $103 per share shall
be payable upon any voluntary liquidation, dissolution or winding up of the
Corporation and $100 per share shall be payable upon any involuntary
liquidation, dissolution or winding up of the Corporation. The number of
shares of this series authorized is 63,000 shares.
(B) 4.40% Series Preferred Stock. The terms of the "4.40% Series Preferred
Stock" in the respects in which the shares of such series may vary from shares
of other series of the Series Preferred Stock shall be as follows: the
dividend rate shall be 4.40% per annum, and dividends on each share of such
series shall be cumulative from the date or dates of the initial issue of
shares of such series; the redemption price shall be $102 per share at any
time; $102 per share shall be payable upon any voluntary liquidation,
dissolution or winding up of the Corporation and $100 per share shall be
payable upon any involuntary liquidation, dissolution or winding up of the
Corporation. The number of shares of this series authorized is 229,214 shares.
(C) 3.35% Series Preferred Stock. The terms of the "3.35% Series Preferred
Stock" in the respects in which the shares of such series may vary from shares
of other series of the Series Preferred Stock shall be as follows: the
dividend rate shall be 3.35% per annum and dividends on each share of such
Series shall be cumulative from the date or dates of the initial issue of
shares of such series; the redemption price shall be $103.50 per share at any
time; $103.50 per share shall be payable upon any voluntary liquidation,
dissolution or winding up of the Corporation and $100 per share shall be
payable upon any involuntary liquidation, dissolution or winding up of the
Corporation. The number of shares of this series authorized is 53,248 shares.
(D) 6.75% Series Preferred Stock. The terms of the "6.75% Series Preferred
Stock" in the respects in which the shares of such series may vary from shares
of other series of the Series Preferred Stock shall be as follows:
(1) The dividend rate shall be 6.75% per annum and dividends on each
share of such Series shall be cumulative from the date or dates of the
initial issue of shares of such series;
3
<PAGE>
(2) Shares of this Series are not redeemable prior to October 1, 2003. On
or after October 1, 2003, the Corporation may, by resolution of the Board
of Directors or the Executive Committee of the Board of Directors, redeem
all, or from time to time, any part of the outstanding shares of this
Series, at the following redemption prices per share:
<TABLE>
<CAPTION>
IF REDEEMED DURING TWELVE MONTH REDEMPTION
PERIOD ENDING SEPTEMBER 30 PRICES
------------------------------- ----------
<S> <C>
2004........................................................... 103.38%
2005........................................................... 103.04
2006........................................................... 102.70
2007........................................................... 102.36
2008........................................................... 102.03
2009........................................................... 101.69
2010........................................................... 101.35
2011........................................................... 101.01
2012........................................................... 100.68
2013........................................................... 100.34
</TABLE>
and thereafter at $100.00 per share. Any shares of this Series which are
redeemed, repurchased or otherwise reacquired by the Corporation shall,
until further action by the Board of Directors or the Executive
Committee of the Board of Directors, have the status of authorized and
unissued shares of Series Preferred Stock, without designation as to
series.
(3) $100.00 per share shall be payable upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation. The shares of
this Series shall not be convertible into shares of any other class or
classes or into any other securities of the Corporation. The number of
shares of this series authorized is 850,000 shares.
(E) 6.125% Series Preferred Stock. The terms of the "6.125% Preferred Stock"
in the respects in which the shares of such series may vary from shares of
other series of the Series Preferred Stock shall be as follows:
(1) The dividend rate shall be 6.125% per share per annum and dividends
on each share of such Series shall be cumulative from the date or dates of
the initial issue of shares of such Series;
(2) So long as any shares of this Series remain outstanding, the
Corporation, after full dividends on all outstanding shares of the 4 1/2%
Preferred Stock and the Series Preferred Stock, including this Series, for
all past dividend periods shall have been paid or set aside, shall redeem
as and for a sinking fund for the retirement of this Series (the "6.125%
Sinking Fund"), out of funds legally available therefor, (i) annually on
October 1 in each of the years 2003 through 2007, 57,500 shares of this
Series, and (ii) on October 1, 2008, the remaining shares of this Series.
The Corporation's obligation to make redemptions for the 6.125% Sinking
Fund on any such October 1 as provided in this subparagraph (2) (such
obligations on each such date being herein called the "6.125% Sinking Fund
Obligation") shall be cumulative so that if on any such October 1 the funds
of the Corporation legally available for the 6.125% Sinking Fund shall be
insufficient to permit the Corporation to discharge its 6.125% Sinking Fund
Obligation on such date, or if for any other reason such 6.125% Sinking
Fund Obligation shall not have been discharged in full on such date, then
such 6.125% Sinking Fund Obligation, to the extent not discharged, shall
become an additional 6.125% Sinking Fund Obligation for each succeeding
October 1 until fully discharged. The price at which shares of this Series
shall be called for redemption through the 6.125% Sinking Fund shall be
$100 per share, plus an amount equal to accumulated and unpaid dividends to
the date of such redemption computed as provided in Section 5 of Division C
of Article VI of these Amended and Restated Articles of Incorporation. The
Corporation's 6.125% Sinking Fund Obligation may be discharged, in whole or
part, by the application of any shares of this Series purchased or
otherwise acquired by the Corporation on or before such date. If the
Corporation shall for any reason fail to discharge in full its 6.125%
Sinking Fund Obligation on any such October 1, the Corporation shall not
thereafter, unless and until such 6.125% Sinking Fund Obligation and its
6.125% Sinking Fund Obligation for each and every prior October 1 shall
have been discharged in full, declare or pay any dividend on, or make any
other distribution of property with respect to, or purchase or otherwise
acquire, any of its Common Stock.
4
<PAGE>
(3) Shares of this Series are not redeemable prior to October 1, 2003. On
and after October 1, 2003, the Corporation may, by resolution of the Board
of Directors or the Executive Committee of the Board of Directors, redeem
all, or from time to time, any part of the outstanding shares of this
Series at $100 per share. Any shares of this Series which are redeemed,
repurchased or otherwise reacquired by the Corporation shall, until further
action by the Board of Directors or the Executive Committee of the Board of
Directors, have the status of authorized and unissued shares of Series
Preferred Stock, without designation as to series.
(4) $100.00 per share shall be payable upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation. The shares of
this Series shall not be convertible into shares of any other class or
classes or into any other securities of the Corporation. The number of
shares of this series authorized is 1,150,000 shares.
(F) 6.33% Series Preferred Stock. The terms of the "6.33% Preferred Stock"
in the respects in which the shares of such series may vary from shares of
other series of the Series Preferred Stock shall be as follows:
(1) The dividend rate shall be 6.33% per share per annum and dividends on
each share of such Series shall be cumulative from the date or dates of the
initial issue of shares of such Series;
(2) So long as any shares of this Series remain outstanding, the
Corporation, after full dividends on all outstanding shares of the 4 1/2%
Preferred Stock and the Series Preferred Stock, including this Series, for
all past dividend periods shall have been paid or set aside, shall redeem
as and for a sinking fund for the retirement of this Series (the "6.33%
Sinking Fund"), out of funds legally available therefor, (i) annually on
July 1 in each of the years 2003 through 2007, 50,000 shares of this
Series, and (ii) on July 1, 2008, the remaining shares of this Series. The
Corporation's obligation to make redemptions for the 6.33% Sinking Fund on
any such July 1 as provided in this subparagraph (2) (such obligations on
each such date being herein called the "6.33% Sinking Fund Obligation")
shall be cumulative so that if on any such July 1 the funds of the
Corporation legally available for the 6.33% Sinking Fund shall be
insufficient to permit the Corporation to discharge its 6.33% Sinking Fund
obligation on such date, or if for any other reason such 6.33% Sinking Fund
Obligation shall not have been discharged in full on such date, then such
6.33% Sinking Fund Obligation, to the extent not discharged, shall become
an additional 6.33% Sinking Fund Obligation for each succeeding July 1
until fully discharged. The price at which shares of this Series shall be
called for redemption through the 6.33% Sinking Fund shall be $100 per
share, plus an amount equal to accumulated and unpaid dividends to the date
of such redemption computed as provided in Section 5 of Division C of
Article VI of these Amended and Restated Articles of Incorporation. The
Corporation's 6.33% Sinking Fund Obligation may be discharged, in whole or
part, by the application of any shares of this Series purchased or
otherwise acquired by the Corporation on or before such date. If the
Corporation shall for any reason fail to discharge in full its 6.33%
Sinking Fund Obligation on any such July 1, the Corporation shall not
thereafter, unless and until such 6.33% Sinking Fund Obligation and its
6.33% Sinking Fund Obligation for each and every prior July 1 shall have
been discharged in full, declare or pay any dividend on, or make any other
distribution of property with respect to, or purchase or otherwise acquire,
any of its Common Stock.
(3) Shares of this Series are not redeemable prior to October 1, 2003. On
and after October 1, 2003, the Corporation may, by resolution of the Board
of Directors or the Executive Committee of the Board of Directors, redeem
all, or from time to time, any part of the outstanding shares of this
Series at $100 per share. Any shares of this Series which are redeemed,
repurchased or otherwise reacquired by the Corporation shall, until further
action by the Board of Directors or the Executive Committee of the Board of
Directors, have the status of authorized and unissued shares of Series
Preferred Stock, without designation as to series.
(4) $100.00 per share shall be payable upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation. The shares of
this Series shall not be convertible into shares of any other class or
classes or into any other securities of the Corporation. The number of
shares of this series authorized is 1,000,000 shares.
(G) 5.95% Series Preferred Stock. The terms of the "5.95% Preferred Stock"
in the respects in which the shares of such series may vary from shares of
other series of the Series Preferred Stock shall be as follows:
(1) The dividend rate shall be 5.95% per share per annum and dividends on
each share of such Series shall be cumulative from the date or dates of the
initial issue of shares of such Series;
5
<PAGE>
(2) The Corporation, after full dividends on all outstanding shares of
the 4 1/2% Preferred Stock and the Series Preferred Stock including this
Series, for all past dividend periods shall have been paid or set aside,
shall redeem as and for a sinking fund for the retirement of this Series
(the "5.95% Sinking Fund"), out of funds legally available therefor, on
April 1, 2001, all of the outstanding shares of this Series. If on April 1,
2001, the required number of shares shall not be redeemed because of the
lack of legally available funds, or for any other reason, the amount
required to be redeemed shall be carried forward until such obligation is
fully discharged. The price at which shares of this Series shall be called
for redemption through the 5.95% Sinking Fund shall be $100 per share, plus
an amount equal to accumulated and unpaid dividends to the date of such
redemption computed as provided in Section 5 of Division C of Article VI of
these Amended and Restated Articles of Incorporation. If the Corporation
shall for any reason fail to discharge in full its 5.95% Sinking Fund
obligation on April 1, 2001, the Corporation shall not thereafter, unless
and until such 5.95% Sinking Fund obligation shall have been discharged in
full, declare or pay any dividend on, or make any other distribution of
property with respect to, or purchase or otherwise acquire, any of its
Common Stock. Any shares of this Series which are redeemed, repurchased or
otherwise reacquired by the Corporation shall, until further action by the
Board of Directors or the Executive Committee of the Board of Directors,
have the status of authorized and unissued shares of Series Preferred
Stock, without designation as to series.
(3) The amount per share for this Series payable to the holders thereof
upon any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation shall be $100. The shares of this Series shall not be
convertible into shares of any other class or classes or into any other
securities of the Corporation. The number of shares of this Series
authorized is 300,000 shares.
(H) 6.05% Series Preferred Stock. The terms of the "6.05% Preferred Stock"
in the respects in which the shares of such series may vary from shares of
other series of the Series Preferred Stock shall be as follows:
(1) The dividend rate shall be 6.05% per share per annum and dividends on
each share of such Series shall be cumulative from the date or dates of the
initial issue of shares of such Series;
(2) The Corporation, after full dividends on all outstanding shares of
the 4 1/2% Preferred Stock and the Series Preferred Stock, including this
Series, for all past dividend periods shall have been paid or set aside,
shall redeem as and for a Sinking Fund for the retirement of this Series
(the "6.05% Sinking Fund"), out of funds legally available therefor, on
April 1, 2002, all of the outstanding shares of this Series. If on April 1,
2002, the required number of shares shall not be redeemed because of the
lack of legally available funds, or for any other reason, the amount
required to be redeemed shall be carried forward until such obligation is
fully discharged. The price at which shares of this Series shall be called
for redemption through the 6.05% Sinking Fund shall be $100 per share, plus
an amount equal to accumulated and unpaid dividends to the date of such
redemption computed as provided in Section 5 of Division C of Article VI of
these Amended and Restated Articles of Incorporation. If the Corporation
shall for any reason fail to discharge in full its 6.05% Sinking Fund
obligation on April 1, 2002, the Corporation shall not thereafter, unless
and until such 6.05% Sinking Fund obligation shall have been discharged in
full, declare or pay any dividend on, or make any other distribution of
property with respect to, or purchase or otherwise acquire, any of its
Common Stock. Any shares of this Series which are redeemed, repurchased or
otherwise reacquired by the Corporation shall, until further action by the
Board of Directors or the Executive Committee of the Board of Directors,
have the status of authorized and unissued shares of Series Preferred
Stock, without designation as to series.
(3) The amount per share for this Series payable to the holders thereof
upon any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation shall be $100. The shares of this Series shall not be
convertible into shares of any other class or classes or into any other
securities of the Corporation. The number of shares of this Series
authorized is 250,000 shares.
(I) 6.15% Series Preferred Stock. The terms of the "6.15% Preferred Stock"
in the respects in which the shares of such series may vary from shares of
other series of the Series Preferred Stock shall be as follows:
(1) The dividend rate shall be 6.15% per share per annum and dividends on
each share of such Series shall be cumulative from the date or dates of the
initial issue of shares of such Series;
(2) The Corporation, after full dividends on all outstanding shares of
the 4 1/2% Preferred Stock and the Series Preferred Stock, including this
Series, for all past dividend periods shall have been paid or set aside,
shall redeem as and for a sinking fund for the retirement of this Series
(the "6.15% Sinking Fund"), out of funds legally available therefor, on
April 1, 2003, all of the outstanding shares of this Series. If on April 1,
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2003, the required number of shares shall not be redeemed because of the
lack of legally available funds, or for any other reason, the amount
required to be redeemed shall be carried forward until such obligation is
fully discharged. The price at which shares of this Series shall be called
for redemption through the 6.15% Sinking Fund shall be $100 per share, plus
an amount equal to accumulated and unpaid dividends to the date of such
redemption computed as provided in Section 5 of Division C of Article VI of
these Amended and Restated Articles of Incorporation. If the Corporation
shall for any reason fail to discharge in full its 6.15% Sinking Fund
obligation on April 1, 2003, the Corporation shall not thereafter, unless
and until such 6.15% Sinking Fund obligation shall have been discharged in
full, declare or pay any dividend on, or make any other distribution of
property with respect to, or purchase or otherwise acquire, any of its
Common Stock. Any shares of this Series which are redeemed, repurchased or
otherwise reacquired by the Corporation shall, until further action by the
Board of Directors or the Executive Committee of the Board of Directors,
have the status of authorized and unissued shares of Series Preferred
Stock, without designation as to series.
(3) The amount per share for this Series payable to the holders thereof
upon any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation shall be $100. The shares of this Series shall not be
convertible into shares of any other class or classes or into any other
securities of the Corporation. The number of shares of this Series
authorized is 250,000 shares.
(J) For the purposes of the foregoing paragraphs (A) through (I), the terms
"involuntary liquidation, dissolution or winding up" shall include, without
being limited to, a liquidation, dissolution or winding up of the Corporation
resulting in the distribution of all of the net proceeds of a sale, lease or
conveyance of all or substantially all of the property or business of the
Corporation to any governmental body including, without limitation, any
municipal corporation or political subdivision or authority.
DIVISION C -- PROVISIONS APPLICABLE TO BOTH THE 4 1/2% PREFERRED STOCK AND THE
SERIES PREFERRED STOCK
Section 1. General. The term "Preferred Stock" whenever used in this Article
VI, shall be deemed to include the 4 1/2% Preferred Stock, the Series
Preferred Stock and any other class of stock entitled to dividends on a parity
with the 4 1/2% Preferred Stock and Series Preferred Stock.
Section 2. Dividends. (A) The shares of Preferred Stock shall be entitled to
the payment of dividends on a parity with each other at the rate or rates
established by or pursuant to the provisions of this Article VI and in
preference to the Preference Stock and the Common Stock, but only when and as
declared by the Board of Directors, out of funds legally available for the
payment of dividends.
(B) Said dividends shall be payable quarterly on January 1, April 1, July 1
and October 1 of each year or otherwise as the Board of Directors may
determine, to shareholders of record as of a date not exceeding forty (40)
days and not less than ten (10) days preceding such dividend payment dates, to
be fixed by the Board of Directors. The holders of the Preferred Stock shall
not be entitled to receive any dividends thereon out of net profits or surplus
earnings other than dividends established by or pursuant to this Article VI.
Section 3. Preferences In Distribution. The shares of the 4 1/2% Preferred
Stock and the Series Preferred Stock shall be entitled to share on a parity
with each other, and shall have a preference over the Preference Stock and the
Common Stock, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, or upon any distribution of assets, other than
net profits or surplus earnings until there shall have been paid in respect of
the shares of:
(a) 4 1/2% Preferred Stock -- the full par value thereof, or
(b) Series Preferred Stock -- the liquidation price fixed as provided in
Division B;
plus, in either case, an amount, if any, by which an amount equivalent to the
annual dividend upon such shares from the date after which dividends thereon
became cumulative to the date of liquidation exceeds the dividends actually
paid thereon or declared and set apart for payment thereon from such date to
the date of liquidation. The 4 1/2% Preferred Stock and the Series Preferred
Stock shall not receive any share in any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation or in any distribution of assets
in excess of the aggregate amount specified in this section.
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Section 4. Voting Rights. (A) Except as otherwise provided in these Amended
and Restated Articles of Incorporation, each share of the 4 1/2% Preferred
Stock, the Series Preferred Stock, the Common Stock and (if, and to the
extent, stated in the resolution or resolutions providing for the issue of a
series of Preference Stock) the Preference Stock shall be equal in voting
power and shall entitle the holder thereof to one vote upon any question
presented to any shareholders meeting, it being hereby agreed and declared
that a majority in number of shares regardless of the class to which such
shares may belong is a majority in value or in interest within the meaning of
any statute or law requiring the consent of stockholders holding a majority in
interest or a greater amount in value of stock of the Corporation.
(B) If and when dividends payable on any shares of Preferred Stock shall be
in default in an amount equivalent to the annual dividend, or more, per share,
and thereafter until all dividends on the Preferred Stock (of all classes and
series) in default shall have been paid, the holders of the Preferred Stock
voting as a single class, separate from the holders of the Preference Stock
and the Common Stock, shall be entitled to elect the smallest number of
directors necessary to constitute a majority of the full Board of Directors,
and the holders of the Common Stock and the Preference Stock (if, and to the
extent, stated in the resolution or resolutions providing for the issue of a
series of Preference Stock), voting separately as a class, shall have the
right to elect the remaining directors of the Corporation. The terms of
office, as directors, of all persons who may be directors of the Corporation
at the time shall terminate upon the election of a majority of the Board of
Directors by the holders of the Preferred Stock, except that, if the holders
of the Preference Stock and/or the Common Stock shall not have exercised their
right to elect directors of the Corporation (either by voting together as a
single class or by voting separately as two distinct classes, as the case may
be) because of the lack of a quorum consisting of a majority of the required
class, then such remaining directors shall be elected by the directors whose
term of office is thus terminated and who have not been elected by the holders
of the Preferred Stock as a class; and in that event, such elected directors
shall hold office for the interim period, pending such time s a quorum of the
requisite class shall be present at a meeting held for the election of
directors.
(C) If and when all dividends then in default on the Preferred Stock, then
outstanding, shall be paid (and such dividends shall be declared and paid out
of any funds legally available therefor as soon as reasonably practicable),
the holders of the Preferred Stock shall be divested of any special right with
respect to the election of directors and the voting power of the holders of
the Preferred Stock and the holders of the Common Stock and the Preference
Stock (to the extent stated in the resolution or resolutions providing for the
issue of a series of Preference Stock) shall revert to the status existing
before the first dividend payment date on which dividends on any shares of the
Preferred Stock were not paid in full; but always subject to the same
provisions for vesting such special rights in the holders of the Preferred
Stock in case of further like default or defaults on dividends thereon. Upon
the termination of any such special voting right, the terms of office of all
persons who may have been elected directors of the Corporation by vote of the
holders of the Preferred Stock, as a class, pursuant to such special voting
right shall forthwith terminate, and the resulting vacancies shall be filled
by the vote of a majority of the remaining directors.
(D) In case of any vacancy in the office of a director occurring among the
directors elected by the holders of the Preferred Stock, voting as a single
class separate from the holders of the Common Stock and the holders of any
series of Preference Stock with voting rights, the remaining directors elected
by the holders of the Preferred Stock, by affirmative vote of a majority
thereof, or the remaining director so elected if there be but one, may elect a
successor or successors to hold office for the unexpired terms of the director
or directors whose place or places shall be vacant.
(E) In case of any vacancy in the office of a director occurring among the
directors not elected by the holders of the Preferred Stock, the remaining
directors not elected by the holders of the Preferred Stock, by affirmative
vote of a majority thereof, or the remaining such director if there be but
one, may elect a successor or successors to hold office for the unexpired term
of the director or directors whose place or places shall be vacant.
(F) Whenever the right shall have accrued to the holders of the Preferred
Stock to elect directors, voting as a single class separate from the holders
of the Common Stock and the holders of any series of Preference Stock with
voting rights, then upon request in writing signed by any holder of the
Preferred Stock entitled to vote, delivered by registered mail or in person to
the president, a vice president or secretary of the Corporation, it shall be
the duty of such officer forthwith to cause notice to be given to the
shareholders entitled to vote of a meeting to be held at such time as such
officer may fix, not less than ten (10) nor more than sixty (60) days after
the
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receipt of such request, for the purpose of electing directors. At all
meetings of shareholders held for the purpose of electing directors during
such time as the holders of a class or classes of stock shall have the special
right, voting as a single class, separate from the holders of the other class
or classes of stock (not entitled to such special right), to elect directors,
the presence in person or by proxy of the holders of a majority of such other
class or classes of stock (counted either separately as single classes or
together as a single class, as the case may be) shall be required to
constitute a quorum of such class or classes for the election of directors,
and the presence in person or by proxy of the holders of a majority of the
outstanding shares of the class or classes of stock entitled to such special
right shall be required to constitute a quorum of such class or classes for
the election of directors; provided, however, that the absence of a quorum of
the holders of any such class or classes of stock shall not prevent the
election at any such meeting or any adjournment thereof of directors by any
other class or classes if the necessary quorum of the holders of stock of such
other class or classes is present in person or by proxy at such meeting or
adjournment thereof; and provided further that in the event a quorum of the
holders of the Preferred Stock is not present, then the election of the
directors elected by the holders of any other class or classes of stock shall
not become effective and the directors so elected by such other class or
classes of stock shall not assume their offices and duties until the holders
of the Preferred Stock shall have elected the directors they shall be entitled
to elect; and provided further, however, that in the absence of a quorum of
the holders of stock of any class, a majority of the holders of the stock of
such class who are present in person or by proxy shall have the power to
adjourn the election of the directors to be elected by such class from day to
day or for such longer periods, not exceeding 15 days, each, as such majority
shall direct without notice other than announcement at the meeting until the
requisite number of holders of such class shall be present in person or by
proxy.
Section 5. Redemption. (A) By a majority vote of the Board of Directors of
the Corporation:
(1) the 4 1/2% Preferred Stock may be redeemed in whole or in part at any
time at One Hundred Ten Dollars ($110.00) per share, or
(2) any series of Series Preferred Stock may be redeemed in whole or in
part at any time at the redemption price fixed and determined as specified
in Division B;
plus, in either case, an amount, if any, by which an amount equivalent to the
annual dividend upon such shares from the date after which dividends thereon
became cumulative to the date of redemption exceeds the dividends actually
paid thereon or declared and set apart for payment thereon from such date to
the date of redemption. If, pursuant to such vote, less than all of the shares
of any class or series thereof of the Preferred Stock are to be redeemed, the
shares to be redeemed shall be selected by lot, in such manner as the Board of
Directors of the Corporation shall determine, by a bank or trust company
chosen for that purpose by the Board of Directors of the Corporation.
(B) Nothing herein contained shall limit any right of the Corporation to
purchase or otherwise acquire any shares of the Preferred Stock.
(C) Notice of the intention of the Corporation to redeem shares of the
Preferred Stock or any thereof shall be mailed thirty (30) days before the
date of redemption to each holder of record of the shares to be redeemed, at
his last known post office address as shown by the records of the Corporation.
At any time after such notice has been mailed as aforesaid, the Corporation
may deposit the aggregate redemption price (or the portion thereof not already
paid in the redemption of shares so to be redeemed) with any bank or trust
company in the City of Philadelphia, Pennsylvania; City of Allentown,
Pennsylvania; or in the City of New York, New York, named in such notice,
payable in amounts aforesaid to the respective orders of the record holders of
the shares so to be redeemed, on endorsement and surrender of their
certificates, and thereupon said holders shall cease to be shareholders with
respect to said shares and from and after the making of such deposit, said
holders shall have no interest in or claim against the Corporation with
respect to said shares, but shall be entitled only to receive said moneys from
said bank or trust company with interest, if any, allowed by such bank or
trust company on such moneys deposited as provided in this subsection (C), on
endorsement and surrender of their certificates as aforesaid.
(D) Any moneys so deposited, plus interest thereon, if any, and remaining
unclaimed at the end of six years from the date fixed for redemption, if
thereafter requested by resolution of the Board of Directors of the
Corporation, shall be repaid to the Corporation and in the event of such
repayment to the Corporation, such
9
<PAGE>
holders of record of the shares so redeemed as shall not have made claim
against such moneys prior to such repayment to the Corporation shall be deemed
to be unsecured creditors of the Corporation for an amount without interest
equivalent to the amount deposited, plus interest thereon, if any, allowed by
such bank or trust company, as above stated, for the redemption of such shares
and so paid to the Corporation.
DIVISION D -- PREFERENCE STOCK
Section 1. General. To the extent permitted by these Amended and Restated
Articles of Incorporation, the Board of Directors, by majority vote of a
quorum, shall have the authority to issue shares of Preference Stock from time
to time in one or more series, and to fix by resolution, at the time of
issuance of each of such series, the distinctive designations, terms, relative
rights, privileges, qualifications, limitations, options, conversion rights,
preferences, and voting powers, and such prohibitions, restrictions and
qualifications of voting or other rights and powers thereof except as they are
fixed and determined in this Article VI. The dividend rate or rates, dividend
payment dates or other terms of a series of Preference Stock may vary from
time to time dependent upon facts ascertainable outside of these Amended and
Restated Articles of Incorporation if the manner in which the facts will
operate to fix or change such terms is set forth in the express terms of the
series or upon terms incorporated by reference to an existing agreement
between the Corporation and one or more other parties or to another document
of independent significance or otherwise to the extent permitted by the
Business Corporation Law of 1988.
Section 2. Dividends. Subject to the provisions of Section 2(A) of Division
C, the holders of shares of each series of Preference Stock shall be entitled
to receive, when and as declared by the Board of Directors, out of any funds
legally available for the purpose under 15 Pa.C.S. (S) 1551 (relating to
distributions to shareholders) or any superseding provision of law subject to
any additional limitations in the express terms of the series, cash dividends
at the rate or rates and on the terms which shall have been fixed by or
pursuant to the authority of the Board of Directors with respect to such
series and no more, payable at such time or times as may be fixed by or
pursuant to the authority of the Board of Directors. If and to the extent
provided by the express terms of any series of Preference Stock, the holders
of the series shall be entitled to receive such other dividends as may be
declared by the Board of Directors.
Section 3. Liquidation of the Corporation. Subject to the provisions of
Section 3 of Division C, in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of
Preference Stock shall be entitled to receive from the assets of the
Corporation (whether capital or surplus), prior to any payment to the holders
of shares of Common Stock or of any other class of stock of the Corporation
ranking as to assets subordinate to the Preference Stock, the amount per share
(which, in the case of an involuntary liquidation, dissolution or winding up,
shall not be in excess of the original offering price per share (not including
accrued dividends, if any) or $100 per share, whichever is less) which shall
have been fixed and determined by the Board of Directors with respect thereto,
plus the accrued and unpaid dividends thereon computed to the date on which
payment thereof is made available, whether or not earned or declared. For the
purposes of this section, the terms "involuntary liquidation, dissolution or
winding up" shall include, without being limited to, a liquidation,
dissolution or winding up of the Corporation resulting in the distribution of
all of the net proceeds of a sale, lease or conveyance of all or substantially
all of the property or business of the Corporation to any governmental body
including, without limitation, any municipal corporation or political
subdivision or authority.
Section 4. Conversion Privileges. In the event any series of the Preference
Stock is issued with the privilege of conversion, such stock may be converted,
at the option of the record holder thereof, at any time or from time to time,
as determined by the Board of Directors, in the manner and upon the terms and
conditions stated in the resolution establishing and designating the series
and fixing and determining the relative rights and preferences thereof.
Section 5. Redemption. The Corporation, at its option to be exercised by its
Board of Directors, may redeem the whole or any part of the Preference Stock
or of any series thereof at such time or times as may be fixed by the Board,
at the applicable price for each share, and upon the terms and conditions
which shall have been fixed and determined by the Board with respect thereto.
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<PAGE>
Section 6. Voting Rights. Each holder of record of shares of a series of
Preference Stock shall have full voting rights of one vote per share or such
other limited, multiple, fractional or conditional or no voting rights as
shall be stated in the resolution or resolutions of the Board of Directors
providing for the issue of the shares of such series. Unless provided in such
resolution or resolutions, no holder of shares of Preference Stock shall have
cumulative voting rights.
DIVISION E -- COMMON STOCK
Section 1. Dividends And Shares In Distribution On Common Stock. (A) Subject
to the rights of the holders of the Senior Stock, and the Preference Stock and
subordinate thereto, the Common Stock alone shall receive all further
dividends and shares upon liquidation, dissolution, winding up or
distribution.
(B) A consolidation or merger of the Corporation with or into any other
corporation or corporations shall not be deemed a distribution of assets of
the Corporation within the meaning of any provision of this Article VI.
Section 2. Voting Rights. Except as otherwise provided in these Amended and
Restated Articles of Incorporation, each share of the 4 1/2% Preferred Stock,
the Series Preferred Stock and the Common Stock shall be equal in voting power
and shall entitle the holder thereof to one vote upon any question presented
to any shareholders' meeting, it being hereby agreed and declared that a
majority in number of shares (including, if and to the extent provided
pursuant to Division D, shares of Preference Stock) regardless of the class to
which such shares may belong is a majority in value or in interest within the
meaning of any statute or law requiring the consent of stockholders holding a
majority in interest or a greater amount in value of stock of the Corporation.
DIVISION F -- GENERAL
PRE-EMPTIVE RIGHTS. The Corporation may issue or sell shares, option rights,
or securities having conversion or option rights for money or otherwise
without first offering them to shareholders of any class or classes.
REDEMPTION. Any shares of the 4 1/2% Preferred Stock, the Series Preferred
Stock, the Preference Stock and the Common Stock which are redeemed,
repurchased or otherwise reacquired by the Corporation shall, until further
action by the Board of Directors or the Executive Committee of the Board of
Directors, have the status of authorized and unissued shares, without, in the
case of the Series Preferred Stock, designation as to series.
CONVERTIBILITY. Unless otherwise provided in the terms of a series of Series
Preferred Stock or Preference Stock or otherwise in these Amended and Restated
Articles of Incorporation, the shares of each of the 4 1/2% Preferred Stock,
the Series Preferred Stock, the Preference Stock and the Common Stock,
respectively, shall not be convertible into shares of any other class or
classes or into any other securities of the Corporation.
ARTICLE VII. A majority of the directors may amend, alter or repeal the
Bylaws, subject to the power of the shareholders to change such action;
provided, however, that any amendment, alteration or repeal of, or the
adoption of any provision inconsistent with, Sections 3.01, 3.01.1, 3.04,
3.05, or 3.13 of the Bylaws, if by action of the shareholders, shall be only
upon the affirmative vote of the shareholders entitled to cast at least two-
thirds of the votes which all shareholders are entitled to cast, and if by
action of the directors, shall be only upon the approval of two-thirds of the
directors.
ARTICLE VIII. These Amended and Restated Articles of Incorporation may be
amended in the manner from time to time prescribed by statute and all rights
conferred upon shareholders herein are granted subject to this reservation;
provided, however, that, notwithstanding the foregoing (and in addition to any
vote that may be required by law, these Amended and Restated Articles of
Incorporation or the Bylaws), the affirmative vote of the shareholders
entitled to cast at least two-thirds of the votes which all shareholders are
entitled to cast shall be required to amend, alter or repeal, or to adopt any
provision inconsistent with, Articles VII or VIII of these Amended and
Restated Articles of Incorporation.
ARTICLE IX. The following provisions of the Business Corporation Law of 1988
shall not be applicable to the Corporation: 15 Pa.C.S. (S) 2538 (relating to
approval of transactions with interested shareholders) and 15 Pa.C.S.
Subchapter E (relating to control transactions).
11
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For any questions you may have or additional information you may require about
your account, change in stock ownership, dividend payments and the reinvestment
of dividends, please call the Shareowner Information Line, or write to:
George Kline, Manager
Investor Services Department
PP&L, Inc.
Two North Ninth Street, Allentown, PA 18101
Shareowner Information Line: 800-345-3085
--------------
PP&L and PP&L Resources file a joint Form 10-K Report and Form 10-Q Report
with the Securities and Exchange Commission. The Form 10-K Report for 1998 and
the Form 10-Q Report for the quarter ending March 31, 1999 are available without
charge by writing to the Investor Services Department at the address printed
above, or by calling the toll-free number.
--------------
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY TODAY IN THE POSTAGE-PAID
ENVELOPE PROVIDED, WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING.
IF YOU HAVE ANY QUESTIONS, OR NEED ASSISTANCE IN VOTING YOUR SHARES, PLEASE
CONTACT
THE FIRM ASSISTING US IN THE SOLICITATION OF PROXIES:
INNISFREE M&A INCORPORATED
TOLL-FREE: (888) 750-5834
- --------------------------------------------------------------------------------
--------------
For the latest information on PP&L Resources or PP&L, Inc.,
visit our location on the Internet at
http:// www.pplresources.com
--------------
<PAGE>
Admission Ticket
PP&L, Inc. Annual Meeting of Shareowners
1:30 p.m., April 23, 1999
Lehigh University's Stabler Arena
Bethlehem, Pennsylvania
March 12, 1999
Shareowner's mailing info here
Dear Shareowner:
It is a pleasure to invite you to attend the 1999 Annual Meeting of
Shareowners, which will be held at 1:30 p.m. on Friday, April 23, 1999, at
Lehigh University's Stabler Arena, at the Goodman Campus Complex, located in
Lower Saucon Township outside Bethlehem.
Detailed information as to the business to be transacted at the meeting is
contained in the accompanying Notice of Annual Meeting and Proxy Statement. We
will conclude the formal portion of the meeting with a discussion of the
company's operations and a question-and-answer period will follow.
We hope you will be able to attend in person. If you plan to attend the
meeting, please detach and return your proxy now and bring this admission ticket
with you to the meeting. If you are unable to attend the meeting but have any
questions or comments on the company's operations, we would like to hear from
you.
In order to receive the cash payment of $1.00 per share as discussed in the
Proxy, Proposal 2 must be approved and adopted, and you must vote FOR Proposal
2. In addition, please remember to complete and sign the enclosed W-9 Form.
Sincerely yours,
/s/ William F. Hecht
William F. Hecht
Chairman, President and Chief Executive Officer
- --------------------------------------------------------------------------------
PROXY
[X] (Name and Account Info Here)
Please date and sign your name(s) exactly
as shown at right, and indicate your vote
on the reverse side. Make sure the return
address on this card shows in the window
of the return envelope. Retain the top
portion of this page as your admission
ticket for the Annual Meeting.
Remember to complete and sign the W-9 form. [_] Check here if the
information shown above
has changed.
PROXY VOTE IMPORTANT: When signing as
PP&L, INC. attorney, executor,
2 N 9TH STREET administrator, trustee or
ALLENTOWN PA 18101-9971 guardian, please give your
full title as such. In the
case of JOINT HOLDERS, all
should sign.
_______________ Date _________
_______________ Date _________
Sequence No.
<PAGE>
[MAP OF BETHLEHEM AREA APPEARS HERE]
*Note: An eight mile section of
Route 22 in the Bethlehem area is
under construction.
Indicate your vote by placing an (X) in the appropriate box, using black or
dark blue ink. Please date and sign your name(s) on the reverse side.
- --------------------------------------------------------------------------------
Proxy Solicited on Behalf of the Board of Directors
for Annual Meeting of Shareowners, April 23, 1999
William F. Hecht, Frank A. Long and Norman Robertson, and each of them, are
hereby appointed proxies, with the power of substitution, to vote the
shares of the undersigned, as directed on the reverse side of this proxy,
at the Annual Meeting of Shareowners of PP&L, Inc. to be held on April 23,
1999, and any adjournments thereof, and in their discretion to vote and act
upon any other matters as may properly come before said meeting and any
adjournments thereof.
Shares represented by all properly executed proxies will be voted at the
Annual Meeting in the manner specified. If properly executed and returned,
and no specification is made, votes will be cast "FOR" all items on the
proxy.
1. ELECTION OF DIRECTORS:
(1) Frederick M. Bernthal (2) William J. Flood (3) Frank A. Long
For All Withhold
For All Except (*) For All
[_] [_] [_]
(*) To withhold authority to vote for any individual nominee, strike a line
through the nominee's name in the list above and mark an (X) in the "For
All Except" box.
For Against Abstain
2. PROPOSAL 2: Amendment to the Articles
[_] [_] [_]
