Filed pursuant to Rule 424(b)(2)
Registration Nos. 333-70101 and 333-70101-01
PRICING SUPPLEMENT
- ------------------
(TO PROSPECTUS DATED JANUARY 19, 1999 AS SUPPLEMENTED BY
PROSPECTUS SUPPLEMENT DATED MARCH 10, 1999)
This pricing supplement relates to an effective registration statement under the
Securities Act of 1933, and is subject to completion of amendment.
$200,000,000 [LOGO]
PP&L CAPITAL FUNDING, INC.
7.70% RESET PUT SECURITIES ("REPS SM") DUE 2007*
UNCONDITIONALLY GUARANTEED AS
TO PAYMENT BY
PP&L RESOURCES, INC.
-------------------
Interest payable on May 15 and November 15
-------------------
The 7.70% REset Put Securities Due 2007 (the "REPS"), are a tranche of
PP&L Capital Funding's securities designated Medium-Term Notes, Series B, and
are described in the accompanying prospectus and prospectus supplement. PP&L
Capital Funding's payment obligations on the REPS will be unconditionally
guaranteed by PP&L Capital Funding's parent, PP&L Resources. The REPS will
mature on November 15, 2007, and will not be redeemable prior to maturity.
However, the REPS will be required to be put by existing holders on
November 15, 2002 as described in this pricing supplement.
UNDERWRITING PROCEEDS TO
DISCOUNTS PP&L CAPITAL
PRICE TO PUBLIC(1) AND COMMISSIONS (2) FUNDING (1)(2)
------------------ ------------------- --------------
Per REPS...... 99.965% .350% 101.295%
Total......... $199,930,000 $700,000 $202,590,000
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(1) Plus accrued interest, if any, from date of issuance.
(2) Includes consideration for the REPS payable by the Remarketing
Dealer for the right to serve as Remarketing Dealer.
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*REPS is a service mark of Morgan Stanley Dean Witter & Co.
---------------------
The Underwriters expect to deliver the REPS to the purchasers on or
about November 1, 1999.
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JOINT BOOK-RUNNERS:
CREDIT SUISSE FIRST BOSTON MORGAN STANLEY DEAN WITTER
---------------------
BANC OF AMERICA SECURITIES LLC BANC ONE CAPITAL MARKETS, INC.
October 27, 1999
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You should rely on the information contained in or incorporated by
reference in this pricing supplement and the accompanying prospectus supplement
and prospectus. We have not authorized anyone to provide you with different
information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information contained
in or incorporated by reference in this pricing supplement and the accompanying
prospectus supplement and prospectus is accurate as of any date other than the
date of this pricing supplement.
TABLE OF CONTENTS
PRICING SUPPLEMENT
PAGE
----
Use of Proceeds...............................................P-3
Description of the REPS.......................................P-3
Certain United States Federal Income Tax Considerations.......P-8
Underwriters.................................................P-10
PROSPECTUS SUPPLEMENT
Description of the Notes......................................S-2
Certain United States Federal Income Tax Considerations......S-20
Validity of the Notes and the Guarantee......................S-22
Supplemental Plan of Distribution............................S-22
PROSPECTUS
Where You Can Find More Information.............................2
PP&L Resources..................................................4
PP&L Capital Funding............................................5
Use of Proceeds.................................................5
Ratios of Earnings to Fixed Charges.............................5
Description of the Debt Securities..............................5
Experts........................................................17
Validity of the Debt Securities and the Guarantees.............17
Plan of Distribution...........................................17
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USE OF PROCEEDS
The net proceeds to be received by PP&L Capital Funding, Inc. ("PP&L
Capital Funding"),from the sale of the REPS offered hereby will be used for
general corporate purposes, including making loans to the unregulated
subsidiaries of PP&L Resources and reduction of commercial paper balances. At
September 30, 1999, PP&L Capital Funding had $202 million aggregate principal
amount of commercial paper notes outstanding, bearing interest at a weighted
average rate of 5.6% per annum.
DESCRIPTION OF THE REPS
The following description of the particular terms of the REPS
supplements, and to the extent inconsistent replaces, the description of the
general terms and provisions of the Debt Securities set forth under "Description
of the Debt Securities" in the accompanying prospectus, and of the Notes set
forth under "Description of the Notes" in the accompanying prospectus
supplement, to which general description reference is hereby made. The following
summary of certain terms and provisions of the REPS, the Guarantees and the
Indenture does not purport to be complete and is qualified in its entirety by
reference to the actual provisions of the REPS, the Guarantees and the
Indenture. Capitalized terms used but not defined herein shall have the meanings
given to them in the accompanying prospectus and prospectus supplement, the REPS
or the Indenture, as the case may be.
GENERAL
The REPS will be issued as a separate tranche of Medium-Term Notes,
Series B under the Indenture among PP&L Capital Funding, PP&L Resources and The
Chase Manhattan Bank, as trustee, which is more fully described in the
accompanying prospectus and prospectus supplement. PP&L Resources will
unconditionally guarantee PP&L Capital Funding's obligation to pay principal,
interest and the Purchase/Repurchase Price (as defined below) payable with
respect to the REPS.
The REPS will be initially issued as Book-Entry Notes as described
under "Description of the Notes--Book-Entry Notes" in the accompanying
prospectus supplement.
INTEREST RATE AND INTEREST PAYMENT DATES
The REPS will bear interest at a fixed rate of 7.70% per annum from
their Original Issue Date to, but excluding, November 15, 2002 (the "Coupon
Reset Date"). From and after the Coupon Reset Date, the REPS will bear interest
at a new fixed rate per annum (the "Coupon Reset Rate"), to be determined as
described below under "Purchase by Remarketing Dealer; Remarketing - Coupon
Reset Process if REPS are Remarketed." The Coupon Reset Rate will not exceed 8
1/2% per annum (the "Maximum Rate"). Interest on the REPS will be payable on
each May 15 and November 15, commencing May 15, 2000 (each such date, an
"Interest Payment Date"). Interest payable, and paid or duly provided for,
on any Interest Payment Date will, as provided in the Indenture, be paid to
the Holder at the close of business on the Regular Record Date next preceding
such Interest Payment Date; except that (a) interest payable on the Couple
Reset Date will be paid to the person to whom the Purchase/Repurchase
Price (as defined below) is paid; and (b) interest payable at Maturity will be
paid to the person to whom principal is paid. The Regular Record
Dates for such Interest Payment Dates will be the April 30 or October 31
immediately preceding such Interest Payment Dates (whether or not any such
Regular Record Date is also a Business Day).
MATURITY DATE; PURCHASE FROM EXISTING HOLDERS REQUIRED ON COUPON RESET DATE
The REPS will mature on November 15, 2007 (the "Stated Maturity Date").
The REPS will not be redeemable prior to the Stated Maturity Date, and will not
be repayable at the option of the Holder prior to the Stated Maturity Date.
However, the REPS are subject to automatic purchase or repurchase from existing
holders on the Coupon Reset Date as described below.
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Morgan Stanley & Co. Incorporated is acting as Remarketing Dealer (the
"Remarketing Dealer") with respect to the REPS. The Remarketing Dealer may elect
to remarket only the entire aggregate principal amount of the REPS and may not
remarket a portion thereof. If the Remarketing Dealer elects to remarket the
REPS, (a) the REPS will be subject to purchase by the Remarketing Dealer at 100%
of the principal amount thereof (the "Purchase/Repurchase Price") for
remarketing on the Coupon Reset Date, on the terms and subject to the conditions
described herein, and (b) if the REPS are so purchased by the Remarketing
Dealer, on and after the Coupon Reset Date, the REPS will bear interest at the
Coupon Reset Rate determined by the Remarketing Dealer in accordance with the
procedures set forth below. See "--Purchase by the Remarketing Dealer;
Remarketing" below.
Under the circumstances described below, the REPS are subject to
repurchase by PP&L Capital Funding on the Coupon Reset Date at the
Purchase/Repurchase Price plus accrued and unpaid interest, if any. See
"--Optional Repurchase by PP&L Capital Funding" and "--Mandatory Repurchase by
PP&L Capital Funding" below.
FOR PERSONS HOLDING REPS (OR AN INTEREST THEREIN) ON THE COUPON RESET
DATE, THE EFFECT OF THE OPERATION OF THE PURCHASE AND REMARKETING BY THE
REMARKETING DEALER OR THE REPURCHASE BY PP&L CAPITAL FUNDING WILL BE THAT SUCH
HOLDERS WILL BE ENTITLED TO RECEIVE, AND WILL BE REQUIRED TO ACCEPT, 100%
OF THE PRINCIPAL AMOUNT OF THE REPS (PLUS ACCRUED INTEREST) ON THE COUPON RESET
DATE IN SATISFACTION OF PP&L CAPITAL FUNDING'S OBLIGATIONS TO THE HOLDERS OF
THE REPS. INTEREST ACCRUED TO, BUT EXCLUDING, THE COUPON RESET DATE WILL BE PAID
BY PP&L CAPITAL FUNDING ON SUCH DATE TO THE PERSON TO WHOM THE PURCHASE/
REPURCHASE PRICE IS PAID.
PURCHASE BY THE REMARKETING DEALER; REMARKETING
GENERAL. If the Remarketing Dealer gives notice in writing of its
intention to purchase the REPS for remarketing (the "Remarketing Notification"),
to PP&L Capital Funding and the Trustee on a Business Day (the "Notification
Date") not later than fifteen calendar days prior to the Coupon Reset Date, such
REPS automatically will be purchased, or deemed purchased, by the Remarketing
Dealer at the Purchase/Repurchase Price on the Coupon Reset Date, except in the
circumstances described below. Interest accrued to but excluding the Coupon
Reset Date will be paid by PP&L Capital Funding on such date to the person to
whom the Purchase/Repurchase Price is paid. When REPS are purchased by
the Remarketing Dealer for remarketing, the Remarketing Dealer may remarket such
REPS for its own account at varying prices to be determined by the Remarketing
Dealer at the time of each sale. From and after the Coupon Reset Date, the REPS
will bear interest at the Coupon Reset Rate if the REPS are so purchased by the
Remarketing Dealer.
The Remarketing Dealer may revoke its notice, and terminate its
obligation, to remarket the REPS at any time prior to 2:00 p.m., New York time,
on the Business Day prior to the Coupon Reset Date. Such revocation will
terminate the Coupon Reset Process.
The Remarketing Dealer's obligation to purchase the REPS may be
terminated and the Coupon Reset Process will terminate, if any of the following
(a "Termination Event") occurs:
(a) an Event of Default under the Indenture (in which case
termination is at the option of the Remarketing Dealer, unless
the Event of Default is of the type referred to in clause (e)
under "Description of Debt Securities - Events of Default" in
the accompanying prospectus, in which case such termination
will be automatic);
(b) (i) a default, event of default or other similar condition
or event (however described) in respect of the Company or
the Guarantor (after giving effect to any applicable notice
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requirement or grace period) has occurred under one or more
agreements or instruments relating to indebtedness of the
Company or the Guarantor in an aggregate amount of not less
than $100,000,000 which has resulted in such indebtedness
becoming due and payable, under such agreements or
instruments, before it would otherwise have been due and
payable (in which case, the termination event is at the
Remarketing Dealer's option), or (ii) the Company or the
Guarantor has defaulted in making one or more payments on
the due date thereof in an aggregate amount of not less than
$100,000,000 under such agreements or instruments (after
giving effect to any applicable notice requirement or grace
period) (in which case, the termination event is at the
Remarketing Dealer's option);
(c) on the Bid Date (as defined below), fewer than two Dealers (as
defined below) submit timely Bids (as defined below)
substantially as provided below (in which case the termination
event is automatic);
(d) PP&L Capital Funding exercises its right to repurchase the
REPS as described under "- Optional Repurchase by PP&L Capital
Funding" below (in which case the termination event is
automatic);
(e) the REPS have been deemed paid as described under
"Description of the Debt Securities-Satisfaction and
Discharge" in the accompanying prospectus (in which case the
termination event is automatic);
(f) the Remarketing Dealer fails to pay the Purchase/Repurchase
Price by 2:00 p.m., New York time, on the Business Day prior
to the Coupon Reset Date (in which case the termination event
is automatic);
(g) the Remarketing Dealer does not give the Remarketing
Notification (in which case the termination event is
automatic);
(h) the Remarketing Dealer validly revokes the Remarketing
Notification (in which case the termination event is
automatic); or
(i) prior to the Notification Date the Remarketing Dealer resigns
and no successor has been appointed (in which case the
termination event is automatic).
The transactions described above will be executed on the Coupon Reset
Date through the Depositary in accordance with the procedures of the Depositary,
and the accounts of participants will be debited and credited and the REPS
delivered by book-entry as necessary to effect the purchases and sales thereof.
For further information with respect to transfers and settlement through the
Depositary, see "Description of the Notes--Book-Entry Notes" in the accompanying
prospectus supplement.
NOTICE TO HOLDERS BY TRUSTEE. In anticipation of the purchase of the
REPS by the Remarketing Dealer or the repurchase of the REPS by PP&L Capital
Funding on the Coupon Reset Date, the Trustee will notify the holders of the
REPS, not less than 30 days nor more than 60 days prior to the Coupon Reset
Date, that all such REPS shall be delivered on the Coupon Reset Date through the
facilities of the Depositary against payment of the Purchase/Repurchase Price by
the Remarketing Dealer or PP&L Capital Funding.
COUPON RESET PROCESS IF REPS ARE REMARKETED. If the Remarketing Dealer
elects to remarket the REPS, then the following steps (the "Coupon Reset
Process") will be taken in order to determine the Coupon Reset Rate; provided,
however, that the Coupon Reset Rate will not exceed the Maximum Rate.
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PP&L Capital Funding and the Remarketing Dealer will use reasonable efforts to
cause the actions contemplated below to be completed in as timely a manner as
possible.
(a) No later than five Business Days prior to the Coupon Reset
Date, PP&L Capital Funding will provide the Remarketing Dealer
with (1) a list (the "Dealer List"), containing the names and
addresses of three dealers, one of whom shall be the
Remarketing Dealer, from whom PP&L Capital Funding desires the
Remarketing Dealer to obtain Bids for the purchase of the REPS
and (2) such other material as may reasonably be requested by
the Remarketing Dealer to facilitate a successful Coupon Reset
Process.
(b) Within one Business Day following receipt by the Remarketing
Dealer of the Dealer List, the Remarketing Dealer will provide
to each dealer ("Dealer") on the Dealer List (1) a copy of
this pricing supplement and the accompanying prospectus
supplement and the prospectus, relating to this offering of
the REPS (collectively, the "Prospectus"), (2) a copy of
the form of such REPS and (3) a written request that each
Dealer submit a Bid to the Remarketing Dealer no later than
3:00 p.m., New York time, on the third Business Day prior to
the Coupon Reset Date (the "Bid Date"). "Bid" means an
irrevocable written offer given by a Dealer for the purchase
of all of the REPS, settling on the Coupon Reset Date, and
shall be quoted by such Dealer as a stated yield to
maturity on the REPS ("Yield to Maturity"). Each Dealer
shall also be provided with (1) PP&L Capital Funding's name
and PP&L Resources' name, as guarantor, (2) an estimate of
the Remarketing Purchase Price (which shall be stated as
a U.S. dollar amount and be calculated by the Remarketing
Dealer in accordance with paragraph (c) below), (3) the
principal amount and maturity of the REPS and (4) the method
by which interest will be calculated on the REPS.
(c) The purchase price for the REPS in connection with the Coupon
Reset Process (the "Remarketing Purchase Price") shall be
equal to (1) the principal amount of such REPS, plus (2) a
premium (the "REPS Premium") which shall be equal to the
excess, if any, on the Coupon Reset Date of (A) the discounted
present value to the Coupon Reset Date of a bond with a
maturity of November 15, 2007 which has an interest rate of
6.115%, semiannual interest payments on each May 15 and
November 15, commencing May 15, 2003, and a principal amount
equal to the principal amount of the REPS, and assuming a
discount rate equal to the Treasury Rate, over (B) such
principal amount of the REPS. The "Treasury Rate" means the
per annum rate equal to the offer side yield to maturity of
the current on-the-run five year United States Treasury
Security per Telerate page 500, or any successor page, no
later than 3:00 p.m., New York time, on the applicable Bid
Date (or such other time or date that may be agreed upon by
PP&L Capital Funding and the Remarketing Dealer) or, if such
rate does not appear on Telerate page 500, or any successor
page, at such time, the rate on GovPX End-of-Day Pricing at
3:00 p.m., New York time, on such Bid Date (or such other time
or date that may be agreed upon by PP&L Capital Funding and
the Remarketing Dealer).
(d) The Remarketing Dealer will provide written notice to PP&L
Capital Funding as soon as practicable, on the applicable
Bid Date, setting forth (1) the names of each of the Dealers
from whom the Remarketing Dealer received Bids on the Bid
Date, (2) the Bid submitted by each such Dealer and (3) the
Remarketing Purchase Price as determined pursuant to
paragraph (c) above. Except as provided below, the
Remarketing Dealer will thereafter select from the Bids
received the Bid with the lowest Yield to Maturity (the
"Selected Bid"); provided, however, that (1) if the
Remarketing Dealer has not received a timely Bid from a
Dealer on or before the Bid Date, the Selected Bid shall be
the lowest of all Bids received by such time and (2) if any
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two or more of the lowest Bids submitted are equivalent,
PP&L Capital Funding shall in its sole discretion select
any of such equivalent Bids (and such selected Bid shall
be the Selected Bid). The Remarketing Dealer will set the
Coupon Reset Rate equal to the lesser of the Maximum Rate and
the interest rate that will amortize the REPS Premium
fully over the term of the applicable issue of REPS at the
Yield to Maturity indicated by the Selected Bid.
(e) Immediately after calculating the Coupon Reset Rate for the
REPS, the Remarketing Dealer will provide written notice to
PP&L Capital Funding and the Trustee, setting forth the Coupon
Reset Rate. The Coupon Reset Rate for the REPS will be
effective from and including the Coupon Reset Date.
THE REMARKETING DEALER
On or prior to the date of original issuance of the REPS, PP&L Capital
Funding, PP&L Resources and the Remarketing Dealer will enter into a Remarketing
Agreement (a "Remarketing Agreement"). No holder or beneficial owner of REPS
shall have any rights or claims under the Remarketing Agreement or against PP&L
Capital Funding, PP&L Resources or the Remarketing Dealer as a result of the
Remarketing Dealer not purchasing the REPS.
The Remarketing Agreement will provide that the Remarketing Dealer may
resign at any time as the Remarketing Dealer, such resignation to be effective
10 Business Days after the delivery to PP&L Capital Funding and the Trustee of
notice of such resignation; provided, however, that the Remarketing Dealer shall
remain subject to the provisions of the Remarketing Agreement during the period
before its resignation becomes effective. In such case, PP&L Capital Funding may
appoint a successor Remarketing Dealer.
The Remarketing Dealer, in its individual or any other capacity, may
buy, sell, hold and deal in the REPS. The Remarketing Dealer may exercise any
vote or join in any action which any holder or beneficial owner of the REPS may
be entitled to exercise or take with like effect as if such Remarketing Dealer
did not act in any capacity under the Remarketing Agreement. The Remarketing
Dealer, in its individual capacity, either as principal or agent, may also
engage in or have an interest in any financial or other transaction with PP&L
Capital Funding or PP&L Resources as freely as if it did not act in any capacity
under the Remarketing Agreement.
MANDATORY REPURCHASE BY PP&L CAPITAL FUNDING
If any Termination Event occurs (including if the Remarketing Dealer
for any reason fails to purchase the REPS), PP&L Capital Funding will repurchase
the entire principal amount of the REPS on the Coupon Reset Date at the
Purchase/Repurchase Price plus accrued and unpaid interest on such REPS.
OPTIONAL REPURCHASE BY PP&L CAPITAL FUNDING
If the Remarketing Dealer gives a Remarketing Notification, then, not
later than the fourth Business Day following the Notification Date, PP&L Capital
Funding may irrevocably elect, by notice in writing to the Remarketing Dealer
and the Trustee, to terminate the Coupon Reset Process, whereupon PP&L Capital
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Funding will repurchase the entire principal amount of the REPS on the Coupon
Reset Date at the Purchase/Repurchase Price plus accrued and unpaid interest
on such REPS.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a summary of the material United States federal income
tax consequences of the purchase, ownership and disposition of the REPS as of
the date hereof and represents the opinion of Thelen Reid & Priest LLP, counsel
to PP&L Capital Funding, insofar as it relates to matters of law or legal
conclusions. This summary is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), existing and proposed regulations promulgated thereunder,
published rulings and court decisions, all as in effect and existing on the date
hereof and all of which are subject to change any time, which change may be
retroactive or prospective. Unless otherwise specifically noted, this summary
applies only to those persons who are initial purchasers and who hold the REPS
as capital assets within the meaning of Section 1221 of the Code. This summary
does not purport to deal with persons in special tax situations, such as
financial institutions, tax-exempt entities, insurance companies, persons who
are not United States Holders as defined below, regulated investment companies,
dealers in securities or currencies, persons holding the REPS as part of a
position in a straddle or a hedge or a conversion transaction, or persons whose
functional currency is not the U.S. dollar. In addition, this discussion only
addresses the United States federal income tax considerations of the REPS until
the Coupon Reset Date.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING
THE UNITED STATES FEDERAL TAX CONSEQUENCES OF OWNING AND DISPOSING OF THE REPS,
AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY STATE,
MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION.
Prospective investors should note that no rulings have been or are
expected to be sought from the Internal Revenue Service (the "Service" or the
"IRS") with respect to any of the tax considerations discussed below, and no
assurance can be given that the Service will not take contrary positions.
As used herein, the term "United States Holder" means a beneficial
owner of the REPS that is for United States federal income tax purposes (a) a
citizen or resident of the United States (b) a corporation, partnership or other
entity created or organized in or under the laws of the United States or of any
political subdivision thereof, (c) an estate whose income is subject to United
States federal income tax regardless of its source, or (d) a trust if (i) a
court within the United States is able to exercise primary supervision over the
administration of the trust and (ii) one or more United States persons have the
authority to control all substantial decisions of the trust.
PAYMENTS OF INTEREST
For United Stated federal income tax purposes, the REPS will be
regarded as indebtedness of PP&L Capital Funding. However, the tax accounting
treatment of interest payable on the REPS is not entirely certain. PP&L Capital
Funding intends to treat the REPS as maturing on the Coupon Reset Date. Based on
this treatment, interest on the REPS will generally be taxable to a United
States Holder as ordinary interest income at the time it is paid or accrued in
accordance with the United States Holder's regular method of tax accounting.
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SALE, EXCHANGE OR REDEMPTION OF THE REPS
Upon the sale, exchange or redemption of the REPS, a United States
Holder generally will recognize gain or loss equal to the difference between the
amount of cash or other property received (except to the extent that such amount
realized represents accrued and unpaid interest that such United States Holder
has not included in gross income previously) and the United States Holder's
adjusted tax basis in the REPS. A United States Holder's adjusted tax basis in
the REPS will generally equal the cost of such REPS to the United States Holder.
Such gain or loss generally will be capital gain or loss and will be long-term
gain or loss if the REPS are held by the United States Holder for more than one
year. The net capital gains of individuals are taxed at lower rates than
ordinary income. Under current law, the deductibility of capital losses is
subject to limitations
ALTERNATIVE CHARACTERIZATION
There can be no assurance that the Service will agree with, or that a
court will uphold, the characterization of the REPS as maturing on the Coupon
Reset Date, and it is possible that the service will assert an alternate
treatment. In particular, the Service could seek to treat the REPS as maturing
on the Stated Maturity Date, instead of the Coupon Reset Date. In such an event,
United States Holders could be subject to certain United States Treasury
regulations dealing with contingent payment debt instruments (the "Contingent
Debt Regulations"). Under these regulations, each United States Holder of the
REPS would be required (regardless of the holder's usual method of accounting)
to accrue income each interest accrual period in an amount equal to the product
of the adjusted issue price of the REPS at the beginning of each interest
accrual period and a projected yield to maturity of the REPS. The projected
yield to maturity would be based on the yield at which PP&L Capital Funding
would have issued a fixed rate debt instrument maturing on the Stated Maturity
Date with terms and conditions otherwise similar to those of the REPS. This
projected yield could be higher than the stated interest rate on the REPS prior
to the Coupon Reset Date. As a result, United States Holders would accrue income
in excess of cash payments actually received, and any gain or loss upon the
sale, exchange or redemption of the REPS would be treated as other than
long-term capital gain or loss.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal and interest paid on the REPS and to the proceeds from the
sale of the REPS made to United States Holders other than certain exempt
recipients (such as corporations). A 31% backup withholding tax will apply to
such payments if the United States Holder fails to provide a taxpayer
identification number or certification of exempt status or fails to report in
full dividend and interest income.
Any amounts withheld under the backup withholding rules will be allowed
as a refund or a credit against a holder's United States federal income tax
liability provided the required information is furnished to the IRS.
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UNDERWRITERS
Under the terms and subject to the conditions contained in a
Terms Agreement dated the date hereof, the Underwriters named below have agreed
to purchase, and PP&L Capital Funding has agreed to sell to them, severally the
respective principal amounts of REPS set forth opposite their respective names
below:
PRINCIPAL AMOUNT
NAME OF REPS
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Credit Suisse First Boston Corporation....... $ 80,000,000
Morgan Stanley & Co. Incorporated............ 80,000,000
Banc of America Securities LLC............... 20,000,000
Banc One Capital Markets, Inc................ 20,000,000
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Total.................................... $200,000,000
==============
Credit Suisse First Boston Corporation and Morgan Stanley &
Co. Incorporated are acting as joint book-runners for the REPS. The Terms
Agreement provides that the obligation of the several Underwriters to pay for
and accept delivery of the REPS is subject to the approval of certain legal
matters by their counsel and to certain other conditions. The Underwriters are
obligated to take and pay for the REPS if any are taken.
The Underwriters of the REPS propose to offer part of the REPS
directly to the public at the public offering price set forth on the cover page
hereof and part to certain dealers at a price that represents a concession not
in excess of .20% of the principal amount of the REPS. After the initial
offering of the REPS, the offering price and other selling terms may from time
to time be varied.
PP&L Capital Funding and PP&L Resources have agreed to
indemnify the several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
PP&L Capital Funding does not intend to apply for listing of
the REPS on a national securities exchange, but has been advised by the
Underwriters that they presently intend to make a market in the REPS as
permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the REPS and any such market making may
be discontinued at any time at the sole discretion of the Underwriters.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the REPS.
In order to facilitate the offering of the REPS, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the REPS. Specifically, the Underwriters may overallot in
connection with the offering, creating a short position in the REPS for their
own account. In addition, to cover overallotments or to stabilize the price of
the REPS, the Underwriters may bid for, and purchase, the REPS in the open
market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an underwriter or a dealer for distributing the REPS in the offering,
if the syndicate repurchases previously distributed REPS in transactions to
cover syndicate short positions, in stabilization transactions or otherwise. Any
of these activities may stabilize or maintain the market price of the REPS above
independent market levels. The Underwriters are not required to engage in these
activities, and may end of these activities at any time.
In the ordinary course of their business, Morgan Stanley & Co.
Incorporated and Credit Suisse First Boston Corporation and certain of the other
Underwriters have engaged and may in the future engage in investment and
commercial banking transactions with PP&L Resources, PP&L Capital Funding and
certain of their affiliates.
P-10
<PAGE>
PROSPECTUS SUPPLEMENT
---------------------
(To Prospectus dated January 19, 1999)
$400,000,000 [LOGO]
PP&L CAPITAL FUNDING, INC.
MEDIUM-TERM NOTES, SERIES B
DUE FROM NINE MONTHS TO FORTY YEARS FROM DATE OF ISSUE
UNCONDITIONALLY GUARANTEED AS TO
PAYMENT OF PRINCIPAL AND ANY PREMIUM
AND INTEREST, BY
PP&L RESOURCES, INC.
PP&L Capital Funding, Inc. may offer from time to time up to
$400,000,000 in aggregate principal amount of its Medium-Term Notes,
Series B. The Notes will be unconditionally guaranteed by PP&L Capital
Funding's parent, PP&L Resources, Inc., as to payment of principal and
any premium and interest. The various terms of each Note will be
determined at the time of sale and, if different from the terms
described in the accompanying prospectus or this prospectus supplement,
will be specified in a pricing supplement to this prospectus
supplement, including the following:
. The stated maturity, . CMT Rate
which will be between 9 . Commercial Paper Rate
months and forty years . Federal Funds Rate
from date of issue . LIBOR
. Interest Payment Dates . Prime Rate
. Interest rates, if any, . Treasury Rate
which may be fixed or . Any other interest rate
floating. The floating formula
interest rate may be . Any redemption or
determined by reference repayment provisions
to one or more of the . Whether the Note will be
following indices plus or offered in book-entry
minus a spread and/or (through The Depository
multiplied by a spread Trust Company) or
multiplier: certificated form
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES
OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT,
THE ACCOMPANYING PROSPECTUS OR ANY PRICING SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We may sell the Notes to Merrill Lynch & Co., Merrill Lynch,
Pierce Fenner & Smith Incorporated, Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated and NationsBanc Montgomery Securities LLC,
and any additional agents as may be appointed from time to time
individually, or in a syndicate, as principal for resale at varying or
fixed offering prices or as agents using their reasonable efforts on
our behalf.
Public Agent's Discounts Proceeds to
Offering Price and Commissions PP&L Capital Funding
-------------- ----------------- --------------------
Per Note . . . 100% .125% - .750% 99.875% - 99.250%
Total . . . . . $400,000,000 $500,000 - $399,500,000 -
$3,000,000 $397,000,000
Such discounts and commissions may exceed these amounts with respect to
sales of Notes with stated maturities in excess of 30 years. We may also
sell Notes without the assistance of any agents or underwriters.
If we sell other Debt Securities as described in the accompanying
prospectus, the aggregate principal amount of Notes that we may offer and
sell under this prospectus supplement would be reduced.
--------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
NATIONSBANC MONTGOMERY SECURITIES LLC
_______________________
The date of this prospectus supplement is March 10, 1999.
<PAGE>
TABLE OF CONTENTS
DESCRIPTION OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . S-2
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS . . . . . . . S-20
VALIDITY OF THE NOTES AND THE GUARANTEE . . . . . . . . . . . . . . . S-22
SUPPLEMENTAL PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . S-22
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes (as
defined below) offered by this prospectus supplement supplements, and to
the extent inconsistent replaces, the description of the general terms and
provisions of the Debt Securities set forth under "Description of the Debt
Securities" in the accompanying prospectus, to which general description
reference is hereby made. The following summary of certain terms and
provisions of the Notes, the Guarantee and the Indenture does not purport
to be complete and is qualified in its entirety by reference to the actual
provisions of the Notes, the Guarantee and the Indenture. Capitalized
terms used but not defined herein shall have the meanings given to them in
the accompanying prospectus, the Notes or the Indenture (as defined below),
as the case may be. The particular terms of the Notes, and provisions of
the Notes that vary from the general provisions of the Notes described
below and the general provisions of the Debt Securities described in the
accompanying prospectus, will be described in the applicable pricing
supplement.
GENERAL
Amount of Notes Offered
PP&L Capital Funding, Inc. ("PP&L Capital Funding") will issue from
time to time up to $400,000,000 in aggregate principal amount of its
Medium-Term Notes, Series B (the "Notes"). If we sell other Debt
Securities as described in the accompanying prospectus, the aggregate
principal amount of Notes that we may offer and sell under this prospectus
supplement would be reduced. We will issue the Notes under the Indenture
among PP&L Capital Funding, PP&L Resources, Inc. ("PP&L Resources") and The
Chase Manhattan Bank, as trustee (the "Trustee"), dated as of November 1,
1997 (as such indenture has been and may be supplemented, the "Indenture"),
which is more fully described in the accompanying prospectus. PP&L Capital
Funding may, from time to time, without the consent of the Holders of the
Notes, provide for the issuance of other Indenture Securities under the
Indenture in addition to the Notes and Debt Securities offered by this
prospectus supplement and by the accompanying prospectus. See "Description
of the Debt Securities--General" in the accompanying prospectus.
The Guarantee of PP&L Resources; Holding Company Structure
The Notes will be unsecured obligations of PP&L Capital Funding, and
by the Guarantee will be unconditionally guaranteed by PP&L Resources as to
payment of principal and any premium and interest as set forth in the
accompanying prospectus under "Description of the Debt Securities--
Guarantee of PP&L Resources; Holding Company Structure." The Notes will
be denominated in and payable in United States dollars.
PP&L Resources conducts it operations primarily through PP&L, Inc.
("PP&L") and PP&L Resources' other wholly-owned subsidiaries, and
substantially all of PP&L Resources' consolidated assets are held by PP&L
and these other subsidiaries. Accordingly, PP&L Resources' cash flow and
its ability to meet its obligations under the Guarantee are largely
dependent upon the earnings of PP&L and the other subsidiaries and the
distribution or other payment of such earnings to PP&L Resources in the
form of dividends or loans or advances and repayment of loans or advances
from PP&L Resources. The subsidiaries are separate and distinct legal
entities and, except for PP&L Capital Funding, have no obligation to pay
any amounts due on the Notes or to make any funds available for such
payment.
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Because PP&L Resources is a holding company, its obligations under the
Guarantee will be effectively subordinated to all existing and future
liabilities of its subsidiaries. Therefore, PP&L Resources' rights and the
rights of its creditors, including the rights of the holders of the Notes
under the Guarantee, to participate in the assets of any subsidiary (other
than PP&L Capital Funding) upon the liquidation or reorganization of such a
subsidiary will be subject to the prior claims of such subsidiary's
creditors. To the extent that PP&L Resources may itself be a creditor with
recognized claims against any such subsidiary, PP&L Resources' claims would
still be effectively subordinated to any security interest in, or mortgages
or other liens on, the assets of such subsidiary and would be subordinated
to any indebtedness or other liabilities of such subsidiary senior to that
held by PP&L Resources. Although certain agreements to which PP&L
Resources and its subsidiaries are parties limit the incurrence of
additional indebtedness, both PP&L Resources and its subsidiaries retain
the ability to incur substantial additional indebtedness and other
liabilities. See "Description of the Debt Securities--Guarantee of PP&L
Resources; Holding Company Structure" in the accompanying prospectus.
Specific Terms to be Determined at Time of Sale and Specified in Pricing
Supplement
Each Note will mature on a date from nine months to forty years
from its date of issue (the "Stated Maturity Date"), as specified in the
applicable pricing supplement, unless the principal thereof becomes due and
payable prior to the Stated Maturity Date, whether by the declaration of
acceleration of maturity, notice of redemption at the option of PP&L
Capital Funding, notice of the Holder's option to elect repayment or
otherwise (the Stated Maturity Date or such prior date, as the case may be,
is herein referred to as the "Maturity").
PP&L Capital Funding may issue Notes that bear interest at fixed rates
("Fixed Rate Notes") or at floating rates ("Floating Rate Notes"), as
specified in the applicable pricing supplement. The applicable pricing
supplement will specify whether a Floating Rate Note is a Regular Floating
Rate Note, a Floating Rate/Fixed Rate Note or an Inverse Floating Rate Note
and whether the rate of interest thereon is determined by reference to one
or more of the CMT Rate, the Commercial Paper Rate, the Federal Funds Rate,
LIBOR, the Prime Rate or the Treasury Rate (each, an "Interest Rate
Basis"), or any other interest rate basis or formula, as adjusted by any
Spread and/or Spread Multiplier. Interest on each Floating Rate Note will
accrue from its date of issue and, unless otherwise specified in the
applicable pricing supplement, will be payable monthly, quarterly,
semiannually or annually in arrears, as specified in the applicable pricing
supplement, and at Maturity. Unless otherwise specified in the applicable
pricing supplement, the rate of interest on each Floating Rate Note will be
reset daily, weekly, monthly, quarterly, semiannually or annually, as
specified in the applicable pricing supplement. Interest on each Fixed
Rate Note will accrue from its date of issue and, except in the limited
circumstances described in this prospectus supplement or as otherwise
specified in the applicable pricing supplement, will be payable
semiannually in arrears on February 15 and August 15 of each year and at
Maturity. See "Description of the Notes--Payment of Principal and any
Premium and Interest" and "--Interest."
The interest rate, or formula for the determination of the interest
rate, if any, applicable to each Note and the other variable terms of each
Note will be established by PP&L Capital Funding on the date of issue of
such Note and will be specified in the applicable pricing supplement.
Interest rates on the Notes may differ depending upon, among other
factors, the aggregate principal amount of Notes purchased in any single
transaction. We may also offer Notes with different variable terms to
different investors concurrently. We may change interest rates or formulas
and other terms of Notes from time to time, but no such change will affect
any Note previously issued or as to which we have accepted an offer to
purchase.
Each Note will be issued in book-entry form (a Note so represented, a
"Book-Entry Note") or in fully registered certificated form (a Note so
represented, a "Certificated Note"), as specified in the applicable pricing
supplement. Each Book-Entry Note will be represented by one of more fully
S-3
<PAGE>
registered global securities (the "Global Securities") deposited with or on
behalf of The Depository Trust Company (or such other depositary as may be
identified in the applicable pricing supplement), as Depositary, and
registered in the name of the Depositary or the Depositary's nominee. A
beneficial interest in a Global Security will be shown on, and transfers or
exchanges thereof will be effected only through, records maintained by the
Depository and its participants, as described below under "--Book-Entry
Notes." You may purchase Book-Entry Notes only in a minimum denomination
of $1,000 and in integral multiples of $1,000, unless otherwise specified
in the applicable pricing supplement. Except in limited circumstances
described below, Book-Entry Notes will not be exchangeable for Certificated
Notes.
Certificated Notes will be exchangeable for other Certificated Notes
of any authorized denominations and of a like aggregate principal amount
and tenor, and may be presented for registration of transfer, in each case,
as described under "Description of the Debt Securities--Form; Transfers;
Exchanges" in the accompanying prospectus.
Unless the applicable pricing supplement provides otherwise, we will
issue each Note at a price (the "Issue Price") equal to 100% of the
principal amount of the Note. Notes will not be issued as discount
securities, at prices below stated principal amounts, or having an original
issue discount for U.S. federal income tax purposes, unless the applicable
pricing supplement so provides and, if applicable, describes potential U.S.
federal income tax consequences.
The pricing supplement relating to each Note will describe the
following terms:
(a) whether such Note is a Fixed Rate Note or a Floating Rate Note;
(b) the Issue Price of such Note, which may be expressed as a
percentage of its aggregate principal amount;
(c) the date on which such Note will be issued (the "Original Issue
Date");
(d) the Stated Maturity Date of such Note;
(e) if such Note is a Fixed Rate Note, the rate per annum at which
such Note will bear interest and the Interest Payment Dates;
(f) if such Note is a Floating Rate Note, the Interest Rate Basis,
the Initial Interest Rate, the Interest Reset Period, Interest
Reset Dates, the Interest Payment Dates, the Index Maturity, the
Maximum Interest Rate, if any, the Minimum Interest Rate, if any,
the Spread and/or Spread Multiplier, if any (all as defined
below), and other terms relating to the particular method of
calculating the interest rate or rates on such Note;
(g) whether such Note may be redeemed at the option of PP&L Capital
Funding prior to its Stated Maturity Date and, if so, the
provisions relating to such redemption;
(h) any sinking fund or other mandatory redemption provisions
applicable to such Note;
(i) any provisions for the repayment by PP&L Capital Funding of such
Note at the option of the Holder; and
(j) any other terms of such Note not inconsistent with the provisions
of the Indenture.
S-4
<PAGE>
PAYMENT OF PRINCIPAL AND ANY PREMIUM AND INTEREST
We will pay interest on the Notes, other than interest payable at
Maturity, by check mailed to the address of the registered Holders of such
Notes as of the regular record date relating to each Interest Payment Date;
provided, however, that
(a) if the Original Issue Date of a Note is after a regular record
date and before the corresponding Interest Payment Date, interest
for the period from and including the Original Issue Date for
such Note to but excluding such Interest Payment Date will be
paid on the next succeeding Interest Payment Date to the Holder
of such Note on the related regular record date;
(b) if and to the extent PP&L Capital Funding defaults in the payment
of the interest due on any Note on any Interest Payment Date,
such defaulted interest will be paid as described under
"Description of the Debt Securities--Payment of Debt
Securities--Interest" in the accompanying prospectus;
(c) in the case where the registered Holder is the Depository or its
nominee (as would be the case for Book-Entry Notes), such payment
may be made in accordance with any other arrangements then in
effect among PP&L Capital Funding, the Trustee or other Paying
Agent and the Depository; and
(d) a registered Holder of $10,000,000 or more in aggregate principal
amount of Notes (whether having identical or different terms and
provisions) will be entitled to receive interest payments, if
any, on any Interest Payment Date other than at Maturity by wire
transfer of immediately available funds if appropriate wire
transfer instructions have been received in writing by the
Trustee not less than 15 days prior to such Interest Payment
Date. Any such wire transfer instructions received by the
Trustee shall remain in effect until revoked by such Holder.
Payment of principal, any premium and interest due on the Notes at
maturity will be made upon presentation of such Notes (and, in the case of
any repayment on any Option Repayment Date provided for such Notes, upon
submission of a duly completed election form in accordance with the
provisions described below) at the office of The Chase Manhattan Bank in
New York, New York.
So long as the Depository is the registered owner of any Global
Security, the Depository, or its nominee, as the case may be, will be
considered the sole Holder of the Book-Entry Notes represented by such
Global Security for all purposes under the Indenture, including payments.
Accordingly, so long as the Depository is the registered owner of any
Global Security, payments of principal and any premium and interest on
Book-Entry Notes represented by such Global Security will be made to the
Beneficial Owners (as defined herein) of such Notes, as described below
under "--Book-Entry Notes."
INTEREST
General
Unless otherwise specified in the applicable pricing supplement, each
Note will bear interest from its Original Issue Date at the rate per annum,
in the case of a Fixed Rate Note, or pursuant to the interest rate formula,
in the case of a Floating Rate Note, in each case as specified in the
applicable pricing supplement, until the principal thereof is paid or made
available for payment. Unless otherwise specified in the applicable
pricing supplement, interest payments in respect of Fixed Rate Notes and
Floating Rate Notes will be made in an amount equal to the interest accrued
from and including the immediately preceding Interest Payment Date in
respect of which interest has been paid or made available for payment (or
S-5
<PAGE>
from and including the Original Issue Date, if no interest has been paid or
made available for payment) to but excluding the applicable Interest
Payment Date or the Maturity, as the case may be (each, an "Interest
Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable
in arrears on each Interest Payment Date and at Maturity. Unless otherwise
specified in the applicable pricing supplement, the first payment of
interest on any such Note originally issued between a Regular Record Date
(as hereinafter defined) and the related Interest Payment Date will be made
on the Interest Payment Date immediately following the next succeeding
Regular Record Date to the Holder of such Note on such next succeeding
Regular Record Date. Unless otherwise specified in the applicable pricing
supplement, "Regular Record Date" shall mean, with respect to any Fixed
Rate Note, the January 31 or July 31, as the case may be (whether or not a
Business Day), immediately preceding the related Interest Payment Date, and
with respect to any Floating Rate Note, the fifteenth calendar day (whether
or not a Business Day) immediately preceding the related Interest Payment
Date.
Unless otherwise specified in the applicable pricing supplement (a)
"Business Day" means any day, other than a Saturday or Sunday, that is not
a day on which banking institutions or trust companies are generally
authorized or required by law, regulation or executive order to close in
The City of New York or other city in which any Paying Agent for the Notes
is located (and, if LIBOR is an applicable Interest Rate Basis, such day
must also be a London Business Day), and (b) "London Business Day" means a
day on which dealings in deposits in United States dollars are transacted
in the London interbank market.
Fixed Rate Notes
Interest on Fixed Rate Notes will be payable on February 15 and August
15 of each year or on such other date(s) specified in the applicable
pricing supplement (each, an "Interest Payment Date" with respect to Fixed
Rate Notes) and at Maturity. Unless otherwise specified in the applicable
pricing supplement, interest on Fixed Rate Notes will be computed on the
basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity of a Fixed Rate Note
falls on a day that is not a Business Day, the required payment of
principal, premium, if any, and/or interest will be made on the next
succeeding Business Day as if made on the date such payment was due, and no
interest will accrue on such payment for the period from and after such
Interest Payment Date or the Maturity, as the case may be, to the date of
such payment on the next succeeding Business Day.
Floating Rate Notes
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as
described below, include
(a) the CMT Rate,
(b) the Commercial Paper Rate,
(c) the Federal Funds Rate,
(d) LIBOR,
(e) the Prime Rate,
(f) the Treasury Rate or
S-6
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(g) any other interest rate basis or interest rate formula specified
in the applicable pricing supplement.
The applicable pricing supplement relating to a Floating Rate Note
will also specify the following terms (as they are defined below):
(a) whether such Floating Rate Note is a "Regular Floating Rate
Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating
Rate Note,"
(b) the Fixed Rate Commencement Date, if applicable,
(c) the Fixed Interest Rate, if applicable,
(d) the Interest Rate Basis or Bases,
(e) the Initial Interest Rate, if any,
(f) the Initial Interest Reset Date,
(g) the Interest Reset Dates,
(h) the Interest Payment Dates,
(i) the Index Maturity,
(j) the Maximum Interest Rate and/or Minimum Interest Rate, if any,
and
(k) the Spread and/or Spread Multiplier, if any.
If one or more of the applicable Interest Rate Bases is LIBOR or the CMT
Rate, the applicable pricing supplement will also specify the Designated
LIBOR Page or the Designated CMT Maturity Index and Designated CMT Telerate
Page, as applicable.
The interest rate borne by the Floating Rate Notes will be determined
as follows:
(a) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note" or an "Inverse Floating Rate Note," or as having
an Addendum attached or having "Other/Additional Provisions" apply, in
each case relating to a different interest rate formula, such Floating
Rate Note will be designated as a "Regular Floating Rate Note" and,
except as described below or in the applicable pricing supplement,
will bear interest at the rate determined by reference to the
applicable Interest Rate Basis or Bases (1) plus or minus the
applicable Spread, if any, and/or (2) multiplied by the applicable
Spread Multiplier, if any. Commencing on the Initial Interest Reset
Date, the rate at which interest on such Regular Floating Rate Note
shall be payable shall be reset as of each Interest Reset Date;
provided, however, that the interest rate in effect for the period, if
any, from the date of issue to the Initial Interest Reset Date will be
the Initial Interest Rate.
(b) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in the
applicable pricing supplement, such Floating Rate Note will bear
interest at the rate determined by reference to the applicable
Interest Rate Basis or Bases (1) plus or minus the applicable Spread,
if any, and/or (2) multiplied by the applicable Spread Multiplier, if
any. Commencing on the Initial Interest Reset Date, the rate at which
interest on such Floating Rate/Fixed Rate Note shall be payable shall
be reset as of each Interest Reset Date; provided, however, that (y)
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the interest rate in effect for the period, if any, from the date of
issue to the Initial Interest Reset Date will be the Initial Interest
Rate and (z) the interest rate in effect for the period commencing on
the Fixed Rate Commencement Date to the Maturity shall be the Fixed
Interest Rate, if such rate is specified in the applicable pricing
supplement or, if no such Fixed Interest Rate is specified, the
interest rate in effect thereon on the day immediately preceding the
Fixed Rate Commencement Date.
(c) If such Floating Rate Note is designated as an "Inverse
Floating Rate Note," then, except as described below or in the
applicable pricing supplement, such Floating Rate Note will bear
interest at the Fixed Interest Rate minus the rate determined by
reference to the applicable Interest Rate Basis or Bases (1) plus or
minus the applicable Spread, if any, and/or (2) multiplied by the
applicable Spread Multiplier, if any; provided, however, that, unless
otherwise specified in the applicable pricing supplement, the interest
rate thereon will not be less than zero. Commencing on the Initial
Interest Reset Date, the rate at which interest on such Inverse
Floating Rate Note shall be payable shall be reset as of each Interest
Reset Date; provided, however, that the interest rate in effect for
the period, if any, from the date of issue to the Initial Interest
Reset Date will be the Initial Interest Rate.
The "Spread" is the number of basis points (one one-hundredth of a
percentage point) to be added to or subtracted from the related Interest
Rate Basis or Bases applicable to such Floating Rate Note. The "Spread
Multiplier" is the percentage of the related Interest Rate Basis or Bases
applicable to such Floating Rate Note and by which such Interest Rate Basis
or Bases will be multiplied to determine the applicable interest rate on
such Floating Rate Note. The "Index Maturity" is the period to maturity of
the instrument or obligation with respect to which the related Interest
Rate Basis or Bases will be calculated.
Unless otherwise specified in the applicable pricing supplement, the
interest rate with respect to each Interest Rate Basis will be determined
in accordance with the applicable provisions below. Except as set forth
above or in the applicable pricing supplement, the interest rate in effect
on each day shall be (a) if such day is an Interest Reset Date, the
interest rate determined as of the Interest Determination Date (as
hereinafter defined) immediately preceding such Interest Reset Date or (b)
if such day is not an Interest Reset Date, the interest rate determined as
of the Interest Determination Date immediately preceding the most recent
Interest Reset Date.
The applicable pricing supplement will specify whether the rate of
interest on the related Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually or on such other specified
basis (each, an "Interest Reset Period") and the dates on which such rate
of interest will be reset (each, an "Interest Reset Date"). Unless
otherwise specified in the applicable pricing supplement, the Interest
Reset Dates will be as follows:
(a) in the case of Floating Rate Notes which reset daily, each
Business Day;
(b) in the case of Floating Rate Notes which reset weekly, the
Wednesday of each week (with the exception of weekly reset
Floating Rate Notes as to which the Treasury Rate is an
applicable Interest Rate Basis, which will reset the Tuesday of
each week, except as described below);
(c) in the case of Floating Rate Notes which reset monthly, the third
Wednesday of each month;
(d) in the case of Floating Rate Notes which reset quarterly, the
third Wednesday of March, June, September and December of each
year,
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(e) in the case of Floating Rate Notes which reset semiannually, the
third Wednesday of the two months specified in the applicable
pricing supplement; and
(f) in the case of Floating Rate Notes which reset annually, the
third Wednesday of the month specified in the applicable pricing
supplement;
provided, however, that, with respect to Floating Rate/Fixed Rate Notes,
the rate of interest thereon will not reset after the applicable Fixed Rate
Commencement Date. If any Interest Reset Date for any Floating Rate Note
would otherwise be a day that is not a Business Day, such Interest Reset
Date will be postponed to the next succeeding Business Day, except that in
the case of a Floating Rate Note as to which LIBOR is an applicable
Interest Rate Basis and such Business Day falls in the next succeeding
calendar month, such Interest Reset Date will be the immediately preceding
Business Day.
The interest rate applicable to each Interest Reset Period commencing
on the related Interest Reset Date will be the rate determined by the
Calculation Agent as of the applicable Interest Determination Date and
calculated on or prior to the Calculation Date (as hereinafter defined),
except with respect to LIBOR, which will be calculated on such Interest
Determination Date. The "Interest Determination Date" with respect to the
CMT Rate, the Commercial Paper Rate, the Federal Funds Rate and the Prime
Rate will be the second Business Day immediately preceding the applicable
Interest Reset Date; and the "Interest Determination Date" with respect to
LIBOR will be the second London Business Day immediately preceding the
applicable Interest Reset Date. With respect to the Treasury Rate, the
"Interest Determination Date" will be the day in the week in which the
applicable Interest Reset Date falls on which day Treasury Bills (as
hereinafter defined) are normally auctioned (Treasury Bills are normally
sold at an auction held on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday);
provided, however, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the "Interest Determination
Date" will be such preceding Friday; provided, further, that if the
Interest Determination Date would otherwise fall on an Interest Reset Date,
then such Interest Reset Date will be postponed to the next succeeding
Business Day. The "Interest Determination Date" pertaining to a Floating
Rate Note the interest rate of which is determined by reference to two or
more Interest Rate Bases will be the most recent Business Day which is at
least two Business Days prior to the applicable Interest Reset Date for
such Floating Rate Note on which each Interest Rate Basis is determinable.
Each Interest Rate Basis will be determined as of such date, and the
applicable interest rate will take effect on the applicable Interest Reset
Date.
Notwithstanding the foregoing, a Floating Rate Note may also have
either or both of the following: (a) a Maximum Interest Rate, or ceiling,
that may accrue during any Interest Period and (b) a Minimum Interest Rate,
or floor, that may accrue during any Interest Period. In addition to any
Maximum Interest Rate that may apply to any Floating Rate Note, the
interest rate on Floating Rate Notes will in no event be higher than the
maximum rate permitted by applicable law.
Except as provided in this prospectus supplement, the accompanying
prospectus or in the applicable pricing supplement, interest will be
payable as follows:
(a) in the case of Floating Rate Notes which reset daily, weekly or
monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as
specified in the applicable pricing supplement;
(b) in the case of Floating Rate Notes which reset quarterly, on the
third Wednesday of March, June, September and December of each
year;
(c) in the case of Floating Rate Notes which reset semiannually, on
the third Wednesday of the two months of each year specified in
the applicable pricing supplement; and
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(d) in the case of Floating Rate Notes which reset annually, on the
third Wednesday of the month of each year specified in the
applicable pricing supplement
(each, an "Interest Payment Date" with respect to Floating Rate Notes) and,
in each case, on the Maturity.
If any Interest Payment Date other than the Maturity for any Floating
Rate Note would otherwise be a day that is not a Business Day, such
Interest Payment Date will be postponed to the next succeeding Business
Day, except that in the case of a Floating Rate Note as to which LIBOR is
an applicable Interest Rate Basis and such Business Day falls in the next
succeeding calendar month, such Interest Payment Date will be the
immediately preceding Business Day. If the Maturity of a Floating Rate
Note falls on a day that is not a Business Day, the required payment of
principal and any premium and interest will be made on the next succeeding
Business Day as if made on the date such payment was due, and no interest
will accrue on such payment for the period from and after the Maturity to
the date of such payment on the next succeeding Business Day.
With respect to each Floating Rate Note, accrued interest is
calculated by multiplying its principal amount by an accrued interest
factor. This accrued interest factor is computed by adding the interest
factor calculated for each day in the applicable period for which accrued
interest is being calculated. Unless otherwise specified in the applicable
pricing supplement, the interest factor for each such day will be computed
by dividing the interest rate applicable to such day by 360, in the case of
Floating Rate Notes for which the applicable Interest Rate Basis is the
Commercial Paper Rate, the Federal Funds Rate, LIBOR or the Prime Rate, or
by the actual number of days in the year in the case of Floating Rate Notes
for which the applicable Interest Rate Basis is the CMT Rate or the
Treasury Rate. The interest factor for Floating Rate Notes for which the
interest rate is calculated with reference to two or more Interest Rate
Bases will be calculated in the manner specified in the applicable pricing
supplement.
All percentages resulting from any calculation on Floating Rate Notes
will be rounded to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g,
9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and
all amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest cent (with one-half cent being rounded
upwards).
Unless otherwise specified in the applicable pricing supplement, the
Trustee will be the "Calculation Agent." Upon request of the Holder of any
Floating Rate Note, the Calculation Agent will disclose the interest rate
then in effect and, if determined, the interest rate that will become
effective as a result of a determination made for the next succeeding
Interest Reset Date with respect to such Floating Rate Note. Unless
otherwise specified in the applicable pricing supplement, the "Calculation
Date," if applicable, pertaining to any Interest Determination Date will be
the earlier of (a) the tenth calendar day after such Interest Determination
Date or, if such day is not a Business Day, the next succeeding Business
Day or (b) the Business Day immediately preceding the applicable Interest
Payment Date or the Maturity, as the case may be.
Unless otherwise specified in the applicable pricing supplement, the
Calculation Agent shall determine each applicable interest rate in
accordance with the following provisions. The Calculation Agent's
determination of any interest rate will be conclusive and binding in the
absence of any manifest error.
CMT RATE. Unless otherwise specified in the applicable pricing
supplement, "CMT Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is
determined with reference to the CMT Rate (a "CMT Rate Interest
Determination Date"), the rate displayed on the Designated CMT Telerate
Page under the caption "...Treasury Constant Maturities...Federal Reserve
Board Release H.15...Mondays Approximately 3:45 P.M.," under the column for
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the Designated CMT Maturity Index for (a) if the Designated CMT Telerate
Page is 7051, the rate on such CMT Rate Interest Determination Date and (b)
if the Designated CMT Telerate Page is 7052, the weekly or monthly average,
as specified in the applicable pricing supplement, for the week or the
month, as applicable, ended immediately preceding the week or the month, as
applicable, in which the related CMT Rate Interest Determination Date
falls. If such rate is no longer displayed on the relevant page or is not
displayed by 3:00 P.M., New York City time, on the related Calculation
Date, then the CMT Rate for such CMT Rate Interest Determination Date will
be such treasury constant maturity rate for the Designated CMT Maturity
Index as published by the Board of Governors of the Federal Reserve System
in "Statistical Release H.15 (519), Selected Interest Rates" or any
successor publication ("H.15(519)"). If such rate is no longer published
or is not published by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate on such CMT Rate Interest Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index (or other United States Treasury rate for the Designated CMT
Maturity Index) for the CMT Rate Interest Determination Date with respect
to such Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the
rate formerly displayed on the Designated CMT Telerate Page and published
in H.15(519). If such information is not provided by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate on the CMT
Rate Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity, based on the arithmetic mean of the
secondary market offered rates as of approximately 3:30 P.M., New York City
time, on such CMT Rate Interest Determination Date reported, according to
their written records, by three leading primary United States government
securities dealers in The City of New York (which may include the Agents or
their affiliates) (each, a "Reference Dealer") selected by the Calculation
Agent (from five such Reference Dealers selected by the Calculation Agent
and eliminating the highest quotation (or, in the event of equality, one of
the highest) and the lowest quotation (or, in the event of equality, one of
the lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an original
maturity of approximately the Designated CMT Maturity Index and a remaining
term to maturity of not less than such Designated CMT Maturity Index minus
one year. If the Calculation Agent is unable to obtain three such Treasury
Note quotations, the CMT Rate on such CMT Rate Interest Determination Date
will be calculated by the Calculation Agent and will be a yield to maturity
based on the arithmetic mean of the secondary market offered rates as of
approximately 3:30 P.M., New York City time, on such CMT Rate Interest
Determination Date of three Reference Dealers in The City of New York (from
five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of
years that is the next highest to the Designated CMT Maturity Index and a
remaining term to maturity closest to the Designated CMT Maturity Index and
in an amount of at least $100 million. If three or four (and not five) of
such Reference Dealers are quoting as described above, then the CMT Rate
will be based on the arithmetic mean of the offered rates obtained and
neither the highest nor the lowest of such quotations will be eliminated;
provided, however, that if fewer than three Reference Dealers so selected
by the Calculation Agent are quoting as mentioned herein, the CMT Rate
determined as of such CMT Rate Interest Determination Date will be the CMT
Rate in effect on such CMT Rate Interest Determination Date, or if no such
CMT Rate is then in effect, the interest rate on the applicable Note will
be the Initial Interest Rate. If two Treasury Notes with an original
maturity as described in the second preceding sentence have remaining terms
to maturity equally close to the Designated CMT Maturity Index, the
Calculation Agent will obtain quotations for the Treasury Note with the
shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on Bridge Telerate,
Inc. (or any successor service) on the page specified in the applicable
pricing supplement (or any other page as may replace such page on such
service) for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519) or, if no such page is specified in the applicable
pricing supplement, page 7052.
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"Designated CMT Maturity Index" means the original period to maturity
of the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable pricing supplement with respect to which the
CMT Rate will be calculated or, if no such maturity is specified in the
applicable pricing supplement, 2 years.
COMMERCIAL PAPER RATE. Unless otherwise specified in the applicable
pricing supplement, "Commercial Paper Rate" means, with respect to any
Interest Determination Date relating to a Floating Rate Note for which the
interest rate is determined with reference to the Commercial Paper Rate (a
"Commercial Paper Rate Interest Determination Date"), the Money Market
Yield (as hereinafter defined) on such date of the rate for commercial
paper having the Index Maturity specified in the applicable pricing
supplement as published in H.15(519) under the heading "Commercial Paper
Nonfinancial." In the event that such rate is not published by 3:00 P.M.,
New York City time, on the related Calculation Date, then the Commercial
Paper Rate on such Commercial Paper Rate Interest Determination Date will
be the Money Market Yield of the rate for commercial paper having the Index
Maturity specified in the applicable pricing supplement as published in
H.15 Daily Update, or such other recognized electronic source used for the
purpose of displaying such rate, under the caption "Commercial Paper
Nonfinancial." "H-15 Daily Update" means the daily update of H.15(519)
available through the world-wide web site of the Board of Governors of
the Federal Reserve System at http:/www.bog.frb.fed.us/releases/h15/update,
or any successor site or publication. If such rate is not yet published
in H.15(519), H.15 Daily Update or another recognized electronic source
by 3:00 P.M., New York City time, on the related Calculation Date, then
the Commercial Paper Rate on such Commercial Paper Rate Interest
Determination Date will be calculated by the Calculation Agent and will
be the Money Market Yield of the arithmetic mean of the offered rates at
approximately 11:00 A.M., New York City time, on such Commercial Paper
Rate Interest Determination Date of three leading dealers of United States
dollar commercial paper in The City of New York (which may include the
Agents or their affiliates) selected by the Calculation Agent for
commercial paper having the Index Maturity specified in the applicable
pricing supplement placed for industrial issuers whose bond rating is
"Aa", or the equivalent, from a nationally recognized statistical rating
organization; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting rates as mentioned in this sentence,
the Commercial Paper Rate determined as of such Commercial Paper Rate
Interest Determination Date will be the Commercial Paper Rate in effect
on such Commercial Paper Rate Interest Determination Date, or if no such
Commercial Paper Rate is then in effect, the interest rate on the
applicable Note will be the Initial Interest Rate.
"Money Market Yield" means a yield (expressed as a percentage)
calculated in accordance with the following formula:
D x 360
Money Market Yield = -------------------- X 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper
quoted on a bank discount basis and expressed as a decimal, and "M" refers
to the actual number of days in the applicable Interest Reset Period.
FEDERAL FUNDS RATE. Unless otherwise specified in the applicable
pricing supplement, "Federal Funds Rate" means, with respect to any
Interest Determination Date relating to a Floating Rate Note for which the
interest rate is determined with reference to the Federal Funds Rate (a
"Federal Funds Rate Interest Determination Date"), the rate on such date
for United States dollar federal funds as published in H.15(519) under the
heading "Federal Funds (Effective)", as such rate is displayed on Bridge
Telerate, Inc. (or any successor service) on page 120 (or any other page as
may replace such page on such service) ("Telerate Page 120"), or, if such
rate does not appear on Telerate Page 120 or is not so published by 3:00
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P.M., New York City time, on the related Calculation Date, the rate on such
Federal Funds Rate Interest Determination Date for United States dollar
federal funds as published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption "Federal Funds (Effective)." If such rate does not appear on
Telerate Page 120 or is not published in H.15(519), H.15 Daily Update or
another recognized electronic source by 3:00 P.M., New York City time, on
the related Calculation Date, then the Federal Funds Rate on such Federal
Funds Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight United States dollar federal funds arranged by
three leading brokers of United States dollar federal funds transactions in
The City of New York (which may include the Agents or their affiliates)
selected by the Calculation Agent prior to 9:00 A.M., New York City time,
on such Federal Funds Rate Interest Determination Date; provided, however,
that if the brokers so selected by the Calculation Agent are not quoting
rates as mentioned in this sentence, the Federal Funds Rate determined as
of such Federal Funds Rate Interest Determination Date will be the Federal
Funds Rate in effect on such Federal Funds Rate Interest Determination
Date, or if no such Federal Funds Rate is then in effect, the interest rate
on the applicable Note will be the Initial Interest Rate.
LIBOR. Unless otherwise specified in the applicable pricing
supplement, "LIBOR" means the rate determined in accordance with the
following provisions:
(a) With respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with
reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be either: (1) if "LIBOR Reuters" is specified in the applicable
pricing supplement, the arithmetic mean of the offered rates (unless
the Designated LIBOR Page by its terms provides only for a single
rate, in which case such single rate shall be used) for deposits in
United States dollars having the Index Maturity specified in such
pricing supplement, commencing on the applicable Interest Reset Date,
that appear (or, if only a single rate is required as aforesaid,
appears) on the Designated LIBOR Page as of 11:00 A.M., London time,
on such LIBOR Interest Determination Date, or (2) if "LIBOR Telerate"
is specified in the applicable pricing supplement or if neither "LIBOR
Reuters" nor "LIBOR Telerate" is specified in the applicable pricing
supplement as the method for calculating LIBOR, the rate for deposits
in United States dollars having the Index Maturity specified in such
pricing supplement, commencing on such Interest Reset Date, that
appears on the Designated LIBOR Page as of 11:00 A.M., London time, on
such LIBOR Interest Determination Date. If fewer than two such
offered rates so appear, or if no such rate so appears, as applicable,
LIBOR on such LIBOR Interest Determination Date will be determined in
accordance with the provisions described in clause (b) below.
(b) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the case
may be, on the Designated LIBOR Page as specified in clause (a) above,
the Calculation Agent will request the principal London offices of
each of four major reference banks (which may include affiliates of
the Agents) in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in United States dollars for the period of the
Index Maturity specified in the applicable pricing supplement,
commencing on the applicable Interest Reset Date, to prime banks in
the London interbank market at approximately 11:00 A.M., London time,
on such LIBOR Interest Determination Date and in a principal amount
that is representative for a single transaction in United States
dollars in such market at such time. If at least two such quotations
are so provided, then LIBOR on such LIBOR Interest Determination Date
will be the arithmetic mean of such quotations. If fewer than two
such quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., New York City time, on such LIBOR Interest
Determination Date by three major banks (which may include affiliates
of the Agents) in The City of New York selected by the Calculation
Agent for loans in United States dollars to leading European banks,
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having the Index Maturity specified in the applicable pricing
supplement and in a principal amount that is representative for a
single transaction in United States dollars in such market at such
time; provided, however, that if the banks so selected by the
Calculation Agent are not quoting as mentioned in this sentence, LIBOR
determined as of such LIBOR Interest Determination Date will be LIBOR
in effect on such LIBOR Interest Determination Date, or if no such
LIBOR rate is then in effect, the interest rate on the applicable Note
will be the Initial Interest Rate.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in
the applicable pricing supplement, the display on the Reuter Monitor Money
Rates Service (or any successor service) on the page specified in such
pricing supplement (or any other page as may replace such page on such
service) for the purpose of displaying the London interbank rates of major
banks for United States dollars or (b) if "LIBOR Telerate" is specified in
the applicable pricing supplement or neither "LIBOR Reuters" nor "LIBOR
Telerate" is specified in the applicable pricing supplement as the method
for calculating LIBOR, the display on Bridge Telerate, Inc. (or any
successor service) on the page specified in such pricing supplement (or any
other page as may replace such page on such service) for the purpose of
displaying the London interbank rates of major banks for United States
dollars.
PRIME RATE. Unless otherwise specified in the applicable pricing
supplement, "Prime Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is
determined with reference to the Prime Rate (a "Prime Rate Interest
Determination Date"), the rate on such date as such rate is published in
H.15(519) under the caption "Bank Prime Loan" or, if not published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on such
Prime Rate Interest Determination Date as published in H.15 Daily Update,
or such other recognized electronic source used for the purpose of
displaying such rate, under the caption "Bank Prime Loan." If such rate is
not yet published in H.15 (519), H.15 Daily Update or another recognized
electronic source by 3:00 P.M., New York City time, on the related
Calculation Date, then the Prime Rate shall be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the
Reuters Screen US PRIME 1 Page (as hereinafter defined) as such bank's
prime rate or base lending rate as of 11:00 A.M., New York City time, on
such Prime Rate Interest Determination Date. If fewer than four such rates
appear on the Reuters Screen US PRIME 1 Page for such Prime Rate Interest
Determination Date, then the Prime Rate shall be the arithmetic mean of the
prime rates or base lending rates quoted on the basis of the actual number
of days in the year divided by a 360-day year as of the close of business
on such Prime Rate Interest Determination Date by four major banks (which
may include affiliates of the Agents) in The City of New York selected by
the Calculation Agent; provided, however, that if the banks or trust
companies so selected by the Calculation Agent are not quoting as mentioned
in this sentence, the Prime Rate determined as of such Prime Rate Interest
Determination Date will be the Prime Rate in effect on such Prime Rate
Interest Determination Date, or, if no such Prime Rate is then in effect,
the interest rate on the applicable Note will be the Initial Interest Rate.
"Reuters Screen US PRIME 1 Page" means the display on the Reuter
Monitor Money Rates Service (or any successor service) on the "US PRIME 1"
page (or such other page as may replace the US PRIME 1 page on such
service) for the purpose of displaying prime rates or base lending rates of
major United States banks.
TREASURY RATE. Unless otherwise specified in the applicable pricing
supplement, "Treasury Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest
rate is determined by reference to the Treasury Rate (a "Treasury Rate
Interest Determination Date"), the rate from the auction held on such
Treasury Rate Interest Determination Date (the "Auction") of direct
obligations of the United States ("Treasury Bills") having the Index
Maturity specified in the applicable pricing supplement as such rate is
published under the caption "AVGE INVEST YIELD" on the display on Bridge
Telerate, Inc. (or any successor service) on page 56 (or any other page as
may replace such page on such service) ("Telerate Page 56") or page 57 (or
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any other page as may replace such page on such service) ("Telerate Page
57"), as applicable, or, if not published by 3:00 P.M., New York City time,
on the related Calculation Date, the auction average rate of such Treasury
Bills (expressed as a bond equivalent on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) as otherwise announced
by the United States Department of the Treasury. In the event that the
results of the Auction of Treasury Bills having the Index Maturity
specified in the applicable pricing supplement are not so published or
announced by 3:00 P.M., New York City time, on the related Calculation
Date, or if no such Auction is held, then the Treasury Rate will be the
rate (expressed as a bond equivalent on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) on such Treasury Rate
Interest Determination Date of Treasury Bills having the Index Maturity
specified in the applicable pricing supplement as published in H.15(519)
under the caption "U.S. Government Securities/Treasury Bills/Secondary
Market" or, if not yet published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Treasury Rate Interest
Determination Date of such Treasury Bills as published in H.15 Daily
Update, or such other recognized electronic source used for the purpose of
displaying such rate, under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market." If such rate is not yet
published in H.15(519), H.15 Daily Update or another recognized electronic
source by 3:00 P.M., New York City time, on the related Calculation Date,
then the Treasury Rate will be calculated by the Calculation Agent and will
be a yield to maturity (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) of
the arithmetic mean of the secondary market bid rates, as of approximately
3:30 P.M., New York City time, on such Treasury Rate Interest Determination
Date, of three primary United States government securities dealers (which
may include the Agents or their affiliates) selected by the Calculation
Agent, for the issue of Treasury Bills with a remaining maturity closest to
the Index Maturity specified in the applicable pricing supplement; provided
however, that if the dealers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the Treasury Rate determined as of
such Treasury Rate Interest Determination Date will be the Treasury Rate in
effect on such Treasury Rate Interest Determination Date, or if no such
Treasury Rate is then in effect, the interest rate on the applicable Note
will be the Initial Interest Rate.
REDEMPTION AT THE OPTION OF PP&L CAPITAL FUNDING
PP&L Capital Funding will have the option to redeem the Notes prior to
the Stated Maturity Date only if an Initial Redemption Date is specified in
the applicable pricing supplement. If so specified, PP&L Capital Funding
may redeem the Notes on any date on and after the applicable Initial
Redemption Date in whole or from time to time in part in increments of
$1,000, at the applicable Redemption Price (calculated as described below),
together with accrued interest to the date of redemption, upon notice given
to the Holders by mail between 30 and 60 days prior to the redemption date.
The Redemption Price, if applicable, shall initially be a percentage of the
principal amount of such Note to be redeemed equal to the "Initial
Redemption Price" specified in such pricing supplement for the twelve-month
period commencing on the Initial Redemption Date and shall decline for the
twelve-month period commencing on each anniversary of the Initial
Redemption Date by a percentage of principal amount to be redeemed equal to
the "Annual Redemption Percentage Reduction" specified in such pricing
supplement until the redemption price is 100% of such principal amount.
Unless otherwise specified in the applicable pricing supplement, the
Notes will not be subject to any sinking fund or other mandatory redemption
provisions.
Additional information concerning redemption is contained under
"Description of the Debt Securities--Redemption" in the accompanying
prospectus.
PP&L Capital Funding may also, at any time, purchase Notes at any
price or prices in the open market or otherwise. Notes so purchased by
PP&L Capital Funding may, at its discretion, be held, resold or surrendered
to the Trustee for cancellation.
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REPAYMENT AT THE OPTION OF THE HOLDER
PP&L Capital Funding will repay the Notes at the option of the
Holders thereof prior to the Stated Maturity Date only if one or more
Option Repayment Dates are specified in the applicable pricing supplement.
If so specified, the Notes will be subject to repayment at the option of
the Holders thereof on any Option Repayment Date in whole or from time to
time in part in increments of $1,000, at a repayment price equal to 100% of
the unpaid principal amount to be repaid, together with accrued interest to
the date of repayment. For any Note to be repaid, the Trustee must receive
such Note, together with the duly completed form thereon entitled "Option
to Elect Repayment," at its office maintained for such purpose in The City
of New York, currently the Corporate Trust Office of the Trustee located at
450 West 33rd Street, New York, New York 10001, between 30 and 60 days
prior to the date of repayment. Once exercised, a Holder may not revoke
such repayment option.
Only the Depository may exercise the repayment option in respect of
Global Securities representing Book-Entry Notes. Accordingly, Beneficial
Owners (as hereinafter defined) of Global Securities that desire to have
all or any portion of the Book-Entry Notes represented by such Global
Securities repaid must instruct the Participant (as hereinafter defined)
through which they own their interest to direct the Depository to exercise
the repayment option on their behalf by delivering the related Global
Security and duly completed election form to the Trustee as described
above. In order to ensure that such Global Security and election form are
received by the Trustee on a particular day, the applicable Beneficial
Owner must so instruct the Participant through which it owns its interest
before such Participant's deadline for accepting instructions for that day.
Different firms may have different deadlines for accepting instructions
from their customers. Accordingly, Beneficial Owners should consult the
Participants through which they own their interest for the applicable
deadlines. All instructions given to Participants from Beneficial Owners
of Global Securities relating to the option to elect repayment will be
irrevocable. In addition, at the time such instructions are given, each
such Beneficial Owner shall cause the Participant through which it owns its
interest to transfer such Beneficial Owner's interest in the Global
Security or Securities representing the related Book-Entry Notes, on the
Depository's records, to the Trustee. See "--Book-Entry Notes" below.
If applicable, PP&L Capital Funding will comply with the requirements
of Section 14(e) of the Exchange Act and the rules thereunder, and any
other applicable securities laws or regulations in connection with any such
repayment.
OTHER/ADDITIONAL PROVISIONS; ADDENDUM
Any provisions with respect to the Notes, including the specification
and determination of one or more Interest Rate Bases, the calculation of
the interest rate applicable to a Floating Rate Note, the Interest Payment
Dates, the Stated Maturity Date, any redemption or repayment provisions or
any other term relating thereto, may be modified and/or supplemented as
specified under "Other/Additional Provisions" on the face thereof or in an
Addendum relating thereto, if so specified on the face thereof, and
described in the applicable pricing supplement.
BOOK-ENTRY NOTES
PP&L Capital Funding has established a depositary arrangement with The
Depository Trust Company ("DTC"), pursuant to which DTC will act as
securities depository for the Book-Entry Notes. The Book-Entry Notes will
be issued as fully registered securities registered in the name of Cede &
Co. (the Depository's partnership nominee). DTC and any other depository
which may replace DTC as depository for the Book-Entry Notes are sometimes
referred to herein as the "Depository."
Upon issuance, all Book-Entry Notes having the same issue date,
interest rate provisions, redemption provisions, provisions for repurchase
at the option of the Holder, stated maturity and other provisions will be
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represented by one or more Global Securities. Each Global Security
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depository and will be registered in the name of the Depository or a
nominee of the Depository. Except under the limited circumstances
described below, Book-Entry Notes represented by Global Securities will not
be exchangeable for certificated Notes.
So long as the Depository or its nominee is the registered owner of a
Global Security, the Depository or its nominee, as the case may be, will be
considered the sole Holder of the Book-Entry Notes represented thereby for
all purposes under the Indenture. Payments of principal and any premium or
interest on individual Book-Entry Notes represented by a Global Security
will be made to the Depository or its nominee, as the case may be, as the
registered holder of such Global Security. Except as set forth below,
owners of beneficial interests in a Global Security will not be entitled to
have any of the individual Book-Entry Notes represented by such Global
Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Book-Entry Note and will not be
considered the registered holder thereof under the Indenture, including,
without limitation, for purposes of consenting to any amendment thereof or
supplement thereto. Accordingly, each Beneficial Owner must rely on the
procedures of the Depository and, if such Beneficial Owner is not a
Participant, on the procedures of the Participant through which such
Beneficial Owner owns its interest in order to exercise any rights of a
Holder under such Global Security or the Indenture. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and laws may
impair the ability to transfer beneficial interests in a Global Security
representing Book-Entry Notes.
The following is based on information furnished by DTC:
DTC is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC holds securities
that its participants ("Participants") deposit with DTC. DTC also
facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants of DTC ("Direct
Participants") include securities brokers and dealers (including the
Agents), banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to DTC's system is also available to others such
as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to DTC and its Participants are on file with the
Commission.
Purchases of Book-Entry Notes under DTC's system must be made by
or through Direct Participants, which will receive a credit for such
Book-Entry Notes on DTC's records. The ownership interest of each
actual purchaser of each Book-Entry Note represented by a Global
Security ("Beneficial Owner") is in turn to be recorded on the records
of Direct Participants and Indirect Participants. Beneficial Owners
will not receive written confirmation from DTC of their purchase, but
Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements
of their holdings, from the Direct Participants or Indirect
Participants through which such Beneficial Owner entered into the
transaction. Transfers of ownership interests in a Global Security
representing Book-Entry Notes are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners of a Global Security representing Book-Entry Notes
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will not receive Certificated Notes representing their ownership
interests therein, except in the event that use of the book-entry
system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities
representing Book-Entry Notes which are deposited with, or on behalf
of, DTC are registered in the name of DTC's partnership nominee, Cede
& Co. The deposit of Global Securities with, or on behalf of, DTC and
their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the Global Securities representing the Book-Entry Notes;
DTC's records reflect only the identity of the Direct Participants to
whose accounts such Book-Entry Notes are credited, which may or may
not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners
will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all
of the Book-Entry Notes of like tenor and terms are being redeemed,
DTC's practice is to determine by lot the amount of the interest of
each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to
the Global Securities representing the Book-Entry Notes. Under its
usual procedures, DTC mails an Omnibus Proxy to PP&L Capital Funding
as soon as possible after the applicable record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Book-Entry Notes are credited on
the applicable record date (identified in a listing attached to the
Omnibus Proxy).
Principal and any premium and/or interest payments on the Global
Securities representing the Book-Entry Notes will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the
applicable payment date in accordance with their respective holdings
shown on DTC's records unless DTC has reason to believe that it will
not receive payment on such date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name",
and will be the responsibility of such Participant and not of DTC, the
Trustee, PP&L Capital Funding or PP&L Resources, subject to any
statutory or regulatory requirements as may be in effect from time to
time. Payment of principal and any premium and interest to DTC is the
responsibility of PP&L Capital Funding and the Trustee, disbursement
of such payments to Direct Participants shall be the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners shall
be the responsibility of Direct Participants and Indirect
Participants.
A Beneficial Owner shall give notice of any option to elect to
have its Book-Entry Notes repaid by PP&L Capital Funding, through its
Participant, to the Trustee and to PP&L Capital Funding, and shall
effect delivery of such Book-Entry Notes by causing the Direct
Participant to transfer the Participant's interest in the Global
Security or Securities representing such Book-Entry Notes, on DTC's
records, to the Trustee. The requirement for physical delivery of
Book-Entry Notes in connection with a demand for repayment will be
deemed satisfied when the ownership rights in the Global Security or
Securities representing such Book-Entry Notes are transferred by
Direct Participants on DTC's records.
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Management of DTC is aware that some computer applications,
systems and the like for processing data ("Systems") that are
dependent upon calendar dates, including dates before, on, and after
January 1, 2000, may encounter "Year 2000 problems." DTC has informed
Direct Participants and Indirect Participants and other members of the
financial community (the "Industry") that it has developed and is
implementing a program so that its Systems, as the same relate to the
timely payment of distributions (including principal and interest
payments) to securityholders, book-entry deliveries, and settlement of
trades within DTC ("Depositary Services"), continue to function
appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan
includes a testing phase, which is expected to be completed within
appropriate time frames.
However, DTC's ability to perform properly its services is also
dependent upon other parties, including, but not limited to, issuers
and their agents, as well as DTC's Direct Participants and Indirect
Participants, third party vendors from whom DTC licenses software and
hardware, and third party vendors on whom DTC relies for information
or the provision of services, including telecommunication and
electrical utility service providers, among others. DTC has informed
the Industry that it is contacting (and will continue to contact)
third party vendors from whom DTC acquires services to: (1) impress
upon them the importance of such services being Year 2000 compliant;
and (2) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In
addition, DTC is in the process of developing such contingency plans
as it deems appropriate.
According to DTC, the information in the preceding two paragraphs
with respect to DTC has been provided to the Industry for
informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
DTC may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to PP&L Capital Funding or the Trustee. Under such
circumstances, in the event that a successor securities depository is
not obtained, Certificated Notes are required to be printed and
delivered in exchange for Book-Entry Notes represented by the Global
Securities held by DTC.
PP&L Capital Funding may decide to discontinue use of the system
of book-entry transfers through DTC (or a successor securities
depository). In that event, Certificated Notes will be printed and
delivered.
The information in this section concerning DTC and DTC's system has
been obtained from DTC. PP&L Capital Funding believes such information to
be reliable, but PP&L Capital Funding takes no responsibility for the
accuracy thereof.
None of PP&L Capital Funding, PP&L Resources, any Agents, the Trustee,
any Paying Agent or any Security Registrar for the Notes will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global
Security or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
If the Depository is at any time unwilling or unable to continue as
depository or ceases to be a clearing agency registered under the Exchange
Act and a successor depository is not appointed by PP&L Capital Funding,
PP&L Capital Funding will issue Certificated Notes in exchange for the
Notes represented by the Global Securities held by the Depository. In
addition, PP&L Capital Funding may at any time and in its sole discretion
determine not to have Notes represented by a Global Security and, in such
event, will issue individual Certificated Notes in fully registered form,
without coupons, in exchange for the Book-Entry Notes represented by the
Global Security.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States federal income
tax consequences of the purchase, ownership and disposition of the Notes as
of the date hereof and represents the opinion of Thelen Reid & Priest LLP,
counsel to PP&L Capital Funding, insofar as it relates to matters of law or
legal conclusions. The following summary is based upon laws, regulations,
rulings and decisions now in effect, all of which are subject to change
(including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code") and does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, traders in
securities that elect to mark to market, persons holding Notes as a hedge,
conversion transaction or as a position in a "straddle" for tax purposes,
or persons whose functional currency is not the United States dollar. It
also does not deal with holders other than original purchasers who
purchased Notes at the original offering price (except where otherwise
specifically noted).
PROSPECTIVE PURCHASERS OF NOTES, INCLUDING PERSONS WHO ARE NOT UNITED
STATES HOLDERS AND PERSONS WHO PURCHASE NOTES IN THE SECONDARY MARKET, ARE
ADVISED TO CONSULT WITH THEIR TAX ADVISORS AS TO THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES
IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY
STATE, LOCAL OR OTHER TAX LAWS.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Note that is for United States Federal income tax purposes:
(a) a citizen or resident of the United States,
(b) a corporation, partnership or other entity created or organized
in or under the laws of the United States or of any political
subdivision thereof,
(c) an estate the income of which is subject to United States Federal
income taxation regardless of its source, or
(d) any trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one
or more United States persons have the authority to control all
substantial decisions of the trust.
As used herein, the term "non-U.S. Holder" means a beneficial owner of a
Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest
Payments of interest on a Note generally will be taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or
are received (in accordance with the U.S. Holder's regular method of tax
accounting).
Premium
If a U.S. Holder purchases a Note for an amount that is greater than
its principal amount, such U.S. Holder will be considered to have purchased
the Note with "amortizable bond premium" equal in amount to such excess. A
U.S. Holder may elect to amortize such premium using a constant yield
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method over the remaining term of the Note and may offset interest
otherwise required to be included in respect of the Note during any taxable
year by the amortized amount of such excess for the taxable year. However,
if the Note may be optionally redeemed after the U.S. Holder acquires it at
a price in excess of its principal amount, special rules would apply which
could result in a deferral of the amortization of some bond premium until
later in the term of the Note. Any election to amortize bond premium
applies to all taxable debt instruments then owned and thereafter acquired
by the U.S. Holder on or after the first day of the first taxable year to
which such election applies and may be revoked only with the consent of the
Internal Revenue Service (the "IRS").
Disposition of a Note
Upon the sale, exchange or retirement of a Note, a U.S. Holder
generally will recognize taxable gain or loss equal to the difference
between the amount realized on the sale, exchange or retirement (other than
amounts representing accrued and unpaid interest) and such U.S. Holder's
adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in a
Note generally will equal such U.S. Holder's initial investment in the Note
decreased by the amount of any payments, other than qualified stated
interest payments, received and amortizable bond premium taken with respect
to such Note. Such gain or loss generally will be long-term capital gain
or loss if the Note were held for more than one year at the time of the
sale, exchange or retirement.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal
income taxes on payments of principal, premium (if any) or interest on a
Note, unless such non-U.S. Holder is a direct or indirect 10% or greater
shareholder of voting stock of PP&L Capital Funding, a controlled foreign
corporation related to PP&L Capital Funding or a bank receiving interest
described in section 881(c)(3)(A) of the Code. To qualify for the
exemption from taxation, the last United States payor in the chain of
payment prior to payment to a non-U.S. Holder (the "Withholding Agent")
must have received in the year in which a payment of interest or principal
occurs, or in either of the two preceding calendar years, a statement that
(1) is signed by the beneficial owner of the Note under penalties of
perjury, (2) certifies that such owner is not a U.S. Holder and (3)
provides the name and address of the beneficial owner. The statement may
be made on an IRS Form W-8 or a substantially similar form, and the
beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is
held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed
statement to the Withholding Agent. However, in such case, the signed
statement must be accompanied by a copy of the IRS Form W-8 or the
substitute form provided by the beneficial owner to the organization or
institution.
Generally, a non-U.S. Holder will not be subject to Federal income
taxes on any amount which constitutes capital gain upon retirement or
disposition of a Note, provided the gain is not effectively connected with
the conduct of a trade or business in the United States by the non-U.S.
Holder. Certain other exceptions may be applicable, and a non-U.S. Holder
should consult its tax advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder
unless the individual is a direct or indirect 10% or greater shareholder of
PP&L Capital Funding or, at the time of such individual's death, payments
in respect of the Notes would have been effectively connected with the
conduct by such individual of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of
31% may apply to payments made in respect of the Notes to registered owners
who are not "exempt recipients" and who fail to provide certain identifying
information (such as the registered owner's taxpayer identification number)
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in the required manner. Generally, individuals are not exempt recipients,
whereas corporations and certain other entities generally are exempt
recipients. Payments made in respect of the Notes to a U.S. Holder must be
reported to the IRS, unless the U.S. Holder is an exempt recipient or
establishes an exemption. Compliance with the identification procedures
described in the preceding section would establish an exemption from backup
withholding for those non-U.S. Holders who are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (1)
the broker determines that the seller is a corporation or other exempt
recipient or (2) the seller provides, in the required manner, certain
identifying information and, in the case of a non-U.S. Holder, certifies
that such seller is a non-U.S. Holder (and certain other conditions are
met). Such a sale must also be reported by the broker to the IRS, unless
either (1) the broker determines that the seller is an exempt recipient or
(2) the seller certifies its non-U.S. status (and certain other conditions
are met). Certification of the registered owner's non-U.S. status would be
made normally on an IRS Form W-8 under penalties of perjury, although in
certain cases it may be possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment
to a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
VALIDITY OF THE NOTES AND THE GUARANTEE
Michael A. McGrail, Esq., Senior Counsel of PP&L, and Thelen Reid
& Priest LLP, New York, New York, counsel to PP&L Resources, will pass upon
the validity of the Guarantee for PP&L Resources. Thelen Reid & Priest
LLP, counsel to PP&L Capital Funding, will pass upon the validity of the
Notes for PP&L Capital Funding. Sullivan & Cromwell, New York, New York,
will pass upon the validity of the Notes and the Guarantee for the Agents.
As to matters involving the law of the Commonwealth of Pennsylvania, Thelen
Reid & Priest LLP and Sullivan & Cromwell will rely on the opinion of Mr.
McGrail. The opinions of Mr. McGrail, Thelen Reid & Priest LLP and
Sullivan & Cromwell will be conditioned upon, and subject to certain
assumptions regarding, future action required to be taken by PP&L Capital
Funding, PP&L Resources and the Trustee in connection with the issuance and
sale of any particular Note, the specific terms of Notes and other matters
which may affect the validity of the Notes and the Guarantee but which
cannot be ascertained on the date of such opinions.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by PP&L
Capital Funding to or through Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Goldman, Sachs & Co., Morgan Stanley & Co.
Incorporated, NationsBanc Montgomery Securities LLC and any additional
agents appointed by PP&L Capital Funding from time to time and named in the
applicable pricing supplements (the "Agents"). The Agents, individually or
in a syndicate, may purchase Notes, as principal, from PP&L Capital Funding
from time to time for resale to investors and other purchasers at varying
prices relating to prevailing market prices at the time of resale as
determined by the applicable Agent or, if so specified in the applicable
pricing supplement, for resale at a fixed offering price. If agreed to by
PP&L Capital Funding and an Agent, such Agent may also utilize its
reasonable efforts on an agency basis to solicit offers to purchase the
Notes at 100% of the principal amount thereof, unless otherwise specified
in the applicable pricing supplement. PP&L Capital Funding will pay a
commission to an Agent, ranging from .125% to .750% of the principal amount
of each Note, depending upon its stated maturity, sold through such Agent
as an agent of PP&L Capital Funding. Commissions with respect to Notes
with stated maturities in excess of 30 years that are sold through an Agent
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as an agent of PP&L Capital Funding will be negotiated between PP&L Capital
Funding and such Agent at the time of such sale. In addition, the expenses
incurred by PP&L Capital Funding in connection with the offering of the
Notes, including reimbursement of certain of the Agent's expenses, are
currently estimated to be $570,000.
Unless otherwise specified in the applicable pricing supplement, any
Note sold to an Agent as principal will be purchased by such Agent at a
price equal to 100% of the principal amount thereof less a percentage of
the principal amount equal to the commission applicable to an agency sale
of a Note of identical maturity. An Agent may sell Notes it has purchased
from PP&L Capital Funding as principal to certain dealers less a concession
equal to all or any portion of the discount received in connection with
such purchase. Such Agent may allow, and such dealers may reallow, a
discount to certain other dealers. After the initial offering of Notes,
the offering price (in the case of Notes to be resold on a fixed offering
price basis), the concession and the reallowance may be changed.
PP&L Capital Funding has reserved the right to appoint additional
agents to solicit offers to purchase the Notes on substantially the same
terms and conditions as the Agents. PP&L Capital Funding may also sell the
Notes directly to investors on its own behalf. In the case of sales made
directly by PP&L Capital Funding no commission will be payable.
PP&L Capital Funding reserves the right to withdraw, cancel or modify
the offer made hereby without notice and may reject offers in whole or in
part (whether placed directly with PP&L Capital Funding or through an
Agent). Each Agent will have the right, in its discretion reasonably
exercised, to reject in whole or in part any offer to purchase Notes
received by it on an agency basis.
Upon issuance, the Notes will not have an established trading market.
The Notes will not be listed on any securities exchange. The Agents may
from time to time purchase and sell Notes in the secondary market, but the
Agents are not obligated to do so, and there can be no assurance that there
will be a secondary market for the Notes or that there will be liquidity in
the secondary market if one develops. From time to time, the Agents may
make a market in the Notes, but the Agents are not obligated to do so and
may discontinue any market-making activity at any time.
In connection with an offering of Notes purchased by one or more
Agents as principal on a fixed price basis, such Agent(s) will be permitted
to engage in certain transactions that stabilize the price of such Notes.
Such transactions may consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of such Notes. If the Agent(s)
create a short position in such Notes, i.e., if they sell Notes in an
aggregate principal amount exceeding that set forth in the applicable
pricing supplement, such Agent(s) may reduce that short position by
purchasing Notes in the open market. In general, purchases of Notes for
the purpose of stabilization or to reduce a short position could cause the
price of Notes to be higher than it might be in the absence of such
purchases.
Neither PP&L Capital Funding nor any of the Agents makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Notes.
In addition, neither PP&L Capital Funding nor any of the Agents makes any
representation that the Agents will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The Agents may be deemed to be "underwriters" within the meaning of
the Securities Act. PP&L Capital Funding and PP&L Resources have agreed to
indemnify the Agents against, and to provide contribution with respect to,
certain liabilities (including liabilities under the Securities Act). PP&L
Capital Funding and PP&L Resources have also agreed to reimburse the Agents
for certain other expenses.
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In the ordinary course of its business, the Agents and their
affiliates have engaged and may in the future engage in investment and
commercial banking transactions with PP&L Capital Funding, PP&L Resources
and certain of their affiliates.
S-24
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PROSPECTUS PP&L CAPITAL FUNDING, INC.
PP&L RESOURCES, INC.
Two North Ninth Street
Allentown, Pennsylvania 18101
(610) 774-5151
$400,000,000
PP&L CAPITAL FUNDING, INC.
DEBT SECURITIES
UNCONDITIONALLY GUARANTEED
AS TO PAYMENT OF PRINCIPAL, AND ANY PREMIUM AND INTEREST, BY
PP&L RESOURCES, INC.
PP&L Capital Funding, Inc. may offer from time to time up to
$400,000,000 of its unsecured debt securities. PP&L Resources,
Inc. will unconditionally guarantee the payment of principal, and
any premium and interest on the debt securities.
We will provide the specific terms of these securities in
supplements to this prospectus. You should read this prospectus
and the supplements carefully before you invest. This prospectus
may not be used to sell securities unless accompanied by a
prospectus supplement.
We may offer the securities directly or through
underwriters, agents or dealers. The supplements will describe
the terms of any particular plan of distribution. The section
captioned "Plan of Distribution" below also provides more
information on this topic.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is January 19, 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
----
WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . 2
PP&L RESOURCES . . . . . . . . . . . . . . . . . . . . . . . 4
PP&L CAPITAL FUNDING . . . . . . . . . . . . . . . . . . . . 5
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . 5
RATIO OF EARNINGS TO FIXED CHARGES . . . . . . . . . . . . . 5
DESCRIPTION OF THE DEBT SECURITIES . . . . . . . . . . . . . 5
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
VALIDITY OF THE DEBT SECURITIES AND THE GUARANTEES . . . . . 17
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . 17
WHERE YOU CAN FIND MORE INFORMATION
AVAILABLE INFORMATION
PP&L Resources, Inc. ("PP&L Resources") files reports, proxy
statements and other information with the Securities and Exchange
Commission ("SEC"). Information filed with the SEC by PP&L
Resources can be inspected and copied at the Public Reference
Room maintained by the SEC and at the Regional Offices of the
SEC:
Public Reference Room New York Regional Chicago Regional
450 Fifth Street, Office Office
N.W. 7 World Trade Citicorp Center
Room 1024 Center 500 West Madison
Washington, D.C. Suite 1300 Street
20549 New York, New York Suite 1400
10048 Chicago, Illinois
60661-2551
You may also obtain copies of this information by mail from
the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, at prescribed rates. Further
information on the operation of the SEC's Public Reference Room
in Washington, D.C. can be obtained by calling the SEC at 1-800-
SEC-0330.
The SEC also maintains an Internet world wide web site that
contains reports, proxy statements and other information about
issuers, such as PP&L Resources, who file electronically with the
Commission. The address of that site is http://www.sec.gov.
------------------
PP&L Resources Common Stock is listed on the New York Stock
Exchange (NYSE: PPL), and reports, proxy statements and other
information concerning PP&L Resources can also be inspected at
the offices of such Exchange at 20 Broad Street, New York, New
York 10005. In addition, reports, proxy statements and other
information concerning PP&L Resources can be inspected at its
offices at Two North Ninth Street, Allentown, Pennsylvania 18101.
More information may be obtained by contacting the PP&L Resources
Internet site (http://www.pplresources.com).
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<PAGE>
This prospectus is part of a registration statement that we
filed with the SEC. The full registration statement may be
obtained from the SEC or PP&L Resources, as indicated below.
Forms of the indenture and other documents establishing the terms
of the offered debt securities and the guarantees are filed as
exhibits to the registration statement. Statements in this
prospectus about such documents are summaries. You should refer
to the actual documents for a more complete description of the
relevant matters.
INCORPORATION BY REFERENCE
The rules of the SEC allow us to "incorporate by reference"
information into this prospectus, which means that we can
disclose important information to you by referring you to another
document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this
prospectus, and later information that we file with the SEC will
automatically update and supersede that information. The
prospectus incorporates by reference the documents set forth
below that have been previously filed with the SEC. These
documents contain important information about PP&L Resources.
SEC FILINGS (FILE NO. 1-11459) PERIOD
------------------------------ ------
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Reports on Form 10-Q Quarters ended March 31, June
30, and September 30, 1998
Current Reports on Form 8-K February 2, April 17, May 1,
May 22, June 23, July 7,
August 20, August 28, October
2, October 19 and November 2,
1998
We are also incorporating by reference additional documents
that PP&L Resources files with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), between the date of this
prospectus and the termination of the offering of the Debt
Securities.
PP&L Resources will provide without charge to each person,
including any beneficial owner, to whom a copy of this prospectus
has been delivered a copy of any and all of these filings. You
may request a copy of these filings by writing or telephoning us
at:
PP&L Resources, Inc.
Two North Ninth Street
Allentown, Pennsylvania 18101
Attention: Investor Services Department
Telephone: 1-800-345-3085
We have not included or incorporated by reference any
separate financial statements of PP&L Capital Funding, Inc.
("PP&L Capital Funding") herein. We do not consider that those
financial statements would be material to holders of the Debt
Securities because (i) PP&L Capital Funding was formed for the
primary purpose of providing financing for PP&L Resources and its
subsidiaries, (ii) PP&L Capital Funding does not currently engage
in any independent operations and (iii) PP&L Capital Funding does
not currently plan to engage, in the future, in more than minimal
independent operations. See "PP&L Capital Funding." PP&L
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<PAGE>
Capital Funding has received a "no action" letter from the Staff
of the SEC stating that the Staff would not raise any objection
if PP&L Capital Funding does not file periodic reports under
Sections 13 and 15(d) of the Exchange Act. Accordingly, we do
not expect PP&L Capital Funding to file those reports.
PP&L RESOURCES
PP&L Resources is a holding company with headquarters in
Allentown, Pennsylvania. Its subsidiaries include PP&L, Inc.
("PP&L"), which provides electricity delivery service in eastern
and central Pennsylvania, sells retail electricity throughout
Pennsylvania and markets wholesale energy throughout the eastern
United States and Canada; PP&L EnergyPlus Co., which sells energy
and energy services to newly deregulated markets; PP&L Global,
Inc. ("PP&L Global"), an international independent power company;
PP&L Spectrum, Inc., which markets energy management services
and products; Penn Fuel Gas, Inc. ("PFG"), which sells natural
gas and propane in Pennsylvania and Maryland; PP&L Capital
Funding, which engages in financing for PP&L Resources and its
subsidiaries; and H.T. Lyons, Inc. and McClure Company, which
provide heating, ventilating and air-conditioning services.
PP&L Global, PP&L Resources' principal unregulated
subsidiary, has investments and commitments of approximately $638
million in distribution, transmission and generation facilities
in the United Kingdom, Bolivia, Peru, Argentina, Spain, Portugal,
Chile and El Salvador. PP&L Global's major investments to date
are South Western Electricity plc, a British regional electric
utility company, Empresas Emel, S.A., a Chilean electric
distribution holding company, and DelSur, an El Salvadorian
electric distribution company.
In September 1998, PP&L Global reached an agreement with
Bangor Hydro-Electric to purchase 100% of the Bangor Hydro's
hydroelectric assets, as well as its interest in an oil-fired
generation facility, for $89 million. The acquisition, which is
subject to state and federal regulatory approvals and third-party
consents, is expected to close by mid-1999.
In November 1998, PP&L Global signed definitive agreements
with Montana Power Company, Portland General Electric Company and
Puget Sound Energy, Inc. to acquire 13 Montana power plants, with
2,614 MW of generating capacity, for a purchase price of $1.6
billion. The acquisition is subject to several conditions,
including the receipt of required state and federal regulatory
approvals and third-party consents. PP&L Global expects to
complete the acquisition by the end of 1999. The agreements also
provide for PP&L Global's acquisition of related transmission
assets for $182 million, subject to certain conditions, including
federal regulatory approval.
The information above concerning PP&L Resources and its
subsidiaries is only a summary and does not purport to be
comprehensive. For additional information concerning PP&L
Resources and its subsidiaries, you should refer to the
information described in "Where You Can Find More Information."
PP&L Resources' offices are located at Two North Ninth
Street, Allentown, Pennsylvania 18101 and the telephone number is
(610) 774-5151.
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PP&L CAPITAL FUNDING
PP&L Capital Funding is a Delaware corporation and a wholly-
owned subsidiary of PP&L Resources. PP&L Capital Funding's
primary business is to provide financing for the operations of
PP&L Resources and its subsidiaries.
PP&L Capital Funding's offices are located at Two North
Ninth Street, Allentown, Pennsylvania 18101 and the telephone
number is (610) 774-5151.
USE OF PROCEEDS
Unless stated otherwise in the applicable prospectus
supplement, the net proceeds from the sale of the offered debt
securities will be loaned to PP&L Resources and/or its
subsidiaries. PP&L Resources and/or its subsidiaries are
expected to use the proceeds for general corporate purposes,
including investing in unregulated business activities and
reducing short-term debt incurred to provide interim financing
for such purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to
fixed charges for PP&L Resources for the periods indicated:
Twelve Months
Ended(a) Year Ended December 31,
------------------ ----------------------------
September 30, 1998 1997 1996 1995 1994 1993
------------------ ---- ---- ---- ---- ----
Ratio of
earnings to
fixed charges . . 3.49 3.23 3.45 3.47 2.70 3.31
(a) Excluding extraordinary items. Earnings for the twelve
months ended September 30, 1998 exclude an extraordinary
charge of $948 million (after tax) associated with PP&L's
restructuring proceedings before the Pennsylvania Public
Utility Commission and the Federal Energy Regulatory
Commission. See PP&L Resources' reports on file with the
SEC pursuant to the Exchange Act as described under "Where
You Can Find More Information" for more information.
DESCRIPTION OF THE DEBT SECURITIES
The following description sets forth certain general terms
and provisions of PP&L Capital Funding's unsecured debt
securities, consisting of notes or debentures, that we may offer
by this prospectus ("Debt Securities"). We will describe the
particular terms of Debt Securities, and provisions that vary
from those described below, in one or more prospectus
supplements.
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We may issue the Debt Securities from time to time in the
future in one or more series. We will issue the Debt Securities
and the guarantee or guarantees of PP&L Resources relating
thereto (the "Guarantee" or "Guarantees") under the Indenture,
dated as of November 1, 1997 (as such indenture has been and may
be supplemented, the "Indenture"), among PP&L Capital Funding,
PP&L Resources and The Chase Manhattan Bank, as trustee (the
"Trustee"). A copy of a form of the Indenture is filed as an
exhibit to the registration statement.
The Indenture and its associated documents contain the full
legal text of the matters described in this section. Because
this section is a summary, it does not describe every aspect of
the Debt Securities or the Indenture. This summary is subject to
and qualified in its entirety by reference to all the provisions
of the Indenture, including definitions of certain terms used in
the Indenture. We also include references in parentheses to
certain sections of the Indenture. Whenever we refer to
particular sections or defined terms of the Indenture in this
prospectus or in a prospectus supplement, such sections or
defined terms are incorporated by reference herein or in the
prospectus supplement. This summary also is subject to and
qualified by reference to the description of the particular terms
of your securities described in the applicable prospectus
supplement or supplements.
GENERAL
We may issue an unlimited amount of Debt Securities or other
securities under the Indenture. The Debt Securities and all
other debt securities issued previously or hereafter under the
Indenture are collectively referred to herein as the "Indenture
Securities."
The Debt Securities will be unsecured obligations of PP&L
Capital Funding, and by the Guarantees will be unconditionally
guaranteed by PP&L Resources as to payment of principal, and any
premium and interest. See " Guarantee of PP&L Resources; Holding
Company Structure."
Prior to the issuance of each series, certain aspects of the
particular Securities have to be specified in a supplemental
indenture, a board resolution of PP&L Capital Funding, or in one
or more officer's certificates of PP&L Capital Funding pursuant
to a supplemental indenture or a board resolution. We refer you
to the applicable prospectus supplement(s) for a description of
the following terms of the series of Debt Securities:
(a) the title of such Debt Securities;
(b) any limit upon the principal amount of such Debt
Securities;
(c) the date or dates on which principal will be payable or
how to determine such dates;
(d) the rate or rates or method of determination of
interest; the date from which interest will accrue; the
dates on which interest will be payable ("Interest
Payment Dates"); and any record dates for the interest
payable on such Interest Payment Dates;
(e) any obligation or option of PP&L Capital Funding to
redeem, purchase or repay Debt Securities, or any
option of the Holder to require PP&L Capital Funding to
redeem or repurchase Debt Securities, and the terms and
conditions upon which such Debt Securities will be
redeemed, purchased or repaid;
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(f) the denominations in which such Debt Securities will be
issuable (if other than denominations of $1,000 and any
integral multiple thereof);
(g) whether such Debt Securities are to be issued in whole
or in part in the form of one or more global Debt
Securities and, if so, the identity of the depositary
for such global Debt Securities; and
(h) any other terms of such Debt Securities.
(See Section 301.)
GUARANTEE OF PP&L RESOURCES; HOLDING COMPANY STRUCTURE
PP&L Resources will unconditionally guarantee the payment of
principal of and any premium and interest on the Debt Securities,
when due and payable, whether at the stated maturity date, by
declaration of acceleration, call for redemption or otherwise, in
accordance with the terms of such Debt Securities and the
Indenture. The Guarantees will remain in effect until the entire
principal of and any premium and interest on the Debt Securities
has been paid in full or otherwise discharged in accordance with
the provisions of the Indenture. (See Article Fourteen.)
PP&L Resources conducts its operations primarily through
PP&L and PP&L Resources' other wholly-owned subsidiaries, and
substantially all of PP&L Resources' consolidated assets are held
by PP&L and these other subsidiaries. Accordingly, PP&L
Resources' cash flow and its ability to meet its obligations
under the Guarantees are largely dependent upon the earnings of
PP&L and the other subsidiaries and the distribution or other
payment of such earnings to PP&L Resources in the form of
dividends or loans or advances and repayment of loans and
advances from PP&L Resources. The subsidiaries are separate and
distinct legal entities and, except for PP&L Capital Funding,
have no obligation to pay any amounts due on the Debt Securities
or to make any funds available for such payment.
Because PP&L Resources is a holding company, its obligations
under the Guarantees will be effectively subordinated to all
existing and future liabilities of its subsidiaries. Therefore,
PP&L Resources' rights and the rights of its creditors, including
the rights of the holders of the Debt Securities under the
Guarantees, to participate in the assets of any subsidiary (other
than PP&L Capital Funding) upon the liquidation or reorganization
of such a subsidiary will be subject to the prior claims of such
subsidiary's creditors. To the extent that PP&L Resources may
itself be a creditor with recognized claims against any such
subsidiary, PP&L Resources' claims would still be effectively
subordinated to any security interest in, or mortgages or other
liens on, the assets of such subsidiary and would be subordinated
to any indebtedness or other liabilities of such subsidiary
senior to that held by PP&L Resources. Although certain
agreements to which PP&L Resources and its subsidiaries are
parties limit the incurrence of additional indebtedness, both
PP&L Resources and its subsidiaries retain the ability to incur
substantial additional indebtedness and other liabilities.
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PAYMENT OF DEBT SECURITIES
INTEREST
Unless we indicate differently in a prospectus supplement,
we will pay interest on each Debt Security on each Interest
Payment Date by check mailed to the person in whose name such
Debt Security is registered (the registered holder of any
Indenture Security being called a "Holder" in this prospectus) as
of the close of business on the regular record date relating to
such Interest Payment Date, except, that interest payable at
maturity (whether at stated maturity, upon redemption or
otherwise, "Maturity") will be paid to the person to whom
principal is paid.
However, if we default in paying interest on a Debt
Security, we will pay defaulted interest in either of the two
following ways:
(a) We will first propose to the Trustee a payment date for
such defaulted interest. Next, the Trustee will choose
a Special Record Date for determining which Holders are
entitled to the payment. The Special Record Date will
be between 10 and 15 days before the payment date we
propose. Finally, we will pay such defaulted interest
on the payment date to the Holder of the Debt Security
as of the close of business on the Special Record Date.
(b) Alternatively, we can propose to the Trustee any other
lawful manner of payment that is consistent with the
requirements of any securities exchange on which such
Debt Securities are listed for trading. If the Trustee
thinks the proposal is practicable, payment will be
made as proposed.
(See Section 307.)
PRINCIPAL
Unless we indicate differently in a prospectus supplement,
we will pay principal of and any premium and interest on the Debt
Securities at Maturity upon presentation of the Debt Securities
at the office of The Chase Manhattan Bank in New York, New York,
as our Paying Agent. Any other Paying Agent initially designated
for the Debt Securities of a particular series will be named in
the applicable prospectus supplement.
In our discretion, we may change the place of payment on the
Debt Securities, and may remove any Paying Agent and may appoint
one or more additional Paying Agents (including PP&L Capital
Funding, PP&L Resources or any affiliate of either of them).
(See Section 602.)
FORM; TRANSFERS; EXCHANGES
The Debt Securities will be issued
(a) only in fully registered form;
(b) without interest coupons; and
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(c) in denominations that are even multiples of $1,000.
You may have your Debt Securities divided into Debt
Securities of smaller denominations (of at least $1,000) or
combined into Debt Securities of larger denominations, as long as
the total principal amount is not changed. This is called an
"exchange."
You may exchange or transfer Debt Securities at the office
of the Trustee. The Trustee acts as our agent for registering
Debt Securities in the names of holders and transferring debt
securities. We may appoint another agent or act as our own agent
for this purpose. The entity performing the role of maintaining
the list of registered holders is called the "Security
Registrar." It will also perform transfers.
In our discretion, we may change the place for registration
of transfer of the Debt Securities and may remove and/or appoint
one or more additional Security Registrars (including PP&L
Capital Funding, PP&L Resources or any affiliate of either of
them). (See Sections 305 and 602.)
Except as otherwise provided in a prospectus supplement,
there will be no service charge for any transfer or exchange of
the Debt Securities, but you may be required to pay a sum
sufficient to cover any tax or other governmental charge payable
in connection therewith. We may block the transfer or exchange
of (a) Debt Securities during a period of 15 days prior to giving
any notice of redemption or (b) any Debt Security selected for
redemption in whole or in part, except the unredeemed portion of
any Debt Security being redeemed in part. (See Section 305.)
REDEMPTION
We will set forth any terms for the redemption of Debt
Securities in a prospectus supplement. Unless we indicate
differently in a prospectus supplement, and except with respect
to Debt Securities redeemable at the option of the Holder, Debt
Securities will be redeemable upon notice by mail between 30 and
60 days prior to the redemption date. If less than all of the
Debt Securities of any series or any tranche thereof are to be
redeemed, the Trustee will select the Debt Securities to be
redeemed. In the absence of any provision for selection, the
Trustee will choose a method of random selection as it deems fair
and appropriate. (See Sections 403 and 404.)
Debt Securities will cease to bear interest on the
redemption date. PP&L Capital Funding will pay the redemption
price and any accrued interest once you surrender the Debt
Security for redemption. (See Section 405.) If only part of a
Debt Security is redeemed, the Trustee will deliver to you a new
Debt Security of the same series for the remaining portion
without charge. (Section 406.)
We may make any redemption at the option of PP&L Capital
Funding conditional upon the receipt by the Paying Agent, on or
prior to the date fixed for redemption, of money sufficient to
pay the redemption price. If the Paying Agent has not received
such money by the date fixed for redemption, PP&L Capital Funding
will not be required to redeem such Debt Securities. (See
Section 404.)
EVENTS OF DEFAULT
An "Event of Default" occurs with respect to Indenture
Securities of any series if
(a) we do not pay any interest on any Indenture Securities
of the applicable series within 30 days of the due
date;
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(b) we do not pay principal or premium on any Indenture
Securities of the applicable series on its due date;
(c) we remain in breach of a covenant (excluding covenants
solely applicable to a specific series) or warranty of
the Indenture for 90 days after we receive a written
notice of default stating we are in breach and
requiring remedy of the breach; the notice must be sent
by either the Trustee or Holders of 25% of the
principal amount of Indenture Securities of the
affected series; the Trustee or such Holders can agree
to extend the 90-day period and such an agreement to
extend will be automatically deemed to occur if we are
diligently pursuing action to correct the default;
(d) the Guarantees on any Indenture Securities of the
applicable series
(1) cease to be effective (except in accordance
with their terms),
(2) are found in any judicial proceeding to be
unenforceable or invalid, or
(3) are denied or disaffirmed (except in
accordance with their terms);
(e) we file for bankruptcy or certain other events in
bankruptcy, insolvency, receivership or reorganization
occur; or
(f) any other Event of Default specified in the prospectus
supplement occurs.
(See Section 801.)
No Event of Default with respect to the Debt Securities
necessarily constitutes an Event of Default with respect to the
Indenture Securities of any other series issued under the
Indenture.
REMEDIES
ACCELERATION
ANY ONE SERIES. If an Event of Default occurs and is
continuing with respect to any one series of Indenture
Securities, then either the Trustee or the Holders of 25% in
principal amount of the outstanding Indenture Securities of such
series may declare the principal amount of all of the Indenture
Securities of such series to be due and payable immediately.
MORE THAN ONE SERIES. If an Event of Default occurs and is
continuing with respect to more than one series of Indenture
Securities, then either the Trustee or the Holders of 25% in
aggregate principal amount of the outstanding Indenture
Securities of all such series, considered as one class, may make
such declaration of acceleration. Thus, if there is more than
one series affected, the action by 25% in principal amount of the
Indenture Securities of any particular series will not, in
itself, be sufficient to make a declaration of acceleration.
(See Section 802.)
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RESCISSION OF ACCELERATION
After the declaration of acceleration has been made and
before the Trustee has obtained a judgment or decree for payment
of the money due, such declaration and its consequences will be
rescinded and annulled, if
(a) we pay or deposit with the Trustee a sum sufficient to
pay
(1) all overdue interest;
(2) the principal of and any premium which have become
due otherwise than by such declaration of
acceleration and overdue interest thereon;
(3) interest on overdue interest to the extent lawful;
and
(4) all amounts due to the Trustee under the
Indenture; and
(b) all Events of Default, other than the nonpayment of the
principal which has become due solely by such
declaration of acceleration, have been cured or waived
as provided in the Indenture.
(See Section 802.) For more information as to waiver of
defaults, see " Waiver of Default and of Compliance" below.
CONTROL BY HOLDERS; LIMITATIONS
Subject to the Indenture, if an Event of Default with
respect to the Indenture Securities of any one series occurs and
is continuing, the Holders of a majority in principal amount of
the outstanding Indenture Securities of that series will have the
right to
(a) direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or
(b) exercise any trust or power conferred on the Trustee
with respect to the Indenture Securities of such
series.
If an Event of Default is continuing with respect to more
than one series of Indenture Securities, the Holders of a
majority in aggregate principal amount of the outstanding
Indenture Securities of all such series, considered as one class,
will have the right to make such direction, and not the Holders
of the Indenture Securities of any one of such series. These
rights of Holders to make direction are subject to the following
limitations:
(a) the Holders' directions will not conflict with any
law or the Indenture; and
(b) the Holders' directions may not involve the Trustee in
personal liability where the Trustee believes indemnity
is not adequate.
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The Trustee may also take any other action it deems proper which
is consistent with the Holders' direction. (See Sections 812 and
903.)
In addition, the Indenture provides that no Holder of any
Indenture Security will have any right to institute any
proceeding, judicial or otherwise, with respect to the Indenture
for the appointment of a receiver or for any other remedy
thereunder unless
(a) that Holder has previously given the Trustee
written notice of a continuing Event of Default;
(b) the Holders of 25% in aggregate principal amount
of the outstanding Indenture Securities of all
affected series, considered as one class, have
made written request to the Trustee to institute
proceedings in respect of that Event of Default
and have offered the Trustee reasonable indemnity
against costs and liabilities incurred in
complying with such request; and
(c) for 60 days after receipt of such notice, the
Trustee has failed to institute any such
proceeding and no direction inconsistent with such
request has been given to the Trustee during such
60-day period by the Holders of a majority in
aggregate principal amount of outstanding
Indenture Securities of all affected series,
considered as one class.
Furthermore, no Holder will be entitled to institute any such
action if and to the extent that such action would disturb or
prejudice the rights of other Holders. (See Sections 807 and
903.)
However, each Holder has an absolute and unconditional right
to receive payment when due and to bring a suit to enforce that
right. (See Sections 807 and 808.)
NOTICE OF DEFAULT
The Trustee is required to give the Holders of the Indenture
Securities notice of any default under the Indenture to the
extent required by the Trust Indenture Act, unless such default
has been cured or waived; except that in the case of an Event of
Default of the character specified above in clause (c) under
"Events of Default," no such notice shall be given to such
Holders until at least 75 days after the occurrence thereof. (See
Section 902.) The Trust Indenture Act currently permits the
Trustee to withhold notices of default (except for certain
payment defaults) if the Trustee in good faith determines the
withholding of such notice to be in the interests of the Holders.
We will furnish the Trustee with an annual statement as to
the compliance by PP&L Capital Funding with the conditions and
covenants in the Indenture. (See Section 605.)
WAIVER OF DEFAULT AND OF COMPLIANCE
The Holders of a majority in aggregate principal amount of
the outstanding Indenture Securities of any series may waive, on
behalf of the Holders of all Indenture Securities of such series,
any past default under the Indenture, except a default in the
payment of principal, premium or interest, or with respect to
compliance with certain provisions of the Indenture that cannot
be amended without the consent of the Holder of each outstanding
Indenture Security. (See Section 813.)
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Compliance with certain covenants in the Indenture or
otherwise provided with respect to Indenture Securities may be
waived by the Holders of a majority in aggregate principal amount
of the affected Indenture Securities, considered as one class.
(See Section 606.)
CONSOLIDATION, MERGER AND CONVEYANCE OF ASSETS AS AN ENTIRETY; NO
FINANCIAL COVENANTS
Subject to the provisions described in the next paragraph,
each of PP&L Capital Funding and PP&L Resources will preserve its
corporate existence. (See Section 604.)
PP&L Capital Funding and PP&L Resources have each agreed not
to consolidate with or merge into any other entity or convey,
transfer or lease its properties and assets substantially as an
entirety to any entity unless
(a) the entity formed by such consolidation or into which
PP&L Capital Funding or PP&L Resources, as the case may
be, is merged or the entity which acquires or which
leases the property and assets of PP&L Capital Funding
or PP&L Resources, as the case may be, substantially as
an entirety is an entity organized and existing under
the laws of the United States of America or any State
thereof or the District of Columbia, and expressly
assumes, by supplemental indenture, the due and
punctual payment of the principal, premium and interest
on all the outstanding Indenture Securities (or the
Guarantees endorsed thereon, as the case may be) and
the performance of all of the covenants of PP&L Capital
Funding or PP&L Resources, as the case may be, under
the Indenture, and
(b) immediately after giving effect to such transactions,
no Event of Default, and no event which after notice or
lapse of time or both would become an Event of Default,
will have occurred and be continuing. (See Section
1101.)
Neither the Indenture nor the Guarantee contains any
financial or other similar restrictive covenants.
MODIFICATION OF INDENTURE
WITHOUT HOLDER CONSENT. Without the consent of any Holders
of Indenture Securities, PP&L Capital Funding, PP&L Resources and
the Trustee may enter into one or more supplemental indentures
for any of the following purposes:
(a) to evidence the succession of another entity to PP&L
Capital Funding or PP&L Resources; or
(b) to add one or more covenants of PP&L Capital Funding or
PP&L Resources or other provisions for the benefit of
the Holders of all or any series or tranche of
Indenture Securities, or to surrender any right or
power conferred upon PP&L Capital Funding or PP&L
Resources; or
(c) to add any additional Events of Default for all or any
series of Indenture Securities; or
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(d) to change or eliminate any provision of the Indenture
or to add any new provision to the Indenture that does
not adversely affect the interests of the Holders; or
(e) to provide security for the Indenture Securities of any
series; or
(f) to establish the form or terms of Indenture Securities
of any series or tranche or any Guarantees as permitted
by the Indenture; or
(g) to provide for the issuance of bearer securities; or
(h) to evidence and provide for the acceptance of
appointment of a separate or successor Trustee; or
(i) to provide for the procedures required to permit the
utilization of a noncertificated system of registration
for any series or tranche of Indenture Securities; or
(j) to change any place or places where
(1) we may pay principal, premium and interest,
(2) Indenture Securities may be surrendered for
transfer or exchange, and
(3) notices and demands to or upon PP&L Capital
Funding or PP&L Resources may be served; or
(k) to cure any ambiguity, defect or inconsistency or to
make any other changes that do not adversely affect the
interests of the Holders in any material respect.
(See Section 1201.)
If the Trust Indenture Act is amended after the date of the
Indenture so as to require changes to the Indenture or so as to
permit changes to, or the elimination of, provisions which, at
the date of the Indenture or at any time thereafter, were
required by the Trust Indenture Act to be contained in the
Indenture, the Indenture will be deemed to have been amended so
as to conform to such amendment or to effect such changes or
elimination, and PP&L Capital Funding, PP&L Resources and the
Trustee may, without the consent of any Holders, enter into one
or more supplemental indentures to effect or evidence such
amendment.
WITH HOLDER CONSENT. Except as provided above, the consent
of the Holders of at least a majority in aggregate principal
amount of the Indenture Securities of all outstanding series,
considered as one class, is generally required for the purpose of
adding to, or changing or eliminating any of the provisions of,
the Indenture pursuant to a supplemental indenture. However, if
less than all of the series of outstanding Indenture Securities
are directly affected by a proposed supplemental indenture, then
such proposal only requires the consent of the Holders of a
majority in aggregate principal amount of the outstanding
Indenture Securities of all directly affected series, considered
as one class. Moreover, if the Indenture Securities of any
series have been issued in more than one tranche and if the
proposed supplemental indenture directly affects the rights of
the Holders of Indenture Securities of one or more, but less than
all, of such tranches, then such proposal only requires the
consent of the Holders of a majority in aggregate principal
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amount of the outstanding Indenture Securities of all directly
affected tranches, considered as one class.
However, no amendment or modification may, without the
consent of the Holder of each outstanding Indenture Security
directly affected thereby,
(a) change the stated maturity of the principal or interest
on any Indenture Security (other than pursuant to the
terms thereof), or reduce the principal amount,
interest or premium payable or change the currency in
which any Indenture Security is payable, or impair the
right to bring suit to enforce of any payment;
(b) reduce the percentages of Holders whose consent is
required for any supplemental indenture or waiver or
reduce the requirements for quorum and voting under the
Indenture; or
(c) modify certain of the provisions in the Indenture
relating to supplemental indentures and waivers of
certain covenants and past defaults.
A supplemental indenture which changes or eliminates any
provision of the Indenture expressly included solely for the
benefit of Holders of Indenture Securities of one or more
particular series or tranches will be deemed not to affect the
rights under the Indenture of the Holders of Indenture Securities
of any other series or tranche. (See Section 1202.)
MISCELLANEOUS PROVISIONS
The Indenture provides that certain Indenture Securities,
including those for which payment or redemption money has been
deposited or set aside in trust as described under "Satisfaction
and Discharge" below, will not be deemed to be "outstanding" in
determining whether the Holders of the requisite principal amount
of the outstanding Indenture Securities have given or taken any
demand, direction, consent or other action under the Indenture as
of any date, or are present at a meeting of Holders for quorum
purposes. (See Section 101.)
PP&L Capital Funding or PP&L Resources will be entitled to
set any day as a record date for the purpose of determining the
Holders of outstanding Indenture Securities of any series
entitled to give or take any demand, direction, consent or other
action under the Indenture, in the manner and subject to the
limitations provided in the Indenture. In certain circumstances,
the Trustee also will be entitled to set a record date for action
by Holders. If such a record date is set for any action to be
taken by Holders of particular Indenture Securities, such action
may be taken only by persons who are Holders of such Indenture
Securities on the record date. (See Section 104.)
SATISFACTION AND DISCHARGE
Any Indenture Securities or any portion will be deemed to
have been paid for purposes of the Indenture, and at PP&L Capital
Funding's election, our entire indebtedness will be satisfied and
discharged, if there shall have been irrevocably deposited with
the Trustee or any Paying Agent (other than PP&L Capital Funding
or PP&L Resources), in trust:
(a) money sufficient, or
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(b) in the case of a deposit made prior to the maturity of
such Indenture Securities, non-redeemable Government
Obligations (as defined in the Indenture) sufficient,
or
(c) a combination of (a) and (b), which in total are
sufficient,
to pay when due the principal of, and any premium, and interest
due and to become due on such Indenture Securities or portions
thereof on and prior to the maturity thereof.
(See Section 701.)
The Indenture will be deemed satisfied and discharged when
no Indenture Securities remain outstanding and when we have paid
all other sums payable by us under the Indenture. (See Section
702.)
All moneys we pay to the Trustee or any Paying Agent on Debt
Securities which remain unclaimed at the end of two years after
payments have become due will be paid to or upon the order of
PP&L Capital Funding. Thereafter, the Holder of such Debt
Security may look only to us for payment thereof. (See Section
603.)
RESIGNATION AND REMOVAL OF THE TRUSTEE; DEEMED RESIGNATION
The Trustee may resign at any time by giving written notice
thereof to us.
The Trustee may also be removed by act of the Holders of a
majority in principal amount of the then outstanding Indenture
Securities of any series.
No resignation or removal of the Trustee and no appointment
of a successor trustee will become effective until the acceptance
of appointment by a successor trustee in accordance with the
requirements of the Indenture.
Under certain circumstances, we may appoint a successor
trustee and if the successor accepts, the Trustee will be deemed
to have resigned.
(Section 910).
CERTAIN PENNSYLVANIA TAX MATTERS
In the opinion of Michael A. McGrail, Esq., Senior Counsel
of PP&L, Debt Securities owned by individuals residing in
Pennsylvania are subject to the 4 mills ($4.00 on each $1,000 of
principal amount) Pennsylvania corporate loans tax. This tax
will be withheld from interest payments to these individuals.
Mr. McGrail is also of the opinion that the Debt Securities are
exempt from existing personal property taxes in Pennsylvania.
THE TRUSTEE'S OTHER DEALINGS WITH PP&L CAPITAL FUNDING AND PP&L
RESOURCES
The Chase Manhattan Bank has at various times in the
ordinary course of business made loans to PP&L Resources and
PP&L, and acts as Administrative Agent with respect to our
current revolving credit facilities. In addition, The Chase
Manhattan Bank acts as trustee with respect to junior
subordinated deferrable interest debentures of PP&L, acts as
issuing and paying agent for PP&L Capital Funding's commercial
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paper notes, and acts as guarantee trustee and property trustee
for the trust originated preferred securities and common
securities of our affiliates, PP&L Capital Trust and PP&L Capital
Trust II. Chase Manhattan Bank Delaware, an affiliate of the
Trustee, also acts as Delaware trustee for the trust originated
preferred securities and common securities.
EXPERTS
The consolidated financial statements of PP&L Resources as
of December 31, 1997 and 1996, and for the two years then ended,
incorporated in this prospectus by reference to the Annual Report
on Form 10-K of PP&L Resources for the year ended December 31,
1997, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
Michael A. McGrail, Esq., Senior Counsel of PP&L, has
reviewed the statements made in the incorporated documents as to
matters of law and legal conclusions. Such statements have been
made in reliance upon his authority as an expert.
VALIDITY OF THE DEBT SECURITIES AND THE GUARANTEES
Michael A. McGrail, Esq., Senior Counsel of PP&L, and Thelen
Reid & Priest LLP, New York, New York, counsel to PP&L Resources,
will pass upon the validity of the guarantees for PP&L Resources.
Thelen Reid & Priest LLP, counsel to PP&L Capital Funding, will
pass upon the validity of the Debt Securities for PP&L Capital
Funding. Sullivan & Cromwell, New York, New York, will pass upon
the validity of the Debt Securities and the Guarantees for any
underwriters or agents. As to matters involving the law of the
Commonwealth of Pennsylvania, Thelen Reid & Priest LLP and
Sullivan & Cromwell will rely on the opinion of Mr. McGrail.
PLAN OF DISTRIBUTION
We may sell Debt Securities (a) to purchasers directly; (b)
to underwriters for public offering and sale by them; or (c)
through agents.
DIRECT SALES
We may sell the Debt Securities directly to institutional
investors or others who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale of
the Debt Securities. A prospectus supplement will describe the
terms of any such sale.
TO UNDERWRITERS
The applicable prospectus supplement will name any
underwriter involved in a sale of Debt Securities. Underwriters
may offer and sell Debt Securities at a fixed price or prices,
which may be changed, or from time to time at market prices or at
negotiated prices. Underwriters may be deemed to have received
compensation from PP&L Capital Funding from sales of Debt
Securities in the form of underwriting discounts or commissions
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and may also receive commissions from purchasers of Debt
Securities for whom they may act as agent.
Underwriters may sell Debt Securities to or through dealers,
and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters
and/or commissions (which may be changed from time to time) from
the purchasers for whom they may act as agent.
Unless otherwise provided in a prospectus supplement, the
obligations of any underwriters to purchase Debt Securities will
be subject to certain conditions precedent, and the underwriters
will be obligated to purchase all the Debt Securities if any are
purchased.
THROUGH AGENTS
We will name any agent involved in a sale of Debt
Securities, as well as any commissions payable by PP&L Capital
Funding to such agent, in a prospectus supplement. Unless we
indicate differently in the prospectus supplement, any such agent
will be acting on a reasonable efforts basis for the period of
its appointment.
GENERAL INFORMATION
Underwriters, dealers and agents participating in a sale of
Debt Securities may be deemed to be underwriters as defined in
the Securities Act, and any discounts and commissions received by
them and any profit realized by them on resale of the Debt
Securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. We, and PP&L Resources,
may have agreements with underwriters, dealers and agents to
indemnify them against certain civil liabilities, including
liabilities under the Securities Act, and to reimburse them for
certain expenses.
Underwriters or agents and their associates may be customers
of, engage in transactions with or perform services for PP&L
Capital Funding or PP&L Resources or their affiliates in the
ordinary course of business.
Unless we indicate differently in a prospectus supplement,
we will not list the Debt Securities on any securities exchange.
The Debt Securities will be a new issue of securities with no
established trading market. Any underwriters that purchase Debt
Securities for public offering and sale may make a market in such
Debt Securities, but such underwriters will not be obligated to
do so and may discontinue any market making at any time without
notice. We make no assurance as to the liquidity of or the
trading markets for any Debt Securities.
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