June 15, 2001
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
(Rule 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[_] Preliminary information statement
[_] Confidential, for use of the Commission only
(as permitted by Rule 14c-5(d)(2)).
[X] Definitive information statement
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PPL ELECTRIC UTILITIES CORPORATION
(Name of Registrant as Specified in Its Charter)
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[Logo of PPL]
PPL Electric Utilities Corporation
Notice of Special Meeting of Shareowners
to be held on
July 17, 2001
and
Information Statement
relating to
Plan of Division
dividing
PPL Electric Utilities Corporation
into
PPL Electric Utilities Corporation,
the surviving corporation,
and
Ninth Street & Hamilton Corporation,
a new corporation,
including
the Amended Articles of Incorporation
and Bylaws
of
PPL Electric Utilities Corporation
and
the Articles of Incorporation
of
Ninth Street & Hamilton Corporation
Notice of Special Meeting of Shareowners
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
A special meeting of shareowners of PPL Electric Utilities Corporation (the
"Company") called by the Board of Directors will be held at the offices of the
Company at Two North Ninth Street, Allentown, Pennsylvania, on Tuesday, July
17, 2001 at 10:30 a.m.
The meeting will be held for the purpose of approving a Plan of Division
which will divide the Company, a Pennsylvania corporation, into two
Pennsylvania corporations, namely PPL Electric Utilities Corporation and Ninth
Street & Hamilton Corporation, with PPL Electric Utilities Corporation being
the surviving company, and will result in amendments to the Articles of
Incorporation and Bylaws of PPL Electric Utilities Corporation. The division
will not affect the number of shares of common stock or the number or the
rights, preferences or terms of the shares of preferred stock of the Company
outstanding prior to the division. The Plan of Division is more fully
described in the Information Statement accompanying this Notice.
Proxies are not being solicited from the Company's shareowners because a
quorum exists for the meeting based upon the stock of the Company held by its
parent, PPL Corporation ("PPL"). PPL owns all of the common stock of the
Company and, as a result, owns 99% of the voting shares of the Company. PPL
intends to vote all of these shares in favor of the Plan of Division which
includes the amendments to the Company's Articles of Incorporation and Bylaws.
Consequently, approval of the Plan of Division, including the amendments to
the Company's Articles of Incorporation and Bylaws, is assured.
Only shareowners of record at the close of business on Friday, June 1, 2001,
will be entitled to vote at the Special Meeting or any adjournments or
postponements thereof. All preferred stock shareowners are invited to attend
the Special Meeting in person. If the Special Meeting is interrupted or
delayed for any reason, the shareowners attending the adjourned meeting shall
constitute a quorum and may act upon such business as may properly come before
the Special Meeting.
By Order of the Board of
Directors.
/s/ Elizabeth Stevens Duane
Elizabeth Stevens Duane
Secretary
June 15, 2001
Table of Contents
Page
----
Information Statement...................................................... 1
Outstanding Stock and Voting Rights........................................ 1
Summary.................................................................... 2
Shareowner Approval of the Plan of Division.............................. 2
No Shareowner Action is Required......................................... 2
The Plan of Division..................................................... 2
Federal Income Tax Consequences.......................................... 3
Effective Date of the Plan of Division................................... 3
Amendment of the Articles of Incorporation and Bylaws of the Company..... 3
Independent Administrator................................................ 4
Concurrent Transactions.................................................. 4
Purpose of the Plan of Division.......................................... 4
Dissenters' Rights....................................................... 5
Financial Statements of the Company...................................... 5
Risk Factors............................................................. 5
Forward-Looking Statements................................................. 6
Risk Factors for Holders of Preferred Stock after the Division ............ 7
Increased Debt Leverage.................................................. 7
Pro Forma Capitalization of PPL Electric Utilities Corporation............. 7
Pro Forma Computation of Ratio of Earnings to Fixed Charges................ 8
Plan of Division........................................................... 9
Purpose.................................................................. 9
The Division............................................................. 9
Capital Structure and Shares............................................. 9
Articles of Incorporation and Bylaws of PPL Electric Utilities........... 9
Management............................................................... 9
Directors.............................................................. 9
Effect of Division....................................................... 10
Effective Date of the Plan of Division................................... 11
Amendment of the Articles of Incorporation and Bylaws of the Company....... 11
Articles of Incorporation Amendments..................................... 11
Bylaw Amendments......................................................... 12
Independent Administrator.................................................. 13
Concurrent Transactions.................................................... 13
Preferred Stock Shareowners' Rights to Dissent............................. 14
Notice of Intent to Dissent.............................................. 14
Notice of Intention to Demand Payment.................................... 15
Payment of Fair Value of Shares.......................................... 15
Estimate by Dissenter of Fair Value...................................... 15
Valuation Proceedings.................................................... 16
Costs and Expenses of Valuation Proceedings.............................. 16
Where You Can Find More Information........................................ 17
Appendix A................................................................. A-1
Appendix B................................................................. B-1
Information Statement
This Information Statement relates to a proposed division of PPL Electric
Utilities Corporation, referred to herein as the Company, of which you are a
preferred shareowner, into two Pennsylvania corporations. The electric
transmission and distribution businesses presently conducted by the Company
will be carried on by it as the surviving corporation with the same name. The
Company's parent, PPL Corporation, referred to herein as "PPL", owns all of
the shares of the Company's common stock, which represents 99% of the total
number of voting shares outstanding. PPL has informed the Company that all of
its voting shares will be present at the Special Meeting of shareowners, and
as a result, a quorum will exist for the Special Meeting based on PPL's common
stock ownership. ACCORDINGLY, WE ARE NOT ASKING THE PREFERRED SHAREOWNERS FOR
A PROXY, AND SHAREOWNERS ARE REQUESTED NOT TO SEND US A PROXY. The Board of
Directors of the Company approved unanimously a Plan of Division on May 21,
2001, pursuant to which the proposed division of the Company will be effected,
including the proposed amendments to the Articles of Incorporation and Bylaws
of the Company. The form of the Plan of Division is attached hereto as
Appendix A.
The preferred shareowners will not receive any shares in the new corporation
resulting from the division, which will be a wholly owned subsidiary of PPL
Corporation.
The Company's principal executive offices are located at Two North Ninth
Street, Allentown, Pennsylvania 18101, telephone number (610) 774-5151. This
Information Statement is first being released to preferred shareowners on or
about June 15, 2001.
OUTSTANDING STOCK AND VOTING RIGHTS
The Board of Directors has established Friday, June 1, 2001, as the Record
Date for shareowners entitled to vote at the Special Meeting (the "Record
Date"). The transfer books of the Company will not be closed. The Company's
Articles of Incorporation divide its voting stock into four classes: 4 1/2%
Preferred Stock, Series Preferred Stock, Preference Stock and Common Stock.
There were no shares of Preference Stock outstanding on the Record Date. Each
currently outstanding share of each class of stock entitles the holder to one
vote upon any business properly presented to the Special Meeting, and for
purposes of voting at the Special Meeting all classes vote together as a
single class. A total of 103,194,705 voting shares were outstanding on the
Record Date, consisting of 102,230,382 shares of Common Stock (all owned by
PPL), 247,658 shares of 4 1/2% Preferred Stock and 716,665 shares of Series
Preferred Stock.
As of May 31, 2001, the following is the only entity known by the Company to
own more than five percent of any class or series of preferred stock entitled
to vote at the Special Meeting:
Name & Number of Percent of Class
Address of Shares (all Preferred
Title Beneficial Owner Beneficially Owned Stock)
----- ---------------------------------- ------------------ ----------------
6.75% Series Wellington Management Company, LLP 85,000(a) 8.72%
Preferred Stock 75 State Street
Boston, MA 02109
-------
(a) Number of shares beneficially owned includes shares for which Wellington
Management Company, LLP exercises investment and/or voting power, but
which are held by one of its wholly owned subsidiaries and/or invesment
advisory clients.
The Company has asked brokers and other custodians, nominees and fiduciaries
to forward this Information Statement to the beneficial owners of the
preferred stock.
Although proxies are not being solicited, shareowners may attend the Special
Meeting and vote in person. If you plan to attend the Special Meeting and vote
in person, we will give you a ballot when you arrive. However, if your shares
are held in "street-name," only your broker or your bank or other nominee can
vote your shares. PPL intends to vote all of its shares of the Company's
common stock, or 99% of the total number of voting shares of the Company, in
favor of the Plan of Division dividing the Company into two Pennsylvania
corporations, PPL Electric Utilities Corporation, the surviving corporation
under the Plan of Division, and Ninth Street & Hamilton Corporation, a new
corporation, and resulting in amendments to the Articles of Incorporation and
the Bylaws of the Company. Consequently, approval of the Plan of Division,
including the amendments to the Articles of Incorporation and the Bylaws of
the Company, is assured.
1
SUMMARY
This summary is qualified by the more detailed information set forth
elsewhere in this Information Statement, which should be read in its entirety.
Shareowner Approval of the Plan of Division
The Plan of Division, including the amendments to the Articles of
Incorporation and the Bylaws of the Company, will be approved upon receiving
the affirmative vote of the majority of the votes cast at the Special Meeting
by all shareowners entitled to vote at the meeting. Thus, the affirmative vote
of PPL, as the holder of all of the shares of common stock of the Company,
representing 99% of the total number of voting shares of the Company, will
assure approval of the Plan of Division, including the amendments to the
Articles of Incorporation and the Bylaws of the Company, at the Special
Meeting. The form of the Plan of Division is attached hereto as Appendix A.
No Shareowner Action is Required
Shareowners will not be required to take any action as a consequence of the
adoption and effectiveness of the Plan of Division, including the amendments
to the Articles of Incorporation and the Bylaws of the Company. Following the
division, you will own the same number of shares of preferred stock of PPL
Electric Utilities Corporation, the surviving corporation of the division, as
you owned prior to the division. You will not own any shares of Ninth Street &
Hamilton Corporation, which will be a wholly owned subsidiary of PPL.
The Plan of Division
On the date it is effective, the Plan of Division will divide the Company
into two separate Pennsylvania corporations. One will be PPL Electric
Utilities Corporation, referred to here as "PPL Electric Utilities". It will
be the surviving corporation in the division. The outstanding shares of the
common stock and the 4 1/2% Preferred Stock and the Series Preferred Stock
will remain outstanding shares of PPL Electric Utilities without you taking
any action and without any change in the rights, preferences or terms of the
holders of these shares, including the rights of the owners of the 4 1/2%
Preferred Stock and the Series Preferred Stock to dividends and preference on
liquidation. Following the division, PPL Electric Utilities will continue to
own and operate its electric transmission and distribution businesses.
In the division, all of the property and liabilities of the Company
associated with its current electric transmission and distribution utility
businesses and which are necessary to carry on those businesses will remain
with PPL Electric Utilities.
The division will create a new Pennsylvania corporation named Ninth Street &
Hamilton Corporation, referred to here as "NS&H Corp." The preferred
shareowners will not own any shares in NS&H Corp., which will be a wholly
owned subsidiary of PPL Corporation. Certain specifically identified assets
and liabilities of the Company will be allocated to NS&H Corp. The allocated
assets consist of $5 million of cash of the Company. The allocated liabilities
consist of the following:
. liabilities of the Company, if any, under contracts that, prior to the
effective date of the division, the Company has assigned to PPL or any
other direct or indirect subsidiary of PPL, and any other contracts
under which the Company has joint liability with PPL or any other direct
or indirect subsidiary of PPL, for which releases from the other
contracting party or parties have not been obtained by the Company;
. liabilities of the Company, if any, under any employee benefit plans,
programs, policies, agreements and other arrangements where the Company
may be responsible for payments to employees of PPL or any other direct
or indirect subsidiary of PPL, other than liabilities for which the
Company is liable under applicable law or regulation notwithstanding the
division;
. liabilities of the Company, if any, for damages with respect to claims
that may be made in the future based on occurrences arising prior to the
effective date of the division for which the Company may be jointly
liable with PPL or any other direct or indirect subsidiary of PPL, other
than tax liabilities and liabilities for which the Company is liable
under applicable law or regulation notwithstanding the division; and
. liabilities of the Company, if any, for damages with respect to claims
that may be made in the future based on occurrences arising prior to the
effective date of the division which do not relate to or arise out of
(1) the Company's transmission and distribution businesses or (2) those
business activities that
2
are related to or arise out of its electric transmission and
distribution businesses, other than tax liabilities and liabilities for
which the Company is liable under applicable law or regulation
notwithstanding the division.
PPL Electric Utilities will not have any interest in the cash allocated to
NS&H Corp. and will not be liable for any of the liabilities allocated to NS&H
Corp. PPL Electric Utilities will, however, continue to be liable for all
other liabilities of the Company not allocated to NS&H Corp.
In order to assure third parties that the liabilities allocated to NS&H
Corp. will be paid and satisfied, $5 million of cash will be allocated to NS&H
Corp. in the Plan of Division and NS&H Corp. will be added as a beneficiary on
existing insurance policies held by PPL Corporation covering the insurable
risks with respect to these liabilities. In addition, PPL Corporation, the
Company's parent company, will guarantee in full the liabilities allocated to
NS&H Corp., effective as of the effective date of the division. (See "Plan of
Division" below for additional information)
Federal Income Tax Consequences
Neither the holders of the 4 1/2% Preferred Stock nor the holders of Series
Preferred Stock will recognize gain or loss for federal income tax purposes as
a result of the adoption of the Plan of Division or the transactions effected
by the Plan of Division.
Effective Date of the Plan of Division
The Plan of Division will become effective upon filing of Articles of
Division and the Plan of Division with the Secretary of State of the
Commonwealth of Pennsylvania. However, the Board of Directors of the Company
in its sole discretion may determine at any time, whether before or after the
vote of the shareowners at the Special Meeting, not to file Articles of
Division and the Plan of Division with the Secretary of State of the
Commonwealth of Pennsylvania.
Amendment of the Articles of Incorporation and Bylaws of the Company
The amendments to the Articles of Incorporation and the Bylaws of the
Company will become effective upon the effectiveness of the Plan of Division.
The principal amendments to the Articles of Incorporation and the Bylaws of
the Company are summarized below:
. The amended Articles of Incorporation will provide that there will be at
least one individual who is an Independent Director (as defined in the
amended Articles of Incorporation) on the Board of Directors. The
provisions of the amended Articles of Incorporation described below
which require the unanimous consent of all directors will require the
vote of the Independent Director.
In general, an Independent Director is a director who is not, and within
the previous five years was not,
. a shareowner, director, officer, employee, customer, supplier or
major creditor of PPL, PPL Electric Utilities or any of their
affiliates, or
. a shareowner of any major creditor of PPL, PPL Electric or any of
their affiliates,
and who did not have any other business relationships with these PPL
entities or creditors.
. The amended Articles of Incorporation will require the unanimous consent
of the Board of Directors to approve the filing by the Company of a
petition commencing a voluntary bankruptcy proceeding or other similar
action relating to the enforcement of creditors' rights. A unanimous
consent of the Board of Directors is also required for the adoption of
any amendment to these provisions of the Articles of Incorporation or
the provisions of the Bylaws described below.
. The amended Bylaws of PPL Electric Utilities will provide that,
. It shall engage, whether directly or indirectly through subsidiaries,
only in (1) the electric transmission and distribution businesses and
(2) those business activities that are related to or arise out of its
electric transmission and distribution businesses.
. It shall at all times ensure that its capitalization is adequate in
light of its business and purpose.
. Its funds and records and books of accounts shall not be commingled
with those of any other entity and its accounts shall be kept
separate from PPL and its other affiliates.
3
. It shall conduct its business solely in its own name and hold itself
separate from PPL and PPL's other affiliates and maintain an arm's
length relationship with PPL and all affiliates of PPL.
. It shall not guarantee or become obligated for the debts of PPL or
any of PPL's other affiliates or make its credit available to satisfy
the obligations of, or pledge its assets for the benefit of, PPL or
any of PPL's other affiliates, with the exception of (1) any
guarantee of the debts of an affiliate in effect as of the effective
date of the division or (2) any guarantee of the debts of any direct
or indirect subsidiary of PPL Electric Utilities.
(See "Amendment of the Articles of Incorporation and Bylaws of the Company"
below for additional information)
Independent Administrator
An Independent Administrator will be appointed to monitor the corporate
proceedings and activities of PPL Electric Utilities to assure compliance with
the additional requirements contained in the amended Articles of Incorporation
and amended Bylaws. (See "Independent Administrator" below for additional
information)
Concurrent Transactions
Following the effective date of the Plan of Division, PPL Electric Utilities
expects to carry out the following related transactions:
. PPL Electric Utilities will sell up to $900 million of senior secured
debt. It is anticipated that approximately $200 million of the proceeds
of that debt will be used to fund the retirement of short-term debt and
$700 million will be available for general corporate purposes, including
payments to energy suppliers to secure the energy supply contracts
described below and to fund construction expenditures.
. PPL Electric Utilities will enter into one or more long-term electric
energy supply contracts in order to secure a market based, long-term
energy supply to meet its obligations as a provider of last resort of
electric services to its retail customers through 2009. In May 2001, PPL
Electric Utilities solicited bids from energy suppliers, including PPL
EnergyPlus, LLC (PPL's energy marketing subsidiary), for these electric
energy supply contracts. The Company is currently negotiating those
energy supply contracts.
Purpose of the Plan of Division
On July 1, 2000, PPL completed a realignment of the electric power
businesses historically conducted by the Company. In general, the realignment
effectively separated the Company's regulated electric transmission and
distribution businesses from the recently deregulated generation and energy
marketing businesses. As a result, the generation assets and related assets
are now owned by unregulated affiliates of the Company. These entities assumed
$670 million of the Company's debt as of July 1, 2000 and certain other
liabilities and obligations related to the former generation business of the
Company. Likewise, the assets of the Company's wholesale energy marketing
business were transferred to PPL EnergyPlus, LLC (referred to here as "PPL
EnergyPlus"), now an indirect wholly owned subsidiary of PPL. PPL EnergyPlus
assumed the liabilities and obligations relating to the wholesale energy
marketing business. Employees operating and administering these businesses
were transferred by the Company to the appropriate affiliate or to PPL
Services Corporation, a wholly owned subsidiary of PPL, which performs
administrative services for PPL and its subsidiaries.
As a result of the realignment of the Company in 2000, the Company divested
itself of its electric generation and wholesale energy marketing businesses.
With the realignment, the adoption of the Plan of Division and the amendments
to the Articles of Incorporation and the Bylaws described above, PPL Electric
Utilities will be limited to conducting only the electric transmission and
distribution businesses and business activities related to or arising from its
transmission and distribution businesses. These changes, together with the
corporate governance requirements contained in the amended Articles of
Incorporation and amended Bylaws, are intended to emphasize the separate
corporate existence of PPL Electric Utilities and underscore that PPL Electric
Utilities is not subject to the liabilities and obligations of PPL, PPL Energy
Supply, PPL EnergyPlus or any other affiliates of PPL. This corporate
structure is intended to enable PPL Electric Utilities to issue debt
securities on more favorable terms and maintain a higher ratio of debt to
total capitalization than would otherwise be the case. This, in turn, should
lower PPL Electric Utilities' total cost of capital.
4
Dissenters' Rights
Under Pennsylvania law, the holders of preferred stock will have the right
to dissent to the Plan of Division and receive payment of the fair value of
their shares. If you seek to assert your rights as a dissenter, you must
comply with the statutory requirements, particularly the requirement that you
must file with the Company prior to the Special Meeting to be held July 17,
2001 a written notice of your intention to demand that you be paid the fair
value of your shares if the division is effectuated. Also, you must not
transfer or otherwise effect any change in your beneficial ownership of the
Company's preferred stock during the period from the date you deliver your
notice to the Company through the effective date of the division. Moreover,
you must refrain from voting your shares in approval of the division. If, in
seeking your right to dissent, you fail in any respect to comply with the
foregoing, you will not be entitled to receive payment of the fair value of
your shares as a dissenter. PPL Electric Utilities, as the surviving
corporation, has the sole responsibility for the payments to dissenters. A
copy of the applicable provisions of the Pennsylvania Business Corporation Law
is attached as Appendix B to this Information Statement, and a description of
these provisions is provided under the caption "Preferred Stock Shareowners'
Rights to Dissent" below.
Financial Statements of the Company
Since the liabilities of the Company to be allocated to NS&H Corp. in the
Plan of Division were not reflected as liabilities on the Company's
consolidated balance sheet as of December 31, 2000 and since the $5 million of
cash of the Company to be allocated to NS&H Corp. will not have a material
effect on the balance sheet of PPL Electric Utilities, this Information
Statement does not include the pro forma financial statements of the Company
as of December 31, 2000 giving effect to the Plan of Division. Such pro forma
financial information would be essentially the same as the consolidated
financial statements of the Company filed as a part of the Company's Report on
Form 10-K to the Securities and Exchange Commission for the year ended
December 31, 2000. That Report on Form 10-K is incorporated by reference into
this Information Statement and is available at no cost as described under the
caption "Where You Can Find More Information" below. Certain of the
liabilities allocated to NS&H Corp. are described in footnotes to such
consolidated balance sheet as of December 31, 2000. The consolidated audited
balance sheets for each of the two fiscal years of the Company ended December
31, 1999 and December 31, 2000 and the audited statements of income and cash
flows for each of the three most recent fiscal years of the Company are
included in that Form 10-K.
Risk Factors
For a description of risk factors to preferred shareowners arising as result
of the adoption of the Plan of Division and the concurrent transactions
described above, see "Risk Factors for Holders of Preferred Stock after the
Division" below.
5
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Information Statement concerning
expectations, beliefs, plans, objectives, goals, strategies, future events or
performance and underlying assumptions and other statements which are other
than statements of historical facts are "forward-looking statements" within
the meaning of the federal securities laws. Although the Company believes that
the expectations and assumptions reflected in these statements are reasonable,
there can be no assurance that these expectations will prove to have been
correct. These forward-looking statements involve a number of risks and
uncertainties, and actual results may differ materially from the results
discussed in the forward-looking statements. In addition to the specific
factors discussed in this Information Statement, the following are among the
important factors that could cause actual results to differ materially from
the forward-looking statements: market demand and prices for energy, capacity
and fuel; competition in retail and wholesale power markets; the effect of any
business or industry restructuring; the profitability and liquidity of the
Company; new accounting requirements or new interpretations or applications of
existing requirements; environmental conditions and requirements; markets and
technologies; receipt of necessary governmental approvals; capital market
conditions; and the commitments and liabilities of the Company. Any such
forward-looking statements should be considered in light of such important
factors and in conjunction with the Company's other documents on file with the
SEC.
New factors that could cause actual results to differ materially from those
described in forward-looking statements emerge from time to time, and it is
not possible for the Company to predict all of such factors, or the extent to
which any such factor or combination of factors may cause actual results to
differ from those contained in any forward-looking statement. Any forward-
looking statement speaks only as of the date on which such statement is made,
and the Company undertakes no obligation to update the information contained
in such statement to reflect subsequent developments or information.
6
RISK FACTORS FOR HOLDERS OF PREFERRED STOCK AFTER THE DIVISION
Increased Debt Leverage
As described under the caption "Concurrent Transactions", PPL Electric
Utilities intends to issue up to $900 million of senior secured debt
securities following the effective date of the Plan of Division. If this
additional debt is issued, the percentage of long-term debt to total
capitalization will increase from 66% to 70% and its ratio of earnings to
fixed charges will decline. (See "Pro Forma Capitalization of PPL Electric
Utilities" and "Pro Forma Ratio of Earnings to Fixed Charges" below). In
addition, it is expected that a significant portion of future capital
expenditures required for PPL Electric Utilities' electric transmission and
distribution businesses will be financed with this additional debt. This
additional debt, along with any other debt, both senior and subordinated,
issued for other purposes will be senior to the preferred stock in any
liquidation or bankruptcy, insolvency or other reorganization of PPL Electric
Utilities. This expected increase in debt leverage may increase the financial
risk of the preferred shareowners.
PRO FORMA CAPITALIZATION OF PPL ELECTRIC UTILITIES CORPORATION
The capital structure of the Company at March 31, 2001, and on a pro forma
basis to give effect to the transactions footnoted below, is as follows
(millions of dollars):
As
Actual Adjustments Adjusted
------ ----------- --------
Common Equity
Common Stock Issued............................... $1,476 $1,476
Miscellaneous Paid-In Capital..................... 55 55
Capital Stock Expense............................. (16) (16)
Treasury Stock.................................... (632) (632)
Earnings Reinvested............................... 304 (5)(d) 299
------ ---- ------
Total Common Equity............................. 1,187 (5) 1,182
------ ---- ------
Preferred Stock
Preferred Stock with Mandatory Redemption......... 50 50
Preferred Stock without Mandatory Redemption...... 47 47
------ ---- ------
Total Preferred Securities...................... 97 97
------ ---- ------
Company-obligated mandatorily redeemabale
preferred securities(c).......................... 250 250
Short-Term Debt................................... 55 55
Transition Bonds(a),(b)........................... 2,098 2,098
Other Long-Term Debt(a)
First Mortgage Bonds............................ 959 700(e) 1,659
Notes
Pollution Control Note.......................... 9 9
Unamortized Discount- Net......................... (5) (5)
------ ---- ------
Total Other Long-Term Debt...................... 963 700 1,663
------ ---- ------
Total Capitalization............................ $4,650 $695 $5,345
====== ==== ======
-------
(a) Includes amounts due within one year.
(b) Transition bonds were issued by PPL Transition Bond Company, LLC to
securitize a portion of the stranded costs of PPL Electric Utilities.
These bonds are secured by the intangible transition property.
(c) The Company issued subordinated debentures to two Delaware statutory
business trusts to support the trusts' issuance of $250 million of
Company-obligated Mandatorily Redeemable Preferred Securities (preferred
securities). The Company has guaranteed all of the trusts' obligations
under the preferred securities.
(d) Asset allocation to NS&H Corp. pursuant to the Plan of Division.
(e) The planned issuance of $900 million of Senior Secured Bonds, less the
retirement of $200 million 6 1/8% reset put securities on May 1, 2001.
These securities were retired using commercial paper pending the issuance
of the Senior Secured Bonds.
7
PPL ELECTRIC UTILITIES CORPORATION
PRO FORMA COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
TWELVE MONTHS ENDED MARCH 31, 2001
(Millions of Dollars)
Actual As Adjusted
------ -----------
Fixed charges, as defined:
Interest on long-term debt(a)............................... $224 $273
Interest on short-term debt and other interest charges...... 14 14
Amortization of debt discount, expense and premium--net..... 4 4
Interest on capital lease obligations
Estimated interest component of operating rentals........... 12 12
---- ----
Total fixed charges....................................... $254 $303
==== ====
Earnings, as defined:
Net income(b)............................................... $179 $151
Less undistributed income of equity method investees........
---- ----
179 151
Add (Deduct):
Income taxes(c)............................................. 112 91
Amortization of capitalized interest on capital leases......
Total fixed charges as above (excluding capitalized interest
on capital lease obligations).............................. 254 303
---- ----
Total earnings............................................ $545 $545
==== ====
Ratio of earnings to fixed charges.......................... 2.15 1.80
==== ====
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(a) "As Adjusted" includes the additional interest on $900 million of Senior
Secured Bonds (at an assumed interest rate of 6 3/4%), less the interest
on the $200 million 6 1/8% reset put securities (which were retired on May
1, 2001).
(b) Excluding extraordinary items. "As Adjusted" reflects the after-tax impact
of the additional interest expense.
(c) "As Adjusted" reflects the reduction in income tax expense due to the
additional interest expense.
8
PLAN OF DIVISION
Purpose
The purpose of the Plan of Division and the amendments to the Articles of
Incorporation and Bylaws is to emphasize the separate corporate existence of
PPL Electric Utilities and underscore that PPL Electric Utilities is not
subject to the liabilities and obligations of PPL, PPL Energy Supply, PPL
EnergyPlus or any other affiliates of PPL. This corporate structure is
intended to enable PPL Electric Utilities to issue debt securities on more
favorable terms and maintain a higher ratio of debt to total capitalization
than would otherwise be the case. This, in turn, should lower PPL Electric
Utilities' total cost of capital.
The Division
The Plan of Division divides the Company into two Pennsylvania corporations,
PPL Electric Utilities Corporation, the surviving corporation, and a newly
formed corporation named Ninth Street & Hamilton Corporation.
Capital Structure and Shares
The Company's common stock and preferred stock will not be affected by the
division. The division will not affect the number of shares of common stock or
the number or the rights, preferences or terms of the shares of preferred
stock of the Company outstanding prior to the division. Upon the effective
date of the division, the shares of the Company's common stock and preferred
stock then outstanding will continue to be registered on the books of PPL
Electric Utilities as they appear in the books and records of the Company. It
is not necessary for the holders of shares of preferred stock to take any
action with respect to their share ownership or certificates for shares of
preferred stock.
Articles of Incorporation and Bylaws of PPL Electric Utilities
The Articles of Incorporation of the Company, as amended by the amendments
described below, will be the Articles of Incorporation of PPL Electric
Utilities, the surviving corporation. The Articles of Incorporation as so
amended are attached as Exhibit A to the Plan of Division. The Bylaws of the
Company, as amended by the amendments described below, will be the Bylaws of
PPL Electric Utilities following the division. The Bylaws as so amended are
attached as Exhibit B to the Plan of Division. See "Amendment of the Articles
of Incorporation and Bylaws of the Company" below.
Management
The individuals who will be the directors of PPL Electric Utilities on the
effective date of the Plan of Division are named below:
Directors
MICHAEL E. BRAY - Mr. Bray, 53, serves as President of PPL Electric
Utilities and also serves as Chief Executive Officer of PPL Gas Utilities
Corporation, a subsidiary of PPL specializing in natural gas distribution,
transmission and storage services and the sale of propane. Mr. Bray holds a
B.S. in mechanical engineering from the University of Missouri and a M.B.A.
from Washington University. Mr. Bray has worked for 30 years in the energy
industry, holding key positions at General Electric Co. from 1970 to 1987. He
currently serves as Vice Chairman of the Energy Association of Pennsylvania.
Prior to joining the Company in April 2000, he served as President and Chief
Executive Officer of Consolidated Edison Development, Inc., Senior Vice
President of the Electric Business Unit of Long Island Lighting Co. and
President and Chief Executive Officer of D.B. Riley Consolidated, Inc. Mr.
Bray has been a Director since July 1, 2000.
WILLIAM F. HECHT - Chairman and Director, PPL Electric Utilities. Mr. Hecht,
57, is Chairman, President and Chief Executive Officer of the Company's
parent, PPL. Mr. Hecht received a B.S. and M.S. in Electrical Engineering from
Lehigh University, and joined the Company in 1964. He was elected President
and Chief Operating Officer in 1991 and was named Chairman, President and
Chief Executive Officer of the Company in 1993, and to his PPL position in
February 1995. Mr. Hecht is a director of Dentsply International, Inc. and
serves on the board of a number of civic and charitable organizations. Mr.
Hecht has been a Director since 1990.
9
JOHN R. BIGGAR - Director, PPL Electric Utilities. Mr. Biggar, 56, serves as
Executive Vice President and Chief Financial Officer of the Company's parent,
PPL. Mr. Biggar earned a Bachelor's degree in political science from Lycoming
College and a Juris Doctor degree from the College of Law at Syracuse
University. He joined the Company in 1969. Before being named as Executive
Vice President and Chief Financial Officer of PPL Corporation and PPL Electric
Utilities in 2000, Mr. Biggar served two years as Senior Vice President and
Chief Financial Officer and 14 years as Vice President-Finance. Mr. Biggar has
been a Director since July 1, 2000.
PAUL T. CHAMPAGNE - Director, PPL Electric Utilities. Mr. Champagne, 42,
serves as President of PPL Global, LLC, a subsidiary of PPL that invests in
and develops world-wide power projects. Mr. Champagne earned a B.S. in
chemical engineering and completed master's course work in mechanical
engineering at the University of Illinois. Prior to joining PPL Global in
1995, he served in several business development positions at Edison Mission
Energy Company, including Midwest regional manager. Before being named as
President of PPL Global in 1999, Mr. Champagne served as Vice President and
Senior Development Officer. Mr. Champagne has been a Director since July 1,
2000.
ROBERT J. GREY - Director, PPL Electric Utilities. Mr. Grey, 50, serves as
Senior Vice President, General Counsel and Secretary of the Company's parent,
PPL. Mr. Grey earned his B.A. from Columbia University, a Master of Laws in
taxation from George Washington University and a Doctor of Law degree from
Emory University. Before being named as Senior Vice President, General Counsel
and Secretary of PPL and PPL Electric Utilities in 1996, Mr. Grey served as
Vice President, General Counsel and Secretary. Before joining the Company in
1995, Mr. Grey served as General Counsel for Long Island Lighting Company and
was a partner with the law firm of Preston Gates & Ellis. He has been a
Director since July 1, 2000.
JAMES H. MILLER - Director, PPL Electric Utilities. Mr. Miller, 52, is
President of PPL Generation, LLC, a subsidiary of PPL that operates nearly
10,000 megawatts of electricity generating capacity in Pennsylvania, Montana
and Maine. Mr. Miller earned a B.S. degree in electrical engineering from the
University of Delaware and served in the U.S. Navy nuclear program. Before
joining PPL Generation in February 2001, Mr. Miller served as Executive Vice
President of USEC, Inc., President of ABB Environmental Systems, President of
UC Operating Services, President of ABB Resource Recovery Systems and Plant
Manager, Delmarva Power and Light Co. Mr. Miller has been a Director since
February 5, 2001.
FRANK A. LONG - Director, PPL Electric Utilities. Mr. Long, 60, is a
Director and Executive Vice President of the Company's parent, PPL. Mr. Long
received a B.S. in Electrical Engineering from Northeastern University, and
joined the Company in 1963. Senior Vice President-System Power & Engineering
from 1990 until 1993, he was named Executive Vice President and Chief
Operating Officer of the Company in 1993 and to his PPL position in February
1995. Mr. Long is director of the Smart Discovery Center. Mr. Long has been a
Director since 1993.
LAWRENCE E. DE SIMONE - Director, PPL Electric Utilities. Mr DeSimone, 53,
serves as President of PPL EnergyPlus, LLC, a subsidiary of PPL that markets
energy in 42 states and Canada. Mr. De Simone earned a B.A. in economics from
Claremont McKenna College and a Ph.D. in business administration from the
University of California at Berkeley. Before joining PPL EnergyPlus in 1998,
Mr. De Simone served as Senior Vice President-Energy Services for Virginia
Power Co. and President of Central & South West Corp.'s energy services and
telecommunications operations as well as its Vice President for Strategic
Planning. He has been a Director since July 1, 2000.
Each of the directors of PPL Electric Utilities, other than the Independent
Director, was elected a director of the Company by the shareowners of the
Company at the annual meeting of its shareowners on April 24, 2001. The
Independent Director is expected to be appointed a director by the board of
directors of PPL Electric Utilities on or about the effective date of the Plan
of Division.
Effect of Division
As of the effective date of the Plan of Division, the assets and the
liabilities of the Company described below will be allocated to and vested in
NS&H Corp. by reason of the adoption and effectiveness of the Plan of
Division:
The allocated assets consist of $5 million of cash of the Company.
10
The allocated liabilities consist of the following:
. liabilities of the Company, if any, under contracts that, prior to the
effective date of the division, the Company has assigned to PPL or any
other direct or indirect subsidiary of PPL, and any other contracts
under which the Company has joint liability with PPL or any other direct
or indirect subsidiary of PPL, for which releases from the other
contracting party or parties have not been obtained by the Company;
. liabilities of the Company, if any, under any employee benefit plans,
programs, policies, agreements and other arrangements where the Company
may be responsible for payments to employees of PPL or any other direct
or indirect subsidiary of PPL, other than liabilities for which the
Company is liable under applicable law or regulation notwithstanding the
division;
. liabilities of the Company, if any, for damages with respect to claims
that may be made in the future based on occurrences arising prior to the
effective date of the division for which the Company may be jointly
liable with PPL or any other direct or indirect subsidiary of PPL, other
than tax liabilities and liabilities for which the Company is liable
under applicable law or regulation notwithstanding the division; and
. liabilities of the Company, if any, for damages with respect to claims
that may be made in the future based on occurrences arising prior to the
effective date of the division, which do not relate to or arise out of
(1) the Company's transmission and distribution businesses or (2) those
business activities that are related to or arise out of its electric
transmission and distribution businesses, other than tax liabilities and
liabilities for which the Company is liable under applicable law or
regulation notwithstanding the division.
As a result of the division, PPL Electric Utilities will no longer be liable
for those liabilities of the Company that are allocated to NS&H Corp.
Except as allocated to NS&H Corp., all of the property, rights, franchises,
privileges, interests and liabilities of the Company will be unaffected by the
division and will continue as the property, rights, franchises, privileges,
interests and liabilities of PPL Electric Utilities, as the surviving
corporation of the division. After the effective date of the division, PPL
Electric Utilities and NS&H Corp. will each be responsible as a separate and
distinct corporation only for those liabilities allocated to it in the Plan of
Division or explicitly undertaken by it following the division. Taxes claimed
against the Company relating to the period prior to the division may be
claimed against PPL Electric Utilities and NS&H Corp.
All property of the Company will remain subject to any existing liens or
encumbrances thereon and the division will not in any way affect such liens or
encumbrances. None of the property allocated to NS&H Corp. will be subject to
the lien of the Company's first mortgage bond indenture.
As of the effective date of the Plan of Division, except for taxes of the
Company that may be claimed against NS&H Corp., neither PPL Electric Utilities
nor NS&H Corp. will be liable, as obligor or guarantor or otherwise, for any
liability allocated to the other, and neither corporation will have any
recourse to any property of the other.
Effective Date of the Plan of Division
The Plan of Division will become effective upon filing of Articles of
Division and the Plan of Division with the Secretary of State of the
Commonwealth of Pennsylvania. However, the Board of Directors of the Company
in its sole discretion may determine at any time, whether before or after the
vote of the shareowners at the Special Meeting, not to file Articles of
Division and the Plan of Division with the Secretary of State of the
Commonwealth of Pennsylvania.
AMENDMENT OF THE ARTICLES OF INCORPORATION AND BYLAWS OF THE COMPANY
On the effective date of the Plan of Division, the amended Articles of
Incorporation set forth in Exhibit A to the Plan of Division will become the
Articles of Incorporation of PPL Electric Utilities. At the same time, the
amended Bylaws of the Company set forth in Exhibit B to the Plan of Division
will become effective as the Bylaws of PPL Electric Utilities. As compared
with the current Articles of Incorporation and Bylaws of the Company, the new
Articles of Incorporation and Bylaws of PPL Electric Utilities will make the
following substantive changes:
Articles of Incorporation Amendments
1. The amended Articles of Incorporation will require that the board of
directors of PPL Electric Utilities include at all times at least one
individual who is an Independent Director who may not delegate any of his or
her
11
duties, authorities or responsibilities as a director. The board may not take
any action requiring a unanimous affirmative consent without the consent of
the Independent Director. In general, an Independent Director is a director
who is not, and within the previous five years was not,
. a shareowner, director, officer, employee, customer, supplier or major
creditor of PPL, PPL Electric Utilities or any of their affiliates, or
. a shareowner of any major creditor of PPL, PPL Electric or any of their
affiliates,
and who did not have any other business relationships with these PPL
entities or creditors.
2. The amended Articles of Incorporation will require the prior unanimous
consent of the board of directors, including the Independent Director, for PPL
Electric Utilities, the shareowners, any director or any other person on
behalf of PPL Electric Utilities to do any of the following:
. make a general assignment for the benefit of creditors;
. file a petition commencing a voluntary bankruptcy case;
. file a petition or answer seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any statute, law or regulation;
. file an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against it in any proceeding
seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or
regulation, or the entry of any order appointing a trustee, liquidator,
receiver or other person or entity fulfilling a similar function for it
or its assets or any substantial portion thereof;
. seek, consent to or acquiesce in the appointment of a trustee,
liquidator, receiver or other person or entity fulfilling a similar
function for it or all or any substantial part of its assets; or
. take action in furtherance of any such action.
In discharging their duties as directors, including with regard to any
action contemplated by the foregoing or with regard to any action taken or
determination made at any time when PPL Electric Utilities is insolvent, the
amended Articles of Incorporation will permit the directors, in considering
the best interests of PPL Electric Utilities, to consider the effects of any
action upon any groups affected by such action, including the creditors of PPL
Electric Utilities. The directors will not be required, in considering the
best interests of PPL Electric Utilities or the effects of any action, to
regard the interests of shareowners of PPL Electric Utilities as a dominant or
controlling interest or factor.
3. The amended Articles of Incorporation will also require the unanimous
consent of the directors for any amendment of these corporate governance
provisions or the Bylaw provisions described under "Bylaw Amendments" below.
Bylaw Amendments
. The amended Bylaws will require that PPL Electric Utilities engage,
whether directly or indirectly through subsidiaries, only in (1) the
electric transmission and distribution businesses and (2) those business
activities that are related to or arise out of its electric transmission
and distribution businesses.
. The amended Bylaws will require PPL Electric Utilities to remain
separate from PPL and its other affiliates in a number of specific ways:
. Its funds and other assets may not be commingled with the other PPL
entities.
. It may not hold itself out as liable for the debts of any of the
other PPL entities.
. It must hold itself out in a separate entity, conduct its business in
its own name, act solely in its own corporate name and conduct its
business so as not to mislead others as to its identity.
. It must maintain separate accounts and separate books and records of
accounts and financial statements.
. It must observe all formalities required by its Articles of
Incorporation and Bylaws and the Pennsylvania Business Corporation
Law.
. Its capitalization must be adequate in light of its business and
purpose.
12
. It may not guarantee or become obligated for the debts of PPL or any
of PPL's other affiliates or make its credit available to satisfy the
obligations of, or pledge its assets for the benefit of, PPL or any
of PPL's other affiliates, with the exception of (i) any guarantee of
the debts of an affiliate in effect as of the effective date of the
division or (ii) any guarantee of the debts of any direct or indirect
subsidiary of PPL Electric Utilities.
. It must pay its own liabilities out of its own funds.
. It must maintain an arms-length relationship with PPL and its other
affiliates.
. Its officers and directors must make all decisions with respects to
the business and daily operation of PPL Electric Utilities
independent of, and not dictated by, PPL or any of its other
affiliates.
. The amended Bylaws will require that PPL Electric Utilities be operated
in such manner as the board of directors deems reasonable and necessary
or appropriate to preserve the separateness of PPL Electric Utilities
from the business of PPL or any of its other affiliates.
INDEPENDENT ADMINISTRATOR
The board of directors of PPL Electric Utilities will appoint an Independent
Administrator to oversee the formalities and activities that support legal
separation of PPL Electric Utilities from PPL and the other affiliates of PPL.
The Independent Administrator will be independent of PPL Electric Utilities,
PPL and its affiliates. In particular, the Independent Administrator will
monitor compliance by PPL Electric Utilities with the provisions of its
amended Articles of Incorporation and amended Bylaws described above.
The Independent Administrator will also make periodic compliance reports to
the trustee under the trust indenture pursuant to which PPL Electric
Utilities' senior secured debt securities are expected to be issued following
the effectiveness of the Plan of Division. It is expected that the terms of
that indenture will provide that a failure by PPL Electric Utilities to comply
with the requirements of the amended Articles of Incorporation and amended
Bylaws described above, following notice from the Independent Administrator
and the expiration of any applicable cure period, will result in restrictions
on the payment of common stock dividends by PPL Electric Utilities and may
ultimately constitute an event of default under the terms of the indenture.
CONCURRENT TRANSACTIONS
PPL Electric Utilities plans to issue and sell up to $900 million of senior
secured debt securities following the effective date of the Plan of Division.
It is anticipated that $200 million of the proceeds will be used to fund the
retirement of short-term debt of PPL Electric Utilities. A portion of the
remaining proceeds is expected to be used for up-front payments to electric
energy suppliers in connection with one of more electric energy supply
contracts to be entered into by PPL Electric Utilities in order for it to meet
its energy supply obligations to its retail customers through 2009. PPL
Electric Utilities is obligated by the Pennsylvania Customer Choice Act as the
"provider of last resort" to provide electric power service to these customers
if they are not supplied by alternative suppliers. In May 2001, the Company
solicited bids from energy suppliers, including PPL EnergyPlus, PPL's energy
marketing subsidiary, for electric energy supply contracts. The Company is
currently negotiating those energy supply contracts. The Company believes that
the up-front payments to energy suppliers will be an economically advantageous
way for PPL Electric Utilities to secure energy supply contracts to meet its
provider of last resort obligation through 2009.
It is expected that any remaining proceeds will be used for general
corporate purposes, including the funding of construction expenditures and
possibly the repurchase of common stock of PPL Electric Utilities.
The senior secured debt is expected to be secured primarily by first
mortgage bonds issued under PPL Electric Utilities' existing first mortgage
indenture and by a lien on PPL Electric Utilities' transmission and
distribution properties. Under certain circumstances, the lien of the first
mortgage indenture and the lien of the indenture pursuant to which the new
senior secured debt will be issued may be discharged. The terms of the
indenture pursuant to which the senior secured debt securities will be issued
are expected to include a restriction on common stock dividends and covenants
to comply with those requirements contained in the amended Articles of
Incorporation and amended Bylaws that will be monitored and reported on by the
Independent Administrator. If, after notice and a period to cure, PPL Electric
Utilities has failed to comply with those requirements, dividends on its
common stock will be restricted. If the failure is not cured within an
additional cure period, an event of default may be declared under the
indenture.
13
Other expected terms and conditions of the senior secured debt securities
include:
. a restriction on the issuance of additional senior secured debt (other
than refunding debt) if the additional debt issuance would result in the
ratings on the outstanding senior debt being withdrawn or downgraded
from their then current ratings;
. a restriction on business activities other than (1) the transmission and
distribution businesses and (2) those business activities that are
related to or arise out of the electric transmission and distribution
businesses;
. a restriction on any consolidation or merger or transfer or lease of all
or substantially all of PPL Electric Utilities assets unless certain
conditions are met including that the ratings on the senior secured debt
securities are not withdrawn or downgraded from their then current
ratings and that the consolidated net worth of PPL Electric Utilities
will not be reduced as a result of the transaction;
. a restriction on any acquisition of tangible electric transmission and
distribution assets from another transmission and distribution company
having a value in excess of 20% of PPL Electric Utilities' total assets,
if such acquisition would result in any of the ratings on the senior
secured debt securities being withdrawn or downgraded from their then
current ratings; and
. a covenant that PPL Electric Utilities will initiate a filing for rate
relief with the Pennsylvania Public Utility Commission, unless such a
filing is prohibited by statute or regulation, if and for so long as the
ratio of funds from operation plus gross interest divided by gross
interest expense for any year falls below 1.5x. (Under the Pennsylvania
Customer Choice Act, the Company's transmission and distribution rates
are capped through 2004.)
Since these expected terms of the senior secured debt financing have not
been finally negotiated or determined, there could be changes in the final,
specific terms of the securities. The financing is also subject to approval by
the Pennsylvania Public Utility Commission. An application for approval is
pending before the Pennsylvania Public Utility Commission.
PREFERRED STOCK SHAREOWNERS' RIGHTS TO DISSENT
Any preferred stock shareowner who objects to the Plan of Division will be
entitled to the rights and remedies of dissenting shareowners provided by the
Pennsylvania Business Corporation Law, so long as the notice and each other
requirement of the statute is met. By meeting such requirements, the
dissenting shareowner may obtain payment of the fair value of his or her
shares.
A record holder of preferred shares may assert dissenters' rights as to
fewer than all of the shares registered in his or her name if the dissent is
with respect to all of the shares of the same class and series beneficially
owned by any one person and he or she discloses the name and address of the
person or persons on whose behalf he or she demands payment. A beneficial
owner of shares who is not the record holder may assert dissenters' rights
with respect to the shares held on his or her behalf and will be treated as a
dissenting shareowner if a written consent of the record holder is submitted
to the Company not later than the time notice of the assertion of dissenters'
rights is required as set forth below. A beneficial owner may not dissent with
respect to some but less than all shares of the same class or series owned by
him or her, whether or not the shares are registered in his or her name.
A person having a beneficial interest in shares held of record in the name
of another person, such as a broker or nominee, must act promptly to cause the
record holder to follow the steps described below properly and in a timely
manner to perfect his or her dissenters' rights.
Notice of Intent to Dissent
Any person who wishes to dissent to the Plan of Division and obtain payment
of the fair value of his or her shares must file with the Company prior to the
Special Meeting of shareowners to be held on July 17, 2001 a written notice of
intention to demand payment of the fair value of his or her shares if the Plan
of Division is effected. The written notice must be sent to PPL Electric
Utilities Corporation, Two North Ninth Street, Allentown, PA 18101-1179,
Attention: Elizabeth Duane and should include the full name and address of the
shareowner(s), the account number, and the class of preferred stock held.
Additionally, in order to be entitled to receive the fair
14
value of his or her shares, a dissenting shareowner must not effect any change
in his or her beneficial ownership of preferred shares from the date the
notice of dissent is filed through the effective date of the Plan of Division.
Moreover, a dissenting shareowner must refrain from voting his or her shares
for approval of the Plan of Division at the Special Meeting. If a dissenter
fails in any respect to give timely notice or fails to refrain from changing
beneficial ownership or from voting in favor of the Plan of Division, he or
she will not acquire any right to payment of the fair value of his or her
shares. A vote by a shareowner against the Plan of Division at the Special
Meeting will not constitute a written notice of dissent that meets the
requirement for payment of the fair value of his or her shares.
Notice of Intention to Demand Payment
After the approval of the Plan of Division by shareowners at the Special
Meeting, the Company will mail a further notice to all dissenters who gave due
notice of their intention to dissent and demand payment of the fair value of
their shares and who refrained from voting in favor of the Plan of Division.
The notice will:
. state where and when a demand for payment must be sent and share
certificates for certificated shares must be deposited in order to
obtain payment,
. inform holders of uncertificated shares to what extent transfers of
shares will be restricted from the time demand for payment is received,
. supply a form for demanding payment, and
. include a copy of the subchapter of the Pennsylvania Business
Corporation Law setting forth the rights of dissenting shareowners.
The date for receipt of the shareowners demand for payment and deposit of
certificates for shares will be set forth in the Company's notice, and the
date will be not less than 30 days from the mailing of the notice. A
shareowner who fails to meet these deadlines will not have a right to receive
payment of the fair value of his or her shares. If the Plan of Division has
not been effected within 60 days of the date set for demanding payment and
depositing shares, the Company is required to return any certificates that
have been deposited and release uncertificated shares from any transfer
restrictions which the Company is permitted to impose by reason of the demand
for payment. The Company may, however, at any later time send a new notice
requiring a notice of a demand for payment by dissenting shareowners.
Payment of Fair Value of Shares
Promptly after the Plan of Division becomes effective, or upon timely
receipt of demand for payment if the Plan has already been effected, PPL
Electric Utilities will either remit to dissenters the amount that it
estimates to be the fair value of the shares or give written notice that no
remittance is being made. The remittance or notice must be accompanied by:
. financial statements for PPL Electric Utilities,
. PPL Electric Utilities' estimate of the fair value of shares of the
preferred stock, and
. a notice of dissenters' rights to demand payment or supplemental
payment, along with a copy of the subchapter of the Pennsylvania
Business Corporation Law setting forth the rights of dissenting
shareowners.
If PPL Electric Utilities does not remit the amount of its estimate of the
fair value of the preferred shares, it must return any certificates that have
been deposited and release uncertificated shares from any transfer
restrictions imposed by reason of the demand for payment. It may make a
notation on the returned certificates or on the records of the corporation
relating to any uncertificated shares that such demand has been made. As a
result, any transferee of such shares will not acquire any rights in PPL
Electric Utilities other than those that the original dissenter had after
making demand for payment of their fair value.
Estimate by Dissenter of Fair Value
If the dissenter believes that the amount stated by PPL Electric Utilities
as the fair value of the preferred shares or remitted as its estimate of fair
value is less than the fair value of his or her shares, the dissenter may
15
send to PPL Electric Utilities his or her own estimate of fair value or the
deficiency between his or her estimate and PPL Electric Utilities' estimate.
If a dissenter fails to file his or her own estimate within 30 days after the
mailing by PPL Electric Utilities of its remittance or notice, the dissenter
will be entitled to no more than the amount stated in the notice or
remittance.
Valuation Proceedings
If demands for payment remain unsettled, then within 60 days after the later
of (a) the Plan of Division becoming effective, (b) timely receipt of any
demands for payment by dissenters or (c) timely receipt of any estimates of
fair value or remittance deficiency by dissenters, PPL Electric Utilities may
file in an appropriate Court of Common Pleas of the Commonwealth of
Pennsylvania an application for relief requesting that the fair value of the
preferred shares be determined by the court. All dissenters, wherever
residing, whose demands have not been settled are made parties to this
proceeding. PPL Electric Utilities must serve a copy of the application to the
court on each dissenting preferred stock shareowner.
The court has plenary and exclusive jurisdiction over the matter and may
appoint an appraiser to receive evidence and recommend a decision on the issue
of fair value. The appraiser will have such power and authority as may be
specified in the order of appointment or in any amendment thereof. Fair value
is defined by the Pennsylvania Business Corporation Law as the fair value of
the shares immediately before the effective date of the Plan of Division,
taking into account all relevant factors, but excluding any appreciation or
depreciation in anticipation of the Plan.
Each dissenter who is a party to the valuation proceeding will be entitled
to recover the amount by which the fair value of his or her shares is found to
exceed the amount, if any, previously remitted to him or her, plus interest.
If PPL Electric Utilities fails to file an application with the court, any
dissenter who has not settled his or her claim against PPL Electric Utilities
may file an application with the court requesting that the fair value be
determined by the court. The dissenter's application must be filed within 30
days after the expiration of the 60-day period in which PPL Electric Utilities
was required to file such an application as described above. If a dissenter
does not file his or her application within this 30 day period and the
dissenter was otherwise entitled to file such an application, PPL Electric
Utilities is required to pay the dissenter PPL Electric Utilities' estimate of
the fair value of the dissenter's preferred shares and no more. The dissenter
may bring an action to recover any amount not remitted by PPL Electric
Utilities.
Costs and Expenses of Valuation Proceedings
The costs and expenses of any valuation proceeding, including the reasonable
compensation and expenses of the appraiser appointed by the court, are
determined by the court and assessed against PPL Electric Utilities, except
that any part of the costs and expenses may be apportioned against all or some
of the dissenting preferred stock shareowners who are parties to the valuation
proceeding and whose action in demanding supplemental payment the court finds
to be dilatory, obdurate, arbitrary, vexatious or in bad faith. Fees and
expenses of counsel and of experts for the respective parties may be assessed
as the court deems appropriate against PPL Electric Utilities if PPL Electric
Utilities fails to comply substantially with the provisions of the statute
relating to dissenters' rights and may be assessed against PPL Electric
Utilities or a dissenter, in favor of the other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith
or in a dilatory, obdurate, arbitrary or vexatious manner in respect to the
dissenters' rights provided by the statute. If the court finds that the
services of counsel for any dissenter were of substantial benefit to other
dissenters similarly situated and should not be assessed against PPL Electric
Utilities, it may award to those counsel reasonable fees to be paid out of the
amount awarded to the dissenters who were benefitted.
The full text of the provisions of the Pennsylvania Business Corporation Law
providing for dissenters' rights is set forth in Appendix B hereto and the
foregoing is qualified in its entirety by this reference to the text of the
statute.
16
WHERE YOU CAN FIND MORE INFORMATION
PPL and the Company file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission
under the Securities Exchange Act of 1934. You may read this information at
the following locations of the SEC.
Public Reference Room Northeast Regional Midwest Regional
450 Fifth Street, Office Office
N.W. 7 World Trade Center 500 West Madison
Room 1024 Suite 1300 Street
Washington, D.C. New York, New York Suite 400
20549 10048 Chicago, Illinois
60661
The public may obtain information on the operations of the Public Reference
Room by calling the SEC at 1-800-SEC-0300. You may also obtain copies of this
information by mail from the Public Reference Section of the SEC, 450 Fifth
Avenue, NW., Room 1024, Washington, D.C. 20549, at prescribed rates.
The SEC also maintains a web site that contains reports, proxy statements
and other information about issuers, like PPL and the Company, who file
electronically with the SEC. The address of that site is http://www.sec.gov.
The SEC allows us to "incorporate by reference" information into this
Information Statement 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 Information
Statement except for any information superseded by information contained
directly in this Information Statement or in any document filed after the date
of this Information Statement by PPL or the Company with the SEC under Section
13(a), 13(c), 14 or 15(d) of the Exchange Act until the Special Meeting of
shareowners. This Information Statement incorporates by reference the
documents set forth below:
Annual Report on Form 10-K for the fiscal year ended December 31, 2000 dated
March 1, 2001.
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2001
dated May 14, 2001.
The Company undertakes to provide without charge to each person to whom a
copy of this Information Statement has been delivered, upon request, a copy of
any or all of the documents incorporated herein, other than the exhibits to
such documents, unless such exhibits are specifically incorporated by
reference into the information that this Information Statement incorporates.
Requests for copies should be sent to: PPL Electric Utilities Corporation, Two
North Ninth Street, Allentown, PA 18101-1179, Attention: Elizabeth Duane. If
you would like to request documents from the Company, please do so by July 10,
2001 in order to receive them before the Special Meeting.
You should rely only on the information contained or incorporated by
reference in this Information Statement. Neither PPL nor the Company has
authorized anyone to provide you with information that is different from what
is contained in this document. This document is dated as of the date set forth
on the cover page. You should not assume that the information contained in
this document is accurate as of any date other than this date, and the mailing
of this document to shareowners shall not create any implication to the
contrary.
17
Appendix A
PLAN OF DIVISION
dividing
PPL ELECTRIC UTILITIES CORPORATION
(a Pennsylvania Corporation)
into
PPL ELECTRIC UTILITIES CORPORATION
(a Pennsylvania Corporation)
and
NINTH STREET & HAMILTON CORPORATION
(a Pennsylvania Corporation)
RECITALS
A. As of June 1, 2001, the issued and outstanding capital stock of PPL
Electric Utilities Corporation, a Pennsylvania corporation ("PPL Electric"),
the dividing corporation, consists of 102,230,382 shares of common stock,
without par value ("PPL Electric Common Stock"), and 964,323 shares of
preferred stock ("PPL Electric Preferred Stock" and together with the PPL
Electric Common Stock, the "PPL Electric Stock"), each such share of PPL
Electric Stock being entitled to one vote.
B. PPL Electric desires to divide itself (the "Division") into PPL Electric,
a surviving corporation, and Ninth Street & Hamilton Corporation ("NS&H
Corp."), a new Pennsylvania corporation.
C. The Board of Directors of PPL Electric has duly adopted a resolution
approving this Plan of Division (the "Plan") and this Plan was submitted to
and approved by the shareholders of PPL Electric at a special meeting of
shareholders.
ARTICLE I
General Provision
1.1. PPL Electric (hereinafter sometimes referred to as the "Dividing
Corporation") shall divide into PPL Electric (hereinafter sometimes referred
to as the "Surviving Corporation") and NS&H Corp. (hereinafter sometimes
called the "New Corporation"), the Surviving Corporation and the New
Corporation being hereinafter sometimes collectively referred to as the
"Resulting Corporations," subject to the terms and conditions of this Plan.
1.2. Upon the Effective Date, as defined in Section 1.6 hereof, the Dividing
Corporation shall be divided into PPL Electric and NS&H Corp. with the effect
specified by Section 1957 (relating to effect of division) (15 Pa. Cons. Stat.
(S) 1957) of the Business Corporation Law of 1988, as amended (hereinafter
referred to as the "BCL"). The Dividing Corporation, PPL Electric, shall
survive the Division.
1.3. The PPL Electric Common Stock and the PPL Electric Preferred Stock
shall not be affected by the Division. Upon the Effective Date the shares of
PPL Electric Common Stock and the shares of PPL Electric Preferred Stock then
outstanding shall continue to be registered on the books of PPL Electric, as
they appear in the books and records of the Dividing Corporation.
1.4. Upon the Effective Date there shall be 1,000 shares of common stock of
NS&H Corp. outstanding, all of which shall be issued to, and registered in the
name of, PPL Corporation, the holder of all of the issued and outstanding
shares of PPL Electric Common Stock.
1.5. Each Resulting Corporation, and its successors or assigns, shall at any
time, or from time to time, as and when requested by the other Resulting
Corporation, or by its successors and assigns, execute and deliver, or cause
to be executed and delivered in its name by any of its duly authorized
officers, all such assumptions, acknowledgements, assignments, conveyances,
transfers, deeds, or other instruments, and shall take or cause to be taken
such further or other action, as the other Resulting Corporation, or its
successors and assigns, may deem necessary or desirable in order to (i)
evidence the transfer, vesting, or devolution in or to either Resulting
Corporation of any property, right, privilege, franchise, or interest, (ii)
vest or perfect in either Resulting
A-1
Corporation, its successors, or assigns, title to and possession of its
respective property, rights, privileges, franchises, and interests, or (iii)
otherwise evidence the apportioning of the liabilities of PPL Electric, the
Dividing Corporation, between the Resulting Corporations, in the manner
specified in, or pursuant to, this Plan and otherwise to carry out the intent
and purposes hereof.
1.6. Articles of Division, incorporating this Plan, shall be executed and
filed in the Department of State of the Commonwealth of Pennsylvania (the
"Department of State"). This Division shall become effective upon the filing
of such Articles of Division in the Department of State (which time is herein
referred to as the "Effective Date").
ARTICLE II
Dividing Corporation
2.1. The Dividing Corporation is PPL Electric, with its registered office at
Two North Ninth Street, Allentown, Pennsylvania 18101-1179.
2.2. PPL Electric was duly incorporated as a Pennsylvania corporation on
June 4, 1920 with the name Pennsylvania Power & Light Company.
ARTICLE III
Surviving Corporation
3.1. PPL Electric, the Dividing Corporation, will survive the Division.
3.2. The Articles of Incorporation of PPL Electric, the Dividing
Corporation, shall be amended and restated as set forth in Exhibit A attached
hereto and shall become the Articles of Incorporation of PPL Electric, the
Surviving Corporation.
3.3. The Bylaws of PPL Electric, the Dividing Corporation, shall be amended
and restated as set forth in Exhibit B attached hereto and shall become the
Bylaws of PPL Electric, the Surviving Corporation (the "PPL Electric Bylaws"),
until changed in the manner therein provided.
3.4. Except as otherwise provided in Section 4.3 hereof, the directors and
officers of PPL Electric, the Dividing Corporation, shall be the directors and
officers of PPL Electric, the Surviving Corporation, until changed in the
manner provided in the PPL Electric Bylaws.
ARTICLE IV
New Corporation; Directors
4.1. The Articles of Incorporation of NS&H Corp. shall be as set forth in
Exhibit C attached hereto. NS&H Corp. will have its registered office at Two
North Ninth Street, Allentown, Pennsylvania 18101-1179.
4.2. The Bylaws of NS&H Corp. shall be in such form as shall be adopted by
the Board of Directors of NS&H Corp.
4.3. On the Effective Date the individuals named on Exhibit D attached
hereto and identified as directors of NS&H Corp. shall become the initial
directors of NS&H Corp. and the individual named on such Exhibit and
identified as an additional director of PPL Electric, the Surviving
corporation, shall become an additional director of PPL Electric.
A-2
ARTICLE V
Effect of Division
5.1. All the property of PPL Electric, the Dividing Corporation, whether
real or personal, tangible or intangible, including all debts due on whatever
account to it, and all liabilities of PPL Electric, the Dividing Corporation,
shall, upon the Effective Date, to the extent allocated to NS&H Corp. in
Schedule 5.1 attached hereto, be without further act or deed allocated to and
vested in NS&H Corp.
5.2. Except as otherwise provided in this Article V, upon the Effective Date
the Surviving Corporation shall be free of all liabilities of the Dividing
Corporation to the extent allocated to NS&H Corp. as provided in this
Article V.
5.3. Except as otherwise provided in this Article V, all of the property,
rights, privileges, franchises, interests and liabilities of PPL Electric, the
Dividing Corporation, not expressly allocated to NS&H Corp., shall, upon the
Effective Date, be unaffected by the Division and shall continue as the
property, rights, privileges, franchises, interests and liabilities of PPL
Electric, the Surviving Corporation. The Resulting Corporations shall each
thenceforth be responsible as separate and distinct corporations only for such
liabilities as each corporation may explicitly undertake or incur pursuant to
the Division or after the Effective Date in its own name.
5.4. Each of the Resulting Corporations shall be liable for any transfer
taxes, costs, or fees associated with the Division and allocation of property
and liabilities as if PPL Electric, the Dividing Corporation, were the seller
of such transferred assets or liabilities and NS&H Corp. were the purchaser of
such assets or liabilities.
5.5. All property of PPL Electric, the Dividing Corporation, however
allocated pursuant to this Plan, shall remain subject to any liens or
encumbrances thereon, and this Plan shall not in any way affect such liens or
encumbrances.
5.6. At and after the Effective Date, except as provided in Section 5.4
hereof, neither of the Resulting Corporations shall be liable, as obligor or
guarantor or otherwise, for any liability allocated to the other Resulting
Corporation hereunder, and neither of the Resulting Corporations shall have
recourse to any property of the other Resulting Corporation, except as
otherwise explicitly provided herein.
ARTICLE VI
General Provisions
6.1. The terms and provisions of this Plan of Division shall survive the
Effective Date hereof.
6.2. This Plan of Division shall be binding upon and inure to the benefit of
PPL Electric, the Surviving Corporation, and NS&H Corp. and each of their
respective successors and assigns.
6.3. This Plan of Division may be withdrawn by action of the Board of
Directors of PPL Electric, the Dividing Corporation, in its sole discretion at
any time prior to the filing of Articles of Division in the Department of
State. Upon such withdrawal, this Plan of Division shall be of no force or
effect.
IN WITNESS WHEREOF, PPL Electric, the Dividing Corporation, has executed
this Plan of Division, this day of , 2001.
ATTEST:
PPL ELECTRIC UTILITIES CORPORATION
_______________________________________ By: __________________________________
Secretary Name:
Title:
A-3
SCHEDULE 5.1
A. The assets of PPL Electric, the Dividing Corporation, allocated to NS&H
Corp. consist of $5 million in cash.
B. The liabilities of PPL Electric, the Dividing Corporation, allocated to
NS&H Corp. consist of the following:
--liabilities of the Dividing Corporation, if any, under contracts that
prior to the effective date of the division the Dividing Corporation
assigned to PPL Corporation or any other direct or indirect subsidiary of
PPL Corporation and any other contracts under which the Dividing
Corporation has joint liability with PPL Corporation or any other direct or
indirect subsidiary of PPL Corporation, for which releases from the other
contracting party or parties have not been obtained by the Dividing
Corporation;
--liabilities of the Dividing Corporation, if any, under any employee
benefit plans, programs, policies, agreements and other arrangements where
the Dividing Corporation may be responsible for payments to employees of
PPL Corporation or any other direct or indirect subsidiary of PPL
Corporation, other than liabilities for which the Company is liable under
applicable law or regulation notwithstanding the division;
--liabilities of the Dividing Corporation, if any, for damages with
respect to claims that may be made in the future based on occurrences
arising prior to the effective date of the division for which the Dividing
Corporation may be jointly liable with PPL Corporation or any other direct
or indirect subsidiary of PPL Corporation, other than tax liabilities and
liabilities for which the Dividing Corporation is liable under applicable
law or regulation notwithstanding the division; and
--liabilities of the Dividing Corporation, if any, for damages with
respect to claims that may be made in the future based on occurrences
arising prior to the effective date of the division which do not relate to
or arise out of (1) the Dividing Corporation's transmission and
distribution businesses or (2) those business activities that are related
to or arise out of its electric transmission and distribution businesses,
other than tax liabilities and liabilities for which the Dividing
Corporation is liable under applicable law or regulation notwithstanding
the division.
A-4
Exhibit A
PPL ELECTRIC UTILITIES CORPORATION
AMENDED AND RESTATED ARTICLES OF INCORPORATION
ARTICLE I. The name of the Corporation is
PPL ELECTRIC UTILITIES CORPORATION
ARTICLE II. The location and post office address of the registered office of
the Corporation in this Commonwealth is
Two North Ninth Street
Allentown, Pennsylvania 18101
ARTICLE III. The purpose or purposes for which the Corporation is
incorporated under the Business Corporation Law of the Commonwealth of
Pennsylvania are to engage in, and do any lawful act concerning, any or all
lawful business for which a corporation may be incorporated under said
Business Corporation Law, including but not limited to:
1. The supply of light, heat or power to the public by means of
electricity or by any other means.
2. The production, generation, manufacture, transmission, storage,
distribution or furnishing of artificial or natural gas, electricity or
steam or air conditioning or refrigerating services, or any combination
thereof to or for the public.
3. The diverting, pumping or impounding of water for the development or
furnishing of hydroelectric power to or for the public.
4. The transportation of artificial or natural gas, electricity,
petroleum or petroleum products or water or any combination of such
substances for the public.
5. The diverting, developing, pumping, impounding, distributing or
furnishing of water from either surface or subsurface sources to or for the
public.
6. Manufacturing, processing, owning, using and dealing in personal
property of every class and description, engaging in research and
development, the furnishing of services, and acquiring, owning, using and
disposing of real property of every nature whatsoever.
ARTICLE IV. The term for which the Corporation is to exist is perpetual.
ARTICLE V. The aggregate number of shares which the Corporation shall have
authority to issue is 185,629,936 shares, divided into 629,936 shares of 4
1/2% Preferred Stock, par value $100 per share; 10,000,000 shares of Series
Preferred Stock, par value $100 per share; 5,000,000 shares of Preference
Stock, without nominal or par value; and 170,000,000 shares of Common Stock,
without nominal or par value.
ARTICLE VI. The designations, preferences, qualifications, limitations,
restrictions, and the special or relative rights in respect of the shares of
each class shall be as follows:
Division A--4 1/2% PREFERRED STOCK
SECTION 1. Dividend Rate. The 4 1/2% Preferred Stock shall be entitled to
-------------
dividends, as provided in Division C, at the rate of four and one-half percent
(4 1/2%) per annum, such dividends to be cumulative from the date of issuance
thereof.
SECTION 2. Restrictions on Certain Corporate Action. (A) Upon the vote of a
----------------------------------------
majority of all the Directors of the Corporation and of a majority of the
total number of shares of stock then issued and outstanding and
entitled to vote, the Corporation may from time to time create or authorize
one or more other classes of stock with such designations, rights, privileges,
limitations, preferences, voting powers, prohibitions, restrictions or
qualifications of the voting and other rights and powers and terms as to
redemption as may be determined by said vote, which may be the same or
different from the designations, rights, privileges, limitations, preferences,
voting powers, prohibitions, restrictions or qualifications of the classes of
stock of the Corporation then authorized; provided, however, that no new class
of stock shall hereafter be created or authorized which is entitled to
dividends or shares in distribution of assets on a parity with or in priority
to the 4 1/2% Preferred Stock, nor shall there be created or authorized any
securities convertible into shares of any such stock, unless the holders of
record of not less than two-thirds of the number of shares of 4 1/2% Preferred
Stock then outstanding shall consent thereto in writing or by voting therefor
in person or by proxy at the meeting of shareholders at which the creation or
authorization of such new class of stock or such convertible securities is
considered. Any such vote may authorize any shares of any class then
authorized but unissued to be issued as shares of such new class or classes.
(B) The expressed rights, privileges, terms and conditions of the 4 1/2%
Preferred Stock then outstanding shall not be amended, altered, changed or
repealed in a manner substantially prejudicial to the holders thereof unless
the holders of record of not less than two-thirds of the number of shares of
the 4 1/2% Preferred Stock then outstanding shall consent thereto in writing
or by voting therefor in person or by proxy at the meeting of shareholders at
which such amendment, alteration, change or repeal is considered.
Division B--SERIES PREFERRED STOCK
SECTION 1. Division into Series. (A) All shares of Series Preferred Stock
--------------------
shall be identical except that the dividend rate, the amount to which such
shares shall be entitled upon redemption and upon liquidation, the sinking
fund, if any, as well as the provisions, if any, with respect to
convertibility may vary between different series. The Series Preferred Stock
may be divided into, and issued from time to time, in one or more series, each
of such series to have such distinctive designation, terms, relative rights,
privileges, limitations, preferences and voting powers and such prohibitions,
restrictions, and qualifications of the voting and other rights and powers as
are fixed and determined in this Article VI or in a resolution or resolutions
providing for the issue of such series adopted by the Board of Directors as
provided in this Division B.
(B) Authority is hereby expressly granted to the Board of Directors to
establish one or more series of Series Preferred Stock and with respect to
each series to fix and determine by resolution or resolutions providing for
the issue of such series:
(1) the number of shares to constitute such series and the distinctive
designation thereof to distinguish the shares thereof from the shares of
all other series and classes;
(2) the dividend rate on the shares of such series, and the date or dates
from which dividends shall be cumulative;
(3) the amount to which shares of such series shall be entitled upon
redemption;
(4) the amount to which shares of such series shall be entitled upon
liquidation;
(5) the amount of the sinking fund, if any, for the purchase or
redemption of shares of such series; and
(6) the terms and conditions, if any, upon which the shares of such
series may be converted into other securities of the Corporation.
SECTION 2. Restrictions on Certain Corporate Action. (A) Upon the vote of a
----------------------------------------
majority of all of the Directors of the Corporation and of a majority of the
total number of shares of stock then issued and outstanding and entitled to
vote, the Corporation may from time to time create or authorize one or more
classes of stock in addition to the Series Preferred Stock, the 4 1/2%
Preferred Stock, the Preference Stock and the Common Stock, with such
designations, rights, privileges, limitations, preferences, voting powers,
prohibitions, restrictions or qualifications of the voting and other rights
and powers and terms as to redemption as may be determined by said vote, which
may be the same or different from the designations, rights, privileges,
limitations, preferences, voting powers, prohibitions, restrictions or
qualifications of the classes of stock of the Corporation then authorized;
provided, however, that no new class of stock shall hereafter be created or
authorized which is entitled to dividends or shares in distribution of assets
on a parity with or in priority to the Series Preferred Stock, nor shall there
be created or authorized any securities convertible into shares of any such
stock, unless the holders of record of not less than two-thirds of the number
of shares of the Series Preferred Stock and the 4 1/2% Preferred
AA-2
Stock then outstanding (consenting or voting as a single class separate from
the holders of the Preference Stock and the Common Stock) shall consent
thereto in writing or by voting therefor in person or by proxy at the meeting
of shareholders at which the creation or authorization of such new class of
stock or such convertible securities is considered. Any such vote may
authorize any shares of any class then authorized but unissued to be issued as
shares of such new class or classes.
(C) The provisions of this Section 2 of this Division B requiring the
approval of a specified percentage of the holders of the Series Preferred
Stock and the 4 1/2% Preferred Stock voting or consenting as a class shall be
construed as in addition to and not in substitution for, any provisions of
Division A of this Article VI requiring the approval of the holders of a
specified percentage of the 4 1/2% Preferred Stock.
(D) The expressed rights, privileges, terms and conditions of the Series
Preferred Stock then outstanding, insofar as they are set forth in the
foregoing subsections of this Section 2 shall not be amended, altered, changed
or repealed in a manner substantially prejudicial to the holders thereof
unless (1) the holders of record of not less than two-thirds of the number of
shares of the Series Preferred Stock and the 4 1/2% Preferred Stock then
outstanding (consenting or voting as a single class separate from the holders
of the Preference Stock and the Common Stock) shall consent thereto in writing
or by voting therefor in person or by proxy at the meeting of shareholders at
which such amendment, alteration, change or repeal is considered, and (2) the
expressed rights, privileges, terms and conditions of the 4 1/2% Preferred
Stock, are, at the same time, similarly amended, altered, changed or repealed.
The expressed rights, privileges, terms and conditions of the Series Preferred
Stock then outstanding, other than those set forth in the foregoing
subsections of this Section 2, shall not be amended, altered, changed or
repealed in a manner substantially prejudicial to the holders thereof unless
the holders of record of not less than two-thirds of the number of shares of
the Series Preferred Stock then outstanding shall consent thereto in writing
or by voting therefor in person or by proxy at the meeting of shareholders at
which such amendment, alteration, change or repeal is considered.
SECTION 3. Variations Among Series of Series Preferred Stock. (A) 4.60%
-------------------------------------------------
Series Preferred Stock. The terms of the "4.60% Series Preferred Stock," in
the respects in which the shares of such series may vary from shares of other
series of the Series Preferred Stock shall be as follows: the dividend rate
shall be 4.60% per annum, and dividends on each share of such series shall be
cumulative from the date or dates of initial issue of shares of such series;
the redemption price shall be $103 per share at any time; $103 per share shall
be payable upon any voluntary liquidation, dissolution or winding up of the
Corporation and $100 per share shall be payable upon any involuntary
liquidation, dissolution or winding up of the Corporation. The number of
shares of this series authorized is 63,000 shares.
(B) 4.40% Series Preferred Stock. The terms of the "4.40% Series Preferred
Stock" in the respects in which the shares of such series may vary from shares
of other series of the Series Preferred Stock shall be as follows: the
dividend rate shall be 4.40% per annum, and dividends on each share of such
series shall be cumulative from the date or dates of the initial issue of
shares of such series; the redemption price shall be $102 per share at any
time; $102 per share shall be payable upon any voluntary liquidation,
dissolution or winding up of the Corporation and $100 per share shall be
payable upon any involuntary liquidation, dissolution or winding up of the
Corporation. The number of shares of this series authorized is 229,214 shares.
(C) 3.35% Series Preferred Stock. The terms of the "3.35% Series Preferred
Stock" in the respects in which the shares of such series may vary from shares
of other series of the Series Preferred Stock shall be as follows: the
dividend rate shall be 3.35% per annum and dividends on each share of such
Series shall be cumulative from the date or dates of the initial issue of
shares of such series; the redemption price shall be $103.50 per share at any
time; $103.50 per share shall be payable upon any voluntary liquidation,
dissolution or winding up of the Corporation and $100 per share shall be
payable upon any involuntary liquidation, dissolution or winding up of the
Corporation. The number of shares of this series authorized is 53,248 shares.
(D) 6.75% Series Preferred Stock. The terms of the "6.75% Series Preferred
Stock" in the respects in which the shares of such series may vary from shares
of other series of the Series Preferred Stock shall be as follows:
(1) The dividend rate shall be 6.75% per annum and dividends on each
share of such Series shall be cumulative from the date or dates of the
initial issue of shares of such series;
AA-3
(2) Shares of this Series are not redeemable prior to October 1, 2003. On
or after October 1, 2003, the Corporation may, by resolution of the Board
of Directors or the Executive Committee of the Board of Directors, redeem
all, or from time to time, any part of the outstanding shares of this
Series, at the following redemption prices per share:
If Redeemed During Twelve Month Period Redemption
Ending September 30 Prices
-------------------------------------- ----------
2004.............................................................. 103.38%
2005.............................................................. 103.04
2006.............................................................. 102.70
2007.............................................................. 102.36
2008.............................................................. 102.03
2009.............................................................. 101.69
2010.............................................................. 101.35
2011.............................................................. 101.01
2012.............................................................. 100.68
2013.............................................................. 100.34
and thereafter at $100.00 per share. Any shares of this Series which are
redeemed, repurchased or otherwise reacquired by the Corporation shall, until
further action by the Board of Directors or the Executive Committee of the
Board of Directors, have the status of authorized and unissued shares of
Series Preferred Stock, without designation as to series.
(3) $100.00 per share shall be payable upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation. The shares of
this Series shall not be convertible into shares of any other class or
classes or into any other securities of the Corporation. The number of
shares of this series authorized is 850,000 shares.
(E) 6.125% Series Preferred Stock. The terms of the "6.125% Preferred Stock"
-----------------------------
in the respects in which the shares of such series may vary from shares of
other series of the Series Preferred Stock shall be as follows:
(1) The dividend rate shall be 6.125% per share per annum and dividends
on each share of such Series shall be cumulative from the date or dates of
the initial issue of shares of such Series;
(2) So long as any shares of this Series remain outstanding, the
Corporation, after full dividends on all outstanding shares of the 4 1/2%
Preferred Stock and the Series Preferred Stock, including this Series, for
all past dividend periods shall have been paid or set aside, shall redeem
as and for a sinking fund for the retirement of this Series (the "6.125%
Sinking Fund"), out of funds legally available therefor, (i) annually on
October 1 in each of the years 2003 through 2007, 57,500 shares of this
Series, and (ii) on October 1, 2008, the remaining shares of this Series.
The Corporation's obligation to make redemptions for the 6.125% Sinking
Fund on any such October 1 as provided in this subparagraph (2) (such
obligations on each such date being herein called the "6.125% Sinking Fund
Obligation") shall be cumulative so that if on any such October 1 the funds
of the Corporation legally available for the 6.125% Sinking Fund shall be
insufficient to permit the Corporation to discharge its 6.125% Sinking Fund
Obligation on such date, or if for any other reason such 6.125% Sinking
Fund Obligation shall not have been discharged in full on such date, then
such 6.125% Sinking Fund Obligation, to the extent not discharged, shall
become an additional 6.125% Sinking Fund Obligation for each succeeding
October 1 until fully discharged. The price at which shares of this Series
shall be called for redemption through the 6.125% Sinking Fund shall be
$100 per share, plus an amount equal to accumulated and unpaid dividends to
the date of such redemption computed as provided in Section 5 of Division C
of Article VI of these Amended and Restated Articles of Incorporation. The
Corporation's 6.125% Sinking Fund Obligation may be discharged, in whole or
part, by the application of any shares of this Series purchased or
otherwise acquired by the Corporation on or before such date. If the
Corporation shall for any reason fail to discharge in full its 6.125%
Sinking Fund Obligation on any such October 1, the Corporation shall not
thereafter, unless and until such 6.125% Sinking Fund Obligation and its
6.125% Sinking Fund Obligation for each and every prior October 1 shall
have been discharged in full, declare or pay any dividend on, or make any
other distribution of property with respect to, or purchase or otherwise
acquire, any of its Common Stock.
(3) Shares of this Series are not redeemable prior to October 1, 2003. On
and after October 1, 2003, the Corporation may, by resolution of the Board
of Directors or the Executive Committee of the Board of
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Directors, redeem all, or from time to time, any part of the outstanding
shares of this Series at $100 per share. Any shares of this Series which
are redeemed, repurchased or otherwise reacquired by the Corporation shall,
until further action by the Board of Directors or the Executive Committee
of the Board of Directors, have the status of authorized and unissued
shares of Series Preferred Stock, without designation as to series.
(4) $100.00 per share shall be payable upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation. The shares of
this Series shall not be convertible into shares of any other class or
classes or into any other securities of the Corporation. The number of
shares of this series authorized is 1,150,000 shares.
(F) 6.33% Series Preferred Stock. The terms of the "6.33% Preferred Stock"
----------------------------
in the respects in which the shares of such series may vary from shares of
other series of the Series Preferred Stock shall be as follows:
(1) The dividend rate shall be 6.33% per share per annum and dividends on
each share of such Series shall be cumulative from the date or dates of the
initial issue of shares of such Series;
(2) So long as any shares of this Series remain outstanding, the
Corporation, after full dividends on all outstanding shares of the 4 1/2%
Preferred Stock and the Series Preferred Stock, including this Series, for
all past dividend periods shall have been paid or set aside, shall redeem
as and for a sinking fund for the retirement of this Series (the "6.33%
Sinking Fund"), out of funds legally available therefor, (i) annually on
July 1 in each of the years 2003 through 2007, 50,000 shares of this
Series, and (ii) on July 1, 2008, the remaining shares of this Series. The
Corporation's obligation to make redemptions for the 6.33% Sinking Fund on
any such July 1 as provided in this subparagraph (2) (such obligations on
each such date being herein called the "6.33% Sinking Fund Obligation")
shall be cumulative so that if on any such July 1 the funds of the
Corporation legally available for the 6.33% Sinking Fund shall be
insufficient to permit the Corporation to discharge its 6.33% Sinking Fund
obligation on such date, or if for any other reason such 6.33% Sinking Fund
Obligation shall not have been discharged in full on such date, then such
6.33% Sinking Fund Obligation, to the extent not discharged, shall become
an additional 6.33% Sinking Fund Obligation for each succeeding July 1
until fully discharged. The price at which shares of this Series shall be
called for redemption through the 6.33% Sinking Fund shall be $100 per
share, plus an amount equal to accumulated and unpaid dividends to the date
of such redemption computed as provided in Section 5 of Division C of
Article VI of these Amended and Restated Articles of Incorporation. The
Corporation's 6.33% Sinking Fund Obligation may be discharged, in whole or
part, by the application of any shares of this Series purchased or
otherwise acquired by the Corporation on or before such date. If the
Corporation shall for any reason fail to discharge in full its 6.33%
Sinking Fund Obligation on any such July 1, the Corporation shall not
thereafter, unless and until such 6.33% Sinking Fund Obligation and its
6.33% Sinking Fund Obligation for each and every prior July 1 shall have
been discharged in full, declare or pay any dividend on, or make any other
distribution of property with respect to, or purchase or otherwise acquire,
any of its Common Stock.
(3) Shares of this Series are not redeemable prior to October 1, 2003. On
and after October 1, 2003, the Corporation may, by resolution of the Board
of Directors or the Executive Committee of the Board of Directors, redeem
all, or from time to time, any part of the outstanding shares of this
Series at $100 per share. Any shares of this Series which are redeemed,
repurchased or otherwise reacquired by the Corporation shall, until further
action by the Board of Directors or the Executive Committee of the Board of
Directors, have the status of authorized and unissued shares of Series
Preferred Stock, without designation as to series.
(4) $100.00 per share shall be payable upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation. The shares of
this Series shall not be convertible into shares of any other class or
classes or into any other securities of the Corporation. The number of
shares of this series authorized is 1,000,000 shares.
(G) 5.95% Series Preferred Stock. The terms of the "5.95% Preferred Stock"
----------------------------
in the respects in which the shares of such series may vary from shares of
other series of the Series Preferred Stock shall be as follows:
(1) The dividend rate shall be 5.95% per share per annum and dividends on
each share of such Series shall be cumulative from the date or dates of the
initial issue of shares of such Series;
(2) The Corporation, after full dividends on all outstanding shares of
the 4 1/2% Preferred Stock and the Series Preferred Stock including this
Series, for all past dividend periods shall have been paid or set aside,
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shall redeem as and for a sinking fund for the retirement of this Series
(the "5.95% Sinking Fund"), out of funds legally available therefor, on
April 1, 2001, all of the outstanding shares of this Series. If on April 1,
2001, the required number of shares shall not be redeemed because of the
lack of legally available funds, or for any other reason, the amount
required to be redeemed shall be carried forward until such obligation is
fully discharged. The price at which shares of this Series shall be called
for redemption through the 5.95% Sinking Fund shall be $100 per share, plus
an amount equal to accumulated and unpaid dividends to the date of such
redemption computed as provided in Section 5 of Division C of Article VI of
these Amended and Restated Articles of Incorporation. If the Corporation
shall for any reason fail to discharge in full its 5.95% Sinking Fund
obligation on April 1, 2001, the Corporation shall not thereafter, unless
and until such 5.95% Sinking Fund obligation shall have been discharged in
full, declare or pay any dividend on, or make any other distribution of
property with respect to, or purchase or otherwise acquire, any of its
Common Stock. Any shares of this Series which are redeemed, repurchased or
otherwise reacquired by the Corporation shall, until further action by the
Board of Directors or the Executive Committee of the Board of Directors,
have the status of authorized and unissued shares of Series Preferred
Stock, without designation as to series.
(3) The amount per share for this Series payable to the holders thereof
upon any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation shall be $100. The shares of this Series shall not be
convertible into shares of any other class or classes or into any other
securities of the Corporation. The number of shares of this Series
authorized is 300,000 shares.
(H) 6.05% Series Preferred Stock. The terms of the "6.05% Preferred Stock"
----------------------------
in the respects in which the shares of such series may vary from shares of
other series of the Series Preferred Stock shall be as follows:
(1) The dividend rate shall be 6.05% per share per annum and dividends on
each share of such Series shall be cumulative from the date or dates of the
initial issue of shares of such Series;
(2) The Corporation, after full dividends on all outstanding shares of
the 4 1/2% Preferred Stock and the Series Preferred Stock, including this
Series, for all past dividend periods shall have been paid or set aside,
shall redeem as and for a Sinking Fund for the retirement of this Series
(the "6.05% Sinking Fund"), out of funds legally available therefor, on
April 1, 2002, all of the outstanding shares of this Series. If on April 1,
2002, the required number of shares shall not be redeemed because of the
lack of legally available funds, or for any other reason, the amount
required to be redeemed shall be carried forward until such obligation is
fully discharged. The price at which shares of this Series shall be called
for redemption through the 6.05% Sinking Fund shall be $100 per share, plus
an amount equal to accumulated and unpaid dividends to the date of such
redemption computed as provided in Section 5 of Division C of Article VI of
these Amended and Restated Articles of Incorporation. If the Corporation
shall for any reason fail to discharge in full its 6.05% Sinking Fund
obligation on April 1, 2002, the Corporation shall not thereafter, unless
and until such 6.05% Sinking Fund obligation shall have been discharged in
full, declare or pay any dividend on, or make any other distribution of
property with respect to, or purchase or otherwise acquire, any of its
Common Stock. Any shares of this Series which are redeemed, repurchased or
otherwise reacquired by the Corporation shall, until further action by the
Board of Directors or the Executive Committee of the Board of Directors,
have the status of authorized and unissued shares of Series Preferred
Stock, without designation as to series.
(3) The amount per share for this Series payable to the holders thereof
upon any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation shall be $100. The shares of this Series shall not be
convertible into shares of any other class or classes or into any other
securities of the Corporation. The number of shares of this Series
authorized is 250,000 shares.
(I) 6.15% Series Preferred Stock. The terms of the "6.15% Preferred Stock"
----------------------------
in the respects in which the shares of such series may vary from shares of
other series of the Series Preferred Stock shall be as follows:
(1) The dividend rate shall be 6.15% per share per annum and dividends on
each share of such Series shall be cumulative from the date or dates of the
initial issue of shares of such Series;
(2) The Corporation, after full dividends on all outstanding shares of
the 4 1/2% Preferred Stock and the Series Preferred Stock, including this
Series, for all past dividend periods shall have been paid or set aside,
shall redeem as and for a sinking fund for the retirement of this Series
(the "6.15% Sinking Fund"), out of funds legally available therefor, on
April 1, 2003, all of the outstanding shares of this Series. If on April 1,
2003, the required number of shares shall not be redeemed because of the
lack of legally available funds, or for any other reason, the amount
required to be redeemed shall be carried forward until such obligation is
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fully discharged. The price at which shares of this Series shall be called
for redemption through the 6.15% Sinking Fund shall be $100 per share, plus
an amount equal to accumulated and unpaid dividends to the date of such
redemption computed as provided in Section 5 of Division C of Article VI of
these Amended and Restated Articles of Incorporation. If the Corporation
shall for any reason fail to discharge in full its 6.15% Sinking Fund
obligation on April 1, 2003, the Corporation shall not thereafter, unless
and until such 6.15% Sinking Fund obligation shall have been discharged in
full, declare or pay any dividend on, or make any other distribution of
property with respect to, or purchase or otherwise acquire, any of its
Common Stock. Any shares of this Series which are redeemed, repurchased or
otherwise reacquired by the Corporation shall, until further action by the
Board of Directors or the Executive Committee of the Board of Directors,
have the status of authorized and unissued shares of Series Preferred
Stock, without designation as to series.
(3) The amount per share for this Series payable to the holders thereof
upon any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation shall be $100. The shares of this Series shall not be
convertible into shares of any other class or classes or into any other
securities of the Corporation. The number of shares of this Series
authorized is 250,000 shares.
(J) For the purposes of the foregoing paragraphs (A) through (I), the terms
"involuntary liquidation, dissolution or winding up" shall include, without
being limited to, a liquidation, dissolution or winding up of the Corporation
resulting in the distribution of all of the net proceeds of a sale, lease or
conveyance of all or substantially all of the property or business of the
Corporation to any governmental body including, without limitation, any
municipal corporation or political subdivision or authority.
Division C--PROVISIONS APPLICABLE TO BOTH THE 4 1/2%
PREFERRED STOCK AND THE SERIES PREFERRED STOCK
SECTION 1. General. The term "Preferred Stock" whenever used in this Article
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VI, shall be deemed to include the 4 1/2% Preferred Stock, the Series
Preferred Stock and any other class of stock entitled to dividends on a parity
with the 4 1/2% Preferred Stock and Series Preferred Stock.
SECTION 2. Dividends. (A) The shares of Preferred Stock shall be entitled to
---------
the payment of dividends on a parity with each other at the rate or rates
established by or pursuant to the provisions of this Article VI and in
preference to the Preference Stock and the Common Stock, but only when and as
declared by the Board of Directors, out of funds legally available for the
payment of dividends.
(B) Said dividends shall be payable quarterly on January 1, April 1, July 1
and October 1 of each year or otherwise as the Board of Directors may
determine, to shareholders of record as of a date not exceeding forty (40)
days and not less than ten (10) days preceding such dividend payment dates, to
be fixed by the Board of Directors. The holders of the Preferred Stock shall
not be entitled to receive any dividends thereon out of net profits or surplus
earnings other than dividends established by or pursuant to this Article VI.
SECTION 3. Preferences In Distribution. The shares of the 4 1/2% Preferred
---------------------------
Stock and the Series Preferred Stock shall be entitled to share on a parity
with each other, and shall have a preference over the Preference Stock and the
Common Stock, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, or upon any distribution of assets, other than
net profits or surplus earnings until there shall have been paid in respect of
the shares of:
(a) 4 1/2% Preferred Stock--the full par value thereof, or
(b) Series Preferred Stock--the liquidation price fixed as provided in
Division B;
plus, in either case, an amount, if any, by which an amount equivalent to the
annual dividend upon such shares from the date after which dividends thereon
became cumulative to the date of liquidation exceeds the dividends actually
paid thereon or declared and set apart for payment thereon from such date to
the date of liquidation. The 4 1/2% Preferred Stock and the Series Preferred
Stock shall not receive any share in any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation or in any distribution of assets
in excess of the aggregate amount specified in this section.
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SECTION 4. Voting Rights. (A) Except as otherwise provided in these Amended
-------------
and Restated Articles of Incorporation, each share of the 4 1/2% Preferred
Stock, the Series Preferred Stock, the Common Stock and (if, and to the
extent, stated in the resolution or resolutions providing for the issue of a
series of Preference Stock) the Preference Stock shall be equal in voting
power and shall entitle the holder thereof to one vote upon any question
presented to any shareholders meeting, it being hereby agreed and declared
that a majority in number of shares regardless of the class to which such
shares may belong is a majority in value or in interest within the meaning of
any statute or law requiring the consent of stockholders holding a majority in
interest or a greater amount in value of stock of the Corporation.
(B) If and when dividends payable on any shares of Preferred Stock shall be
in default in an amount equivalent to the annual dividend, or more, per share,
and thereafter until all dividends on the Preferred Stock (of all classes and
series) in default shall have been paid, the holders of the Preferred Stock
voting as a single class, separate from the holders of the Preference Stock
and the Common Stock, shall be entitled to elect the smallest number of
directors necessary to constitute a majority of the full Board of Directors,
and the holders of the Common Stock and the Preference Stock (if, and to the
extent, stated in the resolution or resolutions providing for the issue of a
series of Preference Stock), voting separately as a class, shall have the
right to elect the remaining directors of the Corporation. The terms of
office, as directors, of all persons who may be directors of the Corporation
at the time shall terminate upon the election of a majority of the Board of
Directors by the holders of the Preferred Stock, except that, if the holders
of the Preference Stock and/or the Common Stock shall not have exercised their
right to elect directors of the Corporation (either by voting together as a
single class or by voting separately as two distinct classes, as the case may
be) because of the lack of a quorum consisting of a majority of the required
class, then such remaining directors shall be elected by the directors whose
term of office is thus terminated and who have not been elected by the holders
of the Preferred Stock as a class; and in that event, such elected directors
shall hold office for the interim period, pending such time s a quorum of the
requisite class shall be present at a meeting held for the election of
directors.
(C) If and when all dividends then in default on the Preferred Stock, then
outstanding, shall be paid (and such dividends shall be declared and paid out
of any funds legally available therefor as soon as reasonably practicable),
the holders of the Preferred Stock shall be divested of any special right with
respect to the election of directors and the voting power of the holders of
the Preferred Stock and the holders of the Common Stock and the Preference
Stock (to the extent stated in the resolution or resolutions providing for the
issue of a series of Preference Stock) shall revert to the status existing
before the first dividend payment date on which dividends on any shares of the
Preferred Stock were not paid in full; but always subject to the same
provisions for vesting such special rights in the holders of the Preferred
Stock in case of further like default or defaults on dividends thereon. Upon
the termination of any such special voting right, the terms of office of all
persons who may have been elected directors of the Corporation by vote of the
holders of the Preferred Stock, as a class, pursuant to such special voting
right shall forthwith terminate, and the resulting vacancies shall be filled
by the vote of a majority of the remaining directors.
(D) In case of any vacancy in the office of a director occurring among the
directors elected by the holders of the Preferred Stock, voting as a single
class separate from the holders of the Common Stock and the holders of any
series of Preference Stock with voting rights, the remaining directors elected
by the holders of the Preferred Stock, by affirmative vote of a majority
thereof, or the remaining director so elected if there be but one, may elect a
successor or successors to hold office for the unexpired terms of the director
or directors whose place or places shall be vacant.
(E) In case of any vacancy in the office of a director occurring among the
directors not elected by the holders of the Preferred Stock, the remaining
directors not elected by the holders of the Preferred Stock, by affirmative
vote of a majority thereof, or the remaining such director if there be but
one, may elect a successor or successors to hold office for the unexpired term
of the director or directors whose place or places shall be vacant.
(F) Whenever the right shall have accrued to the holders of the Preferred
Stock to elect directors, voting as a single class separate from the holders
of the Common Stock and the holders of any series of Preference Stock with
voting rights, then upon request in writing signed by any holder of the
Preferred Stock entitled to vote, delivered by registered mail or in person to
the president, a vice president or secretary of the Corporation, it shall be
the duty of such officer forthwith to cause notice to be given to the
shareholders entitled to vote of a meeting to be held at such time as such
officer may fix, not less than ten (10) nor more than sixty (60) days after
the receipt of such request, for the purpose of electing directors. At all
meetings of shareholders held for the purpose
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of electing directors during such time as the holders of a class or classes of
stock shall have the special right, voting as a single class, separate from
the holders of the other class or classes of stock (not entitled to such
special right), to elect directors, the presence in person or by proxy of the
holders of a majority of such other class or classes of stock (counted either
separately as single classes or together as a single class, as the case may
be) shall be required to constitute a quorum of such class or classes for the
election of directors, and the presence in person or by proxy of the holders
of a majority of the outstanding shares of the class or classes of stock
entitled to such special right shall be required to constitute a quorum of
such class or classes for the election of directors; provided, however, that
the absence of a quorum of the holders of any such class or classes of stock
shall not prevent the election at any such meeting or any adjournment thereof
of directors by any other class or classes if the necessary quorum of the
holders of stock of such other class or classes is present in person or by
proxy at such meeting or adjournment thereof; and provided further that in the
event a quorum of the holders of the Preferred Stock is not present, then the
election of the directors elected by the holders of any other class or classes
of stock shall not become effective and the directors so elected by such other
class or classes of stock shall not assume their offices and duties until the
holders of the Preferred Stock shall have elected the directors they shall be
entitled to elect; and provided further, however, that in the absence of a
quorum of the holders of stock of any class, a majority of the holders of the
stock of such class who are present in person or by proxy shall have the power
to adjourn the election of the directors to be elected by such class from day
to day or for such longer periods, not exceeding 15 days, each, as such
majority shall direct without notice other than announcement at the meeting
until the requisite number of holders of such class shall be present in person
or by proxy.
SECTION 5. Redemption. (A) By a majority vote of the Board of Directors of
----------
the Corporation:
(1) the 4 1/2% Preferred Stock may be redeemed in whole or in part at any
time at One Hundred Ten Dollars ($110.00) per share, or
(2) any series of Series Preferred Stock may be redeemed in whole or in
part at any time at the redemption price fixed and determined as specified
in Division B;
plus, in either case, an amount, if any, by which an amount equivalent to the
annual dividend upon such shares from the date after which dividends thereon
became cumulative to the date of redemption exceeds the dividends actually
paid thereon or declared and set apart for payment thereon from such date to
the date of redemption. If, pursuant to such vote, less than all of the shares
of any class or series thereof of the Preferred Stock are to be redeemed, the
shares to be redeemed shall be selected by lot, in such manner as the Board of
Directors of the Corporation shall determine, by a bank or trust company
chosen for that purpose by the Board of Directors of the Corporation.
(B) Nothing herein contained shall limit any right of the Corporation to
purchase or otherwise acquire any shares of the Preferred Stock.
(C) Notice of the intention of the Corporation to redeem shares of the
Preferred Stock or any thereof shall be mailed thirty (30) days before the
date of redemption to each holder of record of the shares to be redeemed, at
his last known post office address as shown by the records of the Corporation.
At any time after such notice has been mailed as aforesaid, the Corporation
may deposit the aggregate redemption price (or the portion thereof not already
paid in the redemption of shares so to be redeemed) with any bank or trust
company in the City of Philadelphia, Pennsylvania; City of Allentown,
Pennsylvania; or in the City of New York, New York, named in such notice,
payable in amounts aforesaid to the respective orders of the record holders of
the shares so to be redeemed, on endorsement and surrender of their
certificates, and thereupon said holders shall cease to be shareholders with
respect to said shares and from and after the making of such deposit, said
holders shall have no interest in or claim against the Corporation with
respect to said shares, but shall be entitled only to receive said moneys from
said bank or trust company with interest, if any, allowed by such bank or
trust company on such moneys deposited as provided in this subsection (C), on
endorsement and surrender of their certificates as aforesaid.
(D) Any moneys so deposited, plus interest thereon, if any, and remaining
unclaimed at the end of six years from the date fixed for redemption, if
thereafter requested by resolution of the Board of Directors of the
Corporation, shall be repaid to the Corporation and in the event of such
repayment to the Corporation, such holders of record of the shares so redeemed
as shall not have made claim against such moneys prior to such repayment to
the Corporation shall be deemed to be unsecured creditors of the Corporation
for an amount without
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interest equivalent to the amount deposited, plus interest thereon, if any,
allowed by such bank or trust company, as above stated, for the redemption of
such shares and so paid to the Corporation.
Division D--PREFERENCE STOCK
SECTION 1. General. To the extent permitted by these Amended and Restated
-------
Articles of Incorporation, the Board of Directors, by majority vote of a
quorum, shall have the authority to issue shares of Preference Stock from time
to time in one or more series, and to fix by resolution, at the time of
issuance of each of such series, the distinctive designations, terms, relative
rights, privileges, qualifications, limitations, options, conversion rights,
preferences, and voting powers, and such prohibitions, restrictions and
qualifications of voting or other rights and powers thereof except as they are
fixed and determined in this Article VI. The dividend rate or rates, dividend
payment dates or other terms of a series of Preference Stock may vary from
time to time dependent upon facts ascertainable outside of these Amended and
Restated Articles of Incorporation if the manner in which the facts will
operate to fix or change such terms is set forth in the express terms of the
series or upon terms incorporated by reference to an existing agreement
between the Corporation and one or more other parties or to another document
of independent significance or otherwise to the extent permitted by the
Business Corporation Law of 1988.
SECTION 2. Dividends. Subject to the provisions of Section 2(A) of Division
---------
C, the holders of shares of each series of Preference Stock shall be entitled
to receive, when and as declared by the Board of Directors, out of any funds
legally available for the purpose under 15 Pa.C.S. (S) 1551 (relating to
distributions to shareholders) or any superseding provision of law subject to
any additional limitations in the express terms of the series, cash dividends
at the rate or rates and on the terms which shall have been fixed by or
pursuant to the authority of the Board of Directors with respect to such
series and no more, payable at such time or times as may be fixed by or
pursuant to the authority of the Board of Directors. If and to the extent
provided by the express terms of any series of Preference Stock, the holders
of the series shall be entitled to receive such other dividends as may be
declared by the Board of Directors.
SECTION 3. Liquidation of the Corporation. Subject to the provisions of
------------------------------
Section 3 of Division C, in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of
Preference Stock shall be entitled to receive from the assets of the
Corporation (whether capital or surplus), prior to any payment to the holders
of shares of Common Stock or of any other class of stock of the Corporation
ranking as to assets subordinate to the Preference Stock, the amount per share
(which, in the case of an involuntary liquidation, dissolution or winding up,
shall not be in excess of the original offering price per share (not including
accrued dividends, if any) or $100 per share, whichever is less) which shall
have been fixed and determined by the Board of Directors with respect thereto,
plus the accrued and unpaid dividends thereon computed to the date on which
payment thereof is made available, whether or not earned or declared. For the
purposes of this section, the terms "involuntary liquidation, dissolution or
winding up" shall include, without being limited to, a liquidation,
dissolution or winding up of the Corporation resulting in the distribution of
all of the net proceeds of a sale, lease or conveyance of all or substantially
all of the property or business of the Corporation to any governmental body
including, without limitation, any municipal corporation or political
subdivision or authority.
SECTION 4. Conversion Privileges. In the event any series of the Preference
---------------------
Stock is issued with the privilege of conversion, such stock may be converted,
at the option of the record holder thereof, at any time or from time to time,
as determined by the Board of Directors, in the manner and upon the terms and
conditions stated in the resolution establishing and designating the series
and fixing and determining the relative rights and preferences thereof.
SECTION 5. Redemption. The Corporation, at its option to be exercised by its
----------
Board of Directors, may redeem the whole or any part of the Preference Stock
or of any series thereof at such time or times as may be fixed by the Board,
at the applicable price for each share, and upon the terms and conditions
which shall have been fixed and determined by the Board with respect thereto.
SECTION 6. Voting Rights. Each holder of record of shares of a series of
-------------
Preference Stock shall have full voting rights of one vote per share or such
other limited, multiple, fractional or conditional or no voting rights as
shall be stated in the resolution or resolutions of the Board of Directors
providing for the issue of the shares of
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such series. Unless provided in such resolution or resolutions, no holder of
shares of Preference Stock shall have cumulative voting rights.
Division E--COMMON STOCK
SECTION 1. Dividends And Shares In Distribution On Common Stock. (A) Subject
----------------------------------------------------
to the rights of the holders of the Senior Stock, and the Preference Stock and
subordinate thereto, the Common Stock alone shall receive all further
dividends and shares upon liquidation, dissolution, winding up or
distribution.
(B) A consolidation or merger of the Corporation with or into any other
corporation or corporations shall not be deemed a distribution of assets of
the Corporation within the meaning of any provision of this Article VI.
SECTION 2. Voting Rights. Except as otherwise provided in these Amended and
-------------
Restated Articles of Incorporation, each share of the 4 1/2% Preferred Stock,
the Series Preferred Stock and the Common Stock shall be equal in voting power
and shall entitle the holder thereof to one vote upon any question presented
to any shareholders' meeting, it being hereby agreed and declared that a
majority in number of shares (including, if and to the extent provided
pursuant to Division D, shares of Preference Stock) regardless of the class to
which such shares may belong is a majority in value or in interest within the
meaning of any statute or law requiring the consent of stockholders holding a
majority in interest or a greater amount in value of stock of the Corporation.
Division F--GENERAL
Pre-emptive Rights. The Corporation may issue or sell shares, option rights,
or securities having conversion or option rights for money or otherwise
without first offering them to shareholders of any class or classes.
Redemption. Any shares of the 4 1/2% Preferred Stock, the Series Preferred
Stock, the Preference Stock and the Common Stock which are redeemed,
repurchased or otherwise reacquired by the Corporation shall, until further
action by the Board of Directors or the Executive Committee of the Board of
Directors, have the status of authorized and unissued shares, without, in the
case of the Series Preferred Stock, designation as to series.
Convertibility. Unless otherwise provided in the terms of a series of Series
Preferred Stock or Preference Stock or otherwise in these Amended and Restated
Articles of Incorporation, the shares of each of the 4 1/2% Preferred Stock,
the Series Preferred Stock, the Preference Stock and the Common Stock,
respectively, shall not be convertible into shares of any other class or
classes or into any other securities of the Corporation.
ARTICLE VII. A majority of the directors may amend, alter or repeal the
Bylaws, subject to the power of the shareholders to change such action;
provided, however, that any amendment, alteration or repeal of, or the
adoption of any provision inconsistent with, Sections 3.01, 3.01.1, 3.04,
3.05, or 3.13 of the Bylaws, if by action of the shareholders, shall be only
upon the affirmative vote of the shareholders entitled to cast at least two-
thirds of the votes which all shareholders are entitled to cast, and if by
action of the directors, shall be only upon the approval of two-thirds of the
directors.
ARTICLE VIII. These Amended and Restated Articles of Incorporation may be
amended in the manner from time to time prescribed by statute and all rights
conferred upon shareholders herein are granted subject to this reservation;
provided, however, that, notwithstanding the foregoing (and in addition to any
vote that may be required by law, these Amended and Restated Articles of
Incorporation or the Bylaws), the affirmative vote of the shareholders
entitled to cast at least two-thirds of the votes which all shareholders are
entitled to cast shall be required to amend, alter or repeal, or to adopt any
provision inconsistent with, Articles VII or VIII of these Amended and
Restated Articles of Incorporation.
ARTICLE IX. The following provisions of the Business Corporation Law of 1988
shall not be applicable to the Corporation: 15 Pa.C.S. (S) 2538 (relating to
approval of transactions with interested shareholders) and 15 Pa.C.S.
Subchapter E (relating to control transactions).
ARTICLE X. (A) The Corporation shall have at all times at least at least one
individual who is an Independent Director. The Independent Director may not
delegate his or her duties, authorities or responsibilities hereunder. If the
Independent Director resigns, dies or becomes incapacitated, or such position
is otherwise vacant, no action requiring the unanimous affirmative vote of the
Directors shall be taken until a successor Independent Director is appointed
by the Board of Directors and qualifies and approves such action.
AA-11
(B) Notwithstanding any other provision of these Articles of Incorporation
and any provision of law that otherwise so empowers the Corporation, the
shareholders of the Corporation, any Director or any other Person, the
Corporation shall not, and neither the shareholders of the Corporation, nor
any Director nor any other Person on behalf of the Corporation shall, without
the prior unanimous consent of the Directors, including the Independent
Director, do any of the following: (i) make a general assignment for the
benefit of creditors; (ii) file a petition commencing a voluntary bankruptcy
case; (iii) file a petition or answer seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
any statute, law or regulation; (iv) file an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against it in any proceeding seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law or regulation, or the entry of any order appointing a trustee, liquidator,
receiver or other person or entity fulfilling a similar function for it or its
assets or any substantial portion thereof; (v) seek, consent to or acquiesce
in the appointment of a trustee, liquidator, receiver or other person or
entity fulfilling a similar function for it or all or any substantial part of
its assets; (vi) amend any provision of this Article X or Article XI, or amend
Section 9.05 of the Bylaws; or (vii) take action in furtherance of any such
action. In discharging their duties as Directors, including with regard to any
action contemplated by the preceding sentence, or with regard to any action
taken or determination made at any time when the Corporation is insolvent, the
Directors of the Corporation may, in considering the best interests of the
Corporation, consider the effects of any action upon any groups affected by
such action, including the creditors of the Corporation. The Directors shall
not be required, in considering the best interests of the Corporation or the
effects of any action, to regard the interests of shareholders of the
Corporation as a dominant or controlling interest or factor.
(C) As used in this Article X, the following terms shall have the following
meanings:
"Affiliate" shall mean, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used
with respect to any specified Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Independent Director" shall mean, with respect to the Corporation, a
Director who is not, and within the previous five years was not (except solely
by virtue of such Person's serving as, or being an Affiliate of any other
Person serving as, an independent director or manager, as applicable, of any
bankruptcy-remote special purpose entity that is an Affiliate of PPL
Corporation or the Corporation) (i) a shareholder, member, partner, director,
officer, manager, employee, Affiliate, customer, supplier or independent
contractor of, or a Person that has received any benefit in any form whatever
from (other than in such Director's capacity as a ratepayer or customer of the
Corporation in the ordinary course of business), or a Person that has provided
any service in any form whatsoever to, or any major creditor (or any Affiliate
of any major creditor) of, the Corporation, PPL Corporation, or any of their
Affiliates, or (ii) a Person owning beneficially, directly or indirectly, any
outstanding shares of common stock, any limited liability company interests or
any partnership interests, as applicable, of the Corporation, PPL Corporation
or any of their Affiliates, or of any major creditor (or any Affiliate of any
major creditor) of any of the foregoing, or a shareholder, member, partner,
director, officer, manager, employee, Affiliate, customer, supplier, creditor
or independent contractor of, or a Person that has received any benefit in any
form whatever from (other than in such Person's capacity as a ratepayer or
customer of the Corporation in the ordinary course of business), or a Person
that has provided any service in any form whatever to, such beneficial owner
or any of such beneficial owner's Affiliates, or (iii) a member of the
immediate family of any person described above; provided that the indirect or
beneficial ownership of stock through a mutual fund or similar diversified
investment vehicle with respect to which the owner does not have discretion or
control over the investments held by such diversified investment vehicle shall
not preclude such owner from being an Independent Director. For purposes of
this definition, "major creditor" shall mean a natural person or business
entity to which the Corporation, PPL Corporation or any of their Affiliates
has outstanding indebtedness for borrowed money or credit on open account in a
sum sufficiently large as would reasonably be expected to influence the
judgment of the proposed Independent Director adversely to the interests of
the Corporation when the interests of that Person are adverse to those of the
Corporation.
"Person" shall mean any natural person, corporation, business trust, joint
venture, association, company, partnership, limited liability company, joint
stock company, corporation, trust, unincorporated organization, governmental
authority or other entity.
AA-12
"PPL Corporation" shall mean PPL Corporation, a Pennsylvania corporation, or
any successor thereto as holder of the common stock of the Corporation, and/or
any other Person that is or becomes an Affiliate of the Corporation as a
result of its holding of shares of the Corporation.
ARTICLE XI. No shareholder of the Corporation and no creditor of any
shareholder of the Corporation shall have any claim on the assets of the
Corporation except to the extent of any dividends or other distributions
declared by the Board of Directors or otherwise expressly provided for by
these Articles of Incorporation or the Business Corporation Law of the
Commonwealth of Pennsylvania.
AA-13
Exhibit B
Bylaws of
PPL Electric Utilities Corporation
Table of Contents
Section Page
------- ----
ARTICLE I:Offices and Fiscal Year
Section 1.01. Registered Office....................................... 1
Section 1.02. Fiscal Year............................................. 1
Section 1.03. Corporate Seal.......................................... 1
ARTICLE II:Meetings of Shareholders
Section 2.01. Place of Meeting........................................ 1
Section 2.02. Annual Meeting.......................................... 1
Section 2.03. Special Meetings........................................ 1
Section 2.04. Notice of Meetings...................................... 1
Section 2.05. Quorum, Manner of Acting, and Adjournment............... 1
Section 2.06. Organization............................................ 2
Section 2.07. Voting and Proxies...................................... 2
Section 2.08. Voting Lists............................................ 2
Section 2.09. Judges of Election...................................... 3
Section 2.10. Determination of Shareholders of Record................. 3
ARTICLE III:Board of Directors
Section 3.01. Authority, Number and Qualifications.................... 3
Section 3.01.1. Term of Office.......................................... 3
Section 3.02. Organization............................................ 3
Section 3.03. Resignations............................................ 3
Section 3.04. Vacancies............................................... 3
Section 3.05. Removal by Shareholders................................. 4
Section 3.06. Place of Meeting........................................ 4
Section 3.07. Organization Meeting.................................... 4
Section 3.08. Regular Meetings........................................ 4
Section 3.09. Special Meetings........................................ 4
Section 3.10. Quorum, Manner of Acting, and Adjournment............... 4
Section 3.11. Executive and Other Committees.......................... 4
Section 3.12. Compensation............................................ 5
Nominations for Election of Directors and Proposed
Section 3.13. Business to be Transacted............................... 5
ARTICLE IV:Notice--Waivers--Meetings
Section 4.01. Manner of Giving Notice................................. 6
Section 4.02. Waivers of Notice....................................... 7
Section 4.03. Conference Telephone Meetings........................... 7
ARTICLE V:Officers
Section 5.01. Number, Qualifications and Designation.................. 7
Section 5.02. Election and Term of Office............................. 7
Section 5.03. Resignations............................................ 7
Section 5.04. Removal................................................. 7
Section 5.05. Vacancies............................................... 7
Section 5.06. General Powers.......................................... 7
Section 5.07. Compensation............................................ 7
Section 5.08. Standard of Care........................................ 8
ARTICLE VI:Certificates of Stock, Transfer, Etc.
Section 6.01. Issuance................................................ 8
Section 6.02. Transfer................................................ 8
Section 6.03. Share Certificates...................................... 8
Section 6.04. Lost, Stolen, Mutilated or Destroyed Certificates....... 8
ARTICLE VII:Indemnification of Directors, Officers, Etc.
Section 7.01. Personal Liability of Directors......................... 8
Section 7.02. Indemnification of Directors and Officers............... 8
Indemnification of Persons Not Indemnified Under Section
Section 7.03. 7.02.................................................... 9
ARTICLE VIII:Amendments
Section 8.01. Amendment of Bylaws..................................... 11
Table of Contents
Section Page
------- ----
ARTICLE IX:Separateness
Section 9.01. Business Activities....................................... 11
Section 9.02. Separateness Provisions................................... 11
Section 9.03. Director Actions.......................................... 12
Section 9.04. Definitions............................................... 12
Section 9.05. Amendment of Certain Provisions........................... 12
BYLAWS
OF
PPL ELECTRIC UTILITIES CORPORATION
(a Pennsylvania Corporation)
ARTICLE I
Offices and Fiscal Year
Section 1.01. Registered Office. The registered office of the corporation in
-----------------
the Commonwealth of Pennsylvania shall be at Two North Ninth Street,
Allentown, Pennsylvania 18101.
Section 1.02. Fiscal Year. The fiscal year of the corporation shall begin on
-----------
the first day of January in each year.
Section 1.03. Corporate Seal. The corporation shall have a corporate seal in
--------------
the form of a circle containing the name of the corporation, the year of
incorporation and such other details, if any, as approved by the board of
directors.
ARTICLE II
Meetings of Shareholders
Section 2.01. Place of Meeting. All meetings of the shareholders of the
----------------
corporation shall be held at the registered office of the corporation unless
another place is designated by the board of directors in the notice of such
meeting.
Section 2.02. Annual Meeting. The board of directors may fix the date and
--------------
time of the annual meeting of the shareholders, but if no such date and time
is fixed by the board the meeting for any calendar year shall be held on the
fourth Wednesday in April in such year, at 2 o'clock P.M., and at said meeting
the shareholders then entitled to vote shall elect directors and shall
transact such other business as may properly be brought before the meeting.
Section 2.03. Special Meetings. Special meetings of the shareholders of the
----------------
corporation for any purpose or purposes may be called at any time by the
Chairman of the Board, if there be one, or, in the case of a vacancy in the
office, the President; or by the board of directors.
Section 2.04. Notice of Meetings. Written notice of every meeting of the
------------------
shareholders, whether annual or special, shall be given to each shareholder of
record entitled to vote at the meeting, at least five days prior to the day
named for the meeting; provided, however, that at least ten days written
-------- -------
notice prior to the day of the meeting shall be given in the case of any
annual or special meeting at which there is to be considered any amendment to
the Articles of Incorporation of the corporation, the sale of all or
substantially all of its assets, or its merger with or consolidation into any
other corporation. Such notice shall specify the place, day and hour of the
meeting and, in the case of a special meeting of shareholders, the general
nature of the business to be transacted.
Section 2.05. Quorum, Manner of Acting, and Adjournment.
-----------------------------------------
(a) Quorum. The presence in person or by proxy of shareholders entitled to
------
cast a majority of the votes which all shareholders are entitled to cast on
the particular matter shall constitute a quorum for the purposes of
consideration and action on the matter. Shares of the corporation owned,
directly or indirectly, by it and controlled, directly or indirectly, by the
board of directors, as such, shall not be counted in determining the total
number of outstanding shares for quorum purposes at any given time. The
shareholders present at a duly organized meeting can continue to do business
until adjournment notwithstanding the withdrawal of enough shareholders to
leave less than a quorum.
(b) Adjournments. Any regular or special meeting of the shareholders,
------------
including one at which directors are to be elected and one which cannot be
organized because a quorum has not attended, may be adjourned for such period
and to such place as the shareholders present and entitled to vote shall
direct.
Except as otherwise provided in the Articles of Incorporation, those
shareholders entitled to vote who attend a meeting called for the election of
directors that has been previously adjourned for lack of a quorum, although
less than a quorum as fixed in this section, shall nevertheless constitute a
quorum for the purpose of electing directors. Also, except as otherwise
provided in the Articles of Incorporation, those shareholders entitled to vote
who attend a meeting of shareholders that has been previously adjourned for
one or more periods aggregating at least 15 days because of an absence of a
quorum, although less than a quorum, shall nevertheless constitute a quorum
for the purpose of acting upon any matter set forth in the notice of the
meeting if the notice states that those shareholders who attend the adjourned
meeting shall nevertheless constitute a quorum for the purpose of acting upon
the matter.
(c) Action by Shareholders. Except as otherwise provided in the Articles of
----------------------
Incorporation, a section of these bylaws adopted by the shareholders or the
Business Corporation Law, whenever any corporate action is to be taken by vote
of the shareholders, it shall be authorized upon receiving the affirmative
vote of a majority of the votes cast by all shareholders entitled to vote
thereon and, if any shareholders are entitled to vote thereon as a class, upon
receiving the affirmative vote of a majority of the votes cast by the
shareholders entitled to vote as a class.
Section 2.06. Organization. At every meeting of the shareholders, the
------------
Chairman of the Board, or, in the case of vacancy in the office or absence of
the Chairman of the Board, one of the following directors or officers: a
director designated by the Chairman, the president, an executive vice
president, a senior vice president, any vice president, or a Chairman chosen
by the shareholders entitled to cast a majority of the votes which all
shareholders present in person or by proxy are entitled to cast, shall act as
Chairman; and the secretary or a person appointed by the Chairman shall act as
secretary.
Section 2.07 Voting and Proxies. Except as otherwise provided by statute or
------------------
in the Articles of Incorporation, every shareholder of record shall have the
right to one vote for every share standing in his name on the books of the
corporation.
In all elections for directors, every shareholder entitled to vote shall
have the right to multiply the number of votes to which he may be entitled by
the total number of directors to be elected in the same election by the
holders of the class of shares of which his shares are a part, and he may cast
the whole number of such votes for one candidate or he may distribute them
among any two or more candidates. The candidates receiving the highest number
of votes from each class or group of classes entitled to elect directors
separately up to the number of directors to be elected in the same election by
such class or group of classes shall be elected.
Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy. Every proxy
shall be executed in writing by the shareholder or by his duly authorized
attorney in fact and filed with the secretary of the corporation. A proxy,
unless coupled with an interest, shall be revocable at will, notwithstanding
any other agreement or any provision in the proxy to the contrary, but the
revocation of a proxy shall not be effective until notice thereof has been
given to the secretary of the corporation. No unrevoked proxy shall be valid
after eleven months from the date of its execution, unless a longer time is
expressly provided therein, but in no event shall any proxy, unless coupled
with an interest, be voted on after three years from the date of its
execution. A proxy shall not be revoked by the death or incapacity of the
maker unless, before the vote is counted or the authority is exercised,
written notice of such death or incapacity is given to the secretary of the
corporation. A proxy coupled with an interest shall include an unrevoked proxy
in favor of a creditor of a shareholder and such a proxy shall be valid as
long as the debt owed by him to the creditor remains unpaid.
Section 2.08. Voting Lists. The officer or agent of the corporation having
------------
charge of the transfer books for shares of the corporation shall make a
complete list of the shareholders entitled to vote at any meeting of
shareholders, arranged in alphabetical order, with the address of and the
number of shares held by each. The list shall be produced and kept open at the
time and place of the meeting, and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof. In
lieu of the making of such list, the corporation may make the information
therein available at the meeting by any other means. The original share
register or transfer book or a duplicate thereof, kept in Pennsylvania, shall
be prima facie evidence as to who are the shareholders entitled to examine
such list or share register or transfer book, or to vote, in person or by
proxy, at any meeting of shareholders.
AB-2
Section 2.09. Judges of Election. In advance of any meeting of shareholders,
------------------
the board of directors may appoint one or three judges of election, who need
not be shareholders. If judges of election be not so appointed, the chairman
of the meeting may, and on the request of any shareholder or his proxy shall,
appoint judges of election at the meeting. The judges of election shall
determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies, receive votes or ballots, hear
and determine all challenges and questions in any way arising in connection
with nominations by shareholders or the right to vote, count and tabulate all
votes, determine the result and do such acts as may be proper to conduct the
election or vote with fairness to all shareholders. If there are three judges
of election, the decision, act or certificate of a majority shall be effective
in all respects as the decision, act or certificate of all.
On request of the chairman of the meeting or of any shareholder, the judges
shall make a report in writing of any challenge or question or matter
determined by them, and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated therein.
Section 2.10. Determination of Shareholders of Record. The board of
---------------------------------------
directors may fix a date as a record date for the determination of the
shareholders entitled to notice of, or to vote at, any meeting of
shareholders, which date, except in the case of an adjourned meeting, shall be
not more than 90 days prior to the date of the meeting. Only shareholders of
record on the date so fixed, and no others, shall be entitled to notice of, or
to vote at, such meeting, notwithstanding any transfer of any shares on the
books of the corporation after any such record date so fixed. When a
determination of shareholders of record has been made for purposes of a
meeting, the determination shall apply to any adjournment thereof unless the
board of directors fixes a new record date for the adjourned meeting. The
board of directors may similarly fix a record date for the determination of
shareholders of record for any other purpose. If a record date is not fixed by
the board of directors, the record date shall be as determined in the Business
Corporation Law.
ARTICLE III
Board of Directors
Section 3.01. Authority, Number and Qualifications. The business and affairs
------------------------------------
of the corporation shall be managed under the direction of a board of
directors. The board of directors shall consist of not less than six and not
more than twenty directors, as shall be fixed from time to time by resolution
of the board of directors. All directors of the corporation shall be natural
persons of full age, but need not be residents of Pennsylvania. They shall be
shareholders in the corporation. A director may also be an officer or employee
of the corporation.
Section 3.01.1 Term of Office. Each director shall hold office until the
--------------
expiration of the term for which he or she was selected and until a successor
shall have been elected and qualified or until his or her earlier death,
resignation or removal.
Section 3.02. Organization. At every meeting of the Board of Directors, the
------------
Chairman of the Board, if there be one, or, in the case of a vacancy in the
office or absence of the Chairman of the Board, the Vice Chairman, or a
Chairman chosen by a majority of the directors present, shall preside, and the
secretary, or any person appointed by the Chairman of the meeting, shall act
as secretary.
Section 3.03. Resignations. Any director of the corporation may resign at
------------
any time by giving written notice to the Chairman of the Board, if there be
one, or the President, or the secretary of the corporation. Such resignation
shall take effect at the date of the receipt of such notice or at any later
time specified therein and, unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
Section 3.04. Vacancies. The board of directors may declare vacant the
---------
office of a director if he be declared of unsound mind by an order of court,
or convicted of felony, or for any other proper cause.
Except as otherwise provided in the Articles of Incorporation, newly created
directorships resulting from any increase in the authorized number of
directors or any vacancies in the board of directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled solely by the majority vote of the directors then in office,
although less than a quorum. Each director so chosen shall hold office until
the next election of the class for which such director has been chosen, and
until his or her successor has been selected and qualified or until his or her
earlier death, resignation or removal.
AB-3
If one or more directors shall resign from the board effective as of a
future date, the directors then in office, including those who have so
resigned, shall have power by the applicable vote to fill the vacancies, the
vote thereon to take effect when the resignations become effective.
Section 3.05. Removal by Shareholders. Any director may be removed from
-----------------------
office by vote of shareholders only upon the affirmative vote of the
shareholders entitled to cast at least two-thirds of the votes which all
shareholders would be entitled to cast at any annual election of directors and
upon any additional vote of shareholders that may be required by law. No
director elected by holders of the 4-1/2% Preferred Stock and the Series
Preferred Stock of the Corporation or by the holders of the Preference Stock
of the Corporation pursuant to the provisions of Article VI of the Articles of
Incorporation may be removed pursuant to this Section 3.05.
Section 3.06. Place of Meeting. The board of directors may hold its meetings
----------------
at such place or places within Pennsylvania, or elsewhere, as the board of
directors may from time to time appoint, or as may be designated in the notice
calling the meeting.
Section 3.07. Organization Meeting. Immediately after each annual election
--------------------
of directors or other meeting at which the entire board of directors is
elected, the newly elected board of directors shall meet for the purpose of
organization, election of officers, and the transaction of other business, at
the place where said election of directors was held. Notice of such meeting
need not be given. Such organization meeting may be held at any other time or
place which shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors.
Section 3.08. Regular Meetings. Regular meetings of the board of directors
----------------
shall be held at such time as shall be designated from time to time by the
board of directors. At such meetings, the directors shall transact such
business as may properly be brought before the meeting. Notice need not be
given of regular meetings held at the registered office of the corporation. If
held elsewhere, the notice requirements of Section 3.06 shall apply.
Section 3.09. Special Meetings. Special meetings of the board of directors
----------------
shall be held whenever called by two or more of the directors or by the
Chairman of the Board, if there be one, or, in the case of vacancy in the
office or absence of the Chairman of the Board, the president. Notice of every
special meeting of the board of directors shall be given to each director by
telephone or in writing at least 24 hours (in the case of notice by telephone,
telex, TWX or facsimile transmission) or 48 hours (in the case of notice by
telegraph, courier service or express mail) or five days (in the case of
notice by United States mail) before the time at which the meeting is to be
held. Every such notice shall state the time and place of the meeting. Neither
the business to be transacted at nor the purpose of any special meeting need
be specified in a notice of the meeting.
Section 3.10. Quorum, Manner of Acting, and Adjournment. A majority of the
-----------------------------------------
directors in office shall be present at each meeting in order to constitute a
quorum for the transaction of business. Except as otherwise provided in the
Articles of Incorporation or by statute, the acts of a majority of the
directors present at a meeting at which a quorum is present shall be the acts
of the board of directors. In the absence of a quorum, a majority of the
directors present may adjourn the meeting from time to time until a quorum be
present, provided that the notice, if any, required by Sections 3.08 or 3.09
of this Article has been given. The directors shall act only as a board and
the individual directors shall have no power as such, provided, however, that
-------- -------
any action which may be taken at a meeting of the board may be taken without a
meeting if a consent or consents in writing setting forth the action so taken
shall be signed by all of the directors and shall be filed with the secretary
of the corporation.
Section 3.11. Executive and Other Committees. The board of directors may, by
------------------------------
resolution adopted by a majority of the directors in office, establish an
Executive Committee and one or more other committees. Any committee, to the
extent provided in such resolution, shall have and may exercise all of the
powers and authority of the board of directors, except that no committee shall
have any power or authority as to the following:
(1) The submission to shareholders of any action requiring approval of
shareholders under the Business Corporation Law.
(2) The creation or filling of vacancies in the board of directors.
(3) The adoption, amendment or repeal of these bylaws.
(4) The amendment or repeal of any resolution of the board of directors
that by its terms is amendable or repealable only by the board.
AB-4
(5) Action on matters committed by a resolution of the board of directors
to another committee of the board.
A majority of the directors in office designated to a committee shall be
present at each meeting in order to constitute a quorum for the transaction of
business. The acts of a majority of the committee members present at a meeting
at which a quorum is present shall be the acts of the committee. Any action
which may be taken at a meeting of a committee may be taken without a meeting
if a consent or consents in writing setting forth the action so taken shall be
signed by all of the committee members and shall be filed with the secretary
of the corporation.
Each committee shall keep records of its proceedings.
Section 3.12. Compensation. The board of directors shall have the authority
------------
to fix the compensation of directors for their services as directors. A
director may be a salaried officer of the corporation, but no employee shall
receive a salary for serving as a director.
Section 3.13. Nominations for Election of Directors and Proposed Business to
--------------------------------------------------------------
be Transacted.
-------------
(a) Director Nominations. Except as otherwise provided in or fixed by or
pursuant to the provisions of Article VI of the Articles of Incorporation,
nominations for the election of directors may be made by the board of
directors or a committee appointed by the board of directors or by any
shareholder entitled to vote in the election of directors generally.
However, any shareholder entitled to vote in the election of directors
generally may nominate one or more persons for election as directors at a
meeting only if written notice (meeting the requirements hereinafter set
forth) of such shareholder's intent to make such nomination or nominations
has been given by the shareholder and received by the secretary of the
corporation in the manner and within the time specified by this Subsection.
The notice shall be delivered to the secretary of the corporation not later
than (i) with respect to an election to be held at an annual meeting of
shareholders, 75 days in advance of the date of such meeting; provided,
--------
however, that in the event that less than 85 days' notice or prior public
-------
disclosure of the date of the annual meeting is given, notice from the
shareholders to be timely must be received not later than the tenth day
following the date on which such notice of the date of the annual meeting
was mailed or such public disclosure was made, whichever first occurs, and
(ii) with respect to an election to be held at a special meeting of
shareholders for the election of directors, the close of business on the
earlier of (A) the seventh day following the date on which notice of such
meeting is first given to shareholders or (B) the fourth day prior to the
meeting. In lieu of delivery to the secretary, the notice may be mailed to
the secretary by certified mail, return receipt requested, but shall be
deemed to have been given only upon actual receipt by the secretary. Each
such notice shall set forth: (a) the name and address of the shareholder
who intends to make the nomination and of the person or persons to be
nominated; (b) a representation that the shareholder is a holder of record
of stock of the corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of all arrangements or
understandings between the shareholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (d) such other
information regarding each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had proxies been solicited
with respect to such nominee by the management or board of directors of the
corporation; and (e) the consent of each nominee to serve as a director of
the corporation if so elected. If a judge or judges of election shall not
have been appointed pursuant to these bylaws, the presiding officer of the
meeting may, if the facts warrant, determine and declare to the meeting
that any nomination made at the meeting was not made in accordance with the
procedures of this Subsection and, in such event, the nomination shall be
disregarded. Any decision by the presiding officer of the meeting made in
good faith shall be conclusive and binding upon all shareholders of the
corporation for any purpose.
(b) Proposed Business to be Transacted. Except as otherwise provided in
Section 3.13(a) of these bylaws, at any annual meeting or special meeting
of shareholders, only such business as is properly brought before the
meeting in accordance with this Subsection may be transacted. To be
properly brought before any meeting, any proposed business that is to be
brought pursuant to this Subsection must be either (i) specified in the
notice of the meeting (or any supplement thereto) given by or at the
direction of the board of directors, (ii) otherwise properly brought before
the meeting by or at the direction of the board of directors, or (iii) in
the case of an annual meeting of shareholders, otherwise properly brought
before the meeting by a shareholder
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(x) who is a shareholder of record on the date of giving notice provided
for in these bylaws and on the record date for the determination of
shareholders entitled to vote at such annual meeting, and (y) who complies
with the notice provisions set forth in this Subsection. For business to be
properly brought before an annual meeting by a shareholder, the shareholder
must have given timely notice thereof in writing to the secretary of the
corporation. To be timely, a shareholder's notice must be delivered to the
secretary of the corporation not later than 75 days in advance of the date
of such meeting; provided, however, that in the event that less than 85
-------- -------
days' notice or prior public disclosure of the date of the annual meeting
is given, notice from the shareholders to be timely must be received not
later than the tenth day following the date on which such notice of the
date of the annual meeting was mailed or such public disclosure was made,
whichever first occurs. In lieu of delivery to the secretary, the notice
may be mailed to the secretary by certified mail, return receipt requested,
but shall be deemed to have been given only upon actual receipt by the
secretary. A shareholder's notice to the secretary of the corporation, as
required by this Subsection, shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting, (ii)
the name and record address of the shareholder proposing such business,
(iii) the class, series and number of shares of the corporation's stock
which are beneficially owned by the shareholder, (iv) a description of all
arrangements or understandings between such shareholder and any other
person or persons (including their names) in connection with the proposal
of such business by such shareholder in such business, (v) all other
information which would be required to be included in a proxy statement or
other filing required to be filed with the Securities and Exchange
Commission if, with respect to any such item of business, such shareholder
were a participant in a solicitation subject to Regulation 14A under the
Securities Exchange Act of 1934, as amended, and (vi) a representation that
such shareholder intends to appear in person or by proxy at the annual
meeting of shareholders to bring such business before the meeting. Except
as provided in Section 3.13(a) of these bylaws, notwithstanding anything in
the bylaws to the contrary, no business shall be conducted at any meeting
of shareholders except in accordance with the procedures set forth in this
Subsection, provided, however, that nothing in this Subsection shall be
-------- -------
deemed to preclude discussion by any shareholders of any business properly
brought before any such meeting. The presiding officer of a meeting may, if
the facts warrant, determine and declare to the meeting that business was
not properly brought before the meeting in accordance with the provisions
of this Subsection, and if he should so determine, he shall so declare to
the meeting and any such business not properly brought before the meeting
shall not be transacted. Any decision by the presiding officer of the
meeting made in good faith shall be conclusive and binding upon all
shareholders of the corporation for any purpose.
ARTICLE IV
Notice--Waivers--Meetings
Section 4.01 Manner of Giving Notice.
-----------------------
(a) General Rule. Whenever written notice is required to be given to any
------------
person under the provisions of the Articles of Incorporation, these bylaws, or
the Business Corporation Law, it may be given to the person, either personally
or by sending a copy thereof by first-class or express mail, postage prepaid,
or by telegram (with messenger service specified), telex or TWX (with
answerback received) or courier service, charges prepaid, or by facsimile
transmission, to the address (or to the telex, TWX or facsimile transmission
telephone number) of the person appearing on the books of the corporation or,
in the case of directors, supplied by the director to the corporation for the
purpose of notice. Notice of any regular or special meeting of the
shareholders (or any other notice required by the Articles of Incorporation,
these bylaws, or the Business Corporation Law to be given to all shareholders
or to all holders of a class or series of shares) may be given by any class of
mail, postage prepaid, if the notice is deposited in the United States mail at
least 20 days prior to the day named for the meeting or any corporate or
shareholder action specified in the notice.
If the notice is sent by mail, telegraph or courier service, it shall be
deemed to have been given to the person entitled thereto when deposited in the
United States mail or with a telegraph office or courier service for delivery
to that person or, in the case of telex or TWX, when dispatched or, in the
case of facsimile transmission, when received. A notice of meeting shall
specify the place, day and hour of the meeting and any other information
required by any other provision of the Articles of Incorporation, these
bylaws, or the Business Corporation Law.
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(b) Adjourned Shareholder Meetings. When a meeting of shareholders is
------------------------------
adjourned, it shall not be necessary to give any notice of the adjourned
meeting or of the business to be transacted at an adjourned meeting, other
than by announcement at the meeting at which the adjournment is taken, unless
the board fixes a new record date for the adjourned meeting or the Business
Corporation Law requires notice of the business to be transacted and such
notice has not previously been given.
Section 4.02. Waivers of Notice. Whenever any written notice is required to
-----------------
be given under the provisions of the Articles of Incorporation, these bylaws,
or the Business Corporation Law, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
Except in the case of a special meeting of shareholders, neither the business
to be transacted at, nor the purpose of, the meeting need be specified in the
waiver of notice of such meeting.
Attendance of a person, either in person or by proxy, at any meeting, shall
constitute a waiver of notice of such meeting, except where a person attends a
meeting for the express purpose of objecting to the transaction of any
business because the meeting was not lawfully called or convened.
Section 4.03. Conference Telephone Meetings. One or more directors may
-----------------------------
participate in a meeting of the board, or of a committee of the board, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this section shall constitute presence
in person at such meeting.
ARTICLE V
Officers
Section 5.01. Number, Qualifications and Designation. The officers of the
--------------------------------------
corporation shall be a president, a secretary, a treasurer, one or more vice
presidents (including executive vice presidents and senior vice presidents)
and such other officers as the business of the corporation may require,
including one or more assistant officers. In addition, the board of directors
may elect from among its number a Chairman of the Board who, if so elected,
may be chief executive officer of the corporation. One person may hold more
than one office. Officers may but need not be directors or shareholders of the
corporation.
Section 5.02. Election and Term of Office. The officers of the corporation
---------------------------
shall be elected by the board of directors, and each such officer shall hold
his office until the next annual organization meeting of the directors (which
is held immediately following the annual meeting of shareholders), or until
his death, resignation, or removal.
Section 5.03. Resignations. Any officer may resign at any time by giving
------------
written notice to the board of directors, or to the Chairman of the Board, if
there be one, or the President, or the secretary of the corporation. Any such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 5.04. Removal. Any officer may be removed, either for or without
-------
cause, by the board of directors whenever in the judgment of the board of
directors the best interests of the corporation will be served thereby.
Section 5.05. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other cause, may be filled by
the board of directors.
Section 5.06. General Powers. All officers of the corporation as between
--------------
themselves and the corporation, shall, respectively have such authority and
perform such duties in the management of the property and affairs of the
corporation as may be determined by resolution of the board of directors.
Section 5.07. Compensation. The salaries or other compensation of the
------------
officers elected by the board of directors shall be fixed from time to time by
the board of directors or in such manner as the board of directors shall from
time to time provide.
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Section 5.08. Standard of Care. In lieu of the standards of conduct
----------------
otherwise provided by law, officers of the corporation shall be subject to the
same standards of conduct, including standards of care and loyalty and rights
of justifiable reliance, as shall at the time be applicable to directors of
the corporation.
ARTICLE VI
Certificates of Stock, Transfer, Etc.
Section 6.01. Issuance. The share certificates of the corporation shall be
--------
numbered and registered in the share register and transfer books of the
corporation as they are issued. They shall be signed, by facsimile or
otherwise, by the Chairman of the Board, if there be one, or the president or
a vice president and by the secretary or an assistant secretary or the
treasurer or an assistant treasurer, and shall bear the corporate seal, which
may be a facsimile, engraved or printed. In case any officer, transfer agent
or registrar who has signed or authenticated, or whose facsimile signature or
authentication has been placed upon any share certificate shall have ceased to
be such officer, transfer agent or registrar because of death, resignation or
otherwise, before the certificate is issued, the certificate may be issued
with the same effect as if the officer, transfer agent or registrar had not
ceased to be such at the date of its issue.
Section 6.02. Transfer. Transfers of shares shall be made on the books of
--------
the corporation upon surrender of the certificates therefor, endorsed by the
person named in the certificate or by an attorney lawfully constituted in
writing.
Section 6.03. Share Certificates. Certificates for shares of the corporation
------------------
shall be in such form as provided by statute and approved by the board of
directors.
Section 6.04. Lost, Stolen, Mutilated or Destroyed Certificates. In the
-------------------------------------------------
event of loss, theft, mutilation or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the board
of directors may have established concerning proof of such loss, theft,
mutilation or destruction and concerning the giving, if required by such
regulations, of a satisfactory bond or bonds of indemnity.
ARTICLE VII
Indemnification of Directors, Officers, Etc.
Section 7.01. Personal Liability of Directors.
-------------------------------
(a) To the fullest extent that the laws of the Commonwealth of Pennsylvania,
as now in effect or as hereafter amended, permit elimination or limitation of
the liability of directors, no director of the Company shall be personally
liable for monetary damages as such for any action taken, or any failure to
take any action, as a director.
(b) Any amendment or repeal of this Section 7.01 which has the effect of
increasing directors' liability shall operate prospectively only, and shall
not affect any action taken, or any failure to act, prior to its adoption.
Section 7.02. Indemnification of Directors and Officers.
-----------------------------------------
(a) Right to Indemnification. Except as prohibited by law, every director
and officer of the Company shall be entitled as of right to be indemnified by
the Company against reasonable expense and any liability paid or incurred by
such person in connection with any actual or threatened claim, action, suit or
proceeding, civil, criminal, administrative, investigative or other, whether
brought by or in the right of the Company or otherwise, in which he or she may
be involved, as a party or otherwise, by reason of such person being or having
been a director or officer of the Company or by reason of the fact that such
person is or was serving at the request of the Company as a director, officer,
employee, fiduciary or other representative of another corporation,
partnership, joint venture, trust, employee benefit plan or other entity (such
claim, action, suit or proceeding hereinafter being referred to as "action").
Such indemnification shall include the right to have expenses incurred by such
person in connection with an action paid in advance by the Company prior to
final disposition of such action, subject to such conditions as may be
prescribed by law. Persons who are not directors or officers of the Company
may be similarly indemnified in respect of service to the Company or to
another such entity at the request of the Company
AB-8
to the extent the Board of Directors at any time denominates such person as
entitled to the benefits of this Section 7.02. As used herein, "expense" shall
include fees and expenses of counsel selected by such person; and "liability"
shall include amounts of judgments, excise taxes, fines and penalties, and
amounts paid in settlement.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of this
-------------------------------
Section 7.02 is not paid in full by the Company within thirty days after a
written claim has been received by the Company, the claimant may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim, and, if successful in whole or in part, the claimant shall also be
entitled to be paid the expense of prosecuting such claim. It shall be a
defense to any such action that the conduct of the claimant was such that
under Pennsylvania law the Company would be prohibited from indemnifying the
claimant for the amount claimed, but the burden of proving such defense shall
be on the Company. Neither the failure of the Company (including its Board of
Directors, independent legal counsel and its shareholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because the conduct of the
claimant was not such that indemnification would be prohibited by law, nor an
actual determination by the Company (including its Board of Directors,
independent legal counsel or its shareholders) that the conduct of the
claimant was such that indemnification would be prohibited by law, shall be a
defense to the action or create a presumption that the conduct of the claimant
was such that indemnification would be prohibited by law.
(c) Insurance and Funding. The Company may purchase and maintain insurance
---------------------
to protect itself and any person eligible to be indemnified hereunder against
any liability or expense asserted or incurred by such person in connection
with any action, whether or not the Company would have the power to indemnify
such person against such liability or expense by law or under the provisions
of this Section 7.02. The Company may create a trust fund, grant a security
interest, cause a letter of credit to be issued or use other means (whether or
not similar to the foregoing) to ensure the payment of such sums as may become
necessary to effect indemnification as provided herein.
(d) Non-Exclusivity; Nature and Extent of Rights. The right of
--------------------------------------------
indemnification provided for herein (l) shall not be deemed exclusive of any
other rights, whether now existing or hereafter created, to which those
seeking indemnification hereunder may be entitled under any agreement, bylaw
or charter provision, vote of shareholders or directors or otherwise, (2)
shall be deemed to create contractual rights in favor of persons entitled to
indemnification hereunder, (3) shall continue as to persons who have ceased to
have the status pursuant to which they were entitled or were denominated as
entitled to indemnification hereunder and shall inure to the benefit of the
heirs and legal representatives of persons entitled to indemnification
hereunder and (4) shall be applicable to actions, suits or proceedings
commenced after the adoption hereof, whether arising from acts or omissions
occurring before or after the adoption hereof. The right of indemnification
provided for herein may not be amended, modified or repealed so as to limit in
any way the indemnification provided for herein with respect to any acts or
omissions occurring prior to the effective date of any such amendment,
modification or repeal.
Section 7.03. Indemnification of Persons Not Indemnified Under Section 7.02.
-------------------------------------------------------------
(a) Scope. The provisions of this Section 7.03 are applicable only to
-----
employees and other authorized representatives of the corporation who are not
entitled to the benefits of Section 7.02 pursuant to either the terms of
Section 7.02 or a resolution of the Board of Directors of this corporation.
(b) Employees; Third Party Actions. The corporation shall indemnify any
------------------------------
employee of the corporation who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that such person
is or was an authorized representative of the corporation (which, for the
purposes of this Section 7.03, shall mean an employee or agent of the
corporation, or a person who is or was serving at the request of the
corporation as a director, officer, employee, fiduciary or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in, or not opposed
to, the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good
AB-9
faith and in a manner which that person reasonably believed to be in, or not
opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
(c) Employees; Derivative Actions. The corporation shall indemnify any
-----------------------------
employee of the corporation who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that such person is or was an authorized representative of the
corporation, against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in, or not opposed to, the best
interests of the corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his or her duty to the corporation unless and only to the extent that the
court of common pleas of the county in which the registered office of the
corporation is located or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court of common
pleas or such other court shall deem proper.
(d) Other Authorized Representatives. To the extent that an authorized
--------------------------------
representative of the corporation who is not an employee of the corporation
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsections (b) and (c) of this Section 7.03 or
in defense of any claim, issue or matter therein, such person shall be
indemnified by the corporation against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith. Such
an authorized representative may, at the discretion of the corporation, be
indemnified by the corporation in any other circumstances and to any extent if
the corporation would be required by subsections (b) and (c) of this Section
7.03 to indemnify such person in such circumstances and to such extent if such
person were or had been an employee of the corporation.
(e) Procedure for Effecting Indemnification. Indemnification under
---------------------------------------
subsections (b), (c) or (d) of this Section 7.03 shall be made when ordered by
a court (in which case the expenses, including attorneys' fees, of the
authorized representative in enforcing such right of indemnification shall be
added to and be included in the final judgment against the corporation) or
shall be made upon a determination that indemnification of the authorized
representative is required or proper in the circumstances because such person
has met the applicable standard of conduct set forth in subsections (b) and
(c) of this Section 7.03. Such determination shall be made:
(1) By the board of directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding, or
(2) If such a quorum is not obtainable, or, even if obtainable, a
majority vote of a quorum of disinterested directors so direct, by
independent legal counsel in a written opinion, or
(3) By the shareholders.
(f) Advancing Expenses. Expenses (including attorneys' fees) incurred in
------------------
defending a civil or criminal action, suit or proceeding shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding, upon receipt of an undertaking by or on behalf of an employee to
repay such amount unless it shall ultimately be determined that such person is
entitled to be indemnified by the corporation as required in this Section 7.03
or as authorized by law and may be paid by the corporation in advance on
behalf of any other authorized representative when authorized by the board of
directors upon receipt of a similar undertaking.
(g) Non-Exclusivity; Nature and Extent of Rights. Each person who shall act
--------------------------------------------
as an authorized representative of the corporation and who is not entitled to
the benefits of Section 7.02, shall be deemed to be doing so in reliance upon
such rights of indemnification as are provided in this Section 7.03.
The indemnification provided by this Section 7.03 shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any agreement, vote of shareholders or disinterested directors,
statute or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office or position, and shall
continue as to a person who has ceased to be an authorized representative of
the corporation and shall inure to the benefit of the heirs, executors and
administrators of such a person.
AB-10
ARTICLE VIII
Amendments
Section 8.01. Amendment of Bylaws. The directors may make, amend, alter or
-------------------
repeal these bylaws by a vote of the majority of the members of the board of
directors at any regular or special meeting duly convened after notice of that
purpose; subject, however, to the power of the shareholders to make, amend,
and repeal these bylaws at any annual or special meeting duly convened after
notice of that purpose.
ARTICLE IX
Separateness
Section 9.01. Business Activities. The corporation shall engage, whether
-------------------
directly or indirectly through subsidiaries only in (i) the electric
transmission and distribution businesses and (ii) those business activities
that are related to or arise out of its electric transmission and distribution
businesses.
Section 9.02. Separateness Provisions. (a) The funds and other assets of the
-----------------------
corporation shall not be commingled with those of any other entity, and the
corporation shall maintain its accounts separate from PPL Corporation, any
other Affiliate of PPL Corporation and any other Person.
(b) The corporation shall not hold itself out as being liable for the debts
of PPL Corporation, any other Affiliate of PPL Corporation or any other
Person, and shall conduct its own business in its own name.
(c) The corporation shall act solely in its corporate name and through its
duly authorized officers or agents in the conduct of its business, shall
conduct its business so as not to mislead others as to the identity of the
entity or assets with which they are concerned and shall otherwise hold itself
out as a separate entity. The corporation shall correct any known
misunderstanding regarding its separate identity.
(d) The corporation shall maintain separate records, books of account and
financial statements, and shall not commingle its records and books of account
with the records and books of account of PPL Corporation, any other Affiliate
of PPL Corporation or any other Person.
(e) Whenever approval of the board of directors is required by the Articles
of Incorporation or these bylaws or the Business Corporation Law of the
Commonwealth of Pennsylvania for any corporate action of the corporation, such
approval shall be obtained. The corporation shall observe all formalities
required by the Articles of Incorporation and these bylaws and the Business
Corporation Law.
(f) The corporation shall at all times ensure that its capitalization is
adequate in light of its business and purpose.
(g) The corporation shall not guarantee or become obligated for the debts of
PPL Corporation or any of PPL Corporations's other Affiliates or make its
credit available to satisfy the obligations of, or pledge its assets for the
benefit of, PPL Corporation or any of PPL Corporation's other Affiliates, with
the exception of (i) any guarantee of the debts of an Affiliate of the
corporation in effect as of the effective date of the corporation's Plan of
Division or (ii) any guarantee of the debts of any direct or indirect
subsidiary of the corporation.
(h) The corporation shall pay its own liabilities out of its own funds.
(i) The corporation shall maintain an arm's-length relationship with PPL
Corporation and each other Affiliate of PPL Corporation.
(j) The corporation shall allocate fairly and reasonably any overhead for
office space shared with PPL Corporation or any other Affiliate of PPL
Corporation.
(k) The corporation shall use its own separate stationery, invoices, checks
and other business forms.
(l) To the extent permitted by law, until one year and one day after the
Senior Secured Bonds of the corporation have been paid in full, the officers
and directors shall make all decisions with respect to the business and daily
operations of the corporation independent of, and not dictated by, PPL
Corporation or any other Affiliate of PPL Corporation.
AB-11
Nothing in this Section 9.02 shall be construed to mean that the corporation
may not commingle its funds with the funds of any special purpose subsidiary
of the corporation in connection with the corporation acting as servicer or
administrator for such subsidiary; that the corporation may not be treated as
being the obligor on indebtedness of any special purpose subsidiary of the
corporation for tax or financial accounting or reporting purposes; or that the
assets and liabilities of the corporation may not be consolidated with its
subsidiaries and/or with PPL Corporation and the other Affiliates of PPL
Corporation for tax or financial accounting or reporting purposes.
Failure of the corporation or any director or officer on behalf of the
corporation to comply with any of the foregoing restrictions shall not affect
the status of the corporation as a separate legal entity.
Section 9.03. Director Actions. Without limiting the generality of Section
----------------
9.02, the corporation shall be operated in such a manner as the directors deem
reasonable and necessary or appropriate to preserve the separateness of the
corporation from the business of PPL Corporation, as the holder of the common
stock of the corporation, or any other Affiliate thereof.
Section 9.04. Definitions. Capitalized terms used in this Article IX and not
-----------
defined in these Bylaws shall have the meanings specified in the Articles of
Incorporation.
Section 9.05. Amendment of Certain Provisions. The provisions of this
-------------------------------
Article IX may be not amended, repealed or replaced without the prior
unanimous approval of the directors, including the Independent Director.
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Exhibit C
ARTICLES OF INCORPORATION
OF
NINTH STREET & HAMILTON CORPORATION
ARTICLE I. The name of the Corporation is NINTH STREET & HAMILTON
CORPORATION (the "Corporation").
ARTICLE II. The location and post office address of the registered office of
the Corporation in this Commonwealth is: Two North Ninth Street, Allentown,
Pennsylvania 18101.
ARTICLE III. The Corporation is incorporated under the provisions of the
Pennsylvania Business Corporation Law of 1988, as amended (15 Pa. C.S. (S)(S)
1101 et seq.) (the "BCL"). The term for which the Corporation shall exist is
perpetual.
ARTICLE IV. The purpose of the Corporation is to engage in and to do any
lawful business for which corporations may be incorporated under the BCL.
ARTICLE V.
Section 1. The aggregate number of shares which the Corporation shall have
the authority to issue is 1,000 shares of Common Stock, without nominal or par
value.
Section 2. At any meeting of the shareholders, each holder of Common Stock
shall be entitled to one vote per share. The shareholders of the Corporation
shall not have the right to cumulate their votes for the election of directors
of the Corporation.
ARTICLE VI. The following provisions of the BCL shall not be applicable to
the Corporation: 15 Pa.C.S. (S) 2538 (relating to approval of transactions
with interested shareholders) and 15 Pa.C.S. Subchs. 25E-G (relating to
control transactions, business combinations, control-share acquisitions and
disgorgement by certain controlling shareholders following attempts to acquire
control, respectively).
ARTICLE VII. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
shareholders herein are granted subject to this reservation.
AC-1
Exhibit D
Directors of Ninth Street & Hamilton Corporation
James E. Abel
John R. Biggar
Russell R. Clelland
Independent Director of PPL Electric Utilities Corporation
[To be determined]
Appendix B
PENNSYLVANIA STATUTES
*** THIS DOCUMENT REFLECTS CHANGES RECEIVED THROUGH ACT NO. 2000-86 ***
PENNSYLVANIA CONSOLIDATED STATUTES
TITLE 15. CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
PART II. CORPORATIONS
SUBPART B. BUSINESS CORPORATIONS
ARTICLE B. DOMESTIC BUSINESS CORPORATIONS GENERALLY
CHAPTER 15. CORPORATE POWERS, DUTIES AND SAFEGUARDS
SUBCHAPTER D. DISSENTERS RIGHTS
15 Pa.C.S. (S) 1571 (2000)
[Pa.C.S.] (S) 1571. Application and effect of subchapter
(a) General Rule.--Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from,
and to obtain payment of the fair value of his shares in the event of, any
corporate action, or to otherwise obtain fair value for his shares, where this
part expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on transfer
of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of election).
Section 2907(a) (relating to proceedings to terminate breach of qualifying
conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.--
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting
at which a plan specified in any of section 1930, 1931(d), 1932(c) or
1952(d) is to be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
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shall not have the right to obtain payment of the fair value of any such
shares under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:
(i) Shares converted by a plan if the shares are not converted solely
into shares of the acquiring, surviving, new or other corporation or
solely into such shares and money in lieu of fractional shares.
(ii) Shares of any preferred or special class unless the articles, the
plan or the terms of the transaction entitle all shareholders of the
class to vote thereon and require for the adoption of the plan or the
effectuation of the transaction the affirmative vote of a majority of
the votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares,
property or assets of another corporation by the issuance of shares,
obligations or otherwise, with or without assuming the liabilities of the
other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by
the issuance of voting shares of the corporation to be outstanding
immediately after the acquisition sufficient to elect a majority or more of
the directors of the corporation.
(c) Grant of Optional Dissenters Rights.--The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall
have dissenters rights in connection with any corporate action or other
transaction that would otherwise not entitle such shareholders to dissenters
rights.
(d) Notice of Dissenters Rights.--Unless otherwise provided by statute, if a
proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and
(2) a copy of this subchapter.
(e) Other Statutes.--The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part
that makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain Provisions of Articles Ineffective.--This subchapter may not be
relaxed by any provision of the articles.
(g) Cross References.--See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
15 Pa.C.S. (S) 1572 (2000)
[Pa.C.S.] (S) 1572. Definitions
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
Corporation. The issuer of the shares held or owned by the dissenter before
the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall have sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.
Dissenter. A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
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Fair Value. The fair value of shares immediately before the effectuation of
the corporate action to which the dissenter objects, taking into account all
relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action.
Interest. Interest from the effective date of the corporate action until the
date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.
15 Pa.C.S. (S) 1573 (2000)
[Pa.C.S.] (S) 1573. Record and beneficial holders and owners
(a) Record Holders of Shares.--A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of
the same class or series beneficially owned by any one person and discloses
the name and address of the person or persons on whose behalf he dissents. In
that event, his rights shall be determined as if the shares as to which he has
dissented and his other shares were registered in the names of different
shareholders.
(b) Beneficial Owners of Shares.--A beneficial owner of shares of a business
corporation who is not the record holder may assert dissenters rights with
respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the
corporation not later than the time of the assertion of dissenters rights a
written consent of the record holder. A beneficial owner may not dissent with
respect to some but less than all shares of the same class or series owned by
the owner, whether or not the shares so owned by him are registered in his
name.
15 Pa.C.S. (S) 1574 (2000)
[Pa.C.S.] (S) 1574. Notice of intention to dissent
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect
no change in the beneficial ownership of his shares from the date of such
filing continuously through the effective date of the proposed action and must
refrain from voting his shares in approval of such action. A dissenter who
fails in any respect shall not acquire any right to payment of the fair value
of his shares under this subchapter. Neither a proxy nor a vote against the
proposed corporate action shall constitute the written notice required by this
section.
15 Pa.C.S. (S) 1575 (2000)
[Pa.C.S.] (S) 1575. Notice to demand payment
(a) General Rule.--If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice
of intention to demand payment of the fair value of their shares and who
refrained from voting in favor of the proposed action. If the proposed
corporate action is to be taken without a vote of shareholders, the
corporation shall send to all shareholders who are entitled to dissent and
demand payment of the fair value of their shares a notice of the adoption of
the plan or other corporate action. In either case, the notice shall:
(1) State where and when a demand for payment must be sent and certificates
for certificated shares must be deposited in order to obtain payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
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(4) Be accompanied by a copy of this subchapter.
(b) Time for Receipt of Demand for Payment.--The time set for receipt of the
demand and deposit of certificated shares shall be not less than 30 days from
the mailing of the notice.
15 Pa.C.S. (S) 1576 (2000)
[Pa.C.S.] (S) 1576. Failure to comply with notice to demand payment, etc.
(a) Effect of Failure of Shareholder to Act.--A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575
(relating to notice to demand payment) shall not have any right under this
subchapter to receive payment of the fair value of his shares.
(b) Restriction on Uncertificated Shares.--If the shares are not represented
by certificates, the business corporation may restrict their transfer from the
time of receipt of demand for payment until effectuation of the proposed
corporate action or the release of restrictions under the terms of section
1577(a) (relating to failure to effectuate corporate action).
(c) Rights Retained by Shareholder.--The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
15 Pa.C.S. (S) 1577 (2000)
[Pa.C.S.] (S) 1577. Release of restrictions or payment for shares
(a) Failure to Effectuate Corporate Action.--Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares
from any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of Notice to Demand Payment.--When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming
to the requirements of section 1575 (relating to notice to demand payment),
with like effect.
(c) Payment of Fair Value of Shares.--Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are
certificated) have deposited their certificates the amount that the
corporation estimates to be the fair value of the shares, or give written
notice that no remittance under this section will be made. The remittance or
notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of the
shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) Failure to Make Payment.--If the corporation does not remit the amount
of its estimate of the fair value of the shares as provided by subsection (c),
it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such
certificate or on the records of the corporation relating to any such
uncertificated shares that such demand has been made. If shares with respect
to which notation has been so made shall be transferred, each new certificate
issued therefor or the records relating to any transferred uncertificated
shares shall bear a similar notation, together with the name of the original
dissenting holder or owner of such shares. A transferee of such shares shall
not acquire by such transfer any rights in the corporation other than those
that the original dissenter had after making demand for payment of their fair
value.
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15 Pa.C.S. (S) 1578 (2000)
[Pa.C.S.] (S) 1578. Estimate by dissenter of fair value of shares
(a) General Rule.--If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the
fair value of the shares, which shall be deemed a demand for payment of the
amount or the deficiency.
(b) Effect of Failure to File Estimate.--Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the
corporation.
15 Pa.C.S. (S) 1579 (2000)
[Pa.C.S.] (S) 1579. Valuation proceedings generally
(a) General Rule.--Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under section 1575 (relating
to notice to demand payment); or
(3) timely receipt of any estimates pursuant to section 1578 (relating to
estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the
shares be determined by the court.
(b) Mandatory Joinder of Dissenters.--All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served
on each such dissenter. If a dissenter is a nonresident, the copy may be
served on him in the manner provided or prescribed by or pursuant to 42
Pa.C.S. Ch. 53 (relating to bases of jurisdiction and interstate and
international procedure).
(c) Jurisdiction of the Court.--The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of Recovery.--Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found
to exceed the amount, if any, previously remitted, plus interest.
(e) Effect of Corporation's Failure to File Application.--If the corporation
fails to file an application as provided in subsection (a), any dissenter who
made a demand and who has not already settled his claim against the
corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file
an application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not
previously remitted.
15 Pa.C.S. (S) 1580 (2000)
[Pa.C.S.] (S) 1580. Costs and expenses of valuation proceedings
(a) General Rule.--The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578
(relating to estimate by dissenter of fair value of shares) the court finds to
be dilatory, obdurate, arbitrary, vexatious or in bad faith.
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(b) Assessment of Counsel Fees and Expert Fees Where Lack of Good Faith
Appears.--Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the corporation
and in favor of any or all dissenters if the corporation failed to comply
substantially with the requirements of this subchapter and may be assessed
against either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner
in respect to the rights provided by this subchapter.
(c) Award of Fees for Benefits to Other Dissenters.--If the court finds that
the services of counsel for any dissenter were of substantial benefit to other
dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of
the amounts awarded to the dissenters who were benefited.
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For any questions you may have or additional information you may require
about your account, change in stock ownership, dividend payments and the
reinvestment of dividends, please call the Shareowner Information Line, or
write to:
Manager--Investor Services Department
PPL Services Corporation
Two North Ninth Street (GENTW14)
Allentown, PA 18101
Shareowner Information Line: 800-345-3085