<PAGE>
Rule 424(b)(2)
File No. 333-65349
CUSIP No.: 45488P AA8
Pricing Supplement No. 1 Dated November 4, 1998
(To Prospectus dated October 16, 1998 and
Prospectus Supplement dated October 29, 1998)
$100,000,000
INDIANA MICHIGAN POWER COMPANY
Unsecured Medium Term Notes, Series A,
Due From Nine Months to Fifty Years from Date of Issue
Fixed Rate Notes
Principal Amount: $50,000,000
Public Offering Price: Varying prices related to prevailing market prices.
Agent's Discount or Commission: .625%
Original Issue Date: 11-09-1998
Interest Payment Dates: Each February 1 and August 1
Record Dates: Each January 15 and July 15
Initial Interest Payment Date: February 1, 1999
Stated Maturity: 11-10-2008
Interest Rate: 6.45% per annum
Form: Book-Entry
The notes have not been approved by the SEC or any state securities
commission, nor have these organizations determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
Redemption Provisions:
Redeemable: Yes ____ No __X__
In Whole: Yes ____ No __X__
In Part: Yes ____ No __X__
Selling Agents: Salomon Smith Barney Inc.
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Agents acting in the capacity as indicated below:
[ ] Agent [ x ] Principal
Each Agent will purchase $25,000,000 principal amount as principal.
If as Principal:
[x] The notes are being offered at varying prices related to
prevailing market prices at the time of resale.
[ ] The notes are being offered at a fixed initial public offering
price of _______% of the principal amount.
If as Agent:
[ ] The notes are being offered at a fixed initial public offering
price of ____% of principal amount.
<PAGE>
Prospectus Supplement
(To prospectus dated October 16, 1998)
$100,000,000
INDIANA MICHIGAN POWER COMPANY
Medium Term Notes, Series A
We may from time to time offer our Senior Unsecured Medium Term Notes,
Series A, in the aggregate principal amount of up to $100,000,000. Each note
will mature from nine months to fifty years from its date of issue.
The final terms of each note will be established at the time of issuance
and included in a pricing supplement.
We expect to receive between $99,875,000 and $99,250,000 of the proceeds
from the sale of the notes, after paying Salomon Smith Barney Inc. and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as agents,
commissions of between $125,000 and $750,000. The exact proceeds to us will be
set at the time of issuance of the notes. We do not expect that any of the notes
will be listed on an exchange and a market for any particular series of notes
may not develop.
The notes have not been approved by the SEC or any state securities
commission, nor have these organizations determined that this prospectus
supplement or the accompanying prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
Salomon Smith Barney Merrill Lynch & Co.
October 29, 1998
<PAGE>
You should rely only on the information incorporated by reference or provided
in this Prospectus Supplement or the accompanying Prospectus. We have
not authorized anyone to provide you with different information. We
are not making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in
this Prospectus Supplement is accurate as of any date other than the date on the
front of the document.
-----------------------------
Page
TABLE OF CONTENTS
Prospectus Supplement
Supplemental Description of the Notes............................ S-3
Plan of Distribution............................................. S-3
Prospectus
WHERE YOU CAN FIND MORE
INFORMATION ................................................... 2
THE COMPANY........................................................ 2
PROSPECTUS SUPPLEMENTS............................................. 3
RATIO OF EARNINGS TO
FIXED CHARGES................................................... 3
USE OF PROCEEDS ................................................... 3
DESCRIPTION OF THE NOTES .......................................... 3
General ....................................................... 3
Redemptions .................................................... 4
Remarketed Notes................................................ 4
Book-Entry Notes - Registration,
Transfer, and Payment of Interest and Principal ......... 4
Note Certificates - Registration, Transfer, and Payment of
Interest and Principal .................................... 5
Interest Rate .................................................. 6
General ..................................................... 6
Fixed Rate Notes ............................................ 6
Floating Rate Notes: General........................... 6
Floating Rate Notes: Date of Interest Rate Change...... 6
Floating Rate Notes: When Interest Rate Is Determined........ 7
Floating Rate Notes: When Interest Is Paid................... 7
Floating Rate Notes: Interest Rate Formulas........... 8
Events of Default.............................................14
Modification of Indenture.....................................15
Consolidation, Merger or Sale.................................15
Legal Defeasance..............................................15
Covenant Defeasance...........................................15
Governing Law.................................................15
Concerning the Trustee........................................15
PLAN OF DISTRIBUTION................................................15
RECENT DEVELOPMENTS.................................................16
LEGAL OPINIONS......................................................17
EXPERTS.............................................................17
GLOSSARY............................................................17
S-2
<PAGE>
SUPPLEMENTAL DESCRIPTION OF THE NOTES
The following description of the particular terms of the notes supplements
and in certain instances replaces the description of the general terms and
provisions of the notes under "Description of the Notes" in the accompanying
Prospectus. Certain capitalized terms used in this prospectus supplement are
defined in the Glossary in the prospectus. The following description of the
notes will apply, unless otherwise specified in a pricing supplement.
General
The notes will be issued as a series of medium term notes under an
Indenture dated October 1, 1998 between us and the Trustee, The Bank of New
York. The notes will be limited in aggregate principal amount to $100,000,000.
The notes will be issued in fully registered form only, without coupons.
The notes will be issued initially in book-entry form, as a single note
registered in the name of the nominee of The Depository Trust Company. The
authorized denominations of the notes will be $1,000 and any multiple thereof.
The pricing supplement relating to a note will describe the following
terms: (1) the price at which the note will be offered; (2) the date on which
the note will be issued; (3) the date on which the note shall mature; (4) if an
interest-bearing note, whether the note will be a fixed rate note or a floating
rate note; (5) the terms, if any, regarding the optional or mandatory redemption
of the note, including the redemption date or dates of the note, if any, and the
price or prices applicable to redemption (including any premium); (6) any
applicable discounts or commissions; and (7) any other terms of the note not
inconsistent with the provisions of the Indenture.
PLAN OF DISTRIBUTION
The notes are being offered on a continuous basis by us through Salomon
Smith Barney Inc. and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Agents"), which have agreed to use their reasonable best
efforts to solicit offers to purchase notes. Initial purchasers may propose
certain terms of the notes, but we will have the right to accept offers to
purchase notes and may reject proposed purchases in whole or in part. The Agents
will have the right to reject any proposed purchase of notes in whole or in
part.
The Agents, acting individually or in a syndicate, may purchase notes as
principal from us for resale to one or more investors at varying prices relating
to prevailing market prices at the time of resale or, if specified in a pricing
supplement, for resale at a fixed offering price.
We will pay a commission to an Agent who sells a note as agent for us. The
commission will range from .125% to .750% of the principal amount of each note,
depending upon the maturity date of the note. Commissions with respect to notes
with stated maturities in excess of 42 years that are sold through an Agent as
an agent of the Company will be negotiated between the Company and such Agent at
the time of such sale. Any note sold to an Agent acting as principal will be
purchased from us at a price equal to 100% of the principal amount of the note,
less a percentage of the principal amount equal to the Agent's commission (as
described above) that would be payable on a note with the same maturity, unless
otherwise specified in a pricing supplement.
An Agent may resell a note purchased by it as principal to another
broker-dealer at a discount, provided the discount does not exceed the
commission or discount received by the Agent from us in connection with the
original sale of the note.
After the initial offering of notes sold to an Agent as principal, any
specified fixed offering price of the notes and the amount of any discount to a
broker-dealer may change.
We may sell notes directly to investors on our own behalf at a price to be
agreed upon at the time of sale or through negotiated underwritten transactions
with one or more underwriters. In the case of sales made directly by us, no
commission or discount will be paid or allowed.
No note will have an established trading market when issued. The notes
will not be listed on any securities exchange. The Agents may make a market in
the notes, but the Agents are not obligated to do so and may discontinue any
market-making at any time without notice. There can be no assurance of a
secondary market for any notes, or that the notes may be resold.
The Agents, whether acting as agent or principal, may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). We have agreed to indemnify the Agents against certain
liabilities, including certain liabilities under the Securities Act.
The Agents and certain affiliates thereof engage in transactions with and
perform services for us and its affiliates in the ordinary course of business.
In a fixed price offering of notes purchased by one or more Agents as
principal, the Agents may engage in transactions that stabilize the price of the
notes. These transactions may consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the notes. If an Agent creates, or
if the Agents create, a short position in the notes (it or they sell notes in a
principal amount that exceeds the principal amount of notes set forth in the
pricing supplement), the Agent or the Agents, as the case may be, may reduce or
eliminate that short position by purchasing notes in the open market. In
general, purchases of notes for the purpose of stabilization or to reduce a
short position could cause the price of the notes to be higher than it might
otherwise be.
Neither we nor the Agents can predict the effect that the transactions
described in the previous paragraph may have on the price of the notes. The
Agents may or may not engage in those transactions and any of those transactions
may be discontinued at any time without notice.
<PAGE>
PROSPECTUS
$200,000,000
INDIANA MICHIGAN POWER COMPANY
UNSECURED NOTES
TERMS OF SALE
The following terms may apply to the notes that we may sell at one or more
times. A pricing supplement will include the final terms for each note. If we
decide to list upon issuance any note or notes on a securities exchange, a
pricing supplement will identify the exchange and state when we expect trading
could begin.
- Mature 9 months to 50 years
- Fixed or floating interest rate. The floating interest rate
formula would be based on:
Commercial paper rate LIBOR
Prime rate Treasury rate
CD rate CMT rate
Federal Funds rate Another interest rate index
- Remarketing features
- Certificate or book-entry form
- Subject to redemption
- Not convertible, amortized or subject to a sinking fund
- Interest paid on fixed rate notes quarterly or semi-annually
- Interest paid on floating rate notes monthly, quarterly,
semi-annually, or annually
- Issued in multiples of a minimum denomination
The notes have not been approved by the SEC or any state securities commission,
nor have these organizations determined that this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is October 16, 1998.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the SEC.
We also file annual, quarterly and special reports and other information with
the SEC. You may read and copy any document we file at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. You may also examine our SEC filings through the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until we sell all the notes.
- Annual Report on Form 10-K for the year ended December 31, 1997, and Form
10-K/A dated April 1, 1998;
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, as
amended, and June 30, 1998 and Form 10-Q/A filed May 15, 1998; and
- Current Report on Form 8-K dated May 15, 1998.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Mr. G. C. Dean
American Electric Power Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
614-223-1000
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. We are not making an offer of
these notes in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any supplement is accurate as of any
date other than the date on the front of those documents.
THE COMPANY
We generate, sell, purchase, transmit and distribute electric power. We
serve approximately 549,000 retail customers in northern and eastern Indiana and
a portion of southwestern Michigan. We also sell and transmit power at wholesale
to other electric utilities, municipalities, electric cooperatives and
non-utility entities engaged in the wholesale power market. Our principal
executive offices are located at One Summit Square, Fort Wayne, Indiana 46801
(telephone number 219-425-2111). We are a subsidiary of American Electric Power
Company, Inc., a public utility holding company, and we are a part of the
American Electric Power integrated utility system. The executive offices of
American Electric Power Company, Inc. are located at 1 Riverside Plaza,
Columbus, Ohio 43215 (telephone number 614-223-1000).
PROSPECTUS SUPPLEMENTS
We provide information to you about the notes in three separate documents
that progressively provide more detail: (a) this prospectus provides general
information some of which may not apply to your notes, (b) the accompanying
prospectus supplement provides more specific terms of your notes, and (c) the
pricing supplement provides the final terms of your notes. It is important for
you to consider the information contained in this prospectus, the prospectus
supplement and the pricing supplement in making your investment decision.
RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for each of the periods indicated
is as follows:
Twelve Months
Period Ended Ratio
----------------- -----
December 31, 1993 2.06
December 31, 1994 2.23
December 31, 1995 2.31
December 31, 1996 2.62
December 31, 1997 2.55
June 30, 1998 2.38
For current information on the Ratio of Earnings to Fixed
Charges, please see our most recent Form 10-K and 10-Q. See Where
You Can Find More Information.
USE OF PROCEEDS
The net proceeds from the sale of the notes will be used for general
corporate purposes relating to our utility business. These purposes include
redeeming or repurchasing outstanding debt or preferred stock and replenishing
working capital. If we do not use the net proceeds immediately, we temporarily
invest them in short-term, interest-bearing obligations. We estimate that our
construction costs in 1998 will approximate $163,000,000. At September 25, 1998,
our outstanding short-term debt was $59,200,000.
DESCRIPTION OF THE NOTES
General
We will issue the notes under an Indenture to be entered into between us
and the Trustee, The Bank of New York. This prospectus briefly outlines some
provisions of the Indenture. If you would like more information on these
provisions, review the Indenture and any supplemental indentures or company
orders that we file with the SEC. See Where You Can Find More Information on how
to locate these documents. You may also review these documents at the Trustee's
offices at 101 Barclay Street, New York, New York.
The Indenture does not limit the amount of notes that may be issued. The
Indenture permits us to issue notes in one or more series or tranches upon the
approval of our board of directors and as described in one or more company
orders or supplemental indentures. Each series of notes may differ as to their
terms.
The notes are unsecured and will rank equally with all our unsecured
unsubordinated debt. Substantially all of our fixed properties and franchises
are subject to the lien of our first mortgage bonds issued under and secured by
an Indenture of Mortgage and Deed of Trust, dated as of June 1, 1939, as
previously supplemented and amended, between us and The Bank of New York,
formerly Irving Trust Company, as trustee. For current information on our debt
outstanding see our most recent Form 10-K and 10-Q. See Where You Can Find More
Information.
The notes will be denominated in U.S. dollars and we will pay principal
and interest in U.S. dollars. Unless an applicable pricing or prospectus
supplement states otherwise, the notes will not be subject to any conversion,
amortization, or sinking fund. We expect that the notes will be "book-entry,"
represented by a permanent global note registered in the name of The Depository
Trust Company, or its nominee. We reserve the right, however, to issue note
certificates registered in the name of the noteholders.
In the discussion that follows, whenever we talk about paying principal on
the notes, we mean at maturity or redemption. Also, in discussing the time for
notices and how the different interest rates are calculated, all times are New
York City time and all references to New York mean the City of New York, unless
otherwise noted.
The following terms may apply to each note as specified in the applicable
pricing or prospectus supplement and the note.
Redemptions
If we issue redeemable notes, we may redeem such notes at our option
unless an applicable pricing or prospectus supplement states otherwise. The
pricing or prospectus supplement will state the terms of redemption. We may
redeem notes in whole or in part by delivering written notice to the noteholders
no more than 60, and not less than 30, days prior to redemption. If we do not
redeem all the notes of a series at one time, the Trustee selects the notes to
be redeemed in a manner it determines to be fair.
Remarketed Notes
If we issue notes with remarketing features, an applicable pricing or
prospectus supplement will describe the terms for the notes including: interest
rate, remarketing provisions, our right to redeem notes, the holders' right to
tender notes, and any other provisions.
Book-Entry Notes - Registration, Transfer, and Payment of Interest
and Principal
Book-entry notes of a series will be issued in the form of a global note
that the Trustee will deposit with The Depository Trust Company, New York, New
York ("DTC"). This means that we will not issue note certificates to each
holder. One or more global notes will be issued to DTC who will keep a
computerized record of its participants (for example, your broker) whose clients
have purchased the notes. The participant will then keep a record of its clients
who purchased the notes. Unless it is exchanged in whole or in part for a note
certificate, a global note may not be transferred; except that DTC, its
nominees, and their successors may transfer a global note as a whole to one
another.
Beneficial interests in global notes will be shown on, and transfers of
global notes will be made only through, records maintained by DTC and its
participants.
DTC has provided us the following information: DTC is a limited-purpose
trust company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the United States
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered under the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
securities that its participants ("Direct Participants") deposit with DTC. DTC
also records the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
computerized records for Direct Participant's accounts. This eliminates the need
to exchange note certificates. Direct Participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations.
Other organizations such as securities brokers and dealers, banks and
trust companies that work through a Direct Participant also use DTC's book-entry
system. The rules that apply to DTC and its participants are on file with the
SEC.
A number of its Direct Participants and the New York Stock
Exchange, Inc., The American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. own DTC.
We will wire principal and interest payments to DTC's nominee. We and the
Trustee will treat DTC's nominee as the owner of the global notes for all
purposes. Accordingly, we, the Trustee and any paying agent will have no direct
responsibility or liability to pay amounts due on the global notes to owners of
beneficial interests in the global notes.
It is DTC's current practice, upon receipt of any payment of principal or
interest, to credit Direct Participants' accounts on the payment date according
to their respective holdings of beneficial interests in the global notes as
shown on DTC's records. In addition, it is DTC's current practice to assign any
consenting or voting rights to Direct Participants whose accounts are credited
with notes on a record date. The customary practices between the participants
and owners of beneficial interests will govern payments by participants to
owners of beneficial interests in the global notes and voting by participants,
as is the case with notes held for the account of customers registered in
"street name." However, payments will be the responsibility of the participants
and not of DTC, the Trustee or us.
Notes represented by a global note will be exchangeable for note
certificates with the same terms in authorized denominations only if:
- DTC notifies us that it is unwilling or unable to continue as depositary
or if DTC ceases to be a clearing agency registered under applicable law and
a successor depositary is not appointed by us within 90 days; or
- we determine not to require all of the notes of a series to be represented
by a global note and notify the Trustee of our decision.
Note Certificates-Registration, Transfer, and Payment of Interest
and Principal
If we issue note certificates, they will be registered in the name of the
noteholder. The notes may be transferred or exchanged, pursuant to
administrative procedures in the indenture, without the payment of any service
charge (other than any tax or other governmental charge) by contacting the
paying agent. Payments on note certificates will be made by check.
Interest Rate
General
We have provided a Glossary at the end of this prospectus to define the
capitalized terms used in discussing the interest rates payable on the notes.
The interest rate on the notes will either be fixed or floating. The
interest paid will include interest accrued to, but excluding, the date of
maturity or redemption. Interest is generally payable to the person in whose
name the note is registered at the close of business on the record date before
each interest payment date. Interest payable at maturity or redemption, however,
will be payable to the person to whom principal is payable.
If we issue a note after a record date but on or prior to the related
interest payment date, we will pay the first interest payment on the interest
payment date after the next record date. We will pay interest payments by check
or wire transfer, at our option.
Fixed Rate Notes
Each pricing supplement will designate the record dates, payment dates and
the fixed rate of interest payable on a note. We will pay interest quarterly or
semi-annually, and upon maturity or redemption. Unless an applicable pricing or
prospectus supplement states otherwise, if any payment date falls on a day that
is not a Business Day, we will pay interest on the next Business Day and no
additional interest will be paid. Interest payments will be the amount of
interest accrued to, but excluding, each payment date. Interest will be computed
using a 360-day year of twelve 30-day months.
Floating Rate Notes: General
Each floating rate note will have an interest rate formula. The formula
may be based on:
- the commercial paper rate; - the prime rate; - the CD rate; - the
federal funds effective rate; - the LIBOR; - the Treasury rate; - the CMT
rate; or - another interest rate index.
The applicable pricing supplement will also indicate the Spread and/or
Spread Multiplier, if any. In addition, any floating rate note may have a
maximum or minimum interest rate limitation.
Upon request, the Calculation Agent will provide the current interest rate
and, if different, the interest rate which will become effective on the next
Interest Reset Date.
Floating Rate Notes: Date of Interest Rate Change
The interest rate on each floating rate note may be reset
daily, weekly, monthly, quarterly, semi-annually, or annually. The
Interest Reset Date will be:
- for notes which reset daily, each Business Day;
- for notes (other than Treasury rate notes) which reset weekly,
the Wednesday of each week;
- for Treasury rate notes which reset weekly, the Tuesday of each week; for
notes which reset monthly, on the third Wednesday of each month;
- for notes which reset quarterly, the third Wednesday of
March, June, September and December;
- for notes which reset semi-annually, the third Wednesday of the two months
of each year indicated in the applicable pricing supplement; and
- for notes which reset annually, the third Wednesday of the month of each
year indicated in the applicable pricing supplement.
The applicable pricing supplement will state the initial interest rate or
interest rate formula on each note effective until the first Interest Reset
Date. After that, the interest rate will be the rate determined on the next
Interest Determination Date, as explained below. Each time a new interest rate
is determined, it will become effective on the subsequent Interest Reset Date.
If any Interest Reset Date is not a Business Day, then the Interest Reset Date
will be postponed to the next Business Day. However, in the case of a LIBOR
note, if the next Business Day is in the next calendar month, the Interest Reset
Date will be the immediately preceding Business Day.
Floating Rate Notes: When Interest Rate Is Determined
The Interest Determination Date for all notes (except Treasury rate notes)
is the second Business Day before the Interest Reset Date (second London
Business Day before the Interest Reset Date for LIBOR notes).
The Interest Determination Date for Treasury rate notes will be the day of
the week in which the Interest Reset Date falls on which Treasury bills would
normally be auctioned. Treasury bills are usually sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
usually held on Tuesday. However, the auction may be held on the preceding
Friday. If an auction is held on the preceding Friday, that day will be the
Interest Determination Date pertaining to the Interest Reset Date occurring in
the next week. If an auction date falls on any Interest Reset Date then the
Interest Reset Date will instead be the first Business Day immediately following
the auction date.
Floating Rate Notes: When Interest Is Paid
Interest is paid as follows:
- for notes which reset daily, weekly or monthly, on the third Wednesday
of each month or on the third Wednesday of March, June, September and
December (as indicated in the applicable pricing supplement);
- for notes which reset quarterly, on the third Wednesday of
March, June, September, and December;
- for notes which reset semi-annually, on the third Wednesday
of the two months specified in the applicable pricing
supplement;
- for notes which reset annually, on the third Wednesday of
the month specified in the applicable pricing supplement; and
- at maturity or redemption .
If interest is payable on a day which is not a Business Day, payment will
be postponed to the next Business Day and no additional interest shall be due.
However, for LIBOR notes, if the next Business Day is in the next calendar
month, interest will be paid on the preceding Business Day.
Unless an applicable pricing supplement states otherwise, the record date
will be 15 calendar days prior to each day interest is paid, whether or not such
day is a Business Day.
The interest payable will be the amount of interest accrued to, but
excluding, the interest payment date. However, for notes on which the interest
resets daily or weekly, the interest payable will include interest accrued to
and including the record date prior to the interest payment date. If the
interest payment date is also a day that principal is due, the interest payable
will include interest accrued to, but excluding, the date of maturity or
redemption.
The accrued interest for any period is calculated by multiplying the
principal amount of a note by an accrued interest factor. The accrued interest
factor is computed by adding the interest factor calculated for each day in the
period to the date for which accrued interest is being calculated. The interest
factor (expressed as a decimal rounded upwards if necessary) is computed by
dividing the interest rate (expressed as a decimal rounded upwards if necessary)
applicable to such date by 360, unless the applicable pricing supplement states
otherwise, or the notes are Treasury rate notes or CMT rate notes, in which case
it will be divided by the actual number of days in the year.
All percentages resulting from any calculation of floating rate notes will
be rounded, if necessary, to the nearest one-hundred thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655) and 9.876544%
(or .09876544) being rounded to 9.87654% (or .0987654)), and all dollar amounts
used in or resulting from such calculation will be rounded to the nearest cent
(with one-half cent being rounded upwards).
Floating Rate Notes: Interest Rate Formulas
Commercial Paper Rate Notes. Each commercial paper rate note will bear
interest at the rate (calculated with reference to the Commercial Paper Rate and
the Spread and/or Spread Multiplier, if any) specified on the commercial paper
rate note and in the applicable pricing supplement.
"Commercial Paper Rate" means, with respect to any Commercial Paper Rate
Interest Determination Date, the Money Market Yield (calculated as described
below) of the rate on such date for commercial paper having the Index Maturity
specified in the applicable pricing supplement as published in Federal Reserve
Statistical Release H.15(519) under the heading "Commercial
Paper--Nonfinancial."
The following procedures will occur if the rate cannot be set as described
above:
(a) If that rate is not published in H.15 (519) prior to 3:00 P.M. on
the Calculation Date, then the Commercial Paper Rate will be the Money
Market Yield of the rate on the Commercial Paper Rate Interest Determination
Date for commercial paper having the Index Maturity specified in the
applicable pricing supplement as published in Composite Quotations under the
heading "Commercial Paper."
(b) If the rate is not published in either H.15 (519) or in Composite
Quotations by 3:00 P.M. on the Calculation Date, the Commercial Paper Rate
for that Commercial Paper Rate Interest Determination Date will then be
calculated by the Calculation Agent in the following manner.
The Commercial Paper Rate will be calculated as the Money Market Yield
of the average for the offered rates, as of 11:00 A.M. on that date, of
three leading dealers of commercial paper in New York selected for
commercial paper having the applicable Index Maturity placed for an
industrial issuer whose bond rating is "Aa," or the equivalent, from a
nationally recognized rating agency.
(c) Finally, if fewer than three dealers are quoting as mentioned, the
rate of interest in effect for the applicable period will be the same as the
rate of interest in effect for the prior interest reset period.
Prime Rate Notes. Each prime rate note will bear interest at the rate
(calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) specified on the prime rate note and in the applicable
pricing supplement.
"Prime Rate" means, with respect to any Prime Rate Interest Determination
Date, the rate set forth on such date in H.15(519) under the heading "Bank Prime
Loan."
The following procedures will occur if the rate cannot be set as described
above:
(a) If that rate is not published in H.15(519) prior to 3:00 P.M. on
the Calculation Date, then the Prime Rate will be the average of the rates
of interest publicly announced by each bank that appear on the Reuters
Screen USPRIME1 Page as its prime rate or base lending rate as in effect for
that Prime Rate Interest Determination Date.
(b) If fewer than four rates appear on the Reuters Screen USPRIME1
Page, the Prime Rate will be the average of the prime rates or base lending
rates quoted on the basis of the actual number of days in the year divided
by a 360-day year as of the close of business on the Prime Rate Interest
Determination Date by four major money center banks in New York selected by
the Calculation Agent.
(c) If fewer than four banks are quoting as mentioned, the Prime Rate
shall be determined on the basis of the rates furnished in New York by the
major money center banks, if any, that have provided such quotations, and by
an appropriate number of substitute banks or trust companies organized and
doing business under the laws of the United States, or any State thereof,
having total equity capital of at least $500 million and being subject to
supervision or examination by a Federal or State authority, as selected by
the Calculation Agent.
(d) Finally, if the banks are not quoting as mentioned above, the rate
of interest in effect for the applicable period will be the same as the rate
of interest in effect for the prior interest reset period.
CD Rate Notes. Each CD rate note will bear interest at the rate
(calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any) specified on the CD rate note and in the applicable pricing
supplement.
"CD Rate" means, with respect to any CD Rate Interest Determination Date,
the rate on that date for negotiable U.S. dollar certificates of deposit having
the Index Maturity specified in the applicable pricing supplement as published
in H.15(519) under the heading "CDs (Secondary Market)."
The following procedures will occur if the rate cannot be set as described
above:
(a) If that rate is not published in H.15(519) prior to 3:00 P.M. on
the Calculation Date, then the CD Rate will be the rate on that CD Rate
Interest Determination Date for negotiable U.S. Dollar certificates of
deposit having the applicable Index Maturity as published in Composite
Quotations under the heading "Certificates of Deposit."
(b) If that rate is not published in either H.15 (519) or in Composite
Quotations by 3:00 P.M. on that Calculation Date, the CD Rate for that CD
Rate Interest Determination Date shall be calculated by the Calculation
Agent as follows:
The CD Rate will be calculated as the average of the secondary market
offered rates, as of 10:00 A.M., of three leading nonbank dealers of
negotiable U.S. dollar certificates of deposit in New York selected by the
Calculation Agent for negotiable U.S. dollar certificates of deposit of
major United States money market banks with a remaining maturity closest to
the Index Maturity specified in the applicable pricing supplement in a
representative amount.
(c) Finally, if fewer than three dealers are quoting as mentioned, the
rate of interest in effect for the applicable period will be the same as the
rate of interest in effect for the prior interest reset period.
Federal Funds Rate Notes. Each federal funds rate note will bear interest
at the rate (calculated with reference to the Federal Funds Rate and the Spread
and/or Spread Multiplier, if any) specified on the federal funds rate note and
in the applicable pricing supplement.
"Federal Funds Rate" means, with respect to any Federal Funds Rate
Interest Determination Date, the rate on such date for U.S. dollar federal funds
as published in H.15(519) under the heading "Federal Funds (Effective)."
The following procedures will occur if the rate cannot be set as described
above:
(a) If that rate is not published in H.15(519) prior to 3:00 P.M. on
the Calculation Date, then the Federal Funds Rate will be the rate on that
Federal Funds Rate Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate."
(b) If that rate is not published in either H.15 (519) or in Composite
Quotations by 3:00 P.M. on the Calculation Date, the Federal Funds Rate for
that Federal Funds Rate Interest Determination Date will be calculated by
the Calculation Agent as follows:
The Federal Funds Rate will be the average of the rates, as of 9:00
A.M. on that date, for the last transaction in overnight federal funds
arranged by three leading brokers of federal funds transactions in New York
selected by the Calculation Agent.
(c) Finally, if fewer than three brokers are quoting as mentioned
above, the rate of interest in effect for the applicable period will be the
same as the rate of interest in effect for the prior interest reset period.
LIBOR Notes. Each LIBOR note will bear interest at the rate (calculated
with reference to LIBOR and the Spread and/or Spread Multiplier, if any)
specified on the LIBOR note and in the applicable pricing supplement.
"LIBOR" means the London interbank offered rate for deposits
in U.S. dollars and will be determined by the Calculation Agent as
follows:
(a) With respect to any LIBOR Interest Determination Date, LIBOR will
be determined by either:
(1) the average of the offered rates for deposits in U.S. dollars
having the Index Maturity specified in the applicable pricing supplement,
beginning on the second Business Day immediately after that date, that
appear on the Reuters Screen LIBO Page as of 11:00 A.M., London time, on
that date, if at least two offered rates appear on the Reuters Screen
LIBO Page; or
(2) the rate for deposits in U.S. dollars having the Index Maturity
designated in the applicable pricing supplement, beginning on the second
London Business Day immediately after such date, that appears on the
Telerate Page 3750 as of 11:00 A.M., London time, on that date.
If neither Reuters Screen LIBO Page nor Telerate Page 3750 is specified
in the applicable pricing supplement, LIBOR will be determined as if
Telerate Page 3750 had been specified.
In the case where (1) above applies, if fewer than two offered rates
appear on the Reuters Screen LIBO Page, or, in the case where (2) above
applies, if no rate appears on the Telerate Page 3750, LIBOR for that date
will be determined as follows:
(b) LIBOR will be determined based on the rates at approximately
11:00 A.M., London time, on that LIBOR Interest Determination Date at which
deposits in U.S. dollars having the applicable Index Maturity are offered to
prime banks in the London interbank market by four major banks in the London
interbank market selected by the Calculation Agent that in the Calculation
Agent's judgment is representative for a single transaction in such market
at such time (a "Representative Amount"). The offered rates must begin on
the second Business Day immediately after that LIBOR Interest Determination
Date.
The Calculation Agent will request the principal London office of each
such bank to provide a quotation of its rate. If at least two such
quotations are provided, LIBOR for such date will be the average of such
quotations.
(c) If fewer than two quotations are provided, LIBOR for that date will
be the average of the rates quoted at approximately 11:00 A.M. on such date
by three major banks in New York, selected by the Calculation Agent. The
rates will be for loans in U.S. dollars to leading European banks having the
specified Index Maturity beginning on the second Business Day after that
date and in a Representative Amount.
(d) Finally, if fewer than three banks are quoting as mentioned, the
rate of interest in effect for the applicable period will be the same as the
rate of interest in effect for the prior interest reset period.
Treasury Rate Notes. Each Treasury rate note will bear interest at the
rate (calculated with reference to the Treasury Rate and the Spread and/or
Spread Multiplier, if any) specified on the Treasury rate note and in the
applicable pricing supplement.
"Treasury Rate" means, with respect to any Treasury Rate Interest
Determination Date, the rate for the most recent auction of direct obligations
of the United States ("Treasury Bills") having the Index Maturity specified in
the applicable pricing supplement as published in H.15(519) under the heading
"U.S. Government Securities/Treasury Bills/Auction Average (Investment)."
The following procedures will occur if the rate cannot be set as described
above:
(a) If that rate is not published in H.15(519) by 3:00 P.M. on the
applicable Calculation Date, the rate will be the auction average rate
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days,
as applicable, and applied on a daily basis) for such auction as otherwise
announced by the United States Department of the Treasury.
(b) If the results of the auction of Treasury Bills having the
applicable Index Maturity are not published in H.15(519) by 3:00 P.M., or
otherwise published or reported as provided above by 3:00 P.M. on the
Calculation Date, or if no auction is held in a particular week, then the
Treasury Rate shall be calculated by the Calculation Agent as follows:
The rate will be calculated as a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the average of the secondary market bid rates
as of approximately 3:30 P.M. on the Treasury Rate Interest Determination
Date, of three leading primary United States government securities dealers
in New York selected by the Calculation Agent for the issue of Treasury
Bills with a remaining maturity closest to the specified Index Maturity.
(c) Finally, if fewer than three dealers are quoting as mentioned, the
rate of interest in effect for the period will be the same as the rate of
interest in effect for the prior interest reset period.
CMT Rate Notes. Each CMT rate note will bear interest at the rate
(calculated with reference to the CMT Rate and the Spread or Spread Multiplier,
if any) specified on such CMT rate note and in the applicable pricing
supplement.
"CMT Rate" means, with respect to any CMT Rate Interest Determination
Date, the rate displayed on the Designated CMT Telerate Page under the caption
"... Treasury Constant Maturities.. Federal Reserve Board Release H.15...
Mondays Approximately 3:45 P.M.," under the column for the applicable Index
Maturity designated in the applicable pricing supplement for:
(1) if the Designated CMT Telerate Page is 7055, the rate for the
applicable CMT Rate Interest Determination Date; or
(2) if the Designated CMT Telerate Page is 7052, the week, or the month,
as applicable, ended immediately preceding the week in which the CMT Rate
Interest Determination Date occurs.
The following procedures will occur if the rate cannot be set as described
above:
(a) If no page is specified in the applicable pricing supplement and on
the face of such CMT Rate note, the Designated CMT Telerate Page shall be
7052 for the most recent week. If such rate is no longer displayed on the
relevant page, or if it is not displayed by 3:00 P.M. on the related
Calculation Date, then the CMT Rate will be the Treasury constant maturity
rate for the applicable Index Maturity as published in the relevant H.15
(519).
(b) If that rate is no longer published in H.15(519), or is not
published by 3:00 P.M. on the related Calculation Date, then the CMT Rate
for such CMT Rate Interest Determination Date will be the Treasury constant
maturity rate for the applicable Index Maturity (or other United States
Treasury rate for such Index Maturity for that CMT Rate Interest
Determination Date with respect to such Interest Reset Date) as may then be
published by either the Federal Reserve Board or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate
Page and published in the relevant H.15(519).
(c) If that information is not provided by 3:00 P.M. on the related
Calculation Date, then the CMT Rate for that CMT Rate Interest Determination
Date will be calculated by the Calculation Agent as follows:
The rate will be calculated as a yield to maturity, based on the
average of the secondary market closing offer side prices as of
approximately 3:30 P.M. on that CMT Rate Interest Determination Date
reported, according to their written records, by three leading primary
United States government securities dealers (each, a "Reference Dealer") in
New York selected by the Calculation Agent. These dealers will be selected
from five such Reference Dealers.
The Calculation Agent will eliminate the highest quotation (or, in the
event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest), for the most recently issued direct
noncallable fixed rate obligations of the United States ("Treasury Notes")
with an original maturity of approximately the applicable Index Maturity and
a remaining term to maturity of not less than such Index Maturity minus one
year.
If two Treasury Notes with an original maturity as described in the
preceding sentence have remaining terms to maturity equally close to the
applicable Index Maturity, the quotes for the Treasury Note with the shorter
remaining term to maturity will be used.
(d) If the Calculation Agent cannot obtain three such Treasury Note
quotations, the CMT Rate for that CMT Rate Interest Determination Date will
be calculated by the Calculation Agent as follows:
The rate will be calculated as a yield to maturity based on the average
of the secondary market offer side prices as of approximately 3:30 P.M. on
that CMT Rate Interest Determination Date of three Reference Dealers in New
York selected by the Calculation Agent using the same method described
above, for Treasury Notes with an original maturity of the number of years
that is the next highest to the applicable Index Maturity with a remaining
term to maturity closest to such Index Maturity and in an amount of at least
$100 million.
If three or four (and not five) of the Reference Dealers are quoting as
described above, then the CMT Rate will be based on the average of the offer
prices obtained and neither the highest nor the lowest of such quotes will
be eliminated.
(e) Finally, if fewer than three Reference Dealers are quoting as
mentioned, the rate of interest in effect for the applicable period will be
the same as the rate of interest in effect for the prior interest reset
period.
Events of Default
"Event of Default" means any of the following:
- failure to pay for three Business Days the principal of
(or premium, if any, on) any note of a series when due and
payable;
- failure to pay for 30 days any interest on any note of
any series when due and payable;
- failure to perform any other requirements in such notes, or in the
Indenture in regard to such notes, for 90 days after notice; - certain
events of bankruptcy or insolvency; or
- any other event of default specified in a series of notes.
An Event of Default for a particular series of notes does not necessarily
mean that an Event of Default has occurred for any other series of notes issued
under the Indenture. If an Event of Default occurs and continues, the Trustee or
the holders of at least 33% of the principal amount of the notes of the series
affected may require us to repay the entire principal of the notes of such
series immediately ("Repayment Acceleration"). In most instances, the holders of
at least a majority in aggregate principal amount of the notes of the affected
series may rescind a previously triggered Repayment Acceleration. However, if we
cause an Event of Default because we have failed to pay (unaccelerated)
principal, premium, if any, or interest, Repayment Acceleration may be rescinded
only if we have first cured our default by depositing with the Trustee enough
money to pay all (unaccelerated) past due amounts and penalties, if any.
The Trustee must within 90 days after a default occurs, notify the holders
of the notes of the series of default unless such default has been cured or
waived. We are required to file an annual certificate with the Trustee, signed
by an officer, concerning any default by us under any provisions of the
Indenture.
Subject to the provisions of the Indenture relating to its duties in case
of default, the Trustee shall be under no obligation to exercise any of its
rights or powers under the Indenture at the request, order or direction of any
holders unless such holders offer the Trustee reasonable indemnity. Subject to
the provisions for indemnification, the holders of a majority in principal
amount of the notes of any series may direct the time, method and place of
conducting any proceedings for any remedy available to, or exercising any trust
or power conferred on, the Trustee with respect to such notes.
Modification of Indenture
Under the Indenture, our rights and obligations and the rights of the
holders of any notes may be changed. Any change affecting the rights of the
holders of any series of notes requires the consent of the holders of not less
than a majority in aggregate principal amount of the outstanding notes of all
series affected by the change, voting as one class. However, we cannot change
the terms of payment of principal or interest, or a reduction in the percentage
required for changes or a waiver of default, unless the holder consents. We may
issue additional series of notes and take other action that does not affect the
rights of holders of any series by executing supplemental indentures without the
consent of any noteholders.
Consolidation, Merger or Sale
We may merge or consolidate with any corporation or sell substantially all
of our assets as an entirety as long as the successor or purchaser expressly
assumes the payment of principal, and premium, if any, and interest on the
notes.
Legal Defeasance
We will be discharged from our obligations on the notes of any series at
any time if:
- we deposit with the Trustee sufficient cash or government securities to
pay the principal, interest, any premium and any other sums due to the
stated maturity date or a redemption date of the note of the series, and
we deliver to the Trustee an opinion of counsel stating that the federal
income tax obligations of noteholders of that series will not change as a
result of our performing the action described above.
If this happens, the noteholders of the series will not be entitled to the
benefits of the Indenture except for registration of transfer and exchange of
notes and replacement of lost, stolen or mutilated notes.
Covenant Defeasance
We will be discharged from our obligations under any restrictive covenant
applicable to the notes of a particular series if we perform both actions
described above. See Legal Defeasance. If this happens, any later breach of that
particular restrictive covenant will not result in Repayment Acceleration. If we
cause an Event of Default apart from breaching that restrictive covenant, there
may not be sufficient money or government obligations on deposit with the
Trustee to pay all amounts due on the notes of that series. In that instance, we
would remain liable for such amounts.
Governing Law
The Indenture and notes of all series will be governed by the laws of the
State of New York.
Concerning the Trustee
We and our affiliates use or will use some of the banking services of the
Trustee in the normal course of business.
PLAN OF DISTRIBUTION
We may sell the notes (a) through agents; (b) through
underwriters or dealers; or (c) directly to one or more purchasers.
By Agents
Notes may be sold on a continuing basis through agents designated by us.
The agents will agree to use their reasonable efforts to solicit purchases for
the period of their appointment.
Unless the pricing supplement states otherwise, the notes will be sold to
the public at 100% of their principal amount. Agents will receive commissions
from .125% to .750% of the principal amount per note depending on the maturity
of the note they sell.
The Agents will not be obligated to make a market in the notes. We cannot
predict the amount of trading or liquidity of the notes.
By Underwriters
If underwriters are used in the sale, the underwriters will acquire the
notes for their own account. The underwriters may resell the notes in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The obligations of
the underwriters to purchase the notes will be subject to certain conditions.
The underwriters will be obligated to purchase all the notes of the series
offered if any of the notes are purchased. Any initial public offering price and
any discounts or concessions allowed or re-allowed or paid to dealers may be
changed from time to time.
Direct Sales
We may also sell notes directly. In this case, no underwriters or agents
would be involved.
General Information
Underwriters, dealers, and agents that participate in the distribution of
the notes may be underwriters as defined in the Securities Act of 1933 (the
"Act"), and any discounts or commissions received by them from us and any profit
on the resale of the notes by them may be treated as underwriting discounts and
commissions under the Act.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our affiliates in the ordinary course of their
businesses.
RECENT DEVELOPMENTS
Reference is made to pages 22 and 23 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, under the headings NOx SIP Calls
and the Ozone Transport Assessment Group and Section 126 Petitions and to pages
II-1 and II-2 of the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998 for a discussion of proposed nitrogen oxides ("NOx")
emissions reduction rules and related proceedings. On September 24, 1998, the
U.S. Environmental Protection Agency ("Federal EPA") announced the issuance of
final rules (the "Final Rules"), adopted substantially in the form proposed,
requiring reductions in NOx emissions in 22 states in the eastern third of the
country, including the states in which AEP System generating units are located.
It is anticipated that these reductions will be imposed primarily on utility
sources through revisions in state implementation plans ("SIPs") adopted by the
individual states. The Final Rules assume a reduced NOx emission rate for
utility sources of 0.15/MMBtu (approximately an 85% reduction) by May 2003.
Should the states fail to adopt the required revisions to their state plans
within one year of the date of the signing of the Final Rules (September 24,
1999), Federal EPA has proposed to implement a federal plan to accomplish these
NOx reductions. Federal EPA also proposed the approval of portions of petitions
filed by certain northeastern states under Section 126 of the Clean Air Act. The
proposed approval of the Section 126 petitions also would result in imposition
of NOx emission reductions on utility and industrial sources in the states in
which AEP System generating units are located. These reductions are
substantially the same as those required by the Final Rules and could be adopted
by Federal EPA in the event the states fail to implement SIPs in accordance with
the Final Rules. The costs of meeting NOx emissions reduction requirements that
would be imposed as a result of the NOx SIPs or Section 126 petitions cannot be
determined at this time, but such costs are expected to be significant.
LEGAL OPINIONS
Our counsel, Simpson Thacher & Bartlett, New York, NY, and one of our
lawyers will each issue an opinion about the legality of the notes for us. Dewey
Ballantine LLP, New York, NY will issue an opinion for the agents or
underwriters. From time to time, Dewey Ballantine LLP acts as counsel to our
affiliates for some matters.
EXPERTS
The financial statements and related financial statement schedule
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
GLOSSARY
Set forth below are definitions of some of the terms used in this
Prospectus.
"Business Day" means any day other than a Saturday or Sunday that (a) is
not a day on which banking institutions in New York, New York, are authorized or
obligated by law or executive order to be closed, and (b) with respect to LIBOR
Notes only, is a day on which dealings in deposits in U.S. dollars are
transacted in the London interbank market.
"Calculation Agent" means the entity we choose to perform the duties
related to interest rate calculation and resets for floating rate notes. The
applicable pricing supplement will identify the Calculation Agent.
"Calculation Date" means the date on which the Calculation Agent
calculates an interest rate for a floating rate note, which will be one of the
following:
"Prime Rate" - tenth day after the related Prime Rate Interest Determination
Date or, if such day is not a Business Day, the next Business Day.
"CD Rate" - tenth day after the related CD Rate Interest Determination Date
or, if such day is not a Business Day, the next Business Day.
"CMT Rate" - tenth day after the related CMT Rate Interest Determination
Date or, if such day is not a Business Day, the next Business Day.
"Commercial Paper Rate" - tenth day after the related Commercial Paper Rate
Interest Determination Date or, if such day is not a Business Day, the next
Business Day.
"LIBOR" - the LIBOR Interest Determination Date.
"Treasury Rate" - tenth day after the related Treasury Rate Interest
Determination Date or, if such day is not a Business Day, the next Day.
"Federal Funds Rate" - tenth day after the related Federal Funds Rate
Interest Determination Date or, if such day is not a Business Day, the next
Business Day.
"Composite Quotations" means the daily statistical release
entitled "Composite 3:30 P.M. Quotations for U.S. Government
Securities," or any successor publication, published by The Federal
Reserve Bank of New York.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable pricing supplement and on the
face of such CMT Rate note (or any other page as may replace such page on that
service) for the purpose of displaying Treasury Constant Maturities as reported
in H.15(519).
"H.15 (519)" means the weekly statistical release entitled "Statistical
Release H.15 (519), Selected Interest Rates," or any successor publication,
published by the Board of Governors of the Federal Reserve System.
"Index Maturity" means, with respect to a floating rate note, the period
to maturity of the note on which the interest rate formula is based, as
indicated in the applicable pricing supplement.
"Interest Determination Date" means the date as of which the interest rate
for a floating rate note is to be calculated, to be effective as of the
following Interest Reset Date and calculated on the related Calculation Date
(except in the case of LIBOR which is calculated on the related LIBOR Interest
Determination Date). The Interest Determination Dates will be indicated in the
applicable pricing supplement and in the note.
"Interest Reset Date" means the date on which a floating rate note will
begin to bear interest at the variable interest rate determined on any Interest
Determination Date. The Interest Reset Dates will be indicated in the applicable
pricing supplement and in the note.
"Money Market Yield" is the yield (expressed as a percentage rounded
upwards, if necessary, to the next higher one-hundred thousandth of a percentage
point) calculated in accordance with the following formula:
Money Market Yield = D X 360 X
---------------
100 360 - (D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period for which interest is being calculated.
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service for the purpose of displaying London interbank offered
rates of major banks).
"Reuters Screen USPRIME1 Page" means the display designated as page
USPRIME1 on the Reuters Monitor Money Rates Service (or such other page as may
replace the USPRIME1 page on that service for the purpose of displaying prime
rates or base lending rates of major U.S. banks).
"Spread" means the number of basis points specified in the applicable
pricing supplement as being applicable to the interest rate for a floating rate
note.
"Spread Multiplier" means the percentage specified in the applicable
pricing supplement as being applicable to the interest rate for a floating rate
note.
"Telerate Page 3750" means the display designated as page "3750" on the
Dow Jones Telerate Service (or such other page as may replace the 3750 page on
that service or such other service or services as may be nominated by the
British Bankers Association for the purpose of displaying London interbank
offered rates of major banks for U.S. dollar deposits).
<PAGE>
Table of Contents
WHERE YOU CAN FIND MORE
INFORMATION .............. 2
THE COMPANY................... 2
PROSPECTUS SUPPLEMENTS........ 3
RATIO OF EARNINGS TO
FIXED CHARGES.............. 3
USE OF PROCEEDS .............. 3
DESCRIPTION OF THE NOTES ..... 3
General .................. 3
Redemptions ............... 4
Remarketed Notes........... 4
Book-Entry Notes - $200,000,000 UNSECURED NOTES
Registration, Transfer,
and Payment of Interest
and Principal........... 4
Note Certificates-
Registration, Transfer, PROSPECTUS
and Payment of Interest
and Principal.......... 5
Interest Rate ............. 6
General ................ 6
Fixed Rate Notes ....... 6 The date of this
Floating Rate Notes: prospectus is October 16, 1998
General.............. 6
Floating Rate Notes:
Date of Interest
Rate Change.......... 6
Floating Rate Notes: When
Interest Rate Is
Determined......... 7
Floating Rate Notes: When
Interest Is Paid... 7
Floating Rate Notes:
Interest Rate
Formulas........... 8
Events of Default...... ..14
Modification of Indenture..15
Consolidation, Merger or
Sale....................15
Legal Defeasance...........15
Covenant Defeasance........15
Governing Law..............15
Concerning the Trustee.....15
PLAN OF DISTRIBUTION..........15
RECENT DEVELOPMENTS...........16
LEGAL OPINIONS................17
EXPERTS.......................17
GLOSSARY......................17
