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PROSPECTUS
$125,000,000
INDIANA MICHIGAN POWER COMPANY
7.60% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
SERIES B, DUE 2038
The Junior Subordinated Deferrable Interest Debentures, Series
B, Due 2038, will mature on June 30, 2038 (the "New Junior
Subordinated Debentures"). Interest on the New Junior Subordinated
Debentures is payable quarterly, in arrears, on each March 31, June
30, September 30 and December 31, commencing June 30, 1998. The
New Junior Subordinated Debentures will be redeemable at 100% of
the principal amount redeemed plus accrued interest to the redemp-
tion date at the option of the Company in whole or in part on or
after May 7, 2003. The New Junior Subordinated Debentures will be
represented by a global debenture registered in the name of a
nominee of The Depository Trust Company, as Depository, and will be
available for purchase in denominations of $25 and any integral
multiple thereof. See "Description of New Junior Subordinated
Debentures" herein.
Payment of the principal of, premium, if any, and interest on
the New Junior Subordinated Debentures is subordinated and subject
in right of payment to the prior payment in full of all Senior
Indebtedness of the Company. As of December 31, 1997, outstanding
Senior Indebtedness of the Company aggregated approximately
$954,600,000.
The New Junior Subordinated Debentures are expected to be
approved for listing on the New York Stock Exchange ("NYSE"),
subject to notice of issuance. Trading of the New Junior
Subordinated Debentures on the NYSE is expected to commence within
a 30-day period after the initial delivery of the New Junior
Subordinated Debentures. See "Underwriting" herein.
SEE "INVESTMENT CONSIDERATIONS" FOR CERTAIN INFORMATION RELE-
VANT TO AN INVESTMENT IN THE NEW JUNIOR SUBORDINATED DEBENTURES,
INCLUDING THE PERIODS AND CIRCUMSTANCES DURING AND UNDER WHICH
PAYMENT OF INTEREST ON THE NEW JUNIOR SUBORDINATED DEBENTURES MAY
BE DEFERRED AND THE RELATED FEDERAL INCOME TAX CONSEQUENCES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Initial Public Underwriting Proceeds to
Offering Price(1) Discount(2)(4) Company(3)(4)
Per New Junior
Subordinated
Debenture ...... 100 % 3.15% 96.85%
Total ........ $125,000,000 $3,937,000 $121,062,000
(1) Plus accrued interest, if any, from the date of original
issuance.
(2) The Company has agreed to indemnify the Underwriters against
certain liabilities, including certain liabilities under the
Securities Act of 1933, as amended. See "Underwriting"
herein.
(3) Before deducting expenses payable by the Company, estimated at
$174,250.
(4) The Underwriting Discount will be 2% of the principal amount
of the New Junior Subordinated Debentures sold to certain
institutions. Therefore, to the extent any such sales are
made to such institutions, the actual total Underwriting Dis-
count will be less than, and the actual total Proceeds to
Company will be greater than, the amounts shown in the table
above.
The New Junior Subordinated Debentures are offered
severally by the Underwriters, subject to prior sale, when, as and
if issued and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It
is expected that delivery of the New Junior Subordinated Debentures
will be made in New York, New York, on or about May 7, 1998.
Merrill Lynch & Co.
Morgan Stanley Dean Witter
Salomon Smith Barney
PaineWebber Incorporated
The date of this Prospectus is May 4, 1998.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE
OF THE NEW JUNIOR SUBORDINATED DEBENTURES OFFERED HEREBY, INCLUDING
BY ENTERING STABILIZING BIDS, PURCHASING NEW SUBORDINATED
DEBENTURES TO COVER SHORT POSITIONS AND IMPOSING PENALTY BIDS. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING" HEREIN.
No dealer, salesperson or other person has been authorized to
give any information or to make any representation not contained in
this Prospectus in connection with the offer made by this Pros-
pectus, and, if given or made, such information or representation
must not be relied upon as having been authorized by the Company or
any underwriter, agent or dealer. This Prospectus does not con-
stitute an offer to sell, or a solicitation of an offer to buy, by
any underwriter, agent or dealer in any jurisdiction in which it is
unlawful for such underwriter, agent or dealer to make such an
offer or solicitation. Neither the delivery of this Prospectus nor
any sale made thereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the
Company since the date hereof or thereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934 (the "1934 Act") and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "SEC"). Such reports and
other information may be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C., 20549; Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois, 60661; and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The SEC maintains a Web site at http://www.sec.gov
containing reports, proxy statements and information statements and
other information regarding registrants that file electronically
with the SEC, including the Company. Certain of the Company's
securities are listed on the New York Stock Exchange, where reports
and other information concerning the Company may also be inspected.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the SEC are
incorporated in this Prospectus by reference:
-- The Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and Form 10-K/A dated April 1, 1998.
All documents subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Prospectus and prior to the termination of the offering made
by this Prospectus shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing
of such documents.
Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modi-
fied or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently
filed document which is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modi-
fied or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom
a copy of this Prospectus has been delivered, on the written or
oral request of any such person, a copy of any or all of the docu-
ments described above which have been incorporated by reference in
this Prospectus, other than exhibits to such documents. Written
requests for copies of such documents should be addressed to Mr. G.
C. Dean, American Electric Power Service Corporation, 1 Riverside
Plaza, Columbus, Ohio 43215 (telephone number: 614-223-1000). The
information relating to the Company contained in this Prospectus
does not purport to be comprehensive and should be read together
with the information contained in the documents incorporated by
reference.
TABLE OF CONTENTS
Page
Available Information. . . . . . . . . . . . . . . . . . . . . 2
Documents Incorporated by Reference. . . . . . . . . . . . . . 2
Table of Contents. . . . . . . . . . . . . . . . . . . . . . . 3
Investment Considerations. . . . . . . . . . . . . . . . . . . 3
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 5
Ratio of Earnings to Fixed Charges . . . . . . . . . . . . . . 5
Description of New Junior Subordinated Debentures. . . . . . . 6
Certain United States Federal Income Tax Consequences. . . . . 16
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . 20
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . 20
INVESTMENT CONSIDERATIONS
Prospective purchasers of New Junior Subordinated Debentures
should carefully review the information contained elsewhere in this
Prospectus and should particularly consider the following matters:
Subordination of New Junior Subordinated Debentures
Payment of the principal of, premium, if any, and interest on
the New Junior Subordinated Debentures is subordinated and subject
in right of payment to the prior payment in full of all Senior
Indebtedness of the Company. As of December 31, 1997, outstanding
Senior Indebtedness of the Company aggregated approximately
$954,600,000. There are no terms in the New Junior Subordinated
Debentures that limit the Company's ability to incur additional
indebtedness, including indebtedness that ranks senior to the New
Junior Subordinated Debentures. See "Description of New Junior
Subordinated Debentures--Subordination" herein.
Option to Extend Interest Payment Period
The Company has the right under the Indenture to extend the
interest payment period from time to time on the New Junior Sub-
ordinated Debentures to a period not exceeding 20 consecutive
quarters and not extending beyond the maturity of the New Junior
Subordinated Debentures, and as a consequence, quarterly interest
payments on the New Junior Subordinated Debentures would be
deferred (but would continue to accrue with interest thereon
compounded quarterly to the extent permitted by law) during any
such extended interest payment period. In the event that the
Company exercises this right, the Company may not declare or pay
dividends on, or purchase, acquire, or make a liquidation payment
with respect to, any of its capital stock, or make any guarantee
payments with respect to the foregoing. Therefore, the Company
believes that the extension of an interest payment period on the
New Junior Subordinated Debentures is unlikely. Prior to the
termination of any such extension period, the Company may further
extend the interest payment period, provided that such extension
period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond
the maturity of the New Junior Subordinated Debentures. Upon the
termination of any extension period and the payment of all accrued
and unpaid interest then due, the Company may select a new
extension period, subject to the above requirements. See
"Description of Junior Subordinated Debentures--Option to Extend
Interest Payment Period" herein.
Should an extended interest payment period occur, holders of
the New Junior Subordinated Debentures will continue to accrue
income (as original issue discount) for United States federal
income tax purposes even though interest is not being paid on a
current basis. As a result, a holder will include such interest in
gross income for United States federal income tax purposes in ad-
vance of the receipt of cash, and will not receive the cash from
the Company related to such income if a holder disposes of New
Junior Subordinated Debentures prior to the record date for payment
of interest. See "Certain United States Federal Income Tax
Consequences--Interest Income and Original Issue Discount" herein.
Certain Trading Characteristics of the New Junior Subordinated
Debentures
The New Junior Subordinated Debentures are expected to trade
as equity securities on the New York Stock Exchange. Consequently,
purchasers will not pay and sellers will not receive any accrued
and unpaid interest on the New Junior Subordinated Debentures that
is not included in the trading price. For certain tax consequences
with respect to such sales, see "Certain United States Federal
Income Tax Consequences--Sale, Exchange and Retirement of New
Junior Subordinated Debentures" herein.
THE COMPANY
The Company is engaged in the generation, purchase, trans-
mission and distribution of electric power to approximately 549,000
customers in northern and eastern Indiana and southwestern
Michigan, and in supplying electric power at wholesale to other
electric utility companies, rural electric cooperatives and
municipalities. Its principal executive offices are located at One
Summit Square, Fort Wayne, Indiana 46801 (telephone number:
219-425-2111). The Company is a subsidiary of American Electric
Power Company, Inc. ("AEP") and is a part of the American Electric
Power integrated utility system (the "AEP System"). The executive
offices of AEP are located at 1 Riverside Plaza, Columbus, Ohio
43215 (telephone number: 614-223-1000).
USE OF PROCEEDS
The Company proposes to use the net proceeds from the sale of
the New Junior Subordinated Debentures to refund directly or
indirectly, its currently outstanding debt and/or cumulative
preferred stock, and for working capital. The Company's First
Mortgage Bonds, Designated Medium Term Notes, 7.80% Series due July
1, 2023 ($20,000,000 principal amount outstanding) may be redeemed
after July 1, 1998 at their regular redemption price of 105.85% of
the principal amount thereof or pursuant to the maintenance and
replacement provisions of its Mortgage and Deed of Trust dated June
1, 1939 or by the use of proceeds of released property or the
proceeds of insurance at 100.00% of the principal amount thereof,
all plus accrued interest to the date of redemption. The Company's
First Mortgage Bonds, 7% due 1998 ($35,000,000 principal amount
outstanding) will mature on May 1, 1998.
The Company estimates that its consolidated construction costs
(inclusive of allowance for funds during construction) for 1998
will be approximately $169,000,000. At March 31, 1998, the Company
had approximately $110,475,000 of short-term indebtedness
outstanding.
RATIO OF EARNINGS TO FIXED CHARGES
Below is set forth the ratio of earnings to fixed charges for
each of the twelve month periods ended December 31, 1993 through
1997:
Twelve Months 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
DESCRIPTION OF NEW JUNIOR SUBORDINATED DEBENTURES
The New Junior Subordinated Debentures will be issued as a new
series of Junior Subordinated Debentures under an Indenture, dated
as of March 1, 1996, between the Company and The First National
Bank of Chicago, as Trustee (the "Trustee"), as heretofore
supplemented and amended and as to be further supplemented
(collectively, the "Indenture"). Section and Article references
used herein are references to provisions of the Indenture unless
otherwise noted.
All Junior Subordinated Deferrable Interest Debentures
(including the New Junior Subordinated Debentures) issued and to be
issued under the Indenture are herein sometimes referred to as
"Junior Subordinated Debentures". Copies of the Indenture,
including the form of Supplemental Indenture pursuant to which each
series of the New Junior Subordinated Debentures will be issued
(the "new Supplemental Indenture") are filed as exhibits to the
Registration Statement.
The following statements include brief summaries of certain
provisions of the Indenture under which Junior Subordinated
Debentures have been issued. Such summaries do not purport to be
complete and reference is made to the Indenture for complete state-
ments of such provisions.
General
The New Junior Subordinated Debentures will be unsecured,
subordinated obligations of the Company. The Indenture does not
limit the aggregate principal amount of Junior Subordinated
Debentures that may be issued thereunder and provides that the
Junior Subordinated Debentures may be issued thereunder from time
to time in one or more series.
The Indenture does not contain any provisions that afford
holders of New Junior Subordinated Debentures protection in the
event of a highly leveraged transaction involving the Company.
Principal Amount, Interest and Maturity
The New Junior Subordinated Debentures will be limited in
aggregate principal amount to $125,000,000.
The New Junior Subordinated Debentures will mature on the date
shown on the cover page hereof and will bear interest at the rate
per annum shown in the title thereof from the date on which the New
Junior Subordinated Debentures are originally issued until the
principal amount thereof becomes due and payable. Interest will be
payable quarterly, in arrears, on each March 31, June 30, September
30 and December 31, commencing June 30, 1998. Interest (other than
interest payable on redemption or maturity) will be payable to the
persons in whose names the New Junior Subordinated Debentures are
registered at the close of business on the relevant regular record
dates, which will be one Business Day (as hereinafter defined)
prior to the relevant payment dates, except that if the New Junior
Subordinated Debentures are no longer represented by a global
debenture, the regular record date for such interest installment
shall be the close of business on March 15, June 15, September 15
or December 15 (regardless of whether it is a Business Day) next
preceding an interest payment date. Interest payable on redemption
or maturity will be payable to the person to whom the principal is
paid. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. In the event that any date on which interest
is payable on the New Junior Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date
will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately pre-
ceding Business Day, in each case with the same force and effect as
if made on such date. A "Business Day" shall mean any day other
than a day on which banking institutions in the Borough of
Manhattan, the City and State of New York are authorized or obli-
gated by law to close.
Redemption
The New Junior Subordinated Debentures will be redeemable at
the option of the Company, in whole or in part, at any time on or
after May 7, 2003, upon not less than 30 nor more than 60 days'
notice, at 100% of the principal amount redeemed together with
accrued and unpaid interest to the redemption date.
Option to Extend Interest Payment Period
The Company shall have the right at any time during the term
of the New Junior Subordinated Debentures from time to time to
extend the interest payment period of the New Junior Subordinated
Debentures for up to 20 consecutive quarters (the "Extension
Period"), at the end of which Extension Period the Company shall
pay all interest accrued and unpaid thereon (together with interest
thereon compounded quarterly at the rate specified for the New
Junior Subordinated Debentures to the extent permitted by applic-
able law); provided that during any such Extension Period, the
Company shall not declare or pay any dividend on, or purchase,
acquire or make a liquidation payment with respect to, any of its
capital stock or make any guarantee payments with respect to the
foregoing. Prior to the termination of any such Extension Period,
the Company may further extend the interest payment period, pro-
vided that such Extension Period together with all such previous
and further extensions thereof, may not exceed 20 consecutive
quarters or extend beyond the maturity of the New Junior Subordi-
nated Debentures. Upon the termination of any Extension Period and
the payment of all accrued and unpaid interest then due, the
Company may select a new Extension Period, subject to the above
requirements. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company shall
give the holders of the New Junior Subordinated Debentures notice
of its selection of such Extension Period at least 10 Business Days
prior to the earlier of (i) the next interest payment date or (ii)
the date the Company is required to give notice to holders of the
New Junior Subordinated Debentures (or, if applicable, to the New
York Stock Exchange or other applicable self-regulatory organiza-
tion) of the record or payment date of such interest payment, but
in any event not less than two Business Days prior to such record
date.
Subordination
The Indenture provides that payment of the principal of, pre-
mium, if any, and interest on Junior Subordinated Debentures is
subordinated and subject in right of payment to the prior payment
in full of all Senior Indebtedness (as defined below) of the Com-
pany as provided in the Indenture. No payment of principal of
(including redemption and sinking fund payments), premium, if any,
or interest on, Junior Subordinated Debentures may be made if pay-
ment of principal, premium, interest or any other payment on any
Senior Indebtedness is not made when due, any applicable grace
period with respect to such default has ended and such default has
not been cured or waived or ceased to exist, or if the maturity of
any Senior Indebtedness has been accelerated because of a default.
Upon any distribution of assets of the Company to creditors upon
any dissolution, winding up, liquidation or reorganization, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership
or other proceedings, all principal of, premium, if any, and
interest due or to become due on, all Senior Indebtedness must be
paid in full before any payment is made on Junior Subordinated
Debentures. Subject to the payment in full of all Senior Indebted-
ness, the rights of the holders of Junior Subordinated Debentures
will be subrogated to the rights of the holders of Senior Indebted-
ness to receive payments or distributions applicable to Senior
Indebtedness until all amounts owing on Junior Subordinated Deben-
tures are paid in full. (Sections 14.01 to 14.04).
The term "Senior Indebtedness" shall mean the principal of,
premium, if any, interest on and any other payment due pursuant to
any of the following, whether outstanding at the date of execution
of the Indenture or thereafter incurred, created or assumed:
(a) all indebtedness of the Company evidenced by notes,
debentures, bonds or other securities sold by the Company for
money or other obligations for money borrowed;
(b) all indebtedness of others of the kinds described in
the preceding clause (a) assumed by or guaranteed in any man-
ner by the Company or in effect guaranteed by the Company; and
(c) all installment purchase agreements entered into by
the Company in connection with revenue bonds issued by an
agency or political subdivision of a state of the United
States of America;
(d) all renewals, extensions or refundings of indebted-
ness of the kinds described in either of the preceding clauses
(a), (b) and (c);
unless, in the case of any particular indebtedness, renewal, exten-
sion or refunding, the instrument creating or evidencing the same
or the assumption or guarantee of the same expressly provides that
such indebtedness, renewal, extension or refunding is not superior
in right of payment to or is pari passu with Junior Subordinated
Debentures. Such Senior Indebtedness shall continue to be Senior
Indebtedness and entitled to the benefits of the subordination pro-
visions irrespective of any amendment, modification or waiver of
any term of such Senior Indebtedness. (Sections 1.01 and 14.08).
The Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued. As of December 31, 1997, Senior
Indebtedness of the Company aggregated approximately $954,600,000.
Covenant of the Company
The Company will not declare or pay any dividend on, or pur-
chase, acquire or make a distribution or liquidation payment with
respect to, any of its capital stock or make any guarantee payments
with respect thereto, if at such time (i) an Event of Default under
the Indenture has occurred and is continuing or (ii) the Company
has given notice of its selection of an Extension Period and such
period, or any extension thereof, is continuing.
Form, Exchange, Registration and Transfer
The New Junior Subordinated Debentures initially will be
issued in registered form and will be represented by a global
debenture (the "Global Debenture"). See "Book-Entry Debentures"
herein. If not represented by one or more global debentures, New
Junior Subordinated Debentures may be presented for registration of
transfer (with the form of transfer endorsed thereon duly executed)
or exchange, at the office of the Debenture Registrar, without ser-
vice charge and upon payment of any taxes and other governmental
charges as described in the Indenture. Such transfer or exchange
will be effected upon the Company or the Debenture Registrar being
satisfied with the documents of title and identity of the person
making the request. The Company has appointed the Trustee as
Debenture Registrar with respect to New Junior Subordinated Deben-
tures. (Section 2.05).
The Company shall not be required to (i) issue, register the
transfer of or exchange any New Junior Subordinated Debenture
during a period beginning at the opening of business 15 days before
the day of the mailing of a notice of redemption of less than all
the outstanding New Junior Subordinated Debentures and ending at
the close of business on the day of such mailing or (ii) register
the transfer of or exchange any New Junior Subordinated Debentures
or portions thereof called for redemption. (Section 2.05).
Payment and Paying Agents
Payment of principal of and premium (if any) on any New Junior
Subordinated Debenture will be made only against surrender to the
Paying Agent of such New Junior Subordinated Debenture. Principal
of and any premium and interest on New Junior Subordinated Deben-
tures will be payable at the office of such Paying Agent or Paying
Agents as the Company may designate from time to time, except that
at the option of the Company payment of any interest may be made by
check mailed to the address of the person entitled thereto as such
address shall appear in the Debenture Register with respect to such
New Junior Subordinated Debentures. See "Principal Amount,
Interest and Maturity" herein.
The Trustee will act as Paying Agent with respect to New
Junior Subordinated Debentures. The Company may at any time desig-
nate additional Paying Agents or rescind the designation of any
Paying Agents or approve a change in the office through which any
Paying Agent acts. (Sections 4.02 and 4.03).
All moneys paid by the Company to a Paying Agent for the pay-
ment of the principal of or premium or interest, if any, on any New
Junior Subordinated Debenture that remain unclaimed at the end of
two years after such principal, premium, if any, or interest shall
have become due and payable, subject to applicable law, will be
repaid to the Company and the holder of such New Junior Subordi-
nated Debenture will thereafter look only to the Company for
payment thereof. (Section 11.04).
Book-Entry Debentures
Except under the circumstances described below, the New Junior
Subordinated Debentures will be issued in whole or in part in the
form of a Global Debenture that will be deposited with, or on be-
half of, The Depository Trust Company, New York, New York ("DTC"),
or such other depository as may be subsequently designated (the
"Depository"), and registered in the name of a nominee of the
Depository.
Book-Entry Debentures represented by a Global Debenture will
not be exchangeable for Certificated Debentures and, except under
the circumstances described below, will not otherwise be issuable
as Certificated Debentures.
So long as the Depository, or its nominee, is the registered
owner of a Global Debenture, such Depository or such nominee, as
the case may be, will be considered the sole owner of the indi-
vidual Book-Entry Debentures represented by such Global Debenture
for all purposes under the Indenture. Payments of principal of and
premium, if any, and any interest on individual Book-Entry Deben-
tures represented by a Global Debenture will be made to the Deposi-
tory or its nominee, as the case may be, as the Owner of such
Global Debenture. Except as set forth below, owners of beneficial
interests in a Global Debenture will not be entitled to have any of
the individual Book-Entry Debentures represented by such Global
Debenture registered in their names, will not receive or be
entitled to receive physical delivery of any such Book-Entry Deben-
tures and will not be considered the Owners thereof under the
Indenture, including, without limitation, for purposes of consen-
ting to any amendment thereof or supplement thereto.
If the Depository is at any time unwilling or unable to con-
tinue as depository and a successor depository is not appointed,
the Company will issue individual Certificated Debentures in
exchange for the Global Debenture representing the corresponding
Book-Entry Debentures. In addition, the Company may at any time
and in its sole discretion determine not to have any New Junior
Subordinated Debentures represented by the Global Debenture and, in
such event, will issue individual Certificated Debentures in ex-
change for the Global Debenture representing the corresponding
Book-Entry Debentures. In any such instance, an owner of a Book-
Entry Debenture represented by a Global Debenture will be entitled
to physical delivery of individual Certificated Debentures equal in
principal amount to such Book-Entry Debenture and to have such
Certificated Debentures registered in his or her name. Individual
Certificated Debentures so issued will be issued as registered
Debentures in denominations of $25 and integral multiples thereof.
DTC has confirmed to the Company and the Underwriters the
following information:
1. DTC will act as securities depository for the Global
Debenture. The New Junior Subordinated Debentures will be
issued as fully-registered securities registered in the name
of Cede & Co. (DTC's partnership nominee). One fully-
registered Global Debenture will be issued for the series of
New Junior Subordinated Debentures, in the aggregate principal
amount of such series, and will be deposited with DTC.
2. DTC is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of
the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of
Section 17A of the 1934 Act. DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also
facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes
in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Partici-
pants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organiza-
tions. DTC is owned by a number of its Direct Participants
and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to
others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to
DTC and its Participants are on file with the SEC.
3. Purchases of New Junior Subordinated Debentures
under the DTC system must be made by or through Direct
Participants, which will receive a credit for the New Junior
Subordinated Debentures on DTC's records. The ownership
interest of each actual purchaser of each New Junior Sub-
ordinated Debenture ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from
DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the trans-
action, as well as periodic statements of their holdings, from
the Direct or Indirect Participant through which the Benefi-
cial Owner entered into the transaction. Transfers of owner-
ship interests in the New Junior Subordinated Debentures are
to be accomplished by entries made on the books of Partici-
pants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their owner-
ship interests in New Junior Subordinated Debentures, except
in the event that use of the book-entry system for the New
Junior Subordinated Debentures is discontinued.
4. To facilitate subsequent transfers, all New Junior
Subordinated Debentures deposited by Participants with DTC are
registered in the name of DTC's partnership nominee, Cede &
Co. The deposit of New Junior Subordinated Debentures with
DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the New Junior Subordinated Deben-
tures; DTC's records reflect only the identity of the Direct
Participants to whose accounts such New Junior Subordinated
Debentures are credited, which may or may not be the Benefi-
cial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their
customers.
5. Conveyance of notices and other communications by
DTC to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Partici-
pants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory require-
ments as may be in effect from time to time.
6. Redemption notices shall be sent to Cede & Co. If
less than all of the New Junior Subordinated Debentures are
being redeemed, DTC's practice is to determine by lot the
amount of the interest of each Direct Participant in such
issue to be redeemed.
7. Neither DTC nor Cede & Co. will consent or vote with
respect to the New Junior Subordinated Debentures. Under its
usual procedures, DTC mails an Omnibus Proxy to the Company as
soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the New Junior Subordi-
nated Debentures are credited on the record date (identified
in a listing attached to the Omnibus Proxy).
8. Principal and interest payments on the New Junior
Subordinated Debentures will be made to DTC. DTC's practice
is to credit Direct Participants' accounts on the date on
which interest is payable in accordance with their respective
holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payment on such date. Pay-
ments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer
form or registered in "street name", and will be the responsi-
bility of such Participant and not of DTC, the Underwriters or
the Company, subject to any statutory or regulatory require-
ments as may be in effect from time to time. Payment of prin-
cipal and interest to DTC is the responsibility of the Company
or the Trustee, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disburse-
ment of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as
securities depository with respect to the New Junior Subordi-
nated Debentures at any time by giving reasonable notice to
the Company and the Trustee. Under such circumstances, in the
event that a successor securities depository is not obtained,
Certificated Debentures are required to be printed and
delivered.
10. The Company may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor
securities depository). In that event, Certificated Deben-
tures will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Company believes to
be reliable, but the Company takes no responsibility for the accu-
racy thereof.
None of the Company, the Trustee or any agent for payment on or
registration of transfer or exchange of any Global Debenture will
have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial interests in
such Global Debenture or for maintaining, supervising or reviewing
any records relating to such beneficial interests.
Modification of the Indenture
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the holders of not less than a
majority in principal amount of Junior Subordinated Debentures of
each series that are affected by the modification, to modify the
Indenture or any supplemental indenture affecting that series or
the rights of the holders of that series of Junior Subordinated
Debentures; provided, that no such modification may, without the
consent of the holder of each outstanding Junior Subordinated
Debenture affected thereby, (i) extend the fixed maturity of any
Junior Subordinated Debentures of any series, or reduce the prin-
cipal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any premium payable upon the
redemption thereof or (ii) reduce the percentage of Junior Subordi-
nated Debentures, the holders of which are required to consent to
any such supplemental indenture. (Section 9.02).
In addition, the Company and the Trustee may execute, without
the consent of any holder of Junior Subordinated Debentures, any
supplemental indenture for certain other usual purposes including
the creation of any new series of Junior Subordinated Debentures.
(Sections 2.01, 9.01 and 10.01).
Events of Default
The Indenture provides that any one or more of the following
described events, which has occurred and is continuing, constitutes
an "Event of Default" with respect to each series of Junior Subor-
dinated Debentures:
(a) failure for 10 days to pay interest on Junior Sub-
ordinated Debentures of that series when due; provided that a
valid extension of the interest payment period by the Company
shall not constitute a default in the payment of interest for
this purpose; or
(b) failure to pay principal or premium, if any, on
Junior Subordinated Debentures of that series when due whether
at maturity, upon redemption, by declaration or otherwise, or
to make payment required by any sinking or analogous fund with
respect to that series; or
(c) failure by the Company to observe or perform any
other covenant (other than those specifically relating to
another series) contained in the Indenture for 90 days after
written notice to the Company from the Trustee or the holders
of at least 25% in principal amount of the outstanding Junior
Subordinated Debentures of that series; or
(d) certain events involving bankruptcy, insolvency or
reorganization of the Company. (Section 6.01).
The Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of any particular series of Junior
Subordinated Debentures may declare the principal due and payable
immediately upon an Event of Default with respect to such series,
but the holders of a majority in aggregate outstanding principal
amount of such series may annul such declaration and waive the
default with respect to such series if the default has been cured
and a sum sufficient to pay all matured installments of interest
and principal otherwise than by acceleration and any premium has
been deposited with the Trustee. (Sections 6.01 and 6.06).
The holders of a majority in aggregate outstanding principal
amount of any series of Junior Subordinated Debentures have the
right to direct the time, method and place of conducting any pro-
ceeding for any remedy available to the Trustee for that series.
(Section 6.06). Subject to the provisions of the Indenture
relating to the duties of the Trustee in case an Event of Default
shall occur and be continuing, the Trustee will be under no obliga-
tion to exercise any of its rights or powers under the Indenture at
the request or direction of any of the holders of the Junior
Subordinated Debentures, unless such holders shall have offered to
the Trustee indemnity satisfactory to it. (Section 7.02).
The holders of a majority in aggregate outstanding principal
amount of any series of Junior Subordinated Debentures affected
thereby may, on behalf of the holders of all Junior Subordinated
Debentures of such series, waive any past default, except a default
in the payment of principal, premium, if any, or interest when due
otherwise than by acceleration (unless such default has been cured
and a sum sufficient to pay all matured installments of interest
and principal otherwise than by acceleration and any premium has
been deposited with the Trustee) or a call for redemption of Junior
Subordinated Debentures of such series. (Section 6.06). The Com-
pany is required to file annually with the Trustee a certificate as
to whether or not the Company is in compliance with all the condi-
tions and covenants under the Indenture. (Section 5.03(d)).
Consolidation, Merger and Sale
The Indenture does not contain any covenant that restricts the
Company's ability to merge or consolidate with or into any other
corporation, sell or convey all or substantially all of its assets
to any person, firm or corporation or otherwise engage in restruc-
turing transactions, provided that the successor corporation as-
sumes due and punctual payment of principal or premium, if any, and
interest on the Junior Subordinated Debentures. (Section 10.01).
Defeasance and Discharge
Under the terms of the Indenture, the Company will be dis-
charged from any and all obligations in respect of the New Junior
Subordinated Debentures (except in each case for certain obliga-
tions to register the transfer or exchange of New Junior Subordi-
nated Debentures, replace stolen, lost or mutilated New Junior
Subordinated Debentures, maintain paying agencies and hold moneys
for payment in trust) if the Company deposits with the Trustee, in
trust, moneys or Governmental Obligations (as defined in the Inden-
ture), or a combination thereof, in an amount sufficient to pay all
the principal of, and interest on, New Junior Subordinated
Debentures of such series on the dates such payments are due in
accordance with the terms of the New Junior Subordinated Deben-
tures. Such defeasance or discharge may occur only if, among other
things, the Company has delivered to the Trustee an Opinion of
Counsel to the effect that the holders of the New Junior Subordi-
nated Debentures will not recognize gain, loss or income for
federal income tax purposes as a result of the satisfaction and
discharge of the Indenture with respect to such series and such
holders will be subject to federal income taxation on the same
amounts and in the same manner and at the same times as if such
satisfaction and discharge had not occurred. (Section 11.01).
Governing Law
The Indenture and New Junior Subordinated Debentures will be
governed by, and construed in accordance with, the laws of the
State of New York. (Section 13.05).
Concerning the Trustee
AEP System companies, including the Company, utilize or may
utilize some of the banking services offered by The First National
Bank of Chicago in the normal course of their businesses. Among
such services are the making of short-term loans, generally at
rates related to the prime commercial interest rate.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Simpson Thacher & Bartlett, tax counsel to
the Company, the following summary accurately describes the United
States federal income tax consequences that may be relevant to the
purchase, ownership and disposition of New Junior Subordinated
Debentures as of the date hereof. It deals only with New Junior
Subordinated Debentures held by initial purchasers who have
purchased New Junior Subordinated Debentures at the initial
offering price thereof and who hold such New Junior Subordinated
Debentures as capital assets and does not deal with special
situations, such as those of dealers in securities or currencies,
financial institutions, life insurance companies, real estate
investment trusts, regulated investment companies, tax-exempt
investors, persons holding New Junior Subordinated Debentures as a
part of a hedging or conversion transaction or a straddle, United
States Holders (as defined below) whose "functional currency" is
not the U.S. dollar, or Non-United States Holders (as defined
below) who own (actually or constructively) ten percent or more of
the combined voting power of all classes of voting stock of the
Company, who are present in the United States or who have any other
special status with respect to the United States. Furthermore, the
discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations,
rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as to
result in federal income tax consequences different from those
discussed below. Persons considering the purchase, ownership or
disposition of New Junior Subordinated Debentures should consult
their own tax advisors concerning the federal income tax
consequences in light of their particular situations as well as any
consequences arising under the laws of any other taxing
jurisdiction.
United States Holders
As used herein, a "United States Holder" of a New Junior
Subordinated Debenture means a holder that is a citizen or resident
of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or
any political subdivision thereof, an estate the income of which is
subject to United States federal income taxation regardless of its
source or any trust if a court within the United States is able to
exercise primary supervision over the administration of the trust
and one or more United States persons as defined in Section
7701(a)(30) of the Code have the authority to control all
substantial decisions of the trust. A "Non-United States Holder"
is a holder that is not a United States Holder.
Interest Income and Original Issue Discount
The Company believes that, under the applicable Treasury
regulations, the New Junior Subordinated Debentures will not be
treated as issued with "original issue discount" ("OID") within the
meaning of section 1273(a) of the Code. Accordingly, except as set
forth below, stated interest on a New Junior Subordinated Debenture
will generally be taxable to a United States Holder as ordinary
income at the time it is paid or accrued in accordance with the
United States Holder's method of accounting for tax purposes.
If, however, the Company exercises its right to defer payments
of interest on the New Junior Subordinated Debentures, the New
Junior Subordinated Debentures will become OID instruments at such
time and all United States Holders of the New Junior Subordinated
Debentures will be required to accrue the stated interest on the
New Junior Subordinated Debentures on a daily economic accrual
basis (using the constant yield-to-maturity method of accrual
described in section 1272 of the Code) during the Extension Period
even though the Company will not pay such interest until the end of
the Extension Period, and even though some United States Holders
may use the cash method of tax accounting. Moreover, thereafter
the New Junior Subordinated Debentures will be taxed as OID
instruments for as long as they remain outstanding. Thus, even
after the end of an Extension Period, all United States Holders
would be required to continue to include the stated interest on the
New Junior Subordinated Debentures (and any de minimis OID) in
income on a daily economic accrual basis, regardless of their
method of tax accounting and in advance of receipt of the cash
attributable to such interest income. Under the OID economic
accrual rules, a United States Holder would accrue an amount of
interest income each year that approximates the stated interest
payments called for under the terms of the New Junior Subordinated
Debentures, and actual cash payments of interest payments on the
New Junior Subordinated Debentures would not be reported separately
as taxable income.
The Treasury regulations described above have not yet been
addressed in any rulings or other interpretations by the Internal
Revenue Service ("IRS"), and it is possible that the IRS could take
a contrary position. If the IRS were to assert successfully that
the stated interest on the New Junior Subordinated Debentures was
OID regardless of whether the Company exercises its option to defer
payments of interest on such debentures, all United States Holders
of New Junior Subordinated Debentures would be required to include
such stated interest in income on a daily economic accrual basis as
described above.
Sale, Exchange and Retirement of New Junior Subordinated Debentures
Upon the sale, exchange or retirement of a New Junior
Subordinated Debenture, a United States Holder will recognize gain
or loss equal to the difference between the amount realized upon
the sale, exchange or retirement (except to the extent that such
amount realized is characterized as a payment in respect of accrued
but unpaid interest on such United States Holder's New Junior
Subordinated Debentures that such United States Holder has not
included in income previously) and the adjusted tax basis of the
New Junior Subordinated Debenture. A United States Holder's tax
basis in a New Junior Subordinated Debenture will, in general, be
the United States Holder's cost therefor, increased by any OID
previously included in income by the United States Holder and
reduced by any cash payments in respect of such accrued OID on the
New Junior Subordinated Debenture. Such gain or loss will be
capital gain or loss and will be long-term capital gain or loss if
at the time of sale, exchange or retirement the New Junior
Subordinated Debenture has been held for more than one year.
Capital gains of individuals derived with respect to capital assets
held for more than one year are eligible for reduced rates of
taxation depending upon the holding period of such capital assets.
United States Holders should consult their own tax advisors
regarding the capital gains rates applicable to them. The
deductibility of capital losses is subject to limitations.
Non-United States Holders
Under present United States federal income and estate tax law,
and subject to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax
will be required with respect to the payment by the Company or
any Paying Agent of principal or interest (which for purposes
of this discussion includes OID) on a New Junior Subordinated
Debenture owned by a Non-United States Holder, provided (i)
the beneficial owner is not a controlled foreign corporation
that is related to the Company through stock ownership, (ii)
the beneficial owner is not a bank whose receipt of interest
on a New Junior Subordinated Debenture is described in section
881(c)(3)(A) of the Code and (iii) either (y) the beneficial
owner certifies to the Company or its agent, under the
penalties of perjury, that it is not a United States person,
citizen or resident and provides its name and address or (z)
a financial institution holding the New Junior Subordinated
Debentures on behalf of the beneficial owner certifies, under
penalties of perjury, that such statement has been received by
it and furnishes the Company or its agent with a copy thereof;
(b) no withholding of United States federal income tax
will be required with respect to any gain or income realized
by a Non-United States Holder upon the sale, exchange or
retirement of a New Junior Subordinated Debenture; and
(c) a New Junior Subordinated Debenture beneficially
owned by an individual who at the time of death is a Non-
United States Holder will not be subject to United States
federal estate tax as a result of such individual's death,
provided that the interest payments with respect to such
debenture would not have been, if received at the time of such
individual's death, effectively connected with the conduct of
a trade or business by such individual in the United States.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to
certain payments of principal, interest and OID paid on New Junior
Subordinated Debentures and to the proceeds of sale of a New Junior
Subordinated Debenture made to United States Holders other than
certain exempt recipients (such as corporations). A 31 percent
backup withholding tax will apply to such payments if the United
States Holder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report
in full dividend and interest income.
No information reporting or backup withholding will be
required with respect to payments made by the Company or any paying
agent to Non-United States Holders if a statement described in
(a)(iii) under "Non-United States Holders" has been received and
the payor does not have actual knowledge that the beneficial owner
is a United States person.
Payments of the proceeds from the sale by a Non-United States
Holder of a New Junior Subordinated Debenture made to or through a
foreign office of a broker will not be subject to information
reporting or backup withholding, except that if the broker is, for
federal income tax purposes, a United States person, a controlled
foreign corporation or a foreign person that derives 50 percent or
more of its gross income for certain periods from the conduct of a
trade or business in the United States, such payments will not be
subject to backup withholding but may be subject to information
reporting. Payments of proceeds from the sale of a New Junior
Subordinated Debenture to or through the United States office of a
broker is subject to information reporting and backup withholding
unless the Non-United States Holder or the beneficial owner
certifies as to its non-United States status or otherwise
establishes an exemption.
Any amounts withheld under the backup withholding rules will
be allowed as a refund or a credit against such holder's U. S.
federal income tax liability provided the required information is
furnished to the IRS.
New Withholding Regulations
On October 6, 1997, the Treasury Department issued new
regulations (the "New Regulations") which make certain
modifications to the withholding, backup withholding and
information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for
payments made after December 31, 1999, subject to certain
transition rules. Prospective investors are urged to consult their
own tax advisors regarding the New Regulations.
LEGAL OPINIONS
Opinions with respect to the legality of New Junior Subordi-
nated Debentures will be rendered by Simpson Thacher & Bartlett,
425 Lexington Avenue, New York, New York, and 1 Riverside Plaza,
Columbus, Ohio, counsel for the Company, and by Dewey Ballantine,
LLP, 1301 Avenue of the Americas, New York, New York, counsel for
the Underwriters. Additional legal opinions in connection with the
offering of New Junior Subordinated Debentures may be given by
Thomas G. Berkemeyer or Ann B. Graf, counsel for the Company. Mr.
Berkemeyer is Assistant General Counsel, and Ms. Graf is a Senior
Attorney, in the Legal Department of American Electric Power
Service Corporation, a wholly owned subsidiary of AEP. From time
to time, Dewey Ballantine LLP acts as counsel to affiliates of the
Company in connection with certain matters.
Statements as to United States taxation in the Prospectus
under the caption, "Certain United States Federal Income Tax
Consequences" have been passed upon for the Company by Simpson
Thacher & Bartlett, counsel to the Company, and are stated herein
on their authority.
EXPERTS
The financial statements and the 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.
UNDERWRITING
Subject to the terms and conditions set forth in the Under-
writing Agreement, the Company has agreed to sell to each of the
Underwriters named below ("Underwriters"), and each of the Under-
writers has severally agreed to purchase the number of New Junior
Subordinated Debentures set forth opposite its name below:
Principal
Amount of
New Junior
Subordinated
Underwriters Debentures
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . $ 26,875,000
Morgan Stanley & Co. Incorporated . . . . . . . . . 26,875,000
PaineWebber Incorporated . . . . . . . . . . . . . . 26,875,000
Smith Barney Inc. . . . . . . . . . . . . . . . . . 26,875,000
Robert W. Baird & Co. Incorporated . . . . . . . . . 1,250,000
BT Alex. Brown Incorporated . . . . . . . . . . . . 1,250,000
ABN AMRO Incorporated . . . . . . . . . . . . . . . 1,250,000
CIBC Oppenheimer Corp. . . . . . . . . . . . . . . . 1,250,000
Cowen & Company . . . . . . . . . . . . . . . . . . 1,250,000
Dain Rauscher Incorporated . . . . . . . . . . . . . 1,250,000
A.G. Edwards & Sons, Inc. . . . . . . . . . . . . . 1,250,000
EVEREN Securities, Inc. . . . . . . . . . . . . . . 1,250,000
Legg Mason Wood Walker, Incorporated . . . . . . . . 1,250,000
Piper Jaffray Inc. . . . . . . . . . . . . . . . . . 1,250,000
Raymond James & Associates, Inc. . . . . . . . . . . 1,250,000
The Robinson-Humphrey Company, LLC . . . . . . . . . 1,250,000
Tucker Anthony Incorporated. . . . . . . . . . . . . 1,250,000
Wheat First Securities, Inc. . . . . . . . . . . . . 1,250,000
TOTAL . . . . . . . . . . . . . . . . . $125,000,000
The Underwriters are committed to take and pay for all of the
New Junior Subordinated Debentures, if any are taken. The Under-
writing Agreement provides that under certain circumstances
involving a default of Underwriters, less than all of the New
Junior Subordinated Debentures may be purchased.
The Company has been advised by the Underwriters that the
Underwriters propose initially to offer the New Junior Subordinated
Debentures to the public at the public offering price set forth on
the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of 2% of the principal amount
of the New Junior Subordinated Debentures. The Underwriters may
allow, and such dealers may reallow, a discount not in excess of
1.2% of the principal amount of the New Junior Subordinated
Debentures to certain other dealers. After the initial public
offering, the public offering price, concession and reallowance may
be changed.
The New Junior Subordinated Debentures are a new issue of
securities with no established trading market. The New Junior
Subordinated Debentures are expected to be approved for listing on
the NYSE, subject to notice of issuance. Trading of the New Junior
Subordinated Debentures on the NYSE is expected to commence within
a thirty-day period after initial delivery of the New Junior
Subordinated Debentures. The Company has been advised by the
Underwriters that they intend to make a market in the New Junior
Subordinated Debentures, but are not obligated to do so and may
discontinue market making at any time without notice. No assurance
can be given as to the liquidity of the trading market for the New
Junior Subordinated Debentures.
The Underwriters, and certain affiliates thereof, engage in
transactions with and perform services for the Company and its
affiliates in the ordinary course of business.
The Company has agreed to indemnify the Underwriters against
certain liabilities, including certain liabilities under the
Securities Act of 1933.
In connection with this offering and in compliance with
applicable law and industry practice, the Underwriters may
overallot or effect transactions which stabilize, maintain or
otherwise affect the market price of the New Junior Subordinated
Debentures at levels above those which might otherwise prevail in
the open market, including by entering stabilizing bids, purchasing
New Junior Subordinated Debentures to cover syndicate short
positions and imposing penalty bids. A stabilizing bid means the
placing of any bid, or the effecting of any purchase, for the
purpose of pegging, fixing or maintaining the price of a security.
Covering a syndicate short position means placing a bid or
effecting a purchase of a security on behalf of the underwriting
syndicate to reduce the short position created in connection with
the offering. Imposing a penalty bid means purchasing a security
in the open market to reduce the underwriting syndicate's short
position or to stabilize the price of the security and in
connection therewith reclaiming the amount of the selling
concession from the underwriters and selling group members who sold
such securities as part of the offering.
In general, purchases of a security for the purpose of
stabilization or to reduce a syndicate short position could cause
the price of the security to be higher than it might be in the
absence of such purchases. The imposition of a penalty bid might
also have an effect on the price of a security to the extent that
it were to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of
any effect that the transactions described above may have on the
price of the New Junior Subordinated Debentures. In addition,
neither the Company nor any of the Underwriters makes any
representation that the Underwriters will engage in such
transactions or that such transactions once commenced, will not be
discontinued without notice.
The Underwriters, and certain affiliates thereof, engage in
transactions with, and from time to time have performed services
for, the Company and its affiliates in the ordinary course of
business.
