Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
AMERICAN ELECTRIC POWER COMPANY, INC.
(Exact name of registrant as specified in its charter)
New York 13-4922640
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
AEP CAPITAL TRUST I
AEP CAPITAL TRUST II
AEP CAPITAL TRUST III
(Exact name of registrant as specified in its charter)
Delaware [TO BE APPLIED FOR]
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[TO BE APPLIED FOR]
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[TO BE APPLIED FOR]
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 Riverside Plaza
Columbus, Ohio 43215
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 223-1000
ARMANDO A. PENA, Treasurer
JEFFREY D. CROSS, Senior Vice President and General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza
Columbus, Ohio 43215
(614) 223-1580
(Names, addresses and telephone numbers, including
area code, of agents for service)
It is respectfully requested that the Commission send copies
of all notices, orders and communications to:
Simpson Thacher & Bartlett Dewey Ballantine LLP
425 Lexington Avenue 1301 Avenue of the Americas
New York, NY 10017-3909 New York, NY 10019-6092
Attention: James M. Cotter Attention: E. N. Ellis, IV
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of the Registration Statement.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED
PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING
BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(b) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(c)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
CALCULATION OF REGISTRATION FEE
============================== =================== =================== ======================= ========================
Proposed Proposed
Title of Each Class Maximum Maximum
Of Securities Amount to be Offering Price Aggregate Amount of
to be Registered Registered(1) Per Unit* Offering Price* Registration Fee(4)
------------------------------ ------------------- ------------------- ----------------------- ------------------------
Senior Notes 100%
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Common Stock, par value
$6.50 per share
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Junior Subordinated
Debentures 100%
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Trust Preferred Securities
and Related Guarantees(2) 100%
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Stock Purchase Contracts
------------------------------ ------------------- ------------------- ----------------------- ------------------------
Stock Purchase Units(3)
------------------------------ ------------------- ------------------- ----------------------- ------------------------
Total $3,000,000,000 $3,000,000,000 $276,000
============================== =================== =================== ======================= ========================
*Estimated solely for purposes of calculating the registration fee.
(1) There are being registered hereunder such presently indeterminate principal
amount or number of Senior Notes, shares of Common Stock, Junior
Subordinated Debentures, Trust Preferred Securities and related Guarantees,
Stock Purchase Contracts and Stock Purchase Units with an aggregate initial
offering price not to exceed $3,000,000,000. We may refer to Senior Notes
and Junior Subordinated Debentures collectively herein as "Debt
Securities". Debt Securities also may be issued to a trust in connection
with the issuance and sale of Trust Preferred Securities and later
distributed upon dissolution and distribution of the assets thereof, which
would include such Debt Securities for which no separate consideration will
be received. An indeterminate number of shares of Common Stock may also be
issued upon settlement of the Stock Purchase Contracts or Stock Purchase
Units. Pursuant to Rule 457(o) under the Securities Act of 1933, and
General Instruction II.D. of Form S-3, which permits the registration fee
to be calculated on the basis of the maximum aggregate offering price of
all the securities listed, the table does not specify by each class
information as to the amount to be registered, proposed maximum offering
price per unit or proposed maximum aggregate offering price.
(2) Includes the obligations of American Electric Power Company, Inc. under the
respective trust agreements, the applicable indenture, the related series
of Debt Securities and the respective Guarantees, which include its
covenant to pay any indebtedness, expenses or liabilities of the trusts
(other than obligations pursuant to the terms of the Trust Preferred
Securities or other similar interests), all as described in this
registration statement. No separate consideration will be received for the
Guarantees and, pursuant to Rule 457(n) under the Securities Act of 1933,
no separate fee is payable in respect thereof.
(3) Each Stock Purchase Unit consists of (a) a Stock Purchase Contract, under
which the holder, upon settlement, will purchase an indeterminate number of
shares of Common Stock and (b) a beneficial interest in either Debt
Securities, Trust Preferred Securities or debt obligations of third
parties, including U.S. Treasury securities, purchased with the proceeds
from the sale of the Stock Purchase Units. Each beneficial interest will be
pledged to secure the obligation of such holder to purchase such shares of
Common Stock. No separate consideration will be received for the Stock
Purchase Contracts or the related beneficial interests.
(4) The aggregate filing fee for all the securities registered will be
$276,000.
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL 11, 2002
PROSPECTUS
$3,000,000,000
AMERICAN ELECTRIC POWER COMPANY, INC.
1 RIVERSIDE PLAZA
COLUMBUS, OHIO 43215
(614) 223-1000
SENIOR NOTES
COMMON STOCK
JUNIOR SUBORDINATED DEBENTURES
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
AEP CAPITAL TRUST I
AEP CAPITAL TRUST II
AEP CAPITAL TRUST III
TRUST PREFERRED SECURITIES
Guaranteed as described herein by
AMERICAN ELECTRIC POWER COMPANY, INC.
TERMS OF SALE
This prospectus contains summaries of the general terms of the
securities. You will find the specific terms of these securities, and the manner
in which they are being offered, in supplements to this prospectus. You should
read this prospectus and the available prospectus supplement carefully before
you invest.
The common stock of American Electric Power Company, Inc. is listed on
the New York Stock Exchange under the symbol "AEP". The last reported sale of
the common stock on the New York Stock Exchange on March 31, 2002 was $46.09 per
share.
In this prospectus, unless the context indicates otherwise, the words
"we", "ours" and "us" refer to American Electric Power Company, Inc. and its
consolidated subsidiaries. "Trusts" refer to AEP Capital Trust I, AEP Capital
Trust II and AEP Capital Trust III.
INVESTING IN THESE SECURITIES INVOLVES RISKS. SEE THE SECTION ENTITLED "RISK
FACTORS" BEGINNING ON PAGE 2 FOR MORE INFORMATION.
THE SECURITIES HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
("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_________________, 2002.
THE COMPANY
We are a public utility holding company that owns, directly or
indirectly, all of the outstanding common stock of our domestic electric utility
subsidiaries and varying degrees of other subsidiaries. Substantially all of our
operating revenues derive from the furnishing of electric service. In addition,
in recent years we have been pursuing various unregulated business opportunities
in the U.S. and worldwide. We were incorporated under the laws of New York in
1906 and reorganized in 1925. Our principal executive offices are located at 1
Riverside Plaza, Columbus, Ohio 43215, and our telephone number is (614)
223-1000.
We own, directly or indirectly, all the outstanding common stock of the
following operating public utility companies: Appalachian Power Company, Central
Power and Light Company ("CPL"), Columbus Southern Power Company ("CSP"),
Indiana Michigan Power Company ("I&M"), Kentucky Power Company, Kingsport Power
Company, Ohio Power Company ("OPCo"), Public Service Company of Oklahoma
("PSO"), Southwestern Electric Power Company ("SWEPCo"), West Texas Utilities
Company ("WTU") and Wheeling Power Company. These operating public utility
companies supply electric service in portions of Arkansas, Indiana, Kentucky,
Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West
Virginia. We also own all of the outstanding common stock of American Electric
Power Service Corporation, which provides accounting, administrative,
information systems, engineering, financial, legal, maintenance and other
services to us and our subsidiaries.
PROSPECTUS SUPPLEMENTS
We will provide information to you about the securities in up to three
separate documents that progressively provide more detail: (a) this prospectus
provides general information some of which may not apply to your securities, (b)
the accompanying prospectus supplement provides more specific terms of your
securities, and (c) the pricing supplement, if any, provides the final terms of
your securities. It is important for you to consider the information contained
in this prospectus, the prospectus supplement, and the pricing supplement, if
any, in making your investment decision.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW AS WELL AS
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE BUYING THE SECURITIES
REGISTERED HEREIN. THESE ARE RISKS WE CONSIDER TO BE MATERIAL TO YOUR DECISION
WHETHER TO INVEST IN OUR SECURITIES AT THIS TIME. THERE MAY BE RISKS THAT YOU
VIEW IN A DIFFERENT WAY THAN WE DO, AND WE MAY OMIT A RISK THAT WE CONSIDER
IMMATERIAL, BUT YOU CONSIDER IMPORTANT. IF ANY OF THE FOLLOWING RISKS OCCUR, OUR
BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY
HARMED. IN THAT CASE, THE VALUE OR TRADING PRICE OF THE SECURITIES REGISTERED
HEREIN COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR ENERGY TRADING AND WHOLESALE BUSINESSES
o Our revenues and results of operations are subject to market risks
that are beyond our control.
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We sell power from our generation facilities into the spot market or
other competitive power markets or on a contractual basis. We also enter into
contracts to purchase and sell electricity, natural gas and coal as part of our
power marketing and energy trading operations. With respect to such
transactions, we are not guaranteed any rate of return on our capital
investments through mandated rates, and our revenues and results of operations
are likely to depend, in large part, upon prevailing market prices for power in
our regional markets and other competitive markets. These market prices may
fluctuate substantially over relatively short periods of time. It is reasonable
to expect that trading margins may erode as markets mature and that there may be
diminished opportunities for gain should volatility decline. In addition, the
Federal Energy Regulatory Commission (the "FERC"), which has jurisdiction over
wholesale power rates, as well as independent system operators that oversee some
of these markets, may impose price limitations, bidding rules and other
mechanisms to address some of the volatility in these markets. Fuel prices may
also be volatile, and the price we can obtain for power sales may not change at
the same rate as changes in fuel costs. These factors could reduce our margins
and therefore diminish our revenues and results of operations.
Volatility in market prices for fuel and power may result from:
- weather conditions;
- seasonality;
- power usage;
- illiquid markets;
- transmission or transportation constraints or inefficiencies;
- availability of competitively priced alternative energy sources;
- demand for energy commodities;
- natural gas, crude oil and refined products, and coal production
levels;
- natural disasters, wars, embargoes and other catastrophic events; and
- federal, state and foreign energy and environmental regulation and
legislation.
o Our energy trading (including fuel procurement and power marketing)
and risk management policies cannot eliminate the risk associated with
these activities.
Our energy trading (including fuel procurement and power marketing)
activities expose us to risks of commodity price movements. We attempt to manage
our exposure through enforcement of established risk limits and risk management
procedures. These risk limits and risk management procedures may not always be
followed or may not work as planned and cannot eliminate the risks associated
with these activities. As a result, we cannot predict the impact that our energy
trading and risk management decisions may have on our business, operating
results or financial position.
We routinely have open trading positions in the market, within
established guidelines, resulting from the management of our trading portfolio.
To the extent open trading positions exist, fluctuating commodity prices can
improve or diminish our financial results and financial position.
Our energy trading and risk management activities, including our power
sales agreements with counterparties, rely on projections that depend heavily on
judgments and assumptions by
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management of factors such as the future market prices and demand for power and
other energy-related commodities. These factors become more difficult to predict
and the calculations become less reliable the further into the future these
estimates are made. Even when our policies and procedures are followed and
decisions are made based on these estimates, results of operations may be
diminished if the judgments and assumptions underlying those calculations prove
to be wrong or inaccurate. Our policies and procedures do not typically require
us to hedge the multitude of new trading positions taken daily in these
activities.
o Parties with whom we have contracts may fail to perform their
obligations, which could harm our results of operations.
We are exposed to the risk that counterparties that owe us money or
energy will breach their obligations. Should the counterparties to these
arrangements fail to perform, we may be forced to enter into alternative hedging
arrangements or honor underlying commitments at then-current market prices that
may exceed our contractual prices, which would cause our financial results to be
diminished and we might incur losses. Although our estimates take into account
the expected probability of default by a counterparty, our actual exposure to a
default by a counterparty may be greater than the estimates predict if defaults
by counterparties exceed our estimates.
o We rely on electric transmission facilities that we do not own or
control. If these facilities do not provide us with adequate
transmission capacity, we may not be able to deliver our wholesale
electric power to our customers.
We depend on transmission facilities owned and operated by other power
companies to deliver the power we sell at wholesale. This dependence exposes us
to a variety of risks. If transmission is disrupted, or transmission capacity is
inadequate, we may not be able to sell and deliver our wholesale products. If a
region's power transmission infrastructure is inadequate, our recovery of
wholesale costs and profits may be limited. If restrictive transmission price
regulation is imposed, the transmission companies may not have sufficient
incentive to invest in expansion of transmission infrastructure.
The FERC has issued electric and gas transmission initiatives that
require electric and gas transmission services to be offered unbundled from
commodity sales. Although these initiatives are designed to encourage wholesale
market transactions for electricity and gas, access to transmission systems may
in fact not be available if transmission capacity is insufficient because of
physical constraints or because it is contractually unavailable. We also cannot
predict whether transmission facilities will be expanded in specific markets to
accommodate competitive access to those markets.
o We do not fully hedge against price changes in commodities.
We routinely enter into contracts to purchase and sell electricity,
natural gas and coal as part of our power marketing and energy trading
operations and to procure fuel. In connection with these trading activities, we
routinely enter into financial contracts, including futures and options,
over-the counter options, swaps and other derivative contracts. These activities
expose us to risks from price movements. If the values of the financial
contracts change in a manner we do not
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anticipate, it could harm our financial position or reduce the financial
contribution of our trading operations.
We manage our exposure by establishing risk limits and entering into
contracts to offset some of our positions (i.e., to hedge our exposure to
demand, market effects of weather and other changes in commodity prices).
However, we do not always hedge the entire exposure of our operations from
commodity price volatility. To the extent we do not hedge against commodity
price volatility, our results of operations and financial position may be
improved or diminished based upon our success in the market.
RISKS RELATED TO OUR REGULATED BUSINESS
AND EVOLVING REGULATION
o We operate in a non-uniform and fluid regulatory environment.
AEP is subject to regulation by the SEC under the Public Utility
Holding Company Act of 1935 ("PUHCA"). The rates charged by the domestic utility
subsidiaries are approved by the FERC and the eleven state utility commissions.
The FERC regulates wholesale electricity operations and transmission rates and
the state commissions regulate retail generation and distribution rates. The
prices charged by foreign subsidiaries located in the UK, Australia, China,
Mexico and Brazil are regulated by the authorities of those respective countries
and are generally subject to price controls. Seven of the eleven states retail
jurisdictions in which our domestic electric utilities operate have enacted
restructuring legislation. The restructuring legislation of two of the seven
states, Texas and Ohio, require the legal separation of generation and related
assets and liabilities from the other utility assets and liabilities of the
electric utilities in those states. Once legal separation occurs in Texas and
Ohio, approximately one half of our domestic generation will not be regulated by
state utility commissions as to rates. The remaining five states of the seven
that have enacted restructuring legislation contemplate some level of regulatory
reform without currently requiring legal separation of assets. Our utility
operations in the four state retail jurisdictions that have not enacted any
restructuring legislation currently plan to adhere to the vertically-integrated
utility model with cost recovery through regulated rates.
Our business plan is based on the regulatory framework as described and
assumes that deregulated generation will not be re-regulated. There can be no
assurance that the states that have pursued restructuring will not reverse such
policies; nor can there be assurance that the states that have not enacted
restructuring legislation will not do so in the future. In addition to the
multiple levels of regulation at the state level in which we operate, our
business is subject to extensive federal regulation. There can be no assurance
that recent federal legislative and regulatory initiatives which have generally
facilitated competition in the energy sector will continue or will not be
reversed. Critical press coverage of supply problems and price volatility in the
California power markets--a state which enacted restructuring legislation in
favor of competition--as well as critical press coverage of the bankruptcy of
Enron Corp. would suggest that conditions for additional deregulation may not be
favorable.
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Further alteration of the regulatory landscape in which we operate will
impact the effectiveness of our business plan and may, because of the continued
uncertainty, harm our financial condition and results of operations.
RISKS RELATING TO STATE RESTRUCTURING
o We have limited ability to pass on to our customers our costs of
production.
We are exposed to risk from changes in the market prices of coal and
natural gas used to generate power where generation is no longer regulated or
where existing fuel clauses are suspended or frozen. The protection afforded by
retail fuel clause recovery mechanisms has been eliminated by the implementation
of customer choice in Ohio (effective January 1, 2001) and in the Electric
Reliability Council of Texas ("ERCOT") area of Texas (effective January 1,
2002). We expect that there may be similar risks should customer choice be
similarly implemented in other states. Because the risk of fuel price increases,
increased environmental compliance costs and generating unit outage cannot be
passed through to customers during the transition period in Ohio and only
partially in Texas upon regulatory approval, we retain these risks.
The protection afforded by fuel clause recovery mechanisms has been
frozen by settlement agreements currently in place in Indiana (through March 1,
2004, subject to extension) and Michigan (through January 1, 2004). To the
extent all of the fuel supply of the generating units in these states are not
under fixed price long-term contracts we are subject to market price risk. We
continue to be protected against market price changes by active fuel clauses in
Oklahoma, Arkansas, Louisiana, Kentucky, Virginia (through the transition to
competition on July 1, 2007) and the Southwest Power Pool ("SPP") area of Texas
(until the implementation of restructuring). A fuel clause in West Virginia has
been suspended per a settlement reached in a state restructuring proceeding.
However, as restructuring has not been implemented in West Virginia, the fuel
clause may be reactivated.
Ohio: Until the transition to full market competition is complete in
Ohio on December 31, 2005, our Ohio regulated utility subsidiaries there are
required to provide power at capped rates, which may be below current market
rates, to retail customers that do not choose an alternative power generation
supplier. To satisfy this default service obligation, these regulated utility
subsidiaries will source power from our to-be-formed power marketing affiliate
("PMA"), under contract. The power sales agreements PMA will have with our Ohio
regulated utilities have a fixed price, which may have little or no relationship
to the cost of supplying this power. This means that our PMA will absorb the
risk of fuel and power price increases, increased costs of environmental
compliance and generating unit outage. Following the transition, it is
anticipated that the PMA will no longer be obligated to sell to the Ohio
regulated subsidiaries, permitting it to sell power previously committed to
serving this obligation at market rates.
Texas: Under Texas restructuring, beginning January 1, 2002, all retail
electric customers in the ERCOT region will purchase electricity from retail
electric providers ("REPs"). Each restructured utility in Texas has an
obligation to organize a REP which will provide electricity to customers located
in the restructured utility's former franchise area ("Affiliate REPs"). All
Affiliate REPs must offer fixed rates for electricity referred to as the Price
to Beat ("PTB") to
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customers of less than 1 MW peak demand who do not choose an alternative
supplier during a transition period from 2002 through 2006. The PTB may be below
current market rates. The fuel cost component of an Affiliate REPs' PTB will be
permitted prospective adjustment twice a year based upon changes in a natural
gas price index. We currently own two Affiliate REPs that will provide PTB
service in the former franchise area of our regulated utilities situated in the
ERCOT area of Texas. Because the Affiliate REPs must sell at fixed PTB rates to
eligible customers, our Affiliate REPs will absorb the risk of fuel and power
price increases, increased costs of environmental compliance and generating unit
outage, subject to the biannual prospective fuel cost adjustment. AEP has
established a separate REP that provides electric service to customers of
greater than 1MW peak demand throughout Texas. In addition, AEP has established
a REP that offers provider-of-last-resort ("POLR") service to customers both
inside and outside the former franchise area of our regulated utilities. POLR
service is provided to customers when they cannot obtain service from another
REP including the Affiliate REP providing PTB service. Our POLR REP provides
service at fixed rates to customers of greater than 1MW demand in the franchise
area of our regulated utilities and to PTB customers in their service territory
of an unaffiliated utility. Our PMA may enter into agreements to sell power to
our REP and Affiliate REPs and such agreements may assume the risk of fuel price
increases, increased costs of environmental compliance and generating unit
outage--however, if that were the case, on a consolidated basis, we would still
retain such risks. Following the transition, all REPs and Affiliate REPs will be
permitted to sell to retail customers at market rates. Although currently
delayed, it is anticipated that the foregoing framework will be extended to the
SPP area of Texas in a similar fashion.
o The default service, price to beat and provider-of-last-resort
obligations do not restrict customers from switching suppliers of
power.
Those default service, PTB and POLR customers that we serve in Ohio and
Texas may choose to purchase power from alternative suppliers. Should they
choose to switch from us, our sales of power may decrease. Customers originally
choosing alternative suppliers may switch to our default service, PTB or POLR
obligations. This may increase demand above our facilities' available capacity.
Thus, any such switching by customers could have an adverse effect on our
results of operations and financial position. Conversely, to the extent the
power sold by the PMA to meet the default service, PTB or POLR obligations could
have been sold to third parties at more favorable wholesale prices, we will have
incurred potentially significant lost opportunity costs.
o Some laws and regulations governing restructuring of the wholesale
generation market in Oklahoma, Arkansas, Virginia and West Virginia
have not yet been interpreted or adopted and could harm our business,
operating results and financial condition.
While the electric restructuring laws in Oklahoma, Arkansas, Virginia
and West Virginia established the general framework governing the retail
electric market, the laws required the utility commission in each state to issue
rules and determinations implementing the laws. Some of the regulations
governing the retail electric market have not yet been adopted by the utility
commission in each state. These laws, when they are interpreted and when the
regulations are developed and adopted, may harm our business, results of
operations and financial condition. In June 2001, Oklahoma enacted legislation
delaying competition indefinitely. In Virginia, the law requires APCo to make
compliance filings with the Virginia State Corporation Commission ("VSCC") to
implement the law. APCo's compliance filing is pending but we are unable to
predict the outcome of the VSCC's review of our filing. It is possible that the
VSCC could limit APCo's ability to transfer generation assets in connection with
corporate separation. The West Virginia legislature approved electricity
restructuring; however, the West Virginia Public Service Commission ("WVPSC")
cannot implement the restructuring plan until the legislature makes tax law
changes necessary to preserve the revenues of state and local governments. We
cannot predict the timing of the passage of such legislation. Therefore, it is
also possible that the legislation could be revisited. We cannot predict the
impact of such a development.
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o Recovery of deferred fuel balances and stranded costs
According to Texas restructuring legislation, fuel cost in Texas after
2001 will no longer be subject to the Public Utility Commission of Texas
("PUCT") review and reconciliation. During 2002 CPL and WTU will file final fuel
reconciliations with the PUCT to reconcile their fuel costs through the period
ending December 31, 2001. The ultimate recovery of deferred fuel balances at
December 31, 2001 will be decided as part of PUCT-required true-up proceedings
in 2004. If the final under-recovered fuel balances or any amounts incurred but
not yet reconciled are disallowed, it would harm our financial condition and
diminish our results of operations.
As a part of restructuring in Texas, electric utilities are allowed to
recover stranded generation costs including generation-related regulatory
assets. CPL included regulatory assets not approved for securitization in its
request for recovery of $1.1 billion of stranded costs. In a 1997 CPL PUCT rate
proceeding, $800 million of nuclear unit costs included in property, plant and
equipment-electric and regulatory assets on the consolidated balance sheets was
determined to be excess cost over market ("ECOM"). The PUCT provided for a lower
return on ECOM assets and ECOM assets are being amortized on an accelerated
basis for rate-making purposes.
After hearings on the issue of stranded costs in a proceeding to
establish restructured rates for CPL, the PUCT ruled in October 2001 that its
current estimate of CPL's stranded costs was negative $615 million. The final
amount of stranded costs will be established by the PUCT in a 2004 true-up
proceeding. If our total stranded costs determined in the 2004 true-up are less
than the amount of securitized regulatory assets, the PUCT can implement an
offsetting credit to transmission and distribution rates charged of the CPL
transmission and distribution utility. An offsetting credit, if imposed, would
limit our recovery of regulatory assets and may harm our results of operations.
Management believes that CPL will have stranded costs in 2004, and that
the current treatment of excess earnings will be amended at that time. CPL has
appealed the PUCT's estimate of stranded costs and refund of excess earnings to
the Travis County District Court. Unaffiliated parties also appealed the PUCT's
refund order contending the entire $615 million of negative stranded costs
should be refunded presently. Management is unable to predict the outcome of
this litigation. An unfavorable ruling would diminish our results of operations,
cash flows and possibly financial condition.
o The FERC and/or the SEC may not approve the corporate separation plans
we have submitted to comply with the unbundling laws enacted in Texas
and Ohio.
Seven of the eleven state retail jurisdictions in which our domestic
electric utility companies operate have enacted restructuring legislation. In
general, the legislation provides for a transition from cost-based regulation of
bundled electric service to customer choice and market pricing for the supply of
power. Texas and Ohio have each enacted laws that generally require the legal
separation of previously vertically integrated electric utilities into
non-regulated and regulated components. We have filed requests with the FERC and
SEC to complete our corporate separation unbundling restructuring plan to
separate our regulated and non-regulated businesses. Significant portions of
those requests incorporate the unbundling plans which have been approved in
Texas and Ohio to bring our utility companies that operate in those states into
compliance with their respective restructuring laws.
8
Certain industrial and wholesale customers and state utility commissions have
intervened to oppose our corporate separation filings at the FERC. A settlement
agreement has been reached in the FERC proceeding with a majority of the active
intervenors, including all state utility commissions. The agreement was filed
with the FERC in December 2001 to obtain final approval. We believe that the
agreement meets the requirements of the FERC and expect the matter to be
resolved favorably. We can give no assurance, however, that the FERC and/or the
SEC will approve the action necessary to complete the corporate separations.
Failure to approve may limit our ability to efficiently operate our business.
In addition, while not a condition to implementation of corporate
separation, we are seeking to exempt our deregulated generation assets in Ohio
and Texas from regulation as utilities under PUHCA. This generation comprises
about one half of our domestic generation. To obtain this exemption, each of the
eleven state utility commissions in which we operate must make certain findings
regarding the impact of the exemption in their respective states. The SEC and
the FERC must also act before the exemption is granted. We believe we will
obtain all necessary approvals for the exemption; we can give no assurance,
however, that the states, the FERC, the SEC and/or the relevant state utility
commissions will approve the action necessary. Failure to do so may limit our
ability to maximize the return on our deregulated generation assets.
o We may not be able to respond effectively to competition.
We may not be able to respond in a timely or effective manner to the
many changes in the power industry that may occur as a result of regulatory
initiatives to increase competition. These regulatory initiatives may include
deregulation of the electric utility industry in some markets and privatization
of the electric utility industry in others. To the extent that competition
increases, our profit margins may be negatively affected. Industry deregulation
and privatization may not only continue to facilitate the current trend toward
consolidation in the utility industry but may also encourage the disaggregation
of other vertically integrated utilities into separate generation, transmission
and distribution businesses. As a result, additional competitors in our industry
may be created, and we may not be able to maintain our revenues and earnings
levels or pursue our growth strategy.
While demand for power is generally increasing throughout the United
States, the rate of construction and development of new, more efficient electric
generation facilities may exceed increases in demand in some regional electric
markets. The start-up of new facilities in the regional markets in which we have
facilities could increase competition in the wholesale power market in those
regions, which could harm our business, results of operations and financial
condition. Also, industry restructuring in regions in which we have substantial
operations could affect our operations in a manner that is difficult to predict,
since the effects will depend on the form and timing of the restructuring.
GENERAL RISKS OF OUR REGULATED OPERATIONS
o We are exposed to nuclear generation risk.
9
Through I&M and CPL, we have interests in four nuclear generating
units, which interests equal 2,740 MW, or 7% of our generation capacity. We are,
therefore, also subject to the risks of nuclear generation, which include the
following:
- the potential harmful effects on the environment and human health
resulting from the operation of nuclear facilities and the storage,
handling and disposal of radioactive materials;
- limitations on the amounts and types of insurance commercially
available to cover losses that might arise in connection with our
nuclear operations or those of others in the United States;
- uncertainties with respect to contingencies and assessment amounts if
insurance coverage is inadequate; and
- uncertainties with respect to the technological and financial aspects
of decommissioning nuclear plants at the end of their licensed lives.
The Nuclear Regulatory Commission ("NRC") has broad authority under
federal law to impose licensing and safety-related requirements for the
operation of nuclear generation facilities. In the event of non-compliance, the
NRC has the authority to impose fines or shut down a unit, or both, depending
upon its assessment of the severity of the situation, until compliance is
achieved. Revised safety requirements promulgated by the NRC could necessitate
substantial capital expenditures at nuclear plants such as ours. In addition,
although we have no reason to anticipate a serious nuclear incident at our
plants, if an incident did occur, it could harm our results of operations or
financial condition. A major incident at a nuclear facility anywhere in the
world could cause the NRC to limit or prohibit the operation or licensing of any
domestic nuclear unit.
o The different regional power markets in which we compete or will
compete in the future have changing transmission regulatory structures,
which could affect our performance in these regions.
Our results are likely to be affected by differences in the market and
transmission regulatory structures in various regional power markets. Problems
or delays that may arise in the formation and operation of new regional
transmission organizations, or "RTOs", may restrict our ability to sell power
produced by our generating capacity to certain markets if there is insufficient
transmission capacity otherwise available. The rules governing the various
regional power markets may also change from time to time which could affect our
costs or revenues. Because it remains unclear which companies will be
participating in the various regional power markets, or how RTOs will develop or
what regions they will cover, we are unable to assess fully the impact that
these power markets may have on our business.
We are participating with four unaffiliated utilities in the formation
of the Alliance RTO. In 2001 the Alliance companies and MISO entered into a
settlement addressing transmission pricing and other "seam" issues between the
two RTOs. On December 19, 2001 the FERC approved the proposal of the MISO for a
regional transmission organization and instructed the Alliance companies, which
had submitted a separate RTO proposal, to explore joining the MISO organization.
The FERC's order is intended to facilitate the establishment of a single RTO in
the Midwest and support the establishment of viable for-profit transmission
companies under an RTO umbrella. In its order, the FERC concluded that the
proposed Alliance RTO lacks sufficient scope
10
to exist as a stand-alone RTO and directed the Alliance companies to explore how
their business plan can be accommodated within MISO.
Management is unable to predict the outcome of these transmission
regulatory actions and proceedings or their impact on the timing and operation
of RTOs, our transmission operations or future results of operations and cash
flows.
o We are subject to regulation under the Public Utility Holding Company
Act of 1935.
Our system is subject to the jurisdiction of the SEC under PUHCA. The
rules and regulations under PUHCA impose a number of restrictions on the
operations of registered holding company systems. These restrictions include a
requirement that the SEC approve in advance securities issuances, sales and
acquisitions of utility assets, sales and acquisitions of securities of utility
companies and acquisitions of other businesses. PUHCA also generally limits the
operations of a registered holding company to a single integrated public utility
system, plus additional energy-related businesses. PUHCA rules limit the
dividends that our subsidiaries may pay from unearned surplus.
o Our merger with CSW may ultimately be found to violate PUHCA.
We acquired CSW in a merger completed on June 15, 2000. Among the more
significant assets we acquired as a result of the merger were four additional
domestic electric utility companies - CPL, PSO, SWEPCo and WTU. On January 18,
2002, the U.S. Court of Appeals for the District of Columbia ruled that the
SEC's June 14, 2000 order approving the merger failed to properly find that the
merger meets the requirements of PUHCA and sent the case back to the SEC for
further review. Specifically, the court told the SEC to revisit its conclusion
that the merger met PUHCA's requirement that the electric utilities be
"physically interconnected" and confined to a "single area or region."
We believe that the merger meets the requirements of PUHCA and expect
the matter to be resolved favorably. We intend to fully cooperate with the staff
of the SEC in supplementing the record, if necessary, to ensure the merger
complies with PUHCA. We can give no assurance, however, that: (i) the SEC or any
applicable court review will find that the merger complies with PUHCA, or (ii)
the SEC or any applicable court review will not impose material adverse
conditions on us in order to find that the merger complies with PUHCA. If the
merger were ultimately found to violate PUHCA, it may require us to take
remedial actions or divest assets which may harm our results of operations or
financial condition.
RISKS RELATED TO MARKET, ECONOMIC
OR INTERNATIONAL FINANCIAL VOLATILITY
o We are subject to risks associated with a changing economic
environment.
In response to the occurrence of several recent events, including the
September 11, 2001 terrorist attack on the United States, the ongoing war
against terrorism by the United States, and the bankruptcy of Enron Corp., the
financial markets have been disrupted in general, and the availability and cost
of capital for our business and that of our competitors has been at least
11
temporarily harmed. In addition, following the bankruptcy of Enron Corp., the
credit ratings agencies initiated a thorough review of the capital structure and
earnings power of energy companies, including us. These events could constrain
the capital available to our industry and could limit our access to funding for
our operations. Our business is capital intensive, and achievement of our growth
targets is dependent, at least in part, upon our ability to access capital at
rates and on terms we determine to be attractive. If our ability to access
capital becomes significantly constrained, our interest costs will likely
increase and our financial condition could be harmed and future results of
operations could be significantly harmed.
The insurance industry has also been disrupted by these events. As a
result, the availability of insurance covering risks we and our competitors
typically insure against may decrease. In addition, the insurance we are able to
obtain may have higher deductibles, higher premiums and more restrictive policy
terms.
o A downgrade in our credit rating could negatively affect our ability to
access capital and/or to operate our power and gas trading businesses.
Standard & Poor's and Moody's rate our senior, unsecured debt at BBB+
and Baa1, respectively. If Moody's or Standard & Poor's were to downgrade our
long-term rating, particularly below investment grade, our borrowing costs would
increase which would diminish our financial results. In addition, we would
likely be required to pay a higher interest rate in future financings, and our
potential pool of investors and funding sources could decrease. Further, if our
short-term rating were to fall below P-2 or A-2, the current ratings assigned by
Standard & Poor's and Moody's, respectively, it would significantly limit our
access to the commercial paper market.
Our power and gas trading businesses rely on the investment grade
ratings (with respect to senior, unsecured debt) of our public utility
subsidiaries and us, respectively. Most of our counterparties require the
creditworthiness of an investment grade entity to stand behind transactions. If
our rating or those of our public utility subsidiaries were to decline below
investment grade, our ability to profitably operate our power and gas trading
businesses would be diminished because we would likely have to deposit cash or
cash related instruments which would reduce our profits.
o Our operating results may fluctuate on a seasonal and quarterly basis.
Electric power generation is generally a seasonal business. In many
parts of the country, demand for power peaks during the hot summer months, with
market prices also peaking at that time. In other areas, power demand peaks
during the winter. As a result, our overall operating results in the future may
fluctuate substantially on a seasonal basis. The pattern of this fluctuation may
change depending on the nature and location of facilities we acquire and the
terms of power sale contracts we enter into. In addition, we have historically
sold less power, and consequently earned less income, when weather conditions
are milder. We expect that unusually mild weather in the future could diminish
our results of operations and harm our financial condition.
o Changes in technology may significantly affect our business by making
our power plants less competitive.
12
A key element of our business model is that generating power at central
power plants achieves economies of scale and produces power at relatively low
cost. There are other technologies that produce power, most notably fuel cells,
microturbines, windmills and photovoltaic (solar) cells. It is possible that
advances in technology will reduce the cost of alternative methods of producing
power to a level that is competitive with that of most central power station
electric production. If this were to happen and if these technologies achieved
economies of scale, our market share could be eroded, and the value of our power
plants could be reduced. Changes in technology could also alter the channels
through which retail electric customers buy power, thereby harming our financial
results.
o Risks of doing business outside the United States
We currently own and may acquire and/or dispose of material
energy-related investments and projects outside the United States. The economic
and political conditions in certain countries where we have interests or in
which we may explore development, acquisition or investment opportunities
present risks of delays in construction and interruption of business, as well as
risks of war, expropriation nationalization, renegotiation, trade sanctions or
nullification of existing contracts and changes in law or tax policy, that are
greater than in the United States. The uncertainty of the legal environment in
certain foreign countries in which we develop or acquire projects or make
investments could make it more difficult to obtain non-recourse project or other
financing on suitable terms, could adversely affect the ability of certain
customers to honor their obligations with respect to such projects or
investments and could impair our ability to enforce our rights under agreements
relating to such projects or investments.
Operations in foreign countries also can present currency exchange rate
and convertibility, inflation and repatriation risk. In certain countries in
which we develop or acquire projects, or make investments, economic and monetary
conditions and other factors could affect our ability to convert our earnings
denominated in foreign currencies to United States dollars or other hard
currencies or to move funds offshore from such countries. Furthermore, the
central bank of any such country may have the authority in certain circumstances
to suspend, restrict or otherwise impose conditions on foreign exchange
transactions or to approve distributions to foreign investors. Although we
intend to structure our power purchase agreements, joint venture agreements and
other project revenue agreements to provide for payments or contributions to be
made in, or indexed to, United States dollars or a currency freely convertible
into United States dollars, there can be no assurance that we will be able to
achieve this structure in all cases or that a power purchaser or other customer
will be able to obtain sufficient United States dollars or other hard currency
or that available United States dollars will be allocated to pay such
obligations or make such contributions.
o Changes in commodity prices may increase our cost of producing power
or decrease the amount we receive from selling power, harming our
financial performance.
We are heavily exposed to changes in the price and availability of coal
because most of our generating capacity is coal-fired. We have contracts of
varying durations for the supply of coal for most of our existing generation
capacity, but as these contracts end, we may not be able to purchase coal on
terms as favorable as the current contracts.
13
We also own natural gas-fired facilities, which increases our exposure
to the more volatile market prices of natural gas.
Changes in the cost of coal or natural gas and changes in the
relationship between those costs and the market prices of power will affect our
financial results. Since the price we obtain for electricity may not change at
the same rate as the change in coal or natural gas costs, we may be unable to
pass on the changes in costs to our customers. In addition, the price we can
charge our retail customers in some jurisdictions are capped and our fuel
recovery mechanisms in other states are frozen for various periods of time.
In addition, actual power prices and fuel costs will differ from those
assumed in financial projections used to initially value our trading and
marketing transactions, and those differences may be material. As a result, our
financial results may be diminished in the future as those transactions are
marked to market.
o At times, demand for power could exceed our supply capacity.
We are currently obligated to supply power in parts of eleven states.
From time to time the demand for power required to meet these obligations could
exceed our available generation capacity. If this occurs, we would have to buy
power on the market. We may not always have the ability to pass these costs on
to our customers because some of the states we operate in do not allow us to
increase our rates in response to increased fuel cost charges. Since these
situations most often occur during periods of peak demand, it is possible that
the market price for power at that time would be very high. Unlike the cooler
weather over the summer of 2000, the hotter-than-normal summer of 1999 saw
market prices for power in regions in which certain of our regulated utility
subsidiaries have supply obligations peak in excess of $5,000 per megawatt hour.
Utilities that did not own or purchase sufficient available capacity during
those periods incurred significant losses in sourcing incremental power. Even if
a supply shortage was brief, we could suffer substantial losses that could
diminish our results of operations.
RISKS RELATED TO ENVIRONMENTAL REGULATION
o Our costs of compliance with environmental laws are significant, and
the cost of compliance with future environmental laws could harm our
cash flow and profitability.
Our operations are subject to extensive federal, state and local
environmental statutes, rules and regulations relating to air quality, water
quality, waste management, natural resources and health and safety. Compliance
with these legal requirements requires us to commit significant capital toward
environmental monitoring, installation of pollution control equipment, emission
fees and permits at all of our facilities. These expenditures have been
significant in the past and we expect that they will increase in the future.
Costs of compliance with environmental regulations could harm our industry, our
business and our results of operations and financial position, especially if
emission and/or discharge limits are tightened, more extensive permitting
requirements are imposed, additional substances become regulated and the number
and types of assets we operate increase.
14
o We anticipate that we will incur considerable capital costs for
compliance.
Most of our generating capacity is coal burning. We plan to install new
emissions control equipment and may be required to upgrade existing equipment,
purchase emissions allowances or reduce operations. We expect to spend
approximately $1.6 billion in connection with the installation of emission
control equipment at our facilities to comply with the new NOx rule (of which
approximately $450 million has already been expended), the Section 126 Rule and
certain environmental requirements of Texas. Moreover, environmental laws are
subject to change, which may materially increase our costs of compliance or
accelerate the timing of these capital expenditures. Our compliance strategy,
although reasonably based on the information available to us today, may not
successfully address the relevant standards and interpretations of the future.
o Governmental authorities may assess penalties on us for failures to
comply with environmental laws and regulations.
If we fail to comply with environmental laws and regulations, even if
caused by factors beyond our control, that failure may result in the assessment
of civil or criminal penalties and fines against us. Recent lawsuits by the EPA
and various states filed against us highlight the environmental risks faced by
generating facilities, in general, and coal-fired generating facilities, in
particular.
Since 1999, we have been involved in litigation regarding generating
plant emissions under the Clean Air Act. Federal EPA and a number of states
alleged that we and eleven unaffiliated utilities modified certain units at
coal-fired generating plants in violation of the Clean Air Act. Federal EPA
filed complaints against certain AEP subsidiaries in U.S. District Court for the
Southern District of Ohio. A separate lawsuit initiated by certain special
interest groups was consolidated with the Federal EPA case. The alleged
modification of the generating units occurred over a 20 year period.
If these actions are resolved against us, substantial modifications of
our existing coal-fired power plants would be required. In addition, we could be
required to invest significantly in additional emission control equipment,
accelerate the timing of capital expenditures, pay penalties and/or halt
operations. Moreover, our results of operations and financial position could be
reduced due to the consequent distraction of management and the expense of
ongoing litigation.
Other parties have settled similar lawsuits. An unaffiliated utility
which operates certain plants jointly owned by CSPCo reached a tentative
agreement to settle litigation regarding generating plant emissions under the
Clean Air Act. Negotiations are continuing and a settlement could impact the
operation of certain of the jointly owned plants. Until a final settlement is
reached, CSPCo will be unable to determine the settlement's impact on its
jointly owned facilities and its future results of operations and cash flows.
o We are unlikely to be able to pass on the cost of environmental
compliance to our customers.
Most of our contracts with wholesale customers do not permit us to
recover additional capital and other costs incurred by us to comply with new
environmental regulations. Due to the deregulation
15
of generation in Texas, Ohio and Virginia, we cannot recover through rates
additional capital and other costs incurred by us to comply with new
environmental regulations with respect to our generation previously regulated in
those jurisdictions. As a result of rate freezes in effect in Michigan and
Indiana (expiring January 1, 2005) we generally cannot recover through rates
additional capital and other costs incurred by us to comply with new
environmental regulations with respect to our generation subject to those
jurisdictions. A settlement currently on file with the FERC in connection with
our corporate separation proceeding would extend Indiana's rate freeze through
2007.
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, 1997 2.22
December 31, 1998 2.25
December 31, 1999 2.14
December 31, 2000 1.59
December 31, 2001 2.23
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.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we and the trusts
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 Room at 450 Fifth Street, N. W., Washington, D.C. 20549.
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 or at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
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 document 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 securities registered herein.
Annual Report on Form 10-K for the year ended December 31, 2001.
16
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 securities 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.
USE OF PROCEEDS
The net proceeds from the sale of any of the offered securities will be
used for general corporate purposes relating to our business. Unless stated
otherwise in a prospectus supplement, these purposes include redeeming or
repurchasing outstanding debt, replenishing working capital, financing our
subsidiaries' ongoing construction and maintenance programs. If we do not use
the net proceeds immediately, we temporarily invest them in short-term,
interest-bearing obligations. At December 31, 2001, our outstanding short-term
debt was $3,155,000,000.
The prospectus supplement of a particular offering of securities will
identify the use of proceeds for the offering. The proceeds from the sale of
Trust Preferred Securities by a trust will be invested in Debt Securities issued
by us. Except as we may otherwise describe in the related prospectus supplement,
we expect to use the net proceeds of the sale of such Debt Securities to the
applicable trust for the above purposes.
THE TRUSTS
AEP Capital Trust I, AEP Capital Trust II and AEP Trust III (each a
"trust") are statutory business trusts created under the Delaware Business Trust
Act pursuant to amended and restated declarations of trust, among AEP,
Wilmington Trust Company, as the Property Trustee and Delaware Trustee and two
employees of AEP as Administrative Trustees. In this prospectus, we refer to
these declarations as the trust agreements.
Each trust exists solely to:
- issue and sell its Trust Preferred Securities and Trust Common
Securities (the "Trust Securities");
- use the proceeds from the sale of its Trust Securities to purchase and
hold a series of our Debt Securities;
- maintain its status as a grantor trust for federal income tax purposes;
and
- engage in other activities that are necessary or incidental to these
purposes.
17
We will purchase all of the Trust Common Securities. The Trust Common
Securities will represent an aggregate liquidation amount equal to at least 3%
of the total capital of the trust. Payments will be made on the Trust Common
Securities PRO RATA with the Trust Preferred Securities, except that the Trust
Common Securities' right to payment will be subordinated to the rights of the
Trust Preferred Securities if there is a default under the trust agreement
resulting from an event of default under the applicable indenture.
We will guarantee the Trust Preferred Securities as described later in
this prospectus.
Each trust's business and affairs will be conducted by its
Administrative Trustees, as set forth in the trust agreement. The office of the
Delaware Trustee in the State of Delaware is 1100 North Market Street,
Wilmington, Delaware 19890. The trust's offices are located at 1 Riverside
Plaza, Columbus, Ohio 43215; the telephone number is (614) 223-1000.
ACCOUNTING TREATMENT OF TRUSTS
For financial reporting purposes, the trusts will be treated as our
subsidiaries and, accordingly, the accounts of the trusts will be included in
our consolidated financial statements. The Trust Preferred Securities will be
presented as a separate line item in our consolidated balance sheet, and
appropriate disclosures concerning the Trust Preferred Securities, the
Guarantees, the Senior Notes and the junior subordinated debentures will be
included in the notes to the consolidated financial statements. For financial
reporting purposes, we will record distributions payable on the Trust Preferred
Securities as an expense.
DESCRIPTION OF THE SENIOR NOTES
GENERAL
We will issue the Senior Notes directly to the public, to a trust or as
part of a Stock Purchase Unit, under an Indenture dated May 1, 2001 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, you should review the Indenture and any supplemental indentures or
company orders that we have filed or will 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 5 Penn Plaza, New York, New York.
The Indenture does not limit the amount of Senior Notes that may be
issued. The Indenture permits us to issue Senior 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 Senior Notes may
differ as to their terms. The Indenture also gives us the ability to reopen a
previous issue of a series of Senior Notes and issue additional Senior Notes of
such series.
Because we are a holding company, the claims of creditors of our
subsidiaries will have a priority over our equity rights and the rights of our
creditors (including the holders of the Senior Notes) to participate in the
assets of the subsidiary upon the subsidiary's liquidation.
18
The Senior Notes are unsecured and will rank equally with all our
unsecured unsubordinated debt. For current information on our debt outstanding
see our most recent Form 10-K and 10-Q. See WHERE YOU CAN FIND MORE INFORMATION.
A prospectus supplement or pricing supplement will include the final
terms for each Senior Note. If we decide to list upon issuance any Senior Note
or Senior Notes on a securities exchange, a prospectus supplement or pricing
supplement will identify the exchange and state when we expect trading could
begin. The following terms of the Senior Notes that we may sell at one or more
times will be established in the applicable pricing or prospectus supplement:
- Maturity
- Fixed or floating interest rate
- Remarketing features
- Certificate or book-entry form
- Redemption
- Not convertible, amortized or subject to a sinking fund
- Interest paid on fixed rate Senior Notes quarterly or semi-annually
- Interest paid on floating rate Senior Notes monthly, quarterly,
semi-annually, or annually
- Issued in multiples of a minimum denomination
- Ability to defer payment of interest
- Any other terms not inconsistent with the Indenture
- Issued with Original Issue Discount
The Senior 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 Senior Notes will not be subject to
any conversion, amortization, or sinking fund. We expect that the Senior Notes
issued to the public will be "book-entry," represented by a permanent global
Senior Note registered in the name of The Depository Trust Company, or its
nominee. We reserve the right, however, to issue Senior Note certificates
registered in the name of the Senior Noteholders.
The interest rate and interest and other payment dates of each series
of Senior Notes issued to a trust will correspond to the rate at which
distributions will be paid and the distribution and other payment dates of the
Trust Preferred Securities.
In the discussion that follows, whenever we talk about paying principal
on the Senior 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 Indenture does not protect holders of the Senior Notes if we engage
in a highly leveraged transaction.
The following terms may apply to each Senior Note as specified in the
applicable pricing or prospectus supplement and the Senior Note:
19
REDEMPTIONS
If we issue redeemable Senior Notes, we may redeem such Senior 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 Senior Notes in whole or in part by delivering written
notice to the Senior Noteholders no more than 60, and not less than 30, days
prior to redemption. If we do not redeem all the Senior Notes of a series at one
time, the Trustee selects the Senior Notes to be redeemed in a manner it
determines to be fair.
REMARKETED NOTES
If we issue Senior Notes with remarketing features, an applicable
pricing or prospectus supplement will describe the terms for the Senior Notes
including: interest rate, remarketing provisions, our right to purchase or
redeem Senior Notes, the holders' right to tender Senior Notes, and any other
provisions.
NOTE CERTIFICATES-REGISTRATION, TRANSFER, AND PAYMENT OF INTEREST AND PRINCIPAL
Unless otherwise indicated in the applicable prospectus supplement,
each series of Senior Notes issued to the public will be issued initially in the
form of one or more global notes, in registered form, without coupons, as
described under BOOK-ENTRY SYSTEM. However, if we issue Senior Note
certificates, they will be registered in the name of the Senior Noteholder. The
Senior 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 to public holders of Senior Note certificates will be made by check.
ORIGINAL ISSUE DISCOUNT
We may issue the Senior Notes at an original issue discount, bearing no
interest or bearing interest at a rate that, at the time of issuance, is below
market rate, to be sold at a substantial discount below their stated principal
amount. Generally speaking, if the Senior Notes are issued at an original issue
discount and there is an event of default or acceleration of their maturity,
holders will receive an amount less than their principal amount. Tax and other
special considerations applicable to original issue discount debt will be
described in the prospectus supplement in which we offer those Senior Notes.
INTEREST RATE
The interest rate on the Senior 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 Senior 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 Senior 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.
20
For a discussion of our ability to defer interest payments on the
Senior Notes, see DESCRIPTION OF TRUST PREFERRED SECURITIES--OPTION TO EXTEND
INTEREST PAYMENT PERIOD.
FIXED RATE SENIOR NOTES
A pricing or prospectus supplement will designate the record dates,
payment dates, our ability to defer interest payments and the fixed rate of
interest payable on a Senior 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
Each floating rate Senior Note will have an interest rate formula. The
applicable prospectus supplement or pricing supplement will state the initial
interest rate or interest rate formula on each Senior Note effective until the
first interest reset date. The applicable pricing or prospectus supplement will
state the method and dates on which the interest rate will be determined, reset
and paid.
EVENTS OF DEFAULT
The following are events of default under the Indenture with respect to
any series of Senior Notes, unless we state otherwise in the applicable
prospectus supplement:
- failure to pay for three business days the principal of (or premium, if
any, on) any Senior Note of a series when due and payable;
- failure to pay for 30 days any interest on any Senior Note of any
series when due and payable;
- failure to perform any other requirements in such Senior Notes, or in
the Indenture in regard to such Senior Notes, for 90 days after notice;
- certain events of our bankruptcy or insolvency; or
- any other event of default specified in a series of Senior Notes.
An event of default for a particular series of Senior Notes does not
necessarily mean that an event of default has occurred for any other series of
Senior 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 Senior Notes of the series affected may require us to repay the entire
principal of the Senior Notes of such series immediately ("Repayment
Acceleration"). In most instances, the holders of at least a majority in
aggregate principal amount of the Senior 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. For a discussion of
remedies in the event Senior Notes are issued to a trust, see DESCRIPTION OF
TRUST PREFERRED SECURITIES--ENFORCEMENT OF CERTAIN RIGHTS OF HOLDERS OF TRUST
PREFERRED SECURITIES.
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The Trustee must within 90 days after a default occurs, notify the
holders of the Senior 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 Senior 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 Senior Notes.
MODIFICATION OF INDENTURE
Under the Indenture, our rights and obligations and the rights of the
holders of any Senior Notes may be changed. Any change affecting the rights of
the holders of any series of Senior Notes requires the consent of the holders of
not less than a majority in aggregate principal amount of the outstanding Senior
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 Senior 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 Senior Noteholders.
CONSOLIDATION, MERGER OR SALE
We may merge or consolidate with any entity or sell substantially all
of our assets as an entirety as long as the successor or purchaser (i) is
organized and existing under the laws of the United States, any state thereof or
the District of Columbia and (ii) expressly assumes the payment of principal,
premium, if any, and interest on the Senior Notes.
LEGAL DEFEASANCE
We will be discharged from our obligations on the Senior 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 Senior Note of the
series, and
- we deliver to the Trustee an opinion of counsel stating that the
federal income tax obligations of Senior Noteholders of that series
will not change as a result of our performing the action described
above.
If this happens, the Senior Noteholders of the series will not be
entitled to the benefits of the Indenture except for registration of transfer
and exchange of Senior Notes and replacement of lost, stolen or mutilated Senior
Notes.
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COVENANT DEFEASANCE
We will be discharged from our obligations under any restrictive
covenant applicable to the Senior 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 Senior
Notes of that series. In that instance, we would remain liable for such amounts.
GOVERNING LAW
The Indenture and Senior 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. The Trustee is also the
Subordinated Indenture Trustee under the Subordinated Indenture relating to the
Junior Subordinated Debentures.
DESCRIPTION OF COMMON STOCK
Our authorized capital stock currently consists of 600,000,000 shares
of common stock, par value $6.50 per share. 322,235,005 shares of our common
stock were issued and outstanding as of December 31, 2001. Our common stock,
including the common stock offered in this prospectus once issued, is listed on
the New York Stock Exchange. First Chicago Trust Company of New York, P.O. Box
2500, Jersey City, New Jersey 07303-2500, is the transfer agent and registrar
for our common stock.
DIVIDEND RIGHTS
The holders of our common stock are entitled to receive the dividends
declared by our board of directors provided funds are legally available for such
dividends. Our income derives from our common stock equity in the earnings of
our subsidiaries. Various financing arrangements, charter provisions and
regulating requirements may impose certain restrictions on the ability of our
subsidiaries to transfer funds to us in the form of cash dividends, loans or
advances.
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VOTING RIGHTS
The holders of our common stock are entitled to one vote for each share
of common stock held. The holders of our common stock are entitled to cumulate
their votes when voting for the election of directors.
PRE-EMPTIVE RIGHTS
The holders of our common stock generally do not have the right to
subscribe for or purchase any part of any new or additional issue of our common
stock. If, however, our board of directors determines to issue and sell any
common stock solely for money and not by (1) a public offering, (2) an offering
to or through underwriters or dealers who have agreed to promptly make a public
offering, or (3) any other offering which the holders of a majority of our
outstanding common stock have authorized; then such common stock must first be
offered pro rata to our existing shareholders on terms no less favorable than
those offered to persons other than our existing shareholders.
RIGHTS UPON LIQUIDATION
If we are liquidated, holders of our common stock will be entitled to
receive pro rata all assets available for distribution to our shareholders after
payment of our liabilities, including liquidation expenses.
RESTRICTIONS ON DEALING WITH EXISTING SHAREHOLDERS
We are subject to Section 513 of New York's Business Corporation Law,
which provides that no domestic corporation may purchase or agree to purchase
more than 10% of its stock from a shareholder who has held the shares for less
than two years at any price that is higher than the market price unless the
transaction is approved by both the corporation's board of directors and a
majority of the votes of all outstanding shares entitled to vote thereon at a
meeting of shareholders, unless the certificate of incorporation requires a
greater percentage or the corporation offers to purchase shares from all the
holders on the same terms. Our certificate of incorporation does not currently
provide for a higher percentage.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
GENERAL
We will issue the Junior Subordinated Debentures directly to the
public, to a trust or as part of a Stock Purchase Unit under the Subordinated
Indenture to be entered into by us and the Subordinated Indenture Trustee, The
Bank of New York. This prospectus briefly outlines some provisions of the
Subordinated Indenture. If you would like more information on these provisions,
you should review the Subordinated Indenture and any supplemental indentures or
company orders
24
that we will file with the SEC. See WHERE YOU CAN FIND MORE INFORMATION on how
to locate these documents.
The Junior Subordinated Debentures are unsecured obligations and are
junior in right of payment to "Senior Indebtedness". You may find a description
of the subordination provisions of the Junior Subordinated Debentures, including
a description of Senior Indebtedness under SUBORDINATION.
Because we are a holding company, the claims of creditors of our
subsidiaries will have a priority over our equity rights and the rights of our
creditors (including the holders of the Junior Subordinated Debentures) to
participate in the assets of the subsidiary upon the subsidiary's liquidation.
The Subordinated Indenture does not limit the amount of Junior
Subordinated Debentures that we may issue under it. We may issue Junior
Subordinated Debentures from time to time under the Subordinated Indenture in
one or more series by entering into supplemental indentures or by our Board of
Directors or a duly authorized committee authorizing the issuance. The
Subordinated Indenture also gives us the ability to reopen a previous issue of a
series of Junior Subordinated Debentures and issue additional Junior
Subordinated Debentures of such series.
A prospectus supplement or pricing supplement will include the final
terms for each Junior Subordinated Debenture. If we decide to list upon issuance
any Junior Subordinated Debenture or Junior Subordinated Debentures on a
securities exchange, a prospectus supplement or pricing supplement will identify
the exchange and state when we expect trading could begin. The following terms
of the Junior Subordinated Debentures that we may sell at one or more times will
be established in a prospectus supplement:
- Maturity
- Fixed or floating interest rate
- Remarketing features
- Certificate or book-entry form
- Redemption
- Not convertible, amortized or subject to a sinking fund
- Interest paid on fixed rate Junior Subordinated Debentures quarterly or
semi-annually
- Interest paid on floating rate Junior Subordinated Debentures monthly,
quarterly, semi-annually, or annually
- Issued in multiples of a minimum denomination
- Ability to defer interest payments
- Any other terms not inconsistent with the Subordinated Indenture
- Issued with Original Issue Discount
The interest rate and interest and other payment dates of each series
of Junior Subordinated Debentures issued to a trust will correspond to the rate
at which distributions will be paid and the distribution and other payment dates
of the Trust Preferred Securities.
The Subordinated Indenture does not protect the holders of Junior
Subordinated Debentures if we engage in a highly leveraged transaction.
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REDEMPTION
Provisions relating to the redemption of Junior Subordinated Debentures
will be set forth in the applicable prospectus supplement. Unless we state
otherwise in the applicable prospectus supplement, we may redeem Junior
Subordinated Debentures only upon notice mailed at least 30 but not more than 60
days before the date fixed for redemption. If we do not redeem all the Junior
Subordinated Debentures of a series at one time, the Subordinated Indenture
Trustee selects those to be redeemed in a manner it determines to be fair.
JUNIOR SUBORDINATED DEBENTURE CERTIFICATES-REGISTRATION, TRANSFER, AND PAYMENT
OF INTEREST AND PRINCIPAL
Unless otherwise indicated in the applicable prospectus supplement,
each series of Junior Subordinated Debentures issued to the public initially
will be in the form of one or more global Junior Subordinated Debentures, in
registered form, without coupons, as described under BOOK-ENTRY SYSTEM. However,
if we issue Junior Subordinated Debenture certificates, they will be registered
in the name of the Junior Subordinated Debentureholder. The Junior Subordinated
Debentures may be transferred or exchanged, pursuant to administrative
procedures in the Subordinated Indenture, without the payment of any service
charge (other than any tax or other governmental charge) by contacting the
paying agent. Payments to public holders of Junior Subordinated Debenture
certificates will be made by check.
ORIGINAL ISSUE DISCOUNT
We may issue the Junior Subordinated Debentures at an original issue
discount, bearing no interest or bearing interest at a rate that, at the time of
issuance, is below market rate, to be sold at a substantial discount below their
stated principal amount. Generally speaking, if the Junior Subordinated
Debentures are issued at an original issue discount and there is an event of
default or acceleration of their maturity, holders will receive an amount less
than their principal amount. Tax and other special considerations applicable to
original issue discount debt will be described in the prospectus supplement in
which we offer those Junior Subordinated Debentures.
INTEREST RATE
The interest rate on the Junior Subordinated Debentures 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 Junior Subordinated Debenture 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 Junior Subordinated Debenture 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.
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For a discussion of our ability to defer interest payments on the
Junior Subordinated Debentures, see DESCRIPTION OF TRUST PREFERRED
SECURITIES--OPTION TO EXTEND INTEREST PAYMENT PERIOD.
FIXED RATE JUNIOR SUBORDINATED DEBENTURES
A pricing or prospectus supplement will designate the record dates,
payment dates, our ability to defer interest payments and the fixed rate of
interest payable on a Junior Subordinated Debenture. 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 JUNIOR SUBORDINATED DEBENTURES
Each floating rate Junior Subordinated Debenture will have an interest
rate formula. The applicable prospectus supplement or pricing supplement will
state the initial interest rate or interest rate formula on each Junior
Subordinated Debenture effective until the first interest reset date. The
applicable pricing or prospectus supplement will state the method and dates on
which the interest rate will be determined, reset and paid.
EVENTS OF DEFAULT
The following are events of default under the Subordinated Indenture
with respect to any series of Junior Subordinated Debentures, unless we state
otherwise in the applicable prospectus supplement:
- failure to pay for three business days the principal of (or premium, if
any, on) any Junior Subordinated Debenture of a series when due and
payable;
- failure to pay for 30 days any interest on any Junior Subordinated
Debenture of any series when due and payable;
- failure to perform any other requirements in such Junior Subordinated
Debentures, or in the Subordinated Indenture, for 90 days after notice;
- certain events of our bankruptcy or insolvency; or
- any other event of default specified in a series of Junior Subordinated
Debentures.
An event of default for a particular series of Junior Subordinated
Debentures does not necessarily mean that an event of default has occurred for
any other series of Junior Subordinated Debentures issued under the Subordinated
Indenture. If an event of default occurs and continues, the Subordinated
Indenture Trustee or the holders of at least 33% of the principal amount of the
Junior Subordinated Debentures of the series affected may require us to repay
the entire principal of the Junior Subordinated Debentures of such series
immediately ("Repayment Acceleration"). In most instances, the holders of at
least a majority in aggregate principal amount of the Junior Subordinated
Debentures 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
27
only if we have first cured our default by depositing with the Subordinated
Indenture Trustee enough money to pay all (unaccelerated) past due amounts and
penalties, if any. For a discussion of remedies in the event Junior Subordinated
Debentures are issued to a trust, see DESCRIPTION OF TRUST PREFERRED
SECURITIES--ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED
SECURITIES.
The Subordinated Indenture Trustee must within 90 days after a default
occurs, notify the holders of the Junior Subordinated Debentures of the series
of default unless such default has been cured or waived. We are required to file
an annual certificate with the Subordinated Indenture Trustee, signed by an
officer, concerning any default by us under any provisions of the Subordinated
Indenture.
In the case of Junior Subordinated Debentures issued to a trust, a
holder of Trust Preferred Securities may institute a legal proceeding directly
against us without first instituting a legal proceeding against the Property
Trustee of the trust by which those Trust Preferred Securities were issued or
any other person or entity, for enforcement of payment to that holder of
principal or interest on an equivalent amount of Junior Subordinated Debentures
of the related series on or after the due dates specified in those Junior
Subordinated Debentures.
Subject to the provisions of the Subordinated Indenture relating to its
duties in case of default, the Subordinated Indenture Trustee shall be under no
obligation to exercise any of its rights or powers under the Subordinated
Indenture at the request, order or direction of any holders unless such holders
offer the Subordinated Indenture Trustee reasonable indemnity. Subject to the
provisions for indemnification, the holders of a majority in principal amount of
the Junior Subordinated Debentures 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 Subordinated Indenture Trustee with respect
to such Junior Subordinated Debentures.
MODIFICATION OF SUBORDINATED INDENTURE
Under the Subordinated Indenture, our rights and obligations and the
rights of the holders of any Junior Subordinated Debentures may be changed. Any
change affecting the rights of the holders of any series of Junior Subordinated
Debentures requires the consent of the holders of not less than a majority in
aggregate principal amount of the outstanding Junior Subordinated Debentures 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 Junior Subordinated Debentures and
take other action that does not affect the rights of holders of any series by
executing supplemental indentures without the consent of any debentureholders.
CONSOLIDATION, MERGER OR SALE
We may merge or consolidate with any entity or sell substantially all
of our assets as an entirety as long as the successor or purchaser (i) is
organized and existing under the laws of the United States, any state thereof or
the District of Columbia and (ii) expressly assumes the payment of principal,
premium, if any, and interest on the Junior Subordinated Debentures.
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LEGAL DEFEASANCE
We will be discharged from our obligations on the Junior Subordinated
Debentures 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 Junior Subordinated
Debenture of the series, and
- we deliver to the Trustee an opinion of counsel stating that the
federal income tax obligations of debentureholders of that series will
not change as a result of our performing the action described above.
If this happens, the debentureholders of the series will not be
entitled to the benefits of the Subordinated Indenture except for registration
of transfer and exchange of Junior Subordinated Debentures and replacement of
lost, stolen or mutilated Junior Subordinated Debentures.
COVENANT DEFEASANCE
We will be discharged from our obligations under any restrictive
covenant applicable to the Junior Subordinated Debentures 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 Subordinated Indenture Trustee to pay
all amounts due on the Junior Subordinated Debentures of that series. In that
instance, we would remain liable for such amounts.
Junior Subordinated Debentures issued to a trust will not be subject to
covenant defeasance.
SUBORDINATION
Each series of Junior Subordinated Debentures will be subordinate and
junior in right of payment, to the extent set forth in the Subordinated
Indenture, to all Senior Indebtedness as defined below. If:
- we make a payment or distribution of any of our assets to creditors
upon our dissolution, winding-up, liquidation or reorganization,
whether in bankruptcy, insolvency or otherwise;
- a default beyond any grace period has occurred and is continuing with
respect to the payment of principal, interest or any other monetary
amounts due and payable on any Senior Indebtedness; or
- the maturity of any Senior Indebtedness has been accelerated because of
a default on that Senior Indebtedness,
then the holders of Senior Indebtedness generally will have the right to receive
payment, in the case of the first instance, of all amounts due or to become due
upon that Senior Indebtedness, and, in the case of the second and third
instances, of all amounts due on that Senior Indebtedness, or we will make
provision for those payments, before the holders of any Junior Subordinated
Debentures have the right to receive any payments of principal or interest on
their Junior Subordinated Debentures.
29
"Senior Indebtedness" means, with respect to any series of Junior
Subordinated Debentures, the principal, premium, interest and any other payment
in respect of any of the following:
- all of our indebtedness that is evidenced by notes, debentures, bonds
or other securities we sell for money or other obligations for money
borrowed;
- all indebtedness of others of the kinds described in the preceding
category which we have assumed or guaranteed or which we have in effect
guaranteed through an agreement to purchase, contingent or otherwise;
and
- all renewals, extensions or refundings of indebtedness of the kinds
described in either of the preceding two categories.
Any such indebtedness, renewal, extension or refunding, however, will
not be Senior Indebtedness if the instrument creating or evidencing it or the
assumption or Guarantee of it provides that it is not superior in right of
payment to or is equal in right of payment with those Junior Subordinated
Debentures. Senior Indebtedness will be entitled to the benefits of the
subordination provisions in the Subordinated Indenture irrespective of the
amendment, modification or waiver of any term of the Senior Indebtedness.
The Subordinated Indenture does not limit the amount of Senior
Indebtedness that we may issue. As of December 31, 2001, our Senior Indebtedness
totaled approximately $6,252,621,000.
GOVERNING LAW
The Subordinated Indenture and Junior Subordinated Debentures 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 Subordinated Indenture Trustee in the normal course of business. The
Subordinated Trustee is also the Trustee under the Indenture relating to the
Senior Notes.
DESCRIPTION OF TRUST PREFERRED SECURITIES
Each trust may issue Trust Preferred Securities and Trust Common
Securities under the trust agreement, which we refer to in this prospectus as
the Trust Securities. These Trust Securities will represent undivided beneficial
interests in the assets of the trust. Selected provisions of the trust agreement
are summarized below. This summary is not complete. The form of trust agreement
is filed with the SEC herewith and you should read the trust agreement for
provisions that may be important to you. The trust agreement will be qualified
as an indenture under the Trust Indenture Act. You should also refer to the
Trust Indenture Act for provisions that apply to the Trust Preferred Securities.
30
GENERAL
Each trust will exist for the exclusive purposes of:
- issuing and selling its Trust Preferred Securities and Trust Common
Securities;
- investing the gross proceeds of the Trust Securities in our Debt
Securities;
- maintaining its status as a grantor trust for federal income tax
purposes;
- making distributions; and
- engaging in only those other activities necessary, advisable or
incidental to the purposes listed above.
Our Debt Securities will be the sole assets of each trust, and our
payments under the Debt Securities will be the sole income of each trust. No
separate financial statements of any trust will be included in this prospectus.
We consider that these financial statements would not be material to holders of
the Trust Preferred Securities because no trust would have any independent
operations and the only purposes of each trust are those described above. We do
not expect that any trust will be filing annual, quarterly or special reports
with the SEC. The principal place of business of each trust will be c/o American
Electric Power Company, Inc., 1 Riverside Plaza, Columbus, OH 43215.
Each trust will exist until terminated as provided in its trust
agreement. The trustees of each trust will be:
- two of our employees or officers or two employees or officers of our
affiliates as administrators (the "Administrative Trustees"); and
- Wilmington Trust Company, which will act as Property Trustee and as
indenture trustee for purposes of the Trust Indenture Act (the
"Property Trustee") and for the purpose of complying with the
provisions of the Delaware Business Trust Act, the Delaware Trustee
(the "Delaware Trustee").
The trust agreement will authorize the Administrative Trustees to issue
two classes of Trust Securities: Trust Preferred Securities and Trust Common
Securities. We will own all of the Trust Common Securities issued by each trust,
which will rank equally in right of payment with the Trust Preferred Securities
issued by the respective trust. However, if an event of default occurs and is
continuing under the trust agreement, rights of the holders of the Trust Common
Securities to payment for distributions and otherwise will be subordinated to
the rights of the holders of the Trust Preferred Securities. We will acquire
Trust Common Securities of each trust in a total liquidation amount of at least
three percent of the total capital of the trust.
Proceeds from the sale of both the Trust Preferred Securities and the
Trust Common Securities issued by each trust will be used to purchase our Debt
Securities, which will be held in trust by the Property Trustee for the benefit
of the holders of the Trust Securities issued by the respective trust. We will
guarantee the payments of distributions and payments of redemption or
liquidation with respect to the Trust Preferred Securities issued by each trust,
but only to the extent the respective trust has funds legally available for and
cash sufficient to make those payments and has not made the payments. See
DESCRIPTION OF GUARANTEES below.
Each Guarantee, when taken together with our obligations under the
related Debt Securities, the related indenture and the related trust agreement,
will provide a full and unconditional
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guarantee of amounts due on the Trust Preferred Securities issued by the
respective trust. The Trust Preferred Securities will have the terms, including
distributions, redemption, voting, liquidation rights and other rights or
restrictions that will be described in the related trust agreement or made part
of it by the Trust Indenture Act or the Delaware Business Trust Act.
PROVISIONS OF A PARTICULAR SERIES
Each Trust may issue only one series of Trust Preferred Securities. The
applicable prospectus supplement will set forth the principal terms of the Trust
Preferred Securities that will be offered, including:
- the name of the Trust Preferred Securities;
- the liquidation amount and number of Trust Preferred Securities issued;
- the annual distribution rate or rates or method of determining such
rate or rates, the payment date or dates and the record dates used to
determine the holders who are to receive distributions;
- whether distributions will be cumulative and, in the case of Trust
Preferred Securities, having cumulative distribution rights, the date
from which distributions will be cumulative;
- the optional redemption provisions, if any, including the prices, time
periods and other terms and conditions on which the Trust Preferred
Securities will be purchased or redeemed, in whole or in part;
- the terms and conditions, if any, upon which the Debt Securities and
the related Guarantee may be distributed to holders of the Trust
Preferred Securities;
- any securities exchange on which the Trust Preferred Securities will be
listed;
- the terms and conditions, if any, upon which the Trust Preferred
Securities may be converted into our securities; and
- any other relevant rights, covenants, preferences, privileges,
limitations or restrictions of the Trust Preferred Securities.
Terms of the Trust Preferred Securities issued by each trust will
mirror the terms of the Debt Securities held by the respective trust. In other
words, the interest rate and interest and other payment dates of each series of
Debt Securities issued to a trust will correspond to the rate at which
distributions will be paid and the distribution and other payment dates of the
Trust Preferred Securities of that trust. The prospectus supplement will also
set forth whether the Debt Securities to be issued to a trust will be Senior
Notes or Junior Subordinated Debentures.
DISTRIBUTIONS
The Trust Preferred Securities represent preferred, undivided,
beneficial interests in the assets of the respective trust. The applicable
prospectus supplement will state the annual rate, as a percentage of the
liquidation amount, at which distributions on each Trust Preferred Security will
be payable, the liquidation amount and the dates on which distributions will be
payable.
Each trust will use the proceeds from the issuance and sale of the
Trust Preferred Securities to purchase our Debt Securities. The income of a
trust available for distribution to holders of the Trust Preferred Securities
issued by that trust will be limited to payments under those Debt
32
Securities. If we do not make payments on the Debt Securities, a trust will not
have funds available to pay distributions or other amounts payable on the Trust
Preferred Securities issued by that trust. The payment of distributions and
other amounts payable on the Trust Preferred Securities issued by a trust, if
and to the extent the trust has funds legally available for and cash sufficient
to make such payments, is guaranteed by us as described herein under DESCRIPTION
OF GUARANTEES.
OPTION TO ACCELERATE MATURITY DATE
If, at any time the Debt Securities are held by a trust, we are not
able to deduct the interest payable on the Debt Securities as a result of a Tax
Event, then we have the right to accelerate the stated maturity of the Debt
Securities to the minimum extent required so that interest on the Debt
Securities will be deductible for United States federal income tax purposes.
However, the resulting maturity may not be less than 15 years from the date of
the original issuance. Moreover, we may not accelerate the stated maturity
unless we have received an opinion of counsel to the effect that (1) following
acceleration, interest paid on the Debt Securities will be deductible for United
States federal income tax purposes and (2) the holders of Trust Preferred
Securities will not recognize income, gain or loss for United States federal
income tax purposes as a result of this acceleration and will be subject to
United States federal tax in the same amount, in the same manner and at the same
times as would have been the case if acceleration had not occurred.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
If the applicable prospectus supplement so states, we will have the
right to defer the payment of interest on the Debt Securities at any time or
from time to time for a period, which we refer to in this prospectus as an
"extension period," not exceeding 20 consecutive quarterly periods with respect
to each extension period. During each extension period we shall have the right
to make partial payments of interest on the Debt Security on any interest
payment date. At the end of each extension period we shall pay all interest then
accrued and unpaid. No extension period may extend beyond the stated maturity of
the Debt Securities or end on a date other than an interest payment date. As a
consequence of any such deferral, distributions on the Trust Preferred
Securities by a trust will be deferred during any such extension period.
Distributions to which holders of the Trust Preferred Securities are entitled
will accumulate additional distributions at the rate stated in the applicable
prospectus supplement. During an extension period, interest will continue to
accrue and holders of Debt Securities, or holders of Trust Preferred Securities
while outstanding, will be required to accrue original issue discount income for
United States federal income tax purposes. We will provide further discussion of
the accrual of original issue discount in the applicable prospectus supplement.
Prior to the termination of any extension period, we may further defer
the payment of interest, provided that, unless the applicable prospectus
supplement states otherwise, no extension period may exceed 20 consecutive
quarterly periods or extend beyond the stated maturity of the Debt Securities.
Upon the termination of any extension period and the payment of all amounts then
due, we may elect to begin a new extension period subject to the above
conditions. No interest shall be due and payable during an extension period,
except at its end. We must give the applicable trustee and the Property Trustee
notice of our election of an extension period at least one business day prior to
the earlier of the date the distributions on the Trust Preferred Securities
would have been payable but for the election to begin such extension period and
the date the Property Trustee is
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required to give notice to holders of the Trust Preferred Securities of the
record date or the date such distributions are payable, but in any event not
less than one business day prior to such record date. The applicable trustee
will give notice of our election to begin a new extension period to the holders
of the Trust Preferred Securities.
Unless the applicable prospectus supplement states otherwise, during
any extended interest period, or for so long as an event of default under the
applicable indenture or any payment default under the Guarantee has occurred and
is continuing, we will not, except in limited circumstances, (1) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of our capital stock, (2) make any
payment of principal of or interest or premium, if any, on or repay, repurchase
or redeem any Debt Securities of ours that rank equally with, or junior to, the
Debt Securities, or (3) make any guarantee payments with respect to any
guarantee issued by us if such guarantee ranks equally with, or junior to, the
applicable Debt Securities.
REGISTRATION, TRANSFER AND EXCHANGE
Unless otherwise indicated in the applicable prospectus supplement,
each series of Trust Preferred Securities will be issued initially in the form
of one or more global securities, in registered form, without coupons, as
described under BOOK-ENTRY SYSTEM. However, if we issue certificates, they will
be issued in the name of the security holder.
Trust Preferred Securities of any series will be exchangeable for other
Trust Preferred Securities of the same series of any authorized denominations of
a like aggregate liquidation amount and tenor. Subject to the terms of the trust
agreement and the limitations applicable to global securities, Trust Preferred
Securities may be presented for exchange or registration of transfer--duly
endorsed or accompanied by a duly executed instrument of transfer--at the office
of the Property Trustee, without service charges but upon payment of any taxes
and other governmental charges as described in the trust agreement. Such
transfer or exchange will be effected upon the Property Trustee being satisfied
with the documents of title and identity of the person making the request.
The Property Trustee will not be required to issue, register the
transfer of, or exchange any Trust Preferred Securities during a period
beginning at the opening of business 15 days before the day of mailing of a
notice of redemption of any Trust Preferred Securities called for redemption and
ending at the close of business on the day of mailing or register the transfer
of, or exchange, any Trust Preferred Securities selected for redemption except,
in the case of any Trust Preferred Security to be redeemed in part, the portion
thereof not to be so redeemed.
PAYMENT AND PAYING AGENTS
Distributions and other payments on Trust Preferred Securities issued
in the form of global securities will be paid in the manner described under
BOOK-ENTRY SYSTEM.
The paying agent initially will be the Property Trustee and any
co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees. If the Property Trustee is no longer the paying agent,
the Property Trustee will appoint a successor, which must be a bank or
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trust company reasonably acceptable to the Administrative Trustees, to act as
paying agent. Such paying agent will be permitted to resign as paying agent upon
30 days' written notice to the Property Trustee and the Administrative Trustees
at which time the paying agent will return all unclaimed funds and all other
funds in its possession to the Property Trustee.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Debt
Securities held by a trust, the proceeds shall be applied by the Property
Trustee to redeem a Like Amount, as defined below, of the Trust Securities
issued by that trust, upon not less than 30 nor more than 60 days' notice,
unless otherwise indicated in a prospectus supplement, at a redemption price
equal to the aggregate liquidation amount of the Trust Preferred Securities plus
accumulated but unpaid distributions to but excluding the redemption date and
the related amount of the premium, if any, paid by us upon the concurrent
redemption of the Debt Securities. If less than all the Debt Securities held by
a trust are to be repaid or redeemed on a redemption date, then the proceeds
from the repayment or redemption shall be allocated to the redemption
proportionately of the Trust Preferred Securities and the Trust Common
Securities issued by that trust based on the relative liquidation amounts of the
classes. The amount of premium, if any, paid by us upon the redemption of all or
any part of the Debt Securities held by a trust to be repaid or redeemed on a
redemption date shall be allocated to the redemption proportionately of the
Trust Preferred Securities and the Trust Common Securities issued by that trust.
Unless the applicable prospectus supplement states otherwise, we will
have the right to redeem the Debt Securities held by a trust:
- on or after the date fixed for redemption as stated in the applicable
prospectus supplement, in whole at any time or in part from time to
time; or
- prior to the date fixed for redemption as stated in the applicable
prospectus supplement, in whole, but not in part, at any time within 90
days following the occurrence and during the continuation of a Tax
Event or an Investment Company Event, each as defined below.
"Like Amount" means:
- with respect to a redemption of Trust Securities, Trust Securities
having a liquidation amount equal to that portion of the principal
amount of Debt Securities to be contemporaneously redeemed in
accordance with the applicable indenture, allocated to the Trust Common
Securities and to the Trust Preferred Securities based upon the
relative liquidation amounts of the classes; and
- with respect to a distribution of Debt Securities to holders of Trust
Securities in connection with a dissolution or liquidation of a trust,
Debt Securities having a principal amount equal to the liquidation
amount of the Trust Securities of the holder to whom the Debt
Securities are distributed.
"Tax Event" means the receipt by a trust of an opinion of counsel to us
experienced in relevant matters to the effect that, as a result of any amendment
to, or change--including any announced prospective change--in, the laws or any
regulations thereunder of the United States or any political subdivision or
taxing authority of or in the United States, or as a result of any official
35
administrative pronouncement or action or judicial decision interpreting or
applying these laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance by
a trust of Trust Preferred Securities, including, without limitation, any of the
foregoing arising with respect to, or resulting from, any proposal, proceeding
or other action commencing on or before the date of issuance, there is more than
an insubstantial risk that:
- the trust is, or will be within 90 days of the delivery of the opinion,
subject to United States federal income tax with respect to income
received or accrued on the Debt Securities we have issued to that
trust;
- interest payable by us on the Debt Securities is not, or within 90 days
of the delivery of the opinion, will not be, deductible by us, in whole
or in part, for United States federal income tax purposes; or
- the trust is, or will be within 90 days of the delivery of the opinion,
subject to more than an insubstantial amount of other taxes, duties or
other governmental charges.
"Investment Company Event" means the receipt by a trust of an opinion of counsel
to us experienced in these matters to the effect that, as a result of the
occurrence of a change in law or regulation or a written change--including any
announced prospective change--in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the trust is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act, which change or prospective change becomes effective or
would become effective, as the case may be, on or after the date of the issuance
by that trust of Trust Preferred Securities.
If and for so long as a trust is the holder of all the Debt Securities
issued by us to that trust, we will pay, with respect to the Debt Securities,
such additional amounts as may be necessary in order that the amount of
distributions then due and payable by a trust on the outstanding Trust Preferred
Securities and Trust Common Securities of a trust will not be reduced as a
result of any additional taxes, duties and other governmental charges to which
that trust has become subject, including as a result of a Tax Event.
REDEMPTION PROCEDURES
Trust Preferred Securities of a trust redeemed on each redemption date
shall be redeemed at the redemption price with the applicable proceeds from the
contemporaneous redemption of the Debt Securities held by that trust.
Redemptions of Trust Preferred Securities shall be made and the redemption price
shall be payable on each redemption date only to the extent that a trust has
funds on hand available for the payment of the redemption price. See also
SUBORDINATION OF TRUST COMMON SECURITIES.
If a trust gives a notice of redemption in respect of any Trust
Preferred Securities, then, by 12:00 noon, New York City time, on the redemption
date, to the extent funds are available, in the case of Trust Preferred
Securities held in book-entry form, the Property Trustee will deposit
irrevocably with the depository funds sufficient to pay the applicable
redemption price and will give the depository irrevocable instructions and
authority to pay the redemption price to the holders of the Trust Preferred
Securities. With respect to Trust Preferred Securities not held in book-entry
36
form, the Property Trustee, to the extent funds are available, will irrevocably
deposit with the paying agent for the Trust Preferred Securities funds
sufficient to pay the applicable redemption price and will give the paying agent
irrevocable instructions and authority to pay the redemption price to the
holders upon surrender of their certificates evidencing the Trust Preferred
Securities. Notwithstanding the foregoing, distributions payable on or prior to
the redemption date for any Trust Preferred Securities called for redemption
shall be payable to the holders of the Trust Preferred Securities on the
relevant record dates for the related distribution dates. If notice of
redemption shall have been given and funds deposited as required, then upon the
date of the deposit all rights of the holders of the Trust Preferred Securities
so called for redemption will cease, except the right of the holders of the
Trust Preferred Securities to receive the redemption price, and any distribution
payable in respect of the Trust Preferred Securities, but without interest on
the redemption price, and the Trust Preferred Securities will cease to be
outstanding. In the event that payment of the redemption price in respect of
Trust Preferred Securities called for redemption is improperly withheld or
refused and not paid either by a trust or by us pursuant to the Guarantee as
described under DESCRIPTION OF GUARANTEES, distributions on the Trust Preferred
Securities will continue to accumulate at the then applicable rate, from the
redemption date originally established by a trust for the Trust Preferred
Securities it issues to the date the redemption price is actually paid, in which
case the actual payment date will be the date fixed for redemption for purposes
of calculating the redemption price.
If less than all the Trust Preferred Securities and Trust Common
Securities are to be redeemed on a redemption date, then the aggregate
liquidation amount of the Trust Preferred Securities and Trust Common Securities
to be redeemed shall be allocated proportionately to the Trust Preferred
Securities and the Trust Common Securities based upon the relative liquidation
amounts of the classes. The particular Trust Preferred Securities to be redeemed
shall be selected on a proportionate basis not more than 60 days prior to the
redemption date by the Property Trustee from the outstanding Trust Preferred
Securities not previously called for redemption, or if the Trust Preferred
Securities are then held in the form of a global Trust Preferred Security, in
accordance with the depository's customary procedures. The Property Trustee
shall promptly notify the securities registrar for the Trust Securities in
writing of the Trust Preferred Securities selected for redemption and, in the
case of any Trust Preferred Securities selected for partial redemption, the
liquidation amount to be redeemed. For all purposes of the trust agreements,
unless the context otherwise requires, all provisions relating to the redemption
of Trust Preferred Securities shall relate, in the case of any Trust Preferred
Securities redeemed or to be redeemed only in part, to the portion of the
aggregate liquidation amount of Trust Preferred Securities which has been or is
to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each registered holder of Trust
Preferred Securities to be redeemed at its address appearing on the securities
register for the Trust Securities. Unless we default in payment of the
redemption price on the related Debt Securities, on and after the redemption
date interest will cease to accrue on the Debt Securities or portions of them
called for redemption.
SUBORDINATION OF TRUST COMMON SECURITIES
If on any distribution date or redemption date a payment event of
default with respect to the underlying Debt Securities has occurred and is
continuing, no payment on or in respect of the
37
related Trust Common Securities shall be made unless all amounts due in respect
of the related Trust Preferred Securities (including the liquidation amount or
redemption price, if applicable) shall have been paid or payment provided for.
All funds immediately available to the respective Property Trustee shall first
be applied to the payment in full in cash of all distributions on, or redemption
price of, the Trust Preferred Securities then due and payable.
In the case of any event of default under the trust agreement, as
defined below, resulting from an event of default with respect to the underlying
Debt Securities, the holders of Trust Common Securities will be deemed to have
waived any right to act with respect to any event of default under the related
trust agreement until the effects of all events of default with respect to the
related Trust Preferred Securities have been cured, waived or otherwise
eliminated. Until all events of default under the related trust agreement with
respect to the Trust Preferred Securities have been so cured, waived or
otherwise eliminated, the Property Trustee will act solely on behalf of the
holders of the Trust Preferred Securities and not on behalf of the holders of
the Trust Common Securities, and only the holders of the Trust Preferred
Securities will have the right to direct the Property Trustee to act on their
behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any liquidation of a trust, the applicable prospectus
supplement will state the amount payable on the Trust Preferred Securities
issued by that trust as a dollar amount per Trust Preferred Security plus
accumulated and unpaid distributions to the date of payment, subject to certain
exceptions, which may be in the form of a distribution of the amount in Debt
Securities held by that trust.
The holders of all the outstanding Trust Common Securities of a trust
have the right at any time to dissolve the trust and, after satisfaction of
liabilities to creditors of the trust as provided by applicable law, cause the
Debt Securities held by that trust to be distributed in liquidation of the trust
to the holders of the Trust Preferred Securities and Trust Common Securities
issued by the trust.
Pursuant to the related trust agreement, unless the applicable
prospectus supplement states otherwise, a trust will automatically dissolve upon
expiration of its term or, if earlier, will dissolve on the first to occur of:
- events of bankruptcy, dissolution or liquidation involving us or the
holder of the Trust Common Securities, as specified in the trust
agreement;
- the giving by the holder of the Trust Common Securities issued by the
trust of written direction to the Property Trustee to dissolve the
trust, which direction, subject to the foregoing restrictions, is
optional and wholly within the discretion of the holder of the Trust
Common Securities;
- the redemption of all the Trust Preferred Securities issued by the
trust in connection with the repayment or redemption of all the Debt
Securities as described under "Redemption"; and
- the entry of an order for the dissolution of the trust by a court of
competent jurisdiction.
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If dissolution of a trust occurs as described in the first, second or
fourth bullet point above, the trust will be liquidated by the Property Trustee
as expeditiously as the Property Trustee determines to be possible by
distributing, after satisfaction of liabilities to creditors of the trust as
provided by applicable law, to the holders of the Trust Securities issued by the
trust a Like Amount of the related Debt Securities. If such distribution is not
practical, or, if a dissolution of a trust occurs as described in the third
bullet point above, the holders will be entitled to receive out of the assets of
the trust available for distribution to holders, after satisfaction of
liabilities to creditors of the trust as provided by applicable law, an amount
equal to, in the case of holders of the Trust Preferred Securities, the
aggregate of the liquidation amount plus accumulated and unpaid distributions to
the date of payment. In this prospectus we refer to this amount as the
"liquidation distribution." If the liquidation distribution can be paid only in
part because the trust has insufficient assets available to pay in full the
aggregate liquidation distribution, then the amounts payable directly by the
trust on its Trust Preferred Securities shall be paid on a proportionate basis.
The holders of the Trust Common Securities issued by the trust will be entitled
to receive distributions upon any liquidation proportionately with the holders
of the Trust Preferred Securities, except that if a payment event of default has
occurred and is continuing on the related Debt Securities, the Trust Preferred
Securities shall have a priority over the Trust Common Securities. See
SUBORDINATION OF TRUST COMMON SECURITIES.
After the liquidation date is fixed for any distribution of Debt
Securities we have issued to a trust,
- the Trust Preferred Securities issued by that trust will no longer be
deemed to be outstanding,
- the depository or its nominee, as the registered holder of the Trust
Preferred Securities, will receive a registered global certificate or
certificates representing the Debt Securities to be delivered upon the
distribution with respect to the Trust Preferred Securities held by the
depository or its nominee, and
- any certificates representing the Trust Preferred Securities not held
by the depository or its nominee will be deemed to represent the Debt
Securities having a principal amount equal to the stated liquidation
amount of the Trust Preferred Securities and bearing accrued and unpaid
interest in an amount equal to the accumulated and unpaid distributions
on the Trust Preferred Securities until the certificates are presented
to the security registrar for the Trust Securities for transfer or
reissuance.
If we do not redeem the Debt Securities we have issued to a trust prior
to the stated maturity and the trust is not liquidated and the Debt Securities
are not distributed to holders of the Trust Preferred Securities issued by that
trust, the Trust Preferred Securities will remain outstanding until the
repayment of the Debt Securities and the distribution of the liquidation
distribution to the holders of the Trust Preferred Securities.
There can be no assurance as to the market prices for Trust Preferred
Securities or the related Debt Securities that may be distributed in exchange
for Trust Preferred Securities if a dissolution and liquidation of a trust were
to occur. Accordingly, the Trust Preferred Securities that an investor may
purchase, or the related Debt Securities that the investor may receive on
dissolution and liquidation of a trust, may trade at a discount to the price
that the investor paid to purchase the Trust Preferred Securities offered
hereby.
39
CERTAIN COVENANTS
In connection with the issuance of Trust Preferred Securities by a
trust, we will agree:
- to continue to hold, directly or indirectly, 100% of the Trust Common
Securities of any trust to which Debt Securities have been issued while
such Debt Securities are outstanding, provided that certain successors
that are permitted pursuant to the applicable indenture may succeed to
our ownership of the Trust Common Securities;
- not to voluntarily dissolve, wind up or liquidate a trust to which Debt
Securities have been issued, other than in connection with a
distribution of Debt Securities to the holders of the Trust Preferred
Securities in liquidation of a trust or in connection with certain
mergers, consolidations or amalgamations permitted by the trust
agreements; and
- to use our reasonable efforts, consistent with the terms and provisions
of the trust agreements, to cause each trust to which Debt Securities
have been issued to continue not to be taxable other than as a grantor
trust for United States federal income tax purposes.
Unless the applicable prospectus supplement states otherwise, during any
extended interest period, or for so long as an event of default under the
applicable indenture or any payment default under the preferred security
Guarantee has occurred and is continuing, we will also agree that we will not,
except in limited circumstances, (1) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of our capital stock, (2) make any payment of principal of
or interest or premium, if any, on or repay, repurchase or redeem any Debt
Securities of ours that rank equally with, or junior to, the Debt Securities, or
(3) make any guarantee payments with respect to any guarantee issued by us if
such guarantee ranks equally with, or junior to, the applicable Debt Securities,
other than, in each case, repurchases, redemptions or other acquisitions of
shares of our:
- capital stock in connection with any employment contract, benefit plan
or other similar arrangement with or for the benefit of any one or more
employees, officers, directors or consultants or in connection with a
dividend reinvestment or shareholder stock purchase plan;
- as a result of an exchange or conversion of any class or series of our
capital stock, or any capital stock of a subsidiary of ours, for any
class or series of our capital stock or of any class or series of our
then outstanding indebtedness for any class or series of our capital
stock;
- the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital stock
or the security being converted or exchanged;
- payments under any Guarantee executed and delivered by us concurrently
with the issuance of any Trust Preferred Securities;
- any declaration of a dividend in the form of capital stock in
connection with any shareholders' rights plan, or the issuance of
rights to capital stock under any shareholders' rights plan, or the
redemption or repurchase of rights pursuant to any such plan; or
- any dividend in the form of stock, warrants, options or other rights
where the dividend stock or the stock issuable upon exercise of the
warrants, options or other rights is the same stock as that on which
the dividend is being paid or ranks on a parity with or junior to the
stock,
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if at such time
- we have actual knowledge of any event that (a) with the giving of
notice or the lapse of time, or both, would constitute an event of
default under the applicable indenture, and (b) we have not taken
reasonable steps to cure the same;
- we are in default with respect to our payment of any obligations under
any Guarantee executed and delivered by us concurrently with the
issuance of any Trust Preferred Securities; or
- an extension period is continuing.
We will also agree that, if and for so long as a trust is the holder of
all Debt Securities issued by us in connection with the issuance of Trust
Preferred Securities by that trust and that trust is required to pay any
additional taxes, duties or other governmental charges, including in connection
with a Tax Event, we will pay as additional sums on the Debt Securities the
amounts that may be required so that the distributions payable by that trust
will not be reduced as a result of any additional taxes, duties or other
governmental charges.
EVENTS OF DEFAULT
Any one of the following events constitutes an event of default with
respect to the Trust Preferred Securities issued by a trust under the related
trust agreement:
- default by the trust in the payment of any distribution when it becomes
due and payable, and continuation of the default for a period of 30
days;
- default by the trust in the payment of any redemption price of any
trust security issued by that trust when it becomes due and payable;
- default in the performance, or breach, in any material respect, of any
covenant or warranty of the Property Trustee and the Delaware Trustee
in the trust agreement, other than as described above, and continuation
of the default or breach for a period of 60 days after there has been
given, by registered or certified mail, to the appropriate trustees and
to us by the holders of at least 33% in aggregate liquidation amount of
the outstanding Trust Preferred Securities, a written notice specifying
the default or breach and requiring it to be remedied and stating that
the notice is a "Notice of Default" under the trust agreement;
- the occurrence of an event of default under the applicable indenture
relating to the Debt Securities held by a trust (see DESCRIPTION OF THE
SENIOR NOTES--EVENTS OF DEFAULT and DESCRIPTION OF THE JUNIOR
SUBORDINATED DEBENTURES--EVENTS OF DEFAULT);
- the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee or all or substantially all of its
property if a successor Property Trustee has not been appointed within
90 days of the occurrence; or
- the occurrence of certain events of bankruptcy or insolvency with
respect to the trust.
Within five business days after the occurrence of certain events of
default actually known to the respective Property Trustee, the Property Trustee
will transmit notice of the event of default to the respective holders of Trust
Securities and the respective Administrative Trustees, unless the event of
default has been cured or waived. Within five business days after the receipt of
notice that we intend to exercise our right under the applicable indenture to
defer the payment of interest on the related Debt Securities, the Property
Trustee must notify the holders and the Administrative
41
Trustees that we intend to defer these interest payments, unless we have revoked
our determination to do so.
The applicable trust agreement includes provisions as to the duties of
the Property Trustee in case an event of default occurs and is continuing.
Consistent with these provisions, the Property Trustee will be under no
obligation to exercise any of its rights or powers at the request or direction
of any of the holders unless those holders have offered to the Property Trustee
reasonable indemnity. Subject to these provisions for indemnification, the
holders of a majority in liquidation amount of the related outstanding Trust
Preferred Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee, or exercising any
trust or power conferred on the Property Trustee, with respect to the related
Trust Preferred Securities.
The holders of at least a majority in aggregate liquidation amount of
the outstanding Trust Preferred Securities issued by a trust may waive any past
default under the applicable trust agreement except:
- a default in the payment of any distribution when it becomes due and
payable or any redemption price;
- a default with respect to certain covenants and provisions of the
applicable trust agreement that cannot be modified or amended without
consent of the holder of each outstanding Trust Preferred Security; and
- a default under the applicable indenture that the holders of a majority
in liquidation amount of the Trust Preferred Securities would not be
entitled to waive under the applicable trust agreement.
If an event of default under the applicable indenture has occurred and
is continuing as a result of any failure by us to pay any amounts when due in
respect of the related Debt Securities issued by us to a trust, the related
Trust Preferred Securities will have a preference over the related Trust Common
Securities with respect to payments of any amounts in respect of the Trust
Preferred Securities as described above. See SUBORDINATION OF TRUST COMMON
SECURITIES, LIQUIDATION DISTRIBUTION UPON DISSOLUTION, DESCRIPTION OF THE SENIOR
NOTES--EVENTS OF DEFAULT and DESCRIPTION OF JUNIOR SUBORDINATED
DEBENTURES--EVENTS OF DEFAULT.
We must furnish annually to each Property Trustee a statement by an
appropriate officer as to that officer's knowledge of our compliance with all
conditions and covenants under the respective trust agreement. Also, the
Administrative Trustees for each trust must file, on behalf of the respective
trust, a statement as to our compliance with all conditions and covenants under
the respective trust agreement.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under RESIGNATION, REMOVAL OF PROPERTY
TRUSTEE AND DELAWARE TRUSTEE; APPOINTMENT OF SUCCESSORS and DESCRIPTION OF
GUARANTEES--AMENDMENTS AND ASSIGNMENT and as otherwise required by law and the
applicable trust agreement, the holders of the Trust Preferred Securities issued
by a trust will have no voting rights.
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The trust agreement applicable to a trust may be amended from time to
time by the holders of a majority in liquidation amount of its Trust Common
Securities and the respective Property Trustee, without the consent of the
holders of the Trust Preferred Securities issued by the trust:
- to cure any ambiguity, correct or supplement any provisions in the
trust agreements that may be inconsistent with any other provision, or
to make any other provisions with respect to matters or questions
arising under the trust agreements, provided that any such amendment
does not adversely affect in any material respect the interests of any
holder of Trust Securities;
- to facilitate the tendering, remarketing and settlement of the Trust
Preferred Securities, as contemplated in the trust agreement;
- to modify, eliminate or add to any provisions of the trust agreements
to the extent as may be necessary to ensure that a trust will not be
taxable other than as a grantor trust for United States federal income
tax purposes at any time that any Trust Securities are outstanding or
to ensure that a trust will not be required to register as an
"investment company" under the Investment Company Act; or
- to reflect the appointment of a successor trustee.
The trust agreement may be amended by the holders of a majority in
aggregate liquidation amount of the Trust Common Securities and the Property
Trustee with the consent of holders representing not less than a majority in
aggregate liquidation amount of the outstanding Trust Preferred Securities and
receipt by the Property Trustee and the Delaware Trustee of an opinion of
counsel to the effect that the amendment or the exercise of any power granted to
the trustees in accordance with the amendment will not affect the trust's not
being taxable other than as a grantor trust for United States federal income tax
purposes or the trust's exemption from status as an "investment company" under
the Investment Company Act.
Without the consent of each holder of Trust Preferred Securities
affected by the amendment or related exercise of power, the trust agreement
applicable to a trust may not be amended to change the amount or timing of any
distribution on the Trust Securities or otherwise adversely affect the amount of
any distribution required to be made in respect of the Trust Securities as of a
specified date or restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any payment due.
So long as any Debt Securities are held by a trust, the respective
Property Trustee will not:
- direct the time, method and place of conducting any proceeding for any
remedy available to the trustee for the Debt Securities under the
related indenture, or execute any trust or power conferred on the
Property Trustee with respect to the related Debt Securities;
- waive any past default that is waivable under the applicable indenture;
- exercise any right to rescind or annul a declaration that the Debt
Securities shall be due and payable; or
- consent to any amendment, modification or termination of the applicable
indenture or the related Debt Securities, where consent shall be
required;
without, in each case, obtaining the prior approval of the holders of at least a
majority in aggregate liquidation amount of the Trust Preferred Securities,
except that, if a consent under the applicable
43
indenture would require the consent of each holder of Debt Securities affected
by the consent, no consent will be given by the Property Trustee without the
prior written consent of each holder of the Trust Preferred Securities.
A Property Trustee may not revoke any action previously authorized or
approved by a vote of the holders of the Trust Preferred Securities issued by
its respective trust except by subsequent vote of the holders of the Trust
Preferred Securities. The Property Trustee will notify each holder of Trust
Preferred Securities of any notice of default with respect to the Debt
Securities. In addition, before taking any of the foregoing actions, the
Property Trustee will obtain an opinion of counsel experienced in relevant
matters to the effect that the trust will not be taxable other than as a grantor
trust for United States federal income tax purposes on account of the action.
Any required approval of holders of Trust Preferred Securities issued
by a trust may be given at a meeting of holders of those Trust Preferred
Securities convened for the purpose or pursuant to written consent. The Property
Trustee will cause a notice of any meeting at which holders of Trust Preferred
Securities are entitled to vote, or of any matter upon which action by written
consent of the holders is to be taken, to be given to each registered holder of
Trust Preferred Securities in the manner set forth in the applicable trust
agreement.
No vote or consent of the holders of Trust Preferred Securities issued
by a trust will be required to redeem and cancel those Trust Preferred
Securities in accordance with the applicable trust agreement. See above under
REDEMPTION.
Notwithstanding that holders of Trust Preferred Securities issued by a
trust are entitled to vote or consent under any of the circumstances described
above, any of those Trust Preferred Securities that are owned by us, the
respective Property Trustee or Delaware Trustee, or any affiliate of us or
either trustee, will, for purposes of the vote or consent, be treated as if they
were not outstanding.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES
If an event of default has occurred and is continuing under the
applicable indenture, and the trustee for the related Debt Securities and the
holders of those Debt Securities have failed to declare the principal due and
payable, the holders of at least 33% in aggregate liquidation amount of the
related outstanding Trust Preferred Securities shall have this right.
If an event of default has occurred and is continuing under a trust
agreement and the event is attributable to our failure to pay any amounts
payable in respect of Debt Securities on the date the amounts are otherwise
payable, a registered holder of Trust Preferred Securities may institute a
direct action against us for enforcement of payment to the holder of an amount
equal to the amount payable in respect of Debt Securities having a principal
amount equal to the aggregate liquidation amount of the Trust Preferred
Securities held by the holder, which we refer to in this discussion as a "Direct
Action". We will have the right under the applicable indenture to set-off any
payment made to the holders of Trust Preferred Securities by us in connection
with a Direct Action.
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We may not amend the applicable indenture to remove the foregoing right
to bring a Direct Action without the prior written consent of the holders of all
the Trust Preferred Securities. Furthermore, so long as any of the Trust
Preferred Securities are outstanding:
- no modification of the applicable indenture may be made that adversely
affects the holders of the Trust Preferred Securities in any material
respect,
- no termination of the applicable indenture may occur and
- no waiver of any event of default or compliance with any covenant under
the applicable indenture may be effective,
without the prior consent of the holders of at least a majority of the aggregate
liquidation amount of the outstanding Trust Preferred Securities unless and
until the principal of, accrued and unpaid interest on and premium, if any, on
the related Debt Securities have been paid in full and certain other conditions
are satisfied.
With certain exceptions, the holders of the Trust Preferred Securities
would not be able to exercise directly any remedies available to the holders of
the Debt Securities except under the circumstances described in this section.
RESIGNATION, REMOVAL OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE; APPOINTMENT OF
SUCCESSORS
The Property Trustee or the Delaware Trustee of a trust may resign at
any time by giving written notice to us or may be removed at any time by an
action of the holders of a majority in liquidation amount of that trust's
outstanding Trust Preferred Securities delivered to the trustee to be removed
and to us. No resignation or removal of either of the trustees and no
appointment of a successor trustee will become effective until a successor
trustee accepts appointment in accordance with the requirements of the trust
agreement. So long as no event of default or event that would become an event of
default has occurred and is continuing, and except with respect to a trustee
appointed by an action of the holders, if we have delivered to either the
Property Trustee or the Delaware Trustee a resolution of our board of directors
appointing a successor trustee and the successor trustee has accepted the
appointment in accordance with the terms of the trust agreement, the Property
Trustee or the Delaware Trustee, as the case may be, will be deemed to have
resigned and the successor trustee will be deemed to have been appointed as
trustee in accordance with the trust agreement.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF A TRUST
A trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any entity, except as described below or as
otherwise set forth in the applicable trust agreement. A trust may, at the
request of the holders of its Trust Common Securities and with the consent of
the holders of at least a majority in aggregate liquidation amount of its
outstanding Trust Preferred Securities, merge with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to a trust organized as such under the laws
of any state, so long as:
45
- the successor entity either expressly assumes all the obligations of
the trust with respect to its Trust Preferred Securities or substitutes
for the Trust Preferred Securities other securities having
substantially the same terms as the Trust Preferred Securities, which
we refer to in this prospectus as the successor securities, so long as
the successor securities have the same priority as the Trust Preferred
Securities with respect to distributions and payments upon liquidation,
redemption and otherwise;
- a trustee of the successor entity, possessing the same powers and
duties as the Property Trustee, is appointed to hold the related Debt
Securities;
- the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the Trust Preferred Securities,
including any successor securities, to be downgraded by any nationally
recognized statistical rating organization;
- the Trust Preferred Securities or any successor securities are listed
or quoted, or any successor securities will be listed or quoted upon
notification of issuance, on any national securities exchange or with
another organization on which the Trust Preferred Securities are then
listed or quoted;
- the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Trust Preferred Securities, including
any successor securities, in any material respect;
- the successor entity has a purpose substantially identical to that of
the trust;
- prior to the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Property Trustee has received an
opinion from independent counsel experienced in relevant matters to the
effect that such transaction does not adversely affect the rights,
preferences and privileges of the holders of the Trust Preferred
Securities, including any successor securities, in any material respect
and following such transaction, neither the trust nor the successor
entity will be required to register as an investment company under the
Investment Company Act; and
- we or any permitted successor or assignee owns all the Trust Common
Securities of the successor entity and guarantees the obligations of
the successor entity under the successor securities at least to the
extent provided by the applicable Guarantee.
Notwithstanding the foregoing, a trust may not, except with the consent
of holders of 100% in aggregate liquidation amount of the Trust Preferred
Securities, consolidate, amalgamate, merge with or into, or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to, any other entity or permit any other entity to consolidate, amalgamate,
merge with or into, or replace it if the consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the trust or the
successor entity to be taxable other than as a grantor trust for United States
federal income tax purposes.
INFORMATION CONCERNING THE PROPERTY TRUSTEES
Each Property Trustee, other than during the occurrence and continuance
of an event of default, undertakes to perform only the duties as are
specifically set forth in the applicable trust agreement and, after an event of
default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, each Property Trustee is under no obligation to exercise any of the
powers vested in it by the trust agreements at the request of any holder of
Trust Preferred Securities issued by the
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respective trust unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred by exercising these powers.
CONCERNING THE PROPERTY TRUSTEE
We and our affiliates use or will use some of the services of the
Property Trustee in the normal course of business.
MISCELLANEOUS
The Administrative Trustees and the Property Trustee relating to each
trust are authorized and directed to conduct the affairs of and to operate the
trust in such a way that the trust will not be deemed to be an "investment
company" required to be registered under the Investment Company Act or taxable
other than as a grantor trust for United States federal income tax purposes and
so that the Debt Securities held by that trust will be treated as indebtedness
of ours for United States federal income tax purposes. In this regard, each
Property Trustee and the holders of Trust Common Securities issued by the
respective trust are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of the trust or the applicable trust
agreement, that the Property Trustee and the holders of Trust Common Securities
determine in their discretion to be necessary or desirable for these purposes,
as long as this action does not materially adversely affect the interests of the
holders of the Trust Preferred Securities.
Holders of the Trust Preferred Securities have no preemptive or similar
rights.
A trust may not borrow money or issue debt or mortgage or pledge any of
its assets.
GOVERNING LAW
The trust agreement and the Trust Preferred Securities will be governed
by Delaware law.
DESCRIPTION OF GUARANTEES
Each Guarantee will be executed and delivered by us concurrently with
the issuance of Trust Preferred Securities by a trust for the benefit of the
holders from time to time of the Trust Preferred Securities. We will appoint The
Bank of New York as Guarantee Trustee under each Guarantee. Each Guarantee
Trustee will hold the respective Guarantee for the benefit of the holders of the
Trust Preferred Securities issued by the related trust. Each Guarantee will be
qualified as an indenture under the Trust Indenture Act of 1939. We have
summarized below certain provisions of the Guarantees. This summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Guarantee, including the definitions in
the Guarantee of certain terms. The form of guarantee agreement will be filed as
an exhibit to the registration statement of which this prospectus is a part.
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GENERAL
Unless otherwise provided in a prospectus supplement, we will fully and
unconditionally agree, to the extent described herein, to pay the Guarantee
payments, as defined below, to the holders of the Trust Preferred Securities
issued by each trust, as and when due, regardless of any defense, right of
set-off or counterclaim that a trust may have or assert other than the defense
of payment. The following payments with respect to the Trust Preferred
Securities, to the extent not paid or made by or on behalf of the respective
trust, which payments we refer to in this discussion as the "Guarantee
payments," will be subject to the respective Guarantee:
- any accumulated and unpaid distributions required to be paid on the
Trust Preferred Securities, to the extent that the trust has funds on
hand available therefor;
- the redemption price with respect to any Trust Preferred Securities
called for redemption, to the extent that the trust has funds on hand
available therefor; and
- upon a voluntary or involuntary dissolution, winding up or liquidation
of the trust, unless the related Debt Securities are distributed to
holders of the Trust Preferred Securities, the lesser of:
(1) the aggregate of the liquidation amount and all
accumulated and unpaid distributions to the date of payment, to the extent
that the trust has funds on hand available therefor; and
(2) the amount of assets of the trust remaining available for
distribution to holders of the Trust Preferred Securities on liquidation of
the trust.
Our obligation to make a Guarantee payment may be satisfied by direct
payment of the required amounts by us to the holders of the Trust Preferred
Securities or by causing the trust to pay these amounts to the holders.
Each Guarantee will be an irrevocable guarantee of the obligations of
the respective trust under its Trust Preferred Securities, but will apply only
to the extent that the trust has funds sufficient to make these payments.
If we do not make payments on the Debt Securities held by a trust, the
trust will not be able to pay any amounts payable in respect of its Trust
Preferred Securities and will not have funds legally available for these
payments. The applicable prospectus supplement will describe the ranking of the
Guarantee. See STATUS OF THE GUARANTEES. The Guarantees do not limit our
incurrence or issuance of other secured or unsecured debt, including Senior
Indebtedness, whether under the applicable indenture, any other indenture that
we may enter into in the future or otherwise.
We will enter into an agreement as to expenses and liabilities with
each trust to provide funds to such trust as needed to pay obligations of the
trust to parties other than the holders of the Trust Preferred Securities. We
have, through the Guarantees, the trust agreements, the agreements as to
expenses and liabilities, the applicable Debt Securities and the related
indenture, taken together, fully, irrevocably and unconditionally guaranteed all
of each trust's obligations under its
48
Trust Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all the other documents constitutes the Guarantee.
It is only the combined operation of these documents that has the effect of
providing a full, irrevocable and unconditional guarantee of each trust's
obligations in respect of its Trust Preferred Securities. See RELATIONSHIP AMONG
TRUST PREFERRED SECURITIES, DEBT SECURITIES AND GUARANTEES.
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of ours. The
applicable prospectus supplement will describe the ranking of each Guarantee.
Each Guarantee will constitute a guarantee of payment and not of
collection; specifically, the Guaranteed party may institute a legal proceeding
directly against the guarantor to enforce its rights under the Guarantee without
first instituting a legal proceeding against any other person or entity. Each
Guarantee will be held by the respective Guarantee Trustee for the benefit of
the holders of the related Trust Preferred Securities. A Guarantee will not be
discharged except by payment of the applicable Guarantee payments in full to the
extent not paid or distributed by the respective trust.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely
affect the rights of holders of the related Trust Preferred Securities, in which
case no vote will be required, a Guarantee may not be amended without the prior
approval of the holders of not less than a majority of the aggregate liquidation
amount of the related Trust Preferred Securities. The manner of obtaining this
type of approval will be as set forth under DESCRIPTION OF TRUST PREFERRED
SECURITIES--VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT. All Guarantees and
agreements contained in each Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of ours and shall inure to the benefit
of the holders of the related Trust Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under a Guarantee will occur upon our failure to
perform any of our payment obligations under the Guarantee, or to perform any
other obligation if such default remains unremedied for 30 days.
The holders of not less than a majority in aggregate liquidation amount
of the related Trust Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under the Guarantee. Any
registered holder of Trust Preferred Securities may institute a legal proceeding
directly against us to enforce its rights under the related Guarantee without
first instituting a legal proceeding against the related trust, the Guarantee
Trustee or any other person or entity.
We, as guarantor, are required to file annually with each Guarantee
Trustee a certificate as to whether or not we are in compliance with all the
conditions and covenants applicable to us under each Guarantee.
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CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
We may merge or consolidate with any entity or sell substantially all
of our assets as an entirety as long as the successor or purchaser (i) is
organized and existing under the laws of the United States, any state thereof or
the District of Columbia, (ii) expressly assumes our obligations under the
Guarantee and (iii) immediately after giving effect thereto no event of default
under the Guarantee and no event which after notice or lapse of time or both,
would become an event of default under the Guarantee has happened and is
continuing.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance
of a default by us in performance of the Guarantee, undertakes to perform only
such duties as are specifically set forth in the guarantee agreement. After a
default with respect to the Guarantee, the Guarantee Trustee must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
guarantee agreement at the request of any holder of the Trust Preferred
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that it might thereby incur.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate and be of no further force and effect
upon full payment of the redemption price of the related Trust Preferred
Securities, upon full payment of the amounts payable with respect to the Trust
Preferred Securities upon liquidation of the respective trust and upon
distribution of the related Debt Securities to the holders of the Trust
Preferred Securities. Each Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the related Trust
Preferred Securities must restore payment of any sums paid under the Trust
Preferred Securities or the Guarantee.
GOVERNING LAW
Each Guarantee will be governed by New York law.
CONCERNING THE TRUSTEE
We and our affiliates use or will use some of the banking services of
the Guarantee Trustee in the normal course of business.
We must furnish annually to each Property Trustee a statement by an
appropriate officer as to that officer's knowledge of our compliance with all
conditions and covenants under the respective trust agreement. Also, the
Administrative Trustees for each trust must file, on behalf of the respective
trust, a statement as to our compliance with all conditions and covenants under
the respective trust agreement.
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DESCRIPTION OF THE STOCK PURCHASE CONTRACTS AND THE STOCK PURCHASE UNITS
We may issue Stock Purchase Contracts representing contracts obligating
holders to purchase from us and we may sell to the holders, a specified number
of shares of common stock (or a range of numbers of shares pursuant to a
predetermined formula) at a future date or dates. The price per share of common
stock may be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts.
The Stock Purchase Contracts may be issued separately or as a part of
units, often known as Stock Purchase Units, consisting of a Stock Purchase
Contract and either Debt Securities or debt obligations of third parties,
including U.S. Treasury securities or Trust Preferred Securities securing the
holder's obligations to purchase the common stock under the Stock Purchase
Contracts.
The Stock Purchase Contracts may require us to make periodic payments
to the holders of the Stock Purchase Units or vice versa, and such payments may
be unsecured or prefunded on some basis. The Stock Purchase Contracts may
require holders to secure their obligations in a specified manner and in certain
circumstances we may deliver newly issued prepaid Stock Purchase Contracts,
often known as prepaid securities, upon release to a holder of any collateral
securing such holder's obligations under the original Stock Purchase Contract.
The applicable prospectus supplement will describe the terms of any
Stock Purchase Contracts or Stock Purchase Units and, if applicable, prepaid
securities. The description in the applicable prospectus supplement will not
necessarily contain all of information that you may find useful. For more
information, you should review the Stock Purchase Contracts, the collateral
arrangements and depositary arrangements, if applicable, relating to such Stock
Purchase Contracts or Stock Purchase Units and, if applicable, the prepaid
securities and the document pursuant to which the prepaid securities will be
issued. These documents will be filed with the SEC promptly after the offering
of such Stock Purchase Contracts or Stock Purchase Units and, if applicable,
prepaid securities.
RELATIONSHIP AMONG TRUST PREFERRED SECURITIES, DEBT SECURITIES AND GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of distributions and other amounts due on the Trust Preferred
Securities issued by a trust, to the extent the trust has funds available for
the payment, are irrevocably Guaranteed by us as and to the extent set forth
under DESCRIPTION OF Guarantees. Taken together, our obligations under the
related Debt Securities, the applicable indenture, an agreement as to expenses
and liabilities, the related trust agreement and the related Guarantee provide,
in the aggregate, a full, irrevocable and unconditional Guarantee of payments of
distributions and other amounts due on the Trust Preferred Securities issued by
a trust. No single document standing alone or operating in conjunction with
fewer than all the other documents constitutes the Guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional Guarantee of each trust's obligations in respect
of the related Trust Preferred
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Securities. If and to the extent that we do not make payments on the Debt
Securities issued to a trust, the trust will not have sufficient funds to pay
distributions or other amounts due on its Trust Preferred Securities. A
Guarantee does not cover payment of amounts payable with respect to the Trust
Preferred Securities issued by a trust when the trust does not have sufficient
funds to pay these amounts. In this event, the remedy of a holder of the Trust
Preferred Securities is to institute a legal proceeding directly against us for
enforcement of payment of our obligations under Debt Securities having a
principal amount equal to the liquidation amount of the Trust Preferred
Securities held by the holder.
SUFFICIENCY OF PAYMENTS
As long as payments are made when due on the Debt Securities issued to
a trust, these payments will be sufficient to cover distributions and other
payments distributable on the Trust Preferred Securities issued by that trust,
primarily because:
- the aggregate principal amount of the Debt Securities will be equal to
the sum of the aggregate stated liquidation amount of the Trust
Preferred Securities and Trust Common Securities;
- the interest rate and interest and other payment dates on the Debt
Securities will match the distribution rate, distribution dates and
other payment dates for the Trust Preferred Securities;
- we will pay for any and all costs, expenses and liabilities of the
trust except the trust's obligations to holders of the related Trust
Securities; and
- the applicable trust agreement further provides that the trust will not
engage in any activity that is not consistent with the limited purposes
of the trust.
Notwithstanding anything to the contrary in the applicable indenture,
we have the right to set-off any payment we are otherwise required to make under
that indenture against and to the extent we have previously made, or are
concurrently on the date of the payment making, a payment under a Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF TRUST PREFERRED SECURITIES
Under the circumstances set forth under DESCRIPTION OF TRUST PREFERRED
SECURITIES--ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED
SECURITIES, holders of Trust Preferred Securities may bring a Direct Action
against us.
A holder of any Trust Preferred Security may institute a legal
proceeding directly against us to enforce its rights under the related Guarantee
without first instituting a legal proceeding against the related Guarantee
Trustee, the related trust or any other person or entity. See DESCRIPTION OF
GUARANTEES.
LIMITED PURPOSE OF TRUST
The Trust Preferred Securities issued by a trust represent preferred
undivided beneficial interests in the assets of the trust, and the trust exists
for the sole purpose of issuing its Trust Preferred Securities and Trust Common
Securities and investing the proceeds of these Trust
52
Securities in Debt Securities. A principal difference between the rights of a
holder of a Trust Preferred Security and a holder of a debt security is that a
holder of a debt security is entitled to receive from us payments on Debt
Securities held, while a holder of Trust Preferred Securities is entitled to
receive distributions or other amounts distributable with respect to the Trust
Preferred Securities from a trust, or from us under a Guarantee, only if and to
the extent the trust has funds available for the payment of the distributions.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution of a trust, other than
any dissolution involving the distribution of the related Debt Securities, after
satisfaction of liabilities to creditors of the trust as required by applicable
law, the holders of the Trust Preferred Securities issued by the trust will be
entitled to receive, out of assets held by the trust, the liquidation
distribution in cash. See DESCRIPTION OF TRUST PREFERRED SECURITIES--LIQUIDATION
DISTRIBUTION UPON DISSOLUTION. Since we are the guarantor under each of the
Guarantees and have agreed to pay for all costs, expenses and liabilities of
each trust, other than each trust's obligations to the holders of the respective
Trust Securities, the positions of a holder of Trust Preferred Securities and a
holder of Debt Securities relative to other creditors and to our shareholders in
the event of our liquidation or bankruptcy are expected to be substantially the
same.
BOOK-ENTRY SYSTEM
Unless otherwise stated in a prospectus supplement, book-entry
securities of a series will be issued in the form of a global security that the
Trustee will deposit with The Depository Trust Company, New York, New York
("DTC"). This means that we will not issue security certificates to each holder.
One or more global securities will be issued to DTC who will keep a computerized
record of its participants (for example, your broker) whose clients have
purchased the securities. The participant will then keep a record of its clients
who purchased the securities. Unless it is exchanged in whole or in part for a
certificate, a global security may not be transferred, except that DTC, its
nominees, and their successors may transfer a global security as a whole to one
another.
Beneficial interests in global securities will be shown on, and
transfers of global securities 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 security certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations.
53
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 applicable trustee will treat DTC's nominee as the owner of the global
securities 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
securities to owners of beneficial interests in the global securities.
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
securities 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 securities 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 securities and
voting by participants, as is the case with securities 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.
According to DTC, the foregoing information with respect to DTC has
been provided to the Direct Participants and other members of the financial
community for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind.
Securities represented by a global certificate will be exchangeable for
definitive securities 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 securities of a series to be
represented by a global security and notify the Trustee of our
decision.
PLAN OF DISTRIBUTION
We may sell the securities (a) through agents; (b) through underwriters
or dealers; or (c) directly to one or more purchasers.
BY AGENTS
Securities 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.
The applicable prospectus supplement will set forth the terms under
which the securities are offered, including the name or names of any
underwriters, the purchase price of the securities and
54
the proceeds to us from the sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial offering price and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
Any initial offering price and any discounts, concessions or
commissions allowed or reallowed or paid to dealers may be changed from time to
time.
The Agents will not be obligated to make a market in the securities. We
cannot predict the amount of trading or liquidity of the securities.
BY UNDERWRITERS
If underwriters are used in the sale, the underwriters will acquire the
securities for their own account. The underwriters may resell the securities 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 securities will be subject to
certain conditions. The underwriters will be obligated to purchase all the
securities offered if any 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 securities directly. In this case, no underwriters or
agents would be involved.
GENERAL INFORMATION
Underwriters, dealers, and agents that participate in the distribution
of the securities 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 securities 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.
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 securities 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.
55
Certain matters of Delaware law relating to the validity of the Trust
Preferred Securities, the enforceability of the trust agreement and the creation
of the trusts will be passed upon by Richards Layton & Finger, P.A., Wilmington,
Delaware.
EXPERTS
The financial statements of the Company and its subsidiaries (including
Central and South West Corporation and its subsidiaries, as of December 31, 2001
and 2000, and for the years then ended) and the related financial statement
schedule incorporated in this prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 2001 have been audited by
Deloitte & Touche LLP, as stated in their reports dated February 22, 2002 (which
report on the financial statements expresses an unqualified opinion and includes
an explanatory paragraph referring to the restatement of the 1999 financial
statements to give retroactive effect to the conforming change in the method of
accounting for vacation pay accruals), which are incorporated herein by
reference.
The financial statements of Central and South West Corporation and its
subsidiaries (excluding CSW UK Holdings), as of December 31, 1999, and for the
year then ended, have been audited by Arthur Andersen LLP, as stated in their
reports, which are incorporated herein by reference. The financial statements of
CSW UK Holdings, as of December 31, 1999, and for the year then ended, have been
audited by KPMG Audit Plc, as stated in its report, which is incorporated herein
by reference.
Such financial statements of the Company and its subsidiaries have been
so incorporated herein in reliance upon the respective reports of such firms
given upon their authority as experts in accounting and auditing. All of the
foregoing firms are independent auditors.
56
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Estimation based upon the issuance of all of the Securities in three
issuances:
Securities and Exchange Commission Filing Fees .................... $ 276,000
Printing Registration Statement, Prospectus, etc .................. 33,000
Independent Auditors' fees ........................................ 150,000
Charges of Trustee (including counsel fees) ....................... 108,000
Legal fees ........................................................ 300,000
Rating Agency fees ................................................ 380,000
Miscellaneous expenses ............................................ 50,000
----------
Total ........................................................ $1,297,000
==========
* Estimated, except for filing fees.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The New York Business Corporation Law ("BCL"), Article 7, Sections
721-726 provide for the indemnification and advancement of expenses to officers
and directors. Section 721 provides that indemnification and advancement
pursuant to the BCL are not exclusive of any other rights an officer or director
may be entitled to, provided that no indemnification may be made to or on behalf
of any director or officer if a judgment or other final adjudication adverse to
the director or officer establishes that his acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that the director personally gained a
financial profit or other advantage to which he or she was not legally entitled.
Section 722 of the BCL provides that a corporation may indemnify an
officer or director, in the case of third party actions, against judgments,
fines, amounts paid in settlement and reasonable expenses and, in the case of
derivative actions, against amounts paid in settlement and reasonable expenses,
provided that the director or officer acted in good faith, for a purpose which
he or she reasonably believed to be in the best interests of the corporation
and, in the case of criminal actions, had no reasonable cause to believe his
conduct was unlawful. In addition, statutory indemnification may not be provided
in derivative actions (i) which are settled or otherwise disposed of or (ii) in
which the director or officer is adjudged liable to the corporation, unless and
only to the extent a court determines that the person is fairly and reasonably
entitled to indemnity.
Section 723 of the BCL provides that statutory indemnification is
mandatory where the director or officer has been successful, on the merits or
otherwise, in the defense of a civil or criminal action or proceeding. Section
723 also provides that expenses of defending a civil or criminal action or
proceeding may be advanced by the corporation upon receipt of an undertaking to
repay them if and to the extent the recipient is ultimately found not to be
entitled to indemnification. Section 725 provides for repayment of such expenses
when the recipient is ultimately found not to
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be entitled to indemnification. Section 726 provides that a corporation may
obtain indemnification insurance indemnifying itself and its directors and
officers.
Section 402(b) of the BCL provides that a corporation may include in
its certificate of incorporation a provision limiting or eliminating, with
certain exceptions, the personal liability of directors to a corporation or its
shareholders for damages for any breach of duty in such capacity. The
certificate of incorporation of the registrant contains provisions eliminating
the personal liability of directors to the extent permitted by New York law. The
bylaws of the registrant provide for the indemnification of directors and
officers of the registrant to the full extent permitted by law.
The above is a general summary of certain provisions of the
registrant's bylaws and the BCL and is subject in all respects to the specific
and detailed provisions of the registrant's bylaws and the BCL.
Reference is made to the Underwriting Agreements filed as Exhibit
1(a)-1(f) hereto, which provide for indemnification of the registrant, certain
of its directors and officers, and persons who control the registrant, under
certain circumstances.
The registrant maintains insurance policies insuring its directors and
officers against certain obligations that may be incurred by them.
Each trust agreement limits the liability of such trust and certain
other persons and provides for the indemnification by the trust or us of the
trustees, their officers, directors and employees and certain other persons.
ITEM 16. EXHIBITS.
Reference is made to the information contained in the Exhibit Index
filed as part of this Registration Statement.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) of the Securities
Act of 1933 if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum
II-2
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
PROVIDED, HOWEVER, that (i) and (ii) do not apply if the registration
statement is on Form S-3 or Form S-8, and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering thereof at that time shall be deemed to be the initial bona fide
offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the laws of the State of New York, the
registrant's bylaws, or otherwise, the registrant has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
said Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in said Act and will be governed by the
final adjudication of such issue.
(6) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration
II-3
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbus and State of Ohio, on the 11th day of April,
2002.
AMERICAN ELECTRIC POWER COMPANY, INC.
E. Linn Draper, Jr.*
Chairman of the Board and
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
(i) Principal Executive
Officer Chairman of the Board and
Chief Executive Officer
E. Linn Draper, Jr.* April 11, 2002
(ii) Principal Financial
Officer:
/s/ Susan Tomasky Vice President, Secretary
-------------------------- and Chief Financial Officer April 11, 2002
Susan Tomasky
(iii) Principal Accounting
Officer:
/s/ J. M. Buonaiuto
--------------------------
J. M. Buonaiuto Controller April 11, 2002
(iv) A MAJORITY OF THE
DIRECTORS:
*E. R. Brooks *Leonard J. Kujawa
*Donald M. Carlton *James L. Powell
*John P. DesBarres *Richard L. Sandor
*E. Linn Draper, Jr. *Thomas V. Shockley, III
*Robert W. Fri *Donald G. Smith
*William R. Howell *Linda Gillespie Stuntz
*Lester A. Hudson, Jr. *Kathryn D. Sullivan April 11, 2002
*By /s/ Susan Tomasky
-----------------------
(SUSAN TOMASKY, ATTORNEY-IN-FACT)
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AEP CAPITAL TRUST I
AEP CAPITAL TRUST II
AEP CAPITAL TRUST III
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Jeffrey D. Cross Administrative
--------------------- Trustee April 11, 2002
Jeffrey D. Cross
/s/ Stephan T. Haynes Administrative
--------------------- Trustee April 11, 2002
Stephan T. Haynes
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EXHIBIT INDEX
The following exhibits are filed herewith.
EXHIBIT NO. DESCRIPTION
* 1(a) Proposed form of Underwriting Agreement for Senior Notes
* 1(b) Proposed form of Underwriting Agreement for Common Stock
x 1(c) Proposed form of Underwriting Agreement for Junior Subordinated
Debentures
x 1(d) Proposed form of Underwriting Agreement for Trust Preferred
Securities
x 1(e) Proposed form of Underwriting Agreement for Stock Purchase
Contracts
x 1(f) Proposed form of Underwriting Agreement for Stock Purchase Units
**3(a) Restated Certificate of Incorporation [File No. 1-3525, Exhibit
3(a)]
**3(b) Bylaws, as amended January 28, 1998 [File No. 1-3525, Exhibit
3(d)]
* 4(a) Indenture, dated as of May 1, 2001, between the Company and The
Bank of New York, as Trustee for the unsecured Senior Notes
* 4(b) First Supplemental Indenture, dated as of May 1, 2001,
establishing certain terms of the 6.125% Senior Notes, Series A,
due May 15, 2006
* 4(c) Second Supplemental Indenture, dated as of May 1, 2001,
establishing certain terms of the 6.50% Putable Callable Notes,
Series B, Putable Callable May 15, 2006
* 4(d) Proposed form of Supplemental Indenture for the Senior Notes
* 4(e) Proposed form of Subordinated Indenture for the Junior
Subordinated Debentures
* 4(f) Proposed form of Supplemental Indenture for the Junior
Subordinated Debentures
* 4(g)(i) Trust Agreement for the Trust Preferred Securities for AEP
Capital Trust I
* 4(g)(ii) Trust Agreement for the Trust Preferred Securities for AEP
Capital Trust II
* 4(g)(iii) Trust Agreement for the Trust Preferred Securities for AEP
Capital Trust III
* 4(h)(i) Trust Certificate for the Trust Preferred Securities for AEP
Capital Trust I
* 4(h)(ii) Trust Certificate for the Trust Preferred Securities for AEP
Capital Trust II
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* 4(h)(iii) Trust Certificate for the Trust Preferred Securities for AEP
Capital Trust III
* 4(i)(i) Proposed form of Amended and Restated Trust Agreement for the
Trust Preferred Securities for AEP Capital Trust I
* 4(i)(ii) Proposed form of Amended and Restated Trust Agreement for the
Trust Preferred Securities for AEP Capital Trust II
* 4(i)(iii) Proposed form of Amended and Restated Trust Agreement for the
Trust Preferred Securities for AEP Capital Trust III
* 4(j)(i) Proposed form of Guarantee Agreement for AEP Capital Trust I
* 4(j)(ii) Proposed form of Guarantee Agreement for AEP Capital Trust II
* 4(j)(iii) Proposed form of Guarantee Agreement for AEP Capital Trust III
x 4(k) Proposed form of Stock Purchase Contract Agreement, including
the form of Security Certificate
* 4(l) Proposed form of Pledge Agreement
* 5(a) Opinion of Simpson Thacher & Bartlett
* 5(b) Opinion of Richards Layton & Finger, P.A.
12 Computation of Consolidated Ratio of Earnings to Fixed Charges
[Annual Report on Form 10-K of the Company for the year ended
December 31, 2001, File No. 1-3457, Exhibit 12].
*23(a) Consent of Deloitte & Touche LLP
*23(b) Consent of Arthur Andersen LLP
*23(c) Consent of KPMG Audit Plc
23(d) Consent of Simpson Thacher & Bartlett (included in Exhibit 5(a)
filed herewith)
23(e) Consent of Richards Layton & Finger, P.A. (included in Exhibit
5(b) filed herewith)
*24 Powers of Attorney and resolutions of the Board of Directors of
the Company
*25(a) Form T-1 re eligibility of The Bank of New York to act as
Trustee under the Indenture for the Senior Notes
*25(b) Form T-1 re eligibility of The Bank of New York to act as
Subordinated Indenture Trustee under the Subordinated Indenture
for the Junior Subordinated Debentures
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*25(c)(i) Form T-1 re eligibility of The Bank of New York to act as
Guarantee Trustee for the Guarantees for the benefit of the
holders of the Trust Preferred Securities relating to AEP
Capital Trust I
*25(c)(ii) Form T-1 re eligibility of The Bank of New York to act as
Guarantee Trustee for the Guarantees for the benefit of the
holders of the Trust Preferred Securities relating to AEP
Capital Trust II
*25(c)(iii) Form T-1 re eligibility of The Bank of New York to act as
Guarantee Trustee for the Guarantees for the benefit of the
holders of the Trust Preferred Securities relating to AEP
Capital Trust III
*25(d)(i) Form T-1 re eligibility of Wilmington Trust Company to act as
Property Trustee for the Trust Preferred Securities relating to
AEP Capital Trust I
*25(d)(ii) Form T-1 re eligibility of Wilmington Trust Company to act as
Property Trustee for the Trust Preferred Securities relating to
AEP Capital Trust II
*25(d)(iii) Form T-1 re eligibility of Wilmington Trust Company to act as
Property Trustee for the Trust Preferred Securities relating to
AEP Capital Trust III
Note: Reports of the Company on Forms 8-K, 10-Q and 10-K are on file
with the SEC under File No. 1-3525.
* Filed herewith
** Incorporated by reference herein as indicated
x To be filed by amendment or pursuant to a report to be filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 if applicable.
II-9