-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, bUOayNLqZdD+tYEsZW8KueZey6YpK8iL5tKzsUyaY4/v9c3kTmMQqGMjeK4K5g02 ZpU6DPoIx5Js8FwR4oPm/A== 0000006879-94-000021.txt : 19940822 0000006879-94-000021.hdr.sgml : 19940822 ACCESSION NUMBER: 0000006879-94-000021 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPALACHIAN POWER CO CENTRAL INDEX KEY: 0000006879 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 540124790 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-50229 FILM NUMBER: 94545151 BUSINESS ADDRESS: STREET 1: 40 FRANKLIN RD SW CITY: ROANOKE STATE: VA ZIP: 24011 BUSINESS PHONE: 7039852300 MAIL ADDRESS: STREET 1: 1 RIVERSIDE PLAZA CITY: COLUMBUS STATE: OH ZIP: 43215 424B3 1 614/223-1648 Securities and Exchange Commission 450 Fifth Street, N.W. ATTN: Filing Desk, Stop 1-4 Washington, D.C. 20549-1004 August 19, 1994 Re: Appalachian Power Company Registration Statement on Form S-3 File No. 33-50229 Gentlemen: Pursuant to Rule 424(b)(3), transmitted herewith is the Prospectus, dated September 22, 1993, as supplemented by the Prospectus Supplement, dated October 8, 1993, and a Pricing Supplement No. 2 dated August 18, 1994, to be used in connection with the public offering by the Company of its First Mortgage Bond, Designated Secured Medium Term Note, 7.70% Series due September 1, 2004 in the principal amount of $21,000,000. Very truly yours, /s/ Thomas G. Berkemeyer Thomas G. Berkemeyer TGB/mms apfinan.93c\424b3ltr.mtn Rule 424(b)(3) File No. 33-50229 CUSIP No.: 03774B AS2 Pricing Supplement No. 2 Dated August 18, 1994 (To Prospectus dated September 22, 1993 and Prospectus Supplement dated October 8, 1993) $175,000,000 APPALACHIAN POWER COMPANY First Mortgage Bonds, Designated Secured Medium Term Notes Due From Nine Months to Forty-Two Years from Date of Issue Principal Amount: $21,000,000 Issue Price: 100% Original Issue Date: 8-30-1994 Stated Maturity: 9-1-2004 Interest Rate: 7.70% Form: Book-Entry Agent's Discount or Commission: .625% Redemption: The Notes are not redeemable by the Company prior to their maturity. The Company sold $11,000,000 principal amount of the Notes to Salomon Brothers Inc and $10,000,000 principal amount of the Notes to CS First Boston Corporation as principals in this transaction for resale to one or more investors at varying prices related to prevailing market conditions at the time or times of resale as determined by Salomon Brothers Inc and CS First Boston Corporation, as the case may be. Prospectus Supplement (To Prospectus Dated September 22, 1993) $175,000,000 Appalachian Power Company First Mortgage Bonds, Designated Secured Medium Term Notes, Due From Nine Months to Forty-Two Years from Date of Issue Appalachian Power Company (the "Company") may from time to time offer its First Mortgage Bonds, Designated Secured Medium Term Notes (the "Notes"), in the aggregate principal amount of up to $175,000,000, subject to reduction as a result of the sale of other Debt Securities as described in the accompanying Prospectus. Each Note will mature from nine months to forty-two years from its date of issue. Each Note will bear interest at a fixed rate. Unless otherwise indicated in a pricing supplement to this Prospectus Supplement (a "Pricing Supplement"), interest on each Note will be payable semiannually in arrears on each May 1 and November 1 and at redemption, if any, or Stated Maturity. The interest rate, Issue Price, Stated Maturity, Interest Payment Dates, redemption provisions, if any, and certain other terms with respect to each Note will be established at the time of issuance and set forth in a Pricing Supplement. Each series of Notes will be represented by a global Note ("Global Note") registered in the name of a nominee of The Depository Trust Company, as Depository, or another depository (such a Note, so represented, being called a "Book-Entry Note"). Beneficial interests in Global Notes representing Book-Entry Notes will be shown on, and transfers thereof will be effected only through, records maintained by the Depository's participants. Book-Entry Notes will not be issuable as Certificated Notes except under the circumstances described herein. See "Supplemental Description of the Notes--Book-Entry Notes". THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT HERETO OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Price to Agents' Proceeds to Public(1) Commission(2) Company(2)(3) Per Note . . 100.000% .125%-.750% 99.875%-99.250% Total . . . . $175,000,000 $218,750- $174,781,250- $1,312,500 $173,687,500 (1) Unless otherwise specified in the applicable Pricing Supplement, the price to the public will be 100% of the principal amount. (2) The Company will pay to Salomon Brothers Inc and The First Boston Corporation, each as agent (together, the "Agents"), a commission of from .125% to .750% of the principal amount of any Note, depending upon its Stated Maturity, sold through such Agent. The Company may also sell Notes to any Agent, as principal, at a discount for resale to one or more investors or to another broker-dealer (acting as principal for purposes of resale) at varying prices related to prevailing market prices at the time of resale, as determined by such Agent. Unless otherwise indicated in the applicable Pricing Supplement, any Note sold to an Agent as principal shall be purchased by such Agent at a price equal to 100% of the principal amount thereof less the percentage equal to the commission applicable to an agency sale of a Note of identical maturity and may be resold by such Agent. The Notes may also be sold by the Company directly to investors, in which case no commission will be payable to the Agents. The Company has agreed to indemnify the Agents for certain liabilities, including certain liabilities under the Securities Act of 1933, as amended. See "Plan of Distribution" herein. (3) Before deduction of expenses payable by the Company estimated at $432,688, including reimbursement of certain expenses of the Agents. The Notes are being offered on a continuous basis by the Company through the Agents which have agreed to use their reasonable best efforts to solicit offers to purchase Notes. The Company may sell Notes at a discount to either Agent, as principal, for resale to one or more investors or other purchasers at varying prices related to prevailing market prices at the time of resale, as determined by such Agent. The Company also may sell Notes directly to investors on its own behalf. The Notes will not be listed on any securities exchange, and there is no assurance that the maximum amount of Notes offered by this Prospectus Supplement will be sold or that there will be a secondary market for the Notes. The Company reserves the right to withdraw, cancel or modify the offer made hereby without notice. The Company or an Agent may reject an order, whether or not solicited, in whole or in part. See "Plan of Distribution" herein. Salomon Brothers Inc CS First Boston The date of this Prospectus Supplement is October 8, 1993. IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE NOTES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. ____________________ SUPPLEMENTAL DESCRIPTION OF THE NOTES The following description of the particular terms of the Notes supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the Debt Securities set forth under "Description of Debt Securities" in the accompanying Prospectus, to which description reference is hereby made. Certain capitalized terms used herein are defined under "Description of Debt Securities" in the accompanying Prospectus. General The Notes will be issued in one or more series of Debt Securities under the Mortgage. The Notes will be limited in aggregate principal amount to $175,000,000, subject to reduction as a result of the sale of other Debt Securities as described in the accompanying Prospectus. The Notes will be issued in fully registered form only, without coupons. Each series of Notes will be issued initially as a Book-Entry Note. Except as set forth herein under "Book-Entry Notes" or in any Pricing Supplement relating to specific Notes, the Notes will not be issuable as Certificated Notes. The authorized denominations of Global Notes will be $1,000 and any integral multiple thereof up to $150,000,000. Each Note will mature from 9 months to 42 years from its date of issue, as selected by the purchaser and agreed to by the Company. Each Note may also be subject to redemption at the option of the Company prior to its Stated Maturity (as defined below). The Pricing Supplement relating to a Note will describe the following terms: (i) the price (expressed as a percentage of the aggregate principal amount thereof) at which such Note will be issued (the "Issue Price"); (ii) the date on which such Note will be issued (the "Original Issue Date"); (iii) the date on which such Note will mature (the "Stated Maturity"); (iv) the rate per annum at which such Note will bear interest, and the Interest Payment Dates (as defined below); (v) any applicable discounts or commissions; (vi) whether such Note may be redeemed at the option of the Company prior to Stated Maturity and, if so, the provisions relating to such redemption; and (vii) any other terms of such Note not inconsistent with the provisions of the Mortgage. "Business Day" with respect to any Note means any day, other than a Saturday or Sunday, which is not a day on which banking institutions or trust companies in The City of New York, New York or the city in which is located any office or agency maintained for the payment of principal of or premium, if any, or interest on such Note are authorized or required by law, regulation or executive order to remain closed. Payment of Principal and Interest Payments of interest on the Notes (other than interest payable at redemption, if any, or Stated Maturity) will be made, except as provided below, in immediately available funds to the Owners of such Notes (which, in the case of Global Notes representing Book- Entry Notes, will be a nominee of the Depository, as hereinafter defined) as of the Regular Record Date (as defined below) for each Interest Payment Date; provided, however, that if the Original Issue Date of a Note issued as a Global Note is after a Regular Record Date and before the corresponding Interest Payment Date, interest for the period from and including the Original Issue Date for such Note to but excluding such Interest Payment Date will be paid on the next succeeding Interest Payment Date to the Owner of such Note on the related Regular Record Date. Unless otherwise specified in the applicable Pricing Supplement, the principal of the Notes and any premium and interest thereon payable at redemption, if any, or Stated Maturity will be paid in immediately available funds upon surrender thereof at the office of Bankers Trust Company at Four Albany Street in New York, New York. Should any Note be issued other than as a Global Note, interest (other than interest payable at redemption or Stated Maturity) may, at the option of the Company, be paid to the person entitled thereto by check mailed to any such person. See "Book-Entry Notes" herein. If, with respect to any Note, any Interest Payment Date, redemption date or the Stated Maturity is not a Business Day, payment of amounts due on such Note on such date may be made on the next succeeding Business Day, and, if such payment is made or duly provided for on such Business Day, no interest shall accrue on such amounts for the period from and after such Interest Payment Date, redemption date or Stated Maturity, as the case may be, to such Business Day. The "Regular Record Date" with respect to a Note (unless otherwise specified in the applicable Pricing Supplement) will be the April 15 or October 15, as the case may be, next preceding an Interest Payment Date for Notes or if such April 15 or October 15 is not a Business Day, the next preceding Business Day. Each Note issued as a Global Note will bear interest from its Original Issue Date at the fixed interest rate per annum stated on the face thereof until the principal amount thereof is paid or made available for payment. Unless otherwise set forth in the applicable Pricing Supplement, interest on each Note will be payable semiannually in arrears on each May 1 and November 1 (each such date, an "Interest Payment Date") and at redemption, if any, or Stated Maturity. Each payment of interest in respect of an Interest Payment Date shall include interest accrued through the day before such Interest Payment Date. Interest on Notes will be computed on the basis of a 360-day year of twelve 30-day months. Redemption The Pricing Supplement relating to each Note will indicate either that such Note cannot be redeemed prior to Stated Maturity or that such Note will be redeemable at the option of the Company in whole or in part, under the terms and conditions and at the prices specified therein, together with accrued interest to the date of redemption. Any such redemption may be made upon not less than 30 days' notice. Book-Entry Notes Except under the circumstances described below, the Notes will be issued in whole or in part in the form of one or more Global Notes that will be deposited with, or on behalf of, The Depository Trust Company, New York, New York ("DTC"), or such other depository as may be subsequently designated (the "Depository"), and registered in the name of a nominee of the Depository. Book-Entry Notes represented by a Global Note will not be exchangeable for Certificated Notes and, except under the circumstances described below, will not otherwise be issuable as Certificated Notes. So long as the Depository, or its nominee, is the registered owner of a Global Note, such Depository or such nominee, as the case may be, will be considered the sole owner of the individual Book-Entry Notes represented by such Global Note for all purposes under the Mortgage. Payments of principal of and premium, if any, and any interest on individual Book-Entry Notes represented by a Global Note will be made to the Depository or its nominee, as the case may be, as the Owner of such Global Note. Except as set forth below, owners of beneficial interests in a Global Note will not be entitled to have any of the individual Book-Entry Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of any such Book-Entry Notes and will not be considered the Owners thereof under the Mortgage, including, without limitation, for purposes of consenting to any amendment thereof or supplement thereto. If the Depository is at any time unwilling or unable to continue as depository and a successor depository is not appointed, the Company will issue individual Certificated Notes in exchange for the Global Note or Notes representing the corresponding Book- Entry Notes. In addition, the Company may at any time and in its sole discretion determine not to have any Notes represented by one or more Global Notes and, in such event, will issue individual Certificated Notes in exchange for the Global Notes representing the corresponding Book-Entry Notes. In any such instance, an owner of a Book-Entry Note represented by a Global Note will be entitled to physical delivery of individual Certificated Notes equal in principal amount to such Book-Entry Note and to have such Certificated Notes registered in its name. Individual Certificated Notes so issued will be issued as registered Notes in denominations, unless otherwise specified by the Company, of $1,000 and integral multiples thereof. DTC has confirmed to the Company and the Agents the following information: 1. DTC will act as securities depository for the Global Notes. The Notes will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered Global Note will be issued for each series of the Notes, each in the aggregate principal amount of such series, and will be deposited with DTC. If, however, the aggregate principal amount of any series of Notes exceeds $150,000,000, one certificate will be issued with respect to each $150,000,000 of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such series. 2. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. 3. Purchases of Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Notes on DTC's records. The ownership interest of each actual purchaser of each Note ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Notes are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Notes, except in the event that use of the book- entry system for the Notes is discontinued. 4. To facilitate subsequent transfers, all Notes deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Notes with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes; DTC's records reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. 6. Redemption notices shall be sent to Cede & Co. If less than all of the Notes within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. will consent or vote with respect to the Notes. Under its usual procedures, DTC mails an Omnibus Proxy to the Company as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Principal and interest payments on the Notes will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the date on which interest is payable in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on such date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of such Participant and not of DTC, the Agents or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Company or the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. 9. DTC may discontinue providing its services as securities depository with respect to the Notes at any time by giving reasonable notice to the Company and the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Certificated Notes are required to be printed and delivered. 10. The Company may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Certificated Notes will be printed and delivered. The information in this section concerning DTC and DTC's book- entry system has been obtained from sources that the Company believes to be reliable, but the Company takes no responsibility for the accuracy thereof. The Agents are Direct Participants of DTC. None of the Company, the Trustee or any agent for payment on or registration of transfer or exchange of any Global Note will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial interests in such Global Note or for maintaining, supervising or reviewing any records relating to such beneficial interests. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following summary describes certain United States federal income tax consequences of the ownership of Notes as of the date hereof. Except where noted, it deals only with Notes held by initial purchasers who have purchased Notes at the initial offering price thereof and who hold such Notes as capital assets and does not deal with special situations, such as those of dealers in securities, financial institutions, life insurance companies, United States Holders (as defined below) whose "functional currency" is not the U.S. dollar, or Non-United States Holders (as defined below) owning (actually or constructively) ten percent or more of the combined voting power of all classes of voting stock of the Company. Persons considering the purchase, ownership or disposition of Notes should consult their own tax advisors concerning the federal income tax consequences in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction. Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code") and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in federal income tax consequences different from those discussed below. United States Holders As used herein, a "United States Holder" of a Note means a holder that is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, or an estate or trust the income of which is subject to United States federal income taxation regardless of its source. A "Non-United States Holder" is a holder that is not a United States Holder. Payments of Interest. Except as set forth below, interest on a Note will generally be taxable to a United States Holder as ordinary income from domestic sources at the time it is paid or accrued in accordance with the United States Holder's method of accounting for tax purposes. Notes with a maturity of one year or less will be subject to special tax rules that apply to the timing of inclusion in income of interest on such obligations ("Short-Term Notes"). An obligation which is issued for an amount less than its "stated redemption price at maturity" will generally be considered to be issued at a discount for federal income tax purposes. Under proposed Treasury Regulations (the "Proposed Regulations") involving original issue discount ("OID"), all payments (including all stated interest) with respect to a Short-Term Note will be included in the stated redemption price at maturity and, thus, holders will be taxable on discount in lieu of stated interest. This discount will be equal to the excess of the stated redemption price at maturity over the initial offering price to the public at which a substantial amount of the Notes is sold (for purposes of this section of the Prospectus Supplement, the "issue price"), unless a holder elects to compute this discount as acquisition discount using tax basis instead of issue price. In general, individual and certain other cash method holders of a Short-Term Note are not required to include accrued discount in income before receiving cash unless an election is made to do so. Holders who report income for federal income tax purposes on the accrual method and certain other holders, including banks and dealers in securities, are required to include discount on such Short-Term Notes in income on a straight-line method (as ordinary income) unless an election is made based on daily compounding. The amount of discount which accrues in respect of a Short-Term Note while held by a holder will be added to such holder's tax basis for such Note to the extent included in income. The Proposed Regulations were issued on December 21, 1992 and withdrew previously proposed regulations. The Proposed Regulations state that their provisions are to be applicable to Notes issued at any time 60 days after the regulations are published in final form. They are not final and are subject to change. It is impossible to predict whether or in what form the Proposed Regulations will become final and what the scope or effective date of any such final regulations might be. Holders should therefore consult their tax advisers as to the potential application of the above-discussed provisions of the Proposed Regulations. Sale, Exchange and Retirement of Notes. Upon the sale, exchange or retirement of a Note, a United States Holder will recognize gain or loss equal to the difference between the amount realized upon the sale, exchange or retirement and the adjusted tax basis of the Note. Under the Proposed Regulations, a United States Holder's tax basis in a Note will, in general, be the United States Holder's cost therefor, increased by any discount included in income by the United States Holder and reduced by any cash payments on the Note other than "qualified stated interest" payments. (In general, "qualified stated interest" includes interest at a single fixed rate unconditionally payable at least annually, other than interest on Short-Term Notes.) Except as described below with respect to certain Short-Term Notes, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if at the time of sale, exchange or retirement the Note has been held for more than one year. Under current law, net capital gains of individuals are, under certain circumstances, taxed at lower rates than items of ordinary income. The deductibility of capital losses is subject to limitations. In the case of a cash basis holder who does not include discount income currently, any gain realized on the sale, exchange or retirement of the Short-Term Note will be ordinary interest income to the extent of the discount accrued on a straight-line basis (or, if elected, according to a constant yield method based on daily compounding) through the date of sale, exchange or retirement. In addition, such non-electing holders which are not subject to the current inclusion requirement described above will be required to defer deductions for any interest paid on indebtedness incurred or continued to purchase or carry such Short-Term Notes in an amount not exceeding the deferred interest income, until such deferred interest income is realized. Non-United States Holders Non-United States Holders will not be subject to United States federal income taxes, including withholding taxes, on the interest income (including any OID) on, or gain from the sale or disposition of, any Note provided that (1) the interest income or gain is not effectively connected with the conduct by the Non-United States Holder of a trade or business within the United States, (2) the Non-United States Holder is not a controlled foreign corporation related to the Company through stock ownership, (3) with respect to any gain, the Non-United States Holder, if an individual, is not present in the United States for 183 days or more during the taxable year and (4) the Non-United States Holder provides the correct certification of his status (which may generally be satisfied by providing an Internal Revenue Service Form W-8 certifying that the beneficial owner is not a United States Holder and providing the name and address of the beneficial owner). An individual holder of a Note who is not a citizen or resident of the United States at the time of the holder's death will not be subject to United States federal estate tax as a result of the holder's death, as long as any interest received on the Note, if received by the holder at the time of the holder's death, would not be effectively connected with the conduct of a trade or business by such individual in the United States. Backup Withholding In general, if a holder other than a corporate holder fails to furnish a correct taxpayer identification number or certification of foreign or other exempt status, fails to report dividend and interest income in full, or fails to certify that such holder has provided a correct taxpayer identification number and that the holder is not subject to backup withholding, a 31 percent federal backup withholding tax may be withheld from amounts paid to such holder. An individual's taxpayer identification number is such individual's social security number. The backup withholding tax is not an additional tax and may be credited against a holder's regular federal income tax liability or refunded by the Internal Revenue Service where applicable. PLAN OF DISTRIBUTION The Notes are being offered on a continuous basis by the Company through the Agents, which have agreed to use their reasonable best efforts to solicit offers to purchase Notes. Initial purchasers may propose certain terms of the Notes, but the Company will have the right to accept offers to purchase Notes and may reject proposed purchases in whole or in part. The Agents will have the right, in their discretion reasonably exercised and without notice to the Company, to reject any proposed purchase of Notes in whole or in part. The Company will pay each Agent a commission of from .125% to .750% of the principal amount of Notes sold through it, depending upon Stated Maturity. The Company also may sell Notes to any Agent, acting as principal, at a discount to be agreed upon at the time of sale, for resale to one or more investors or to another broker- dealer (acting as principal for purposes of resale) at varying prices related to prevailing market prices at the time of such resale, as determined by such Agent. An Agent may resell a Note purchased by it as principal to another broker-dealer at a discount, provided such discount does not exceed the commission or discount received by such Agent from the Company in connection with the original sale of such Note. The Company may also sell Notes directly to investors on its own behalf at a price to be agreed upon at the time of sale or through negotiated underwritten transactions with one or more underwriters. In the case of sales made directly by the Company, no commission or discount will be paid or allowed. No Note will have an established trading market when issued. The Notes will not be listed on any securities exchange. The Agents may make a market in the Notes, but the Agents are not obligated to do so and may discontinue any market-making at any time without notice. There can be no assurance of a secondary market for any Notes, or that the Notes will be sold. The Agents, whether acting as agent or principal, may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). The Company has agreed to indemnify the Agents against certain liabilities, including certain liabilities under the Securities Act. Salomon Brothers Inc and The First Boston Corporation and certain affiliates thereof engage in transactions with and perform services for the Company and its affiliates in the ordinary course of business. PROSPECTUS Appalachian Power Company $175,000,000 Debt Securities Appalachian Power Company (the "Company") intends to offer, from time to time, up to $175,000,000 aggregate principal amount of its Debt Securities consisting of First Mortgage Bonds (the "new Bonds") in one or more series and/or First Mortgage Bonds, Designated Secured Medium Term Notes (the "Notes"), in one or more series, at prices and on terms to be determined at the time or times of sale (the new Bonds and the Notes are hereinafter collectively referred to as the "Debt Securities"). The aggregate principal amount, rate and time of payment of interest, maturity, initial public offering price, if any, redemption provisions, if any, credit enhancement, if any, improvement fund, if any, dividend restrictions in addition to those described herein, if any, and other specific terms of each series of Debt Securities in respect of which this Prospectus is being delivered will be set forth in an accompanying prospectus or pricing supplement ("Prospectus Supplement"). THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Company may sell the Debt Securities through underwriters, dealers or agents, or directly to one or more institutional purchasers. A Prospectus Supplement will set forth the names of underwriters or agents, if any, any applicable commissions or discounts and the net proceeds to the Company from any such sale. The date of this Prospectus is September 22, 1993 No dealer, salesperson or other person has been authorized to give any information or to make any representation not contained in this Prospectus in connection with the offer made by this Prospectus or any Prospectus Supplement relating hereto, and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or any underwriter, agent or dealer. Neither this Prospectus nor this Prospectus as supplemented by any Prospectus Supplement constitutes an offer to sell, or a solicitation of an offer to buy, by any underwriter, agent or dealer in any jurisdiction in which it is unlawful for such underwriter, agent or dealer to make such an offer or solicitation. Neither the delivery of this Prospectus or this Prospectus as supplemented by any Prospectus Supplement nor any sale made thereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or thereof. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "1934 Act") and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "SEC"). Such reports and other information may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.; Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois; and 7 World Trade Center, 13th Floor,, New York, New York. Copies of such material can be obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Certain of the Company's securities are listed on the New York Stock Exchange, Inc., where reports and other information concerning the Company may also be inspected. DOCUMENTS INCORPORATED BY REFERENCE The following documents filed by the Company with the SEC are incorporated in this Prospectus by reference: -- The Company's Annual Report on Form 10-K for the year ended December 31, 1992; and -- The Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1993 and June 30, 1993. All documents subsequently filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus and prior to the termination of the offering made by this Prospectus shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents; provided, however, that the documents enumerated above or subsequently filed by the Company pursuant to Section 13 of the 1934 Act prior to the filing of the Company's most recent Form 10-K with the SEC shall not be incorporated by reference in this Prospectus or be a part hereof from and after the filing of such Form 10-K. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which is deemed to be incorporated by reference herein or in a Prospectus Supplement modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom a copy of this Prospectus has been delivered, on the written or oral request of any such person, a copy of any or all of the documents described above which have been incorporated by reference in this Prospectus, other than exhibits to such documents. Written requests for copies of such documents should be addressed to Mr. G. C. Dean, American Electric Power Service Corporation, 1 Riverside Plaza, Columbus, Ohio 43215 (telephone number: 614-223-1000). The information relating to the Company contained in this Prospectus or any Prospectus Supplement relating hereto does not purport to be comprehensive and should be read together with the information contained in the documents incorporated by reference. THE COMPANY The Company is engaged in the generation, purchase, transmission and distribution of electric power to approximately 827,000 customers in Virginia and West Virginia, and in supplying electric power at wholesale to other electric utility companies and municipalities in those states and in Tennessee. Its principal executive offices are located at 40 Franklin Road, S.W., Roanoke, Virginia 24011 (telephone number: 703-985-2300). The Company is a subsidiary of American Electric Power Company, Inc. ("AEP") and is a part of the American Electric Power integrated utility system (the "AEP System"). The executive offices of AEP are located at 1 Riverside Plaza, Columbus, Ohio 43215 (telephone number: 614-223-1000). USE OF PROCEEDS The Company proposes to use the proceeds from the sales of the Debt Securities to refund long-term debt, to repay short-term unsecured indebtedness at or prior to maturity or for other corporate purposes. At August 31, 1993, the Company had approximately $28,825,000 of unsecured short-term debt outstanding. The Company's First Mortgage Bonds, 8-1/2% Series due 1999 ($60,000,000 principal amount outstanding) may be redeemed at a regular redemption price of 101.73% of the principal amount thereof on or after October 1, 1993, the Company's First Mortgage Bonds, 8-3/4% Series due 2017 ($56,686,000 principal amount outstanding) may be redeemed at a regular redemption price of 105.78% of the principal amount thereof, and the Company's First Mortgage Bonds, 8-1/8% Series due 2003 ($50,000,000 principal amount outstanding) may be redeemed at a regular redemption price of 101.65% of the principal amount thereof. Such Bonds may also be redeemed at a lower special redemption price (but not lower than 100% of the principal amount thereof) through the application of cash deposited with the Trustee (as defined below), pursuant to certain provisions of the Mortgage (as defined below). The Company may redeem all or a portion of said series of Bonds if they can be redeemed at a lower effective interest cost. RATIO OF EARNINGS TO FIXED CHARGES Below is set forth the ratio of earnings to fixed charges for each of the years in the period 1988 through 1992 and for the twelve months ended June 30, 1993. 12-Month Period Ended Ratio December 31, 1988 3.31 December 31, 1989 3.43 December 31, 1990 2.63 December 31, 1991 2.85 December 31, 1992 2.58 June 30, 1993 2.63 DESCRIPTION OF DEBT SECURITIES The Debt Securities will be issued under the Mortgage and Deed of Trust, dated as of December 1, 1940, made by the Company to Bankers Trust Company, New York City, as Trustee, as heretofore supplemented and amended and as to be further supplemented (the "Mortgage"). All First Mortgage Bonds (including the Debt Securities) issued and to be issued under the Mortgage are herein sometimes referred to as "Bonds". Copies of the Mortgage, including the respective forms of Supplemental Indenture pursuant to which each series of the Debt Securities will be issued (the "new Supplemental Indenture") are filed as exhibits to the Registration Statement. The following statements include brief summaries of certain provisions of instruments under which securities of the Company, including Bonds, have been issued. Certain of these instruments apply to the issuance of Debt Securities. Such instruments, including amendments and supplements thereto, have been filed by the Company as exhibits to the Registration Statement. Such summaries do not purport to be complete and reference is made to such instruments for complete statements of such provisions. Such summaries are qualified in their entirety by such reference and do not relate or give effect to provisions of statutory or common law. Form and Exchange Unless otherwise set forth in a Prospectus Supplement, Debt Securities in definitive form will be issued only as registered Bonds without coupons in denominations of $1,000 and in multiples thereof authorized by the Company. Debt Securities will be exchangeable for a like aggregate principal amount of the same series of Debt Securities of other authorized denominations, and will be transferable, at the office or agency of the Company in New York City, and at such other office or agency of the Company as the Company may from time to time designate, in either case without payment, until further action by the Company, of any charge other than for any tax or taxes or other governmental charge required to be paid by the Company. Bankers Trust Company is to be designated by the Company to act as agent for payment, registration, transfer and exchange of the Debt Securities in New York City. Maturity, Interest, Redemption, Credit Enhancement, Improvement Fund, Additional Dividend Restrictions and Payment Information concerning the maturity, interest, redemption provisions, if any, credit enhancement, if any, improvement fund, if any, any dividend restrictions in addition to those described herein and payment with respect to any series of the Debt Securities will be contained in a Prospectus Supplement. Security The Debt Securities will be secured, pari passu with Bonds of all other series now or hereafter issued, by the lien of the Mortgage which, except as provided in the following paragraph, constitutes, in the opinion of counsel for the Company, a first lien on substantially all of the fixed physical property and franchises of the Company, subject only to (a) the conditions and limitations in the instruments through which the Company claims title to its properties, (b) "excepted encumbrances" as defined in Section 6 of the Mortgage, including claims later perfected into statutory liens or equitable priorities for taxes, services, materials and supplies, (c) the prior lien of the Trustee for its compensation, expenses and liabilities, and (d) in the case of property acquired of record by the Company since the recordation of the supplemental indenture dated as of May 15, 1993 (not affixed to other property so as thereby to become subject to the Mortgage), recordation of a supplemental indenture conveying such property to the Trustee. Property acquired after the recordation of the most recent supplemental indenture may be subject to liens, ranking prior to the lien of the Mortgage, existing thereon at the time of acquisition of such property, and the lien thereon of the Mortgage may be subject to the rights of others which may attach prior to recordation of a supplemental indenture conveying such property to the Trustee after its acquisition. The provisions of the Mortgage, in substance, permit releases of property from the lien and the withdrawal of cash proceeds of property released from the lien, not only against new property then becoming subject to the lien, but also against property already subject to the lien of the Mortgage, unless such property was owned at August 31, 1940, or has been made the basis of the issue of Bonds or a credit under Sections 20 or 40 of the Mortgage. Accordingly, any increase in the amount of the mortgaged and pledged property as a result of the after-acquired property clause may be eliminated by means of such releases and withdrawals. Issuance of Additional Bonds Additional Bonds of any series may be issued in a principal amount equal to: 1. 60% of the cost or the then fair value, whichever is less, of property additions after deduction for retirements; 2. The principal amount of Bonds or prior lien bonds retired or then to be retired; and 3. The amount of cash deposited with the Trustee; but, except as otherwise provided in the Mortgage, only if the net earnings (as defined in Section 7 of the Mortgage) are at least twice the annual interest requirement on all outstanding Bonds and indebtedness having an equal or prior lien, including the additional issue. However, no Bonds may be issued against property additions subject to prior liens, as defined in Section 6 of the Mortgage (a) if the principal amount of outstanding prior lien bonds secured thereby exceeds 40% of the cost or fair value (whichever is less) of such property additions or (b) if the principal amount of all Bonds theretofore issued on such basis and continuing on such basis, and the amount of certain other items representing deposited cash withdrawn or property released on such basis, in the aggregate, exceeds 15% of the aggregate principal amount of all Bonds theretofore issued (except Bonds issued under Article VII upon retirement of Bonds previously outstanding under the Mortgage), including the additional issue. (See Sections 4, 7, 24, 26, 27, 28, 29, 30, 31 and 40 of the Mortgage and "Description of Debt Securities-- Modification of the Mortgage" below.) The requirement, referred to above, that net earnings be at least twice the annual interest requirements on all outstanding Bonds and indebtedness having an equal or prior lien, including a proposed additional issue of Bonds, is not applicable under certain circumstances where additional Bonds are issued in a principal amount equal to the principal amount of Bonds or prior lien bonds retired or then to be retired (see Section 30 of the Mortgage). In calculating earnings coverages under the provisions of the Mortgage, the Company includes, as a component of earnings, revenues being collected subject to refund and, to the extent not limited by the terms of the Mortgage, an allowance for funds used during construction, including amounts positioned and classified as an allowance for borrowed funds used during construction. It is estimated that as of August 31, 1993, the Company had available, for use in connection with the authentication of Bonds, more than $948,000,000 of unbonded bondable property additions. The Company expects that the Debt Securities will be authenticated upon the basis of Bonds previously retired or to be retired and/or property additions. Other Restrictions Upon Creation and/or Issuance of Debt Securities and Other Senior Securities There are, in addition to the foregoing restrictions, a number of additional limitations upon the creation and/or issuance by the Company of long-term debt securities and of shares of stock ranking, as to dividends and distributions of assets, prior to the common stock equity of the Company. One limitation upon the issuance of long-term debt securities, contained in the debenture agreement under which unsecured debentures of the Company are from time to time issued, consists of a covenant by the Company that it will not incur any Funded Debt, as defined, (a) unless, after giving effect to such additional Funded Debt and to the application of all proceeds thereof, the ratio of the Funded Debt of the Company to its Capitalization, as defined, does not exceed 65% (or such higher percentage as shall be authorized by the SEC, or any successor commission thereto, pursuant to an exemption or order under the Public Utility Holding Company Act of 1935 (the "1935 Act")) and the ratio of Common Stock Equity, as defined, of the Company to its Capitalization equals or exceeds 30% (or such lower percentage as shall be authorized or approved by the SEC, or any successor commission thereto, under the 1935 Act), and (b) unless, with certain specified exceptions, the adjusted net earnings of the Company, calculated as therein provided, are not less than twice the annual interest requirements upon all Funded Debt of the Company, including the additional issue. This limitation is more restrictive than the net earnings requirement referred to above under the heading "Description of Debt Securities--Issuance of Additional Bonds" but is not applicable in certain instances to issues of long-term debt securities issued to refund outstanding long-term debt securities. Although the Company has been able to issue significant amounts of Bonds in recent years, earnings coverage requirements did at certain times limit the amount of Bonds (except for refunding purposes) which could have been issued. The debt coverage of the Company under this provision, calculated as of June 30, 1993, based on the amounts then recorded in the accounts of the Company was at least 3.52. In calculating earnings coverages under the provisions of its debenture agreement and charter, the Company includes, as a component of earnings, revenues being collected subject to refund and, to the extent not limited by the terms of the instrument under which the calculation is made, an allowance for funds used during construction, including amounts positioned and classified as an allowance for borrowed funds used during construction. The issuance of additional securities is also limited by provisions of the Restated Articles of Incorporation of the Company which require the consent of the holders of the Cumulative Preferred Stock then outstanding prior to certain corporate actions. The favorable vote of holders of at least two-thirds of the total voting power of the Cumulative Preferred Stock then outstanding is required (see Restated Articles of Incorporation, Article V, Paragraph (7)(A)) (a) to increase the total authorized amount of the Cumulative Preferred Stock, (b) to create or authorize any series of stock (other than a series of the Cumulative Preferred Stock) ranking prior to or on a parity with the Cumulative Preferred Stock as to assets or dividends, or to create or authorize any obligation or security convertible into shares of any such stock, or to issue any such prior ranking stock or security more than twelve months after the date as of which the Company was empowered to create or authorize such stock or security, or (c) to change any of the express terms of the Cumulative Preferred Stock or of any outstanding series thereof in a manner prejudicial to the holders thereof. Under Paragraph (7)(A)(c) of Article V of the Restated Articles of Incorporation, if less than all series are prejudicially affected, only the consent of the holders of two-thirds of the total number of votes which holders of the shares of each series so affected are entitled to cast is required. The favorable vote of the holders of a majority of the total voting power of the Cumulative Preferred Stock then outstanding is required before the Company may (see Restated Articles of Incorporation, Article V, Paragraph (7)(B)): (a) merge or consolidate with or into any other corporation or corporations, or sell all or substantially all of its assets, unless such action has been approved by the SEC or by a successor regulatory authority; (b) issue or assume any evidences of indebtedness, secured or unsecured (other than (i) Bonds issued under the Company's Mortgage, (ii) bonds issued under a new mortgage replacing the Mortgage, (iii) bonds issued under any other new mortgage, provided the Mortgage shall have been irrevocably closed against the authentication of additional Bonds thereunder, (iv) indebtedness secured by bonds of the Company or by bonds issued under any such new mortgage, (v) indebtedness secured by bonds issued under a mortgage existing at the time of acquisition of property acquired by the Company, provided such mortgage, or any mortgage replacing it, is irrevocably closed against authentication of additional bonds thereunder, or (vi) obligations to pay the purchase price of materials or equipment made in the ordinary course of the Company's business), for purposes other than the refunding or renewing of evidences of indebtedness previously issued or assumed by the Company resulting in equal or longer maturities or redeeming or otherwise retiring all outstanding shares of the Cumulative Preferred Stock, if immediately after such issue or assumption, (x) the total principal amount of all such indebtedness (other than those referred to in (i) through (vi) above) issued or assumed by the Company and then outstanding (including the evidences of indebtedness then to be issued or assumed) would exceed 20% of the sum of (1) the total principal amount of all debt securities of the character hereinbefore described in (i) through (vi) above, issued or assumed by the Company and then to be outstanding, and (2) the stated capital and surplus of the Company, or (y) the total outstanding principal amount of all unsecured debt securities of the Company (other than obligations of the character described in (vi) above) would exceed 20% of the sum of (1) the total outstanding principal amount of all bonds or other secured debt of the Company, and (2) the stated capital and surplus of the Company, or (z) the total outstanding principal amount of all unsecured debt securities of the Company (other than obligations of the character described in (vi) above) of maturities of less than 10 years would exceed 10% of the sum of (1) the total principal amount of all bonds or other secured debt of the Company, and (2) the stated capital and surplus of the Company; provided that the payment due upon the maturity of unsecured debt having an original single maturity of 10 or more years or the payment due upon the final maturity of any unsecured serial debt which had original maturities of 10 or more years is not regarded for purposes of this subparagraph (b) as unsecured debt of a maturity of less than 10 years until payment thereof is required within 3 years; (c) issue or reissue any shares of the Cumulative Preferred Stock or of any other class of stock ranking on a parity with the outstanding shares of Cumulative Preferred Stock as to dividends or assets for any purpose other than to refinance an amount of outstanding Cumulative Preferred Stock, or stock ranking prior to or on a parity with the Cumulative Preferred Stock as to dividends or assets, having an aggregate involuntary liquidation amount equal to the aggregate involuntary liquidation amount of such issued or reissued shares, unless (i) the net income of the Company, determined in accordance with generally accepted accounting principles to be available for the payment of dividends for a period of 12 consecutive calendar months within the 15 calendar months immediately preceding the calendar month of such issuance, is equal to at least twice the annual dividend requirements on the Cumulative Preferred Stock (including dividend requirements on such prior or parity stock), which will be outstanding immediately after such issuance; (ii) the gross income of the Company for the same period determined in accordance with generally accepted accounting principles (but in any event after all taxes including taxes based on income) is equal to at least one and one-half times the aggregate of annual interest charges on indebtedness (excluding interest charges on indebtedness to be retired by the application of the proceeds from the issuance of such shares) and the annual dividend requirements on the Cumulative Preferred Stock (including dividend requirements on such prior or parity stock), which will be outstanding immediately after such issuance; and (iii) the aggregate of the Common Stock Equity, as defined, is at least equal to the aggregate amount payable in connection with an involuntary liquidation of the Company with respect to all shares of Cumulative Preferred Stock and all shares of such prior or parity stock, if any, which will be outstanding immediately after such issuance. No dividends may be paid on Common Stock which would result in the reduction of the Common Stock Equity, as defined, below the requirements of clause (iii). The restrictions and limitations described or referred to above, which are designed to protect the relative positions of the holders of outstanding senior securities of the Company, can operate in such manner as to limit substantially the additional amounts of senior securities which can be issued by the Company. The Company believes that its ability to issue short and long- term debt securities and preferred stock in the amounts required to finance its operations and construction program may depend upon the timely approval of future rate increase applications. If the Company is unable to continue the issue and sale of securities on an orderly basis, the Company will be required to consider the obtaining of additional amounts of common equity, the use of possibly more costly alternative financing arrangements, if available, or the curtailment of its construction program and other outlays. Maintenance and Replacement Provisions Section 40 of the Mortgage provides (A) in Part I thereof for the annual deposit by the Company with the Trustee on or before April 30 of an amount in cash or principal amount of Bonds of any series equal to the amount by which a defined percentage (currently 15%) of the base operating revenues, as defined in Section 40, less the cost of purchased power during the preceding calendar year exceeds the aggregate amounts expended during such period by the Company for repairs and maintenance and for property substituted for property retired since August 31, 1940 (see "Description of Debt Securities--Modification of the Mortgage" below); and (B) in Part II thereof for the annual deposit (which the Mortgage requires to be made so long as any of the Bonds of any series issued prior to December 31, 1992 are outstanding and which, except as disclosed in a Prospectus Supplement, the new Supplemental Indenture will not require to be made so long as any of the Debt Securities are outstanding) by the Company with the Trustee on or before April 30 of an amount in cash or principal amount of Bonds of any series equal to the excess of the product of a specified percentage (currently 2.25% but subject to change as provided in the Mortgage (see "Description of Debt Securities--Modification of the Mortgage" below)) and the average of the Depreciable Property (as defined) of the Company at the first and the last day of the preceding calendar year over the sum of (i) the aggregate amount expended during the preceding calendar year for property substituted for retired property, (ii) the aggregate of the property additions certified, and the cash and/or Bonds deposited pursuant to the requirements of Part I of Section 40 with respect to such year, and (iii) any credit applicable to prior years. The Company may under this covenant certify to the Trustee, in lieu of depositing cash or Bonds, property additions which are not then funded property (which thereupon become funded property) at cost or fair value, whichever is less. Release and Substitution of Property The Mortgage permits property to be released from the lien of the Mortgage upon compliance with the provisions thereof. Such provisions require that, in certain specified cases, cash be deposited with the Trustee in an amount equal to the excess of the fair value of the property to be released over the aggregate of certain computations required by the Mortgage. (See Sections 65 and 69 of the Mortgage.) The Mortgage also contains certain requirements relating to the withdrawal of release moneys. (See Section 67 of the Mortgage.) Modification of the Mortgage Article XX of the Mortgage provides for modifying or altering the Mortgage with the consent of the Company and by vote of the holders of 75% in principal amount of the outstanding Bonds which are affected by the proposed modification or alteration. No modification or alteration, without the consent of the holder of a Bond, may modify the terms of payment of the principal amount of or interest on such Bond or create an equal or prior lien or deprive such holder of a lien on the mortgaged property or reduce the above percentage. The Supplemental Indenture dated as of May 1, 1979 amended Article XX to provide that the Mortgage may at a future date be amended (i) to delete the requirement for annual deposits pursuant to Part I of Section 40 of the Mortgage as described under "Description of Debt Securities--Maintenance and Replacement Provisions" and/or (ii) to delete the 15% limit on Bonds issued on the basis of property additions subject to prior liens as described under "Description of Debt Securities-- Issuance of Additional Bonds", upon compliance with the provisions of the Mortgage but without the favorable vote or consent of the holder of any new Bond or any other Bond issued after April 30, 1979 or including any such new Bond or other such Bond in determining whether a quorum exists or a specified percentage of holders of Bonds participated in action on any such amendment. The Company, in its application to the SEC with respect to the issuance of $70,000,000 principal amount of First Mortgage Bonds, 11% Series due 1987, proposed, and the SEC approved, a change in the specified percentage in Part II of Section 40 of the Mortgage (see "Description of Debt Securities-- Maintenance and Replacement Provisions") from 2.25% to 2.90%, such change to become effective on the date the Mortgage is amended as contemplated in clause (i) above and to continue at 2.90% until another change in such percentage shall be authorized or approved upon application by the Company to the SEC. Restriction on Common Stock Dividends Various restrictions on the use of retained earnings for cash dividends on Common Stock and other purposes are contained in or result from other covenants in the Mortgage and in its debenture agreement, charter provisions and orders of regulatory authorities. At June 30, 1993, the Company's consolidated retained earnings amounted to $227,989,000, of which approximately $37,900,000 were so restricted. Unless otherwise specified in a Prospectus Supplement, there will be no additional restrictions on common stock dividends. Concerning the Trustee AEP System companies, including the Company, utilize many of the banking services offered by Bankers Trust Company in the normal course of their businesses. Among such services are the making of short-term loans and in certain cases term loans, generally at rates related to the prime commercial interest rate, and acting as a depositary. The Trustee may, and upon written request of the holders of a majority in principal amount of the Bonds shall, declare the principal due upon occurrence of a completed default, but the holders of a majority in principal amount of the Bonds may annul such declaration if the default has been cured. (See Section 71 of the Mortgage.) The holders of a majority in principal amount of the Bonds may direct the time, method and place of conducting any proceeding for the enforcement of the Mortgage. (See Section 76 of the Mortgage.) No Bondholder has the right to institute any proceeding for the enforcement of the Mortgage unless such holder shall have given the Trustee written notice of a completed default, the holders of 25% in principal amount of the Bonds shall have offered to the Trustee indemnity against costs, expenses and liabilities, requested the Trustee to take action and given the Trustee reasonable opportunity to take such action. The foregoing does not affect or impair the right of a holder of a Bond to enforce the payment of the principal of and interest on such Bond on the respective due dates. (See Section 86 of the Mortgage.) The Trustee is entitled to be indemnified before taking action to enforce the lien at the request of such Bondholders. (See Section 75 of the Mortgage.) Defaults By Section 71 of the Mortgage, the following are defined as "completed defaults": default in the payment of principal; default for 60 days in the payment of interest; default in payment of principal or interest on outstanding prior lien bonds in certain cases; certain events of bankruptcy, insolvency or reorganization; and default for 60 days after notice in the performance of any other covenant. By Section 59 of the Mortgage, a failure to provide money for the redemption of Bonds called for redemption also constitutes a completed default. The Company is required to furnish annually to the Trustee a certificate as to compliance with all conditions and covenants under the Mortgage. LEGAL OPINIONS Opinions with respect to the legality of the Debt Securities will be rendered by Simpson Thacher & Bartlett (a partnership which includes professional corporations), 425 Lexington Avenue, New York, New York, and 1 Riverside Plaza, Columbus, Ohio, counsel for the Company, and by Winthrop, Stimson, Putnam & Roberts, One Battery Park Plaza, New York, New York, counsel for any underwriters, dealers or agents. Simpson Thacher & Bartlett and Winthrop, Stimson, Putnam & Roberts will rely as to matters of Virginia law, upon the opinion of Hunton & Williams, as to matters of West Virginia law, upon the opinion of Kay, Casto, Chaney, Love & Wise and as to matters of Tennessee law, upon the opinion of Hunter, Smith & Davis, all counsel for the Company. EXPERTS The financial statements and related financial statement schedules incorporated by reference or included in the Company's most recent Annual Report on Form 10-K and incorporated by reference in this Prospectus have been audited by Deloitte & Touche, independent auditors, as stated in their reports appearing in and incorporated by reference in such Annual Report on Form 10-K, and have been so incorporated herein in reliance upon such reports given upon the authority of that firm as experts in accounting and auditing. The legal conclusions in "Security" under the caption "Description of Debt Securities", as to those matters governed by the laws of the Commonwealth of Virginia have been reviewed by Hunton & Williams, Richmond, Virginia; as to those matters governed by the laws of the State of West Virginia by Kay, Casto, Chaney, Love & Wise, Charleston, West Virginia; and as to those matters governed by the laws of the State of Tennessee by Hunter, Smith & Davis, Kingsport, Tennessee, all counsel for the Company. All of said statements are made on the authority of said firms as experts. PLAN OF DISTRIBUTION The Company may sell the Debt Securities in any of three ways: (i) through underwriters or dealers; (ii) directly to a limited number of purchasers or to a single purchaser; or (iii) through agents. The Prospectus Supplement relating to a series of the Debt Securities will set forth the terms of the offering of the Debt Securities, including the name or names of any underwriters, dealers or agents, the purchase price of such Debt Securities and the proceeds to the Company from such sale, any underwriting discounts and other items constituting underwriters' or agents' compensation, any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. If underwriters are used in the sale, the Debt Securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of the sale. The underwriters with respect to a particular underwritten offering of Debt Securities will be named in the Prospectus Supplement relating to such offering and, if an underwriting syndicate is used, the managing underwriters will be set forth on the cover page of such Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement, the obligations of the underwriters to purchase the Debt Securities will be subject to certain conditions precedent, and the underwriters will be obligated to purchase all such Debt Securities if any are purchased. Debt Securities may be sold directly by the Company or through agents designated by the Company from time to time. The Prospectus Supplement will set forth the name of any agent involved in the offer or sale of the Debt Securities in respect of which the Prospectus Supplement is delivered as well as any commissions payable by the Company to such agent. Unless otherwise indicated in the Prospectus Supplement, any such agent will be acting on a reasonable best efforts basis for the period of its appointment. If so indicated in the Prospectus Supplement, the Company will authorize agents, underwriters or dealers to solicit offers by certain specified institutions to purchase Debt Securities from the Company at the public offering price set forth in the Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. Such contracts will be subject to those conditions set forth in the Prospectus Supplement, and the Prospectus Supplement will set forth the commission payable for solicitation of such contracts. Subject to certain conditions, the Company may agree to indemnify any underwriters, dealers, agents or purchasers and their controlling persons against certain civil liabilities, including certain liabilities under the Securities Act of 1933. -----END PRIVACY-ENHANCED MESSAGE-----