Exhibit 26(b)
Invitation for Proposals for the Purchase of First Mortgage Bonds
of
APPALACHIAN POWER COMPANY
APPALACHIAN POWER COMPANY (hereinafter called the Company)
hereby invites proposals, subject to the terms and conditions
hereof, for the purchase from it, in one or more transactions, of
up to $200,000,000 principal amount of First Mortgage Bonds of the
Company to mature on a date or dates to be determined as provided
in Section 4 hereof (hereinafter called the Bonds). The Bonds may
be issued and sold by the Company in one or more series. A brief
description of the Bonds is contained in the Registration
Statements and Prospectus referred to hereinafter.
1. Information Respecting the Company and the Bonds
Prospective bidders may examine, at the office of American
Electric Power Service Corporation, 1270 Avenue of the Americas,
New York, New York 10020, at any time during business hours, the
following:
(a) the form of proposed Supplemental Indenture to the
Mortgage and Deed of Trust between the Company and Bankers
Trust Company, as Trustee, under which the Bonds are to be
issued and secured;
(b) the Registration Statements of the Company and any
amendments thereto (including exhibits) under the Securities
Act of 1933, as amended, with respect to the Bonds, the
related combined Prospectus (such term as used herein to
include any applicable supplements thereto) and any orders of
the Securities and Exchange Commission (hereinafter called the
Commission) thereon;
(c) the form of proposal to be used by bidders in
offering to purchase the Bonds (hereinafter called the Form of
Proposal), which includes the form of contract for the
purchase of the Bonds (hereinafter called the Purchase
Contract);
(d) proposed forms of opinions to be furnished to the
successful bidder or bidders by Simpson Thacher & Bartlett,
counsel for the Company, and by Dewey Ballantine, who have
been selected by the Company as counsel for such bidder or
bidders;
(e) the form of questionnaire to be used by prospective
bidders in furnishing information to the Company and the
Trustee, and, in the case of a group of bidders, in
designating the Representative of the members of the group,
referred to in Section 2 hereof;
(f) the orders of the Virginia State Corporation
Commission and the Tennessee Public Service Commission
relating to the issuance of the Bonds; and
(g) memorandum by Dewey Ballantine with respect to the
requirements of the securities or "blue sky" laws of various
jurisdictions.
Copies of said documents in reasonable quantities (except certain
exhibits to the Registration Statements) will be supplied on
request, so long as available, to prospective bidders. The Company
reserves the right to amend or supplement such Registration
Statements and Prospectus (including the documents incorporated
therein by reference pursuant to Item 12 of Form S-3), and to make
changes in the form of any documents relating to the issuance of
the Bonds. The Company will furnish copies of such amendments,
supplements or changes and of any filing pursuant to Section 13 or
14 of the Securities and Exchange Act of 1934 to Dewey Ballantine,
and on request to any prospective bidder who shall have furnished
a questionnaire to the Company as provided in Section 2 hereof or
to the Representative of any group of prospective bidders desig-
nated as provided in Section 2 hereof.
2. Information Respecting the Bidders to be Furnished to the
Company
Except as hereinafter provided, no proposal will be considered
unless the bidder (or in the case of a group of bidders, each
bidder) shall have furnished (by fascimile or other appropriate
means) to the Company, care of American Electric Power Service
Corporation, 1 Riverside Plaza, Columbus, Ohio 43215, Attention:
Thomas G. Berkemeyer, Esq., not less than two hours prior to the
time for submission of proposals the form of questionnaire referred
to above, properly filled out and signed. Notwithstanding the
furnishing of such questionnaires to the Company, any prospective
bidder or group of prospective bidders may thereafter determine not
to bid, or any of the several members of a group may withdraw and
may thereafter determine not to bid or determine to bid as a member
of some other group. One or more additional members may be
included in a group, with the consent of the Company, after the
time (or any extended time) for furnishing questionnaires, if the
information required by the form of questionnaire as to each such
additional member is furnished to the Company, at or before the
time fixed by the Company for such purpose, by means of a
questionnaire properly filled out and signed or by such other means
as the Company may have approved for such purpose. The Company
reserves the right to waive any irregularity in any questionnaire
and to extend, either generally or in specific instances, the time
for furnishing questionnaires and to permit the furnishing of
information required by the form of questionnaire by telefacsimile
or other means of communication satisfactory to it. The Company
further reserves the right to require bidders to furnish updated
questionnaires at any time prior to any submission of proposals as
a condition of the consideration of such proposals.
In the case of a proposal by a group of bidders, the several
bidders in the group shall act through a duly authorized
representative or representatives (hereinafter called the
Representative), who may be included in such group and who shall be
designated by each member of such group in, or in the manner
authorized by, questionnaires furnished to the Company as above
provided. The Company shall be entitled to assume in all matters
contemplated hereby that any Representative, and in case such
Representative consists of two or more persons, then any of such
persons, is fully authorized to represent and act for each member
of a group of bidders which has furnished a questionnaire to the
Company designating, or authorizing the designation of, such
Representative as its Representative, which designation has not
been revoked prior to the submission of a proposal to the Company
on behalf of such group of bidders, including the right to rely on
any statement made by such Representative or any such person on
behalf of the Representative as to the amount of the participation
of such member of such group or as to changes made in any agreement
among members of such group and the right to rely on the authority
of the Representative or such person on behalf of the
Representative to execute and submit the proposal presented to the
Company in the form in which it was signed.
3. Form and Contents of Proposals
Each proposal shall be for the purchase of all of the Bonds
then being offered by the Company as provided by Section 4 and may
be made by a single bidder or a group of bidders. In case the
proposal of a group of bidders is accepted in writing by the
Company, the obligations of the members of the group shall be
several, and not joint, to purchase the respective principal
amounts of Bonds indicated in the proposal. No bidder (including
in such term for the purpose of this restriction any and all
affiliates of a specified bidder) may submit or participate in more
than one such bid with respect to the Bonds being offered at any
one time.
Each proposal shall specify the annual interest rate of the
Bonds (which shall be an integral multiple of .01% or 1/8 of 1%),
the maturity date, the principal amount and the price (exclusive of
accrued interest) to be paid to the Company for such Bonds (which
shall not be less than 99% nor more than 101% of the principal
amount of such Bonds). Accrued interest from the first day of the
calendar month during which such Bonds are to be issued to the date
of delivery and payment will be paid to the Company by the
purchaser or purchasers.
A proposal confirmed in writing as provided in Section 4
hereof on behalf of a group of bidders shall give the names of the
members in the group but may, at the time of such confirmation,
omit the amounts or numbers of Bonds to be purchased by the members
of such group; but, in the case of such omission, the
Representative, on behalf of the successful bidders, shall, and by
the submission of such proposal agrees to, insert promptly in
Exhibit A to the Form of Proposal, prior to its acceptance in
writing by the Company and in any event within one hour after the
time fixed for the submission of proposals, the respective amounts
of Bonds to be purchased severally by such bidders, all with the
same force and effect as if the same had been included in such
proposal at the time of the submission thereof.
The Representative submitting a successful proposal may,
forthwith upon discovery, correct any error which it has made in
the proposal in specifying the bidders or the amount of Bonds to be
purchased by any bidder or bidders at a different amount than
authorized by such bidder or bidders; and if, after all such
corrections, a proposal is accepted which provides for the purchase
of less than all or more than all of the Bonds, the Representative
submitting such proposal shall be deemed to have increased or
decreased, as the case may be, to the extent of the discrepancy,
the amount of Bonds offered to be purchased by it. In case such
Representative consists of two or more persons, such increase or
decrease in the amount of Bonds shall be allocated between or among
them as they shall agree; provided that, if there shall be no such
agreement, then such increase or decrease shall be allocated
between or among them in proportion to the amount of Bonds set
forth opposite their respective names in Exhibit A attached to the
Form of Proposal. If in the case of a decrease the discrepancy is
greater than the amount of Bonds offered to be purchased by the
Representative, then to the extent that the discrepancy is greater
than such amount, the amount of Bonds offered to be purchased by
each other bidder shall be proportionately reduced. Any correction
or adjustment in the amount of Bonds or in the specification of any
bidder made or provided for hereunder shall, for all purposes of
the Purchase Contract, be or be deemed to have been reflected in
Exhibit A attached to the Form of Proposal.
4. Submission of Proposals
All proposals must be submitted to the Company in accordance
with such procedures and at such time or times on such day or days
as shall be designated by the Company by notice in writing or by
telephone, confirmed in writing. The Company in its discretion
may, but will not be obligated to, give any such notice to any
prospective bidder who shall have furnished a questionnaire to the
Company as provided in Section 2 hereof, or to the Representative
of any group of prospective bidders designated as provided in
Section 2 hereof, or to any other prospective bidders. The Company
will designate in each such notice the principal amount of Bonds
for which proposals are to be submitted at such time. Each such
notice will also designate the term thereof, which shall be not
more than 40 years. The Company reserves the right in its
discretion from time to time to postpone any time for submission of
proposals designated as provided herein.
All proposals must be confirmed in writing on the appropriate
Form of Proposal, signed by the Representative on behalf of the
members of a group of bidders, or in the case of a single bidder by
such bidder with appropriate changes in the text of the Form of
Proposal.
5. Acceptance or Rejection of Proposals
All proposals will be received by the Company in accordance
with the procedures and at the time or times designated as provided
in Section 4 hereof. Within three hours after each time designated
for the submission of proposals, the Company (subject to the
provisions of the next following paragraph) will by announcement
accept the proposal which results in the lowest "annual cost of
money" to it for the Bonds, determined by the Company in accordance
with Section 6 hereof, and any proposal not so accepted within such
time shall be deemed to have been rejected. Each proposal will be
accepted or rejected in its entirety. If two or more such
proposals for the purchase of the Bonds then being offered shall
specify an identical lowest "annual cost of money" to the Company,
then the Company (subject to the provisions of the succeeding
paragraph) will give to the bidders making such identical proposals
an opportunity to improve their bids. Thereupon, if no improved
bid shall be made within the time fixed by the Company, or if, upon
such rebidding, two or more proposals again result in an identical
lowest "annual cost of money" for such Bonds, the Company may in
its discretion accept any one of such proposals. If in the case of
identical proposals a bid is not being improved, the proposal
submitted by the bidder or group of bidders making such proposal
need not be resubmitted to be considered.
The Company reserves the right to (a) reject all proposals,
and (b) reject the proposal of any bidder or of any group of
bidders (i) if such bidder or any member of such group of bidders
is in such relationship with Bankers Trust Company or its direct or
indirect corporate parent, if any, as would disqualify such trustee
from acting as trustee under the Company's Mortgage and Deed of
Trust dated as of December 1, 1940, as supplemented if the proposal
of such bidder or group of bidders should be accepted; (ii) if the
Company, in the opinion of its counsel, may not lawfully sell the
Bonds then being offered to such bidder or to any member of such
group of bidders and, in either of such events in the case of a
group of bidders, if within one hour after the time at which the
bids are required to be submitted, the member or members of such
group causing such disqualification or illegality have not
withdrawn from the group and the remaining members, including
substituted members, if any, have not agreed to purchase the Bonds,
which such withdrawing member or members had proposed to purchase;
(iii) if, in the opinion of the Company, such bidder or group of
bidders would not be able to comply with the terms of the Purchase
Contract if such proposal were accepted; or (iv) if, in the opinion
of counsel for the Company, the Company would not be able to comply
with the terms of the Purchase Contract if such proposal were
accepted. The proposal of any bidder or group of bidders rejected
by the Company by reason of clause (b) of this paragraph shall be
disregarded solely for the purpose of determining the proposal
specifying the lowest "annual cost of money" for such Bonds.
The Company also reserves the right in its discretion (i) to
waive any failure on the part of any bidder or group of bidders to
comply with the terms and conditions hereof and to permit
correction of any typographical, clerical, or similar error, and
(ii) to designate, not less than 30 minutes prior to the time, or
extended time, specified for the submission of proposals, a
principal amount less than that previously designated.
Prior to the acceptance by the Company of any proposal, the
bidder or bidders thereunder will be furnished with a copy of a
Prospectus relating to the Bonds which meets the requirements of
Section 10(a) of the Securities Act of 1933 at that time.
6. Determination of "Annual Cost of Money"
The "annual cost of money" to the Company for the Bonds will
be determined by the Company, such determination by the Company to
be final. With respect to each proposal for the purchase of the
Bonds, the Company will determine on a consistent basis the yield
on the basis of (i) the term of the Bonds then being offered, (ii)
the price per $100 principal amount specified in such proposal to
be paid to the Company (exclusive of accrued interest) and (iii)
the interest rate specified in such proposal. The proposal so
computed by the Company to have the lowest yield for such Bonds is
hereby defined as the lowest "annual cost of money" for such Bonds.
For this purpose, the entire principal amount of the Bonds shall be
deemed to remain outstanding during the term thereof designated by
the Company as provided in Section 4 hereof.
7. Redemption of the Bonds
The Bonds are subject to redemption at any time, on not less
than 30 days' notice by mail prior to the redemption date, either
as a whole or in part at the option of the Company (A) at an amount
equal to 100% of the principal amount thereof, together with
accrued interest to the date fixed for redemption, if redeemed by
the use of proceeds of released property or the proceeds of
insurance, or (B) at a redemption price equal to the greater of (i)
100% of the principal amount of the Bonds and (ii) the sum of the
present values of the remaining scheduled payments of principal and
interest thereon discounted to the redemption date on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate (as defined below) plus in each case 10 basis
points, plus accrued interest thereon to the date of redemption.
"Treasury Rate" means, with respect to any redemption date,
the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such
redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a
maturity comparable to the remaining term of the Bonds to be
redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues
of corporate debt securities of comparable maturity to the
remaining term of the Bonds.
"Comparable Treasury Price" means, with respect to any
redemption date, (i) the average of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) on the third business day
preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30
p.m. Quotations for U.S. Government Securities" or (ii) if such
release (or any successor release) is not published or does not
contain such prices on such third business day, (A) the average of
the Reference Treasury Dealer Quotations for such redemption date,
after excluding the highest and lowest such Reference Treasury
Dealer Quotations or (B) if the Trustee is unable to obtain four
such Reference Treasury Dealer Quotations, the average of all such
Reference Treasury Dealer Quotations so obtained.
"Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the Company and acceptable to the
Trustee.
"Reference Treasury Dealer" means a primary U.S. Government
Securities Dealer in New York City selected by the Company and
acceptable to the Trustee.
"Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer and any redemption date, the
average, as determined by the Trustee, of the bid and asked prices
for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the
Trustee by such Treasury Reference Dealer at or before 5:00 p.m.,
New York City time, on the third business day preceding such
redemption date.
8. Purchase Contract and Prospectus Supplement
Upon the acceptance of a proposal, (a) the Purchase Contract
shall become effective without any separate execution thereof and
shall constitute the agreement between the Company and the
successful bidder or bidders; (b) the successful bidder, or, in the
case of a proposal by a group of bidders, the Representative on
behalf of the successful bidders, shall furnish to the Company in
writing the information regarding the bidders and the public
offering, if any, as is required to complete a prospectus
supplement and any further information regarding the bidders and
the public offering, if any, which may be required by the Virginia
State Corporation Commission and the Tennessee Public Service
Commission; and (c) upon performance by the successful bidder or
bidders, and their Representative, of the obligations under
Sections 3, 4 and 8 hereof, all rights of the Company and of the
successful bidder or bidders under an accepted proposal shall
thereafter be determined solely in accordance with the terms of the
Purchase Contract.
9. Opinion of Counsel for the Purchasers
Dewey Ballantine, 1301 Avenue of the Americas, New York, New
York, have been selected by the Company as counsel for the
Purchasers to give to the successful bidder or bidders an opinion
with respect to the Bonds. Such counsel have participated in the
preparation of certain of the documents under which the Bonds are
to be issued and have reviewed or will review the corporate
proceedings with respect to the Bonds and the proceedings before
the Virginia State Corporation Commission and the Tennessee Public
Service Commission and the Securities and Exchange Commission and
the orders of said commissions with respect to the Bonds. Their
compensation and disbursements are, under the terms of the Purchase
Contract, to be paid by the successful bidder or bidders, except as
otherwise provided in the Purchase Contract. Such counsel will, on
request, advise any prospective bidder, or the Representative of
any group of prospective bidders, of the amount of such
compensation and disbursements to be paid by the successful bidder
or bidders for the Bonds.
10. Waiver of Irregularities
The Company reserves the right to waive any failure on the
part of any bidder or group of bidders to comply with the terms and
conditions hereof.
APPALACHIAN POWER COMPANY
By A. A. PENA
Treasurer
Dated: March 12, 1996