Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-100721
333-100721-01
333-100721-02
333-100721-03
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 6, 2002)
$100,000,000
(ALABAMA POWER LOGO)
SERIES Q 5.50% SENIOR NOTES
DUE OCTOBER 15, 2017
---------------------------
This is a public offering by Alabama Power Company of $100,000,000 of
Series Q 5.50% Senior Notes due October 15, 2017. Interest is payable April 15
and October 15 of each year, beginning April 15, 2003.
Alabama Power Company may redeem the Series Q Senior Notes, in whole or in
part, at any time, at a make-whole redemption price, as described herein on page
S-5.
The Series Q Senior Notes should be delivered on or about November 26, 2002
through the book-entry facilities of The Depository Trust Company.
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Per Series Q
Senior Note Total
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Public Offering Price....................................... 101.82% $101,820,000
Underwriting Discount....................................... 0.75% $ 750,000
Proceeds to Alabama Power Company........................... 101.07% $101,070,000
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---------------------------
The initial public offering price set forth above does not include accrued
interest which must be paid by the purchaser. Interest on the Series Q Senior
Notes will accrue from October 22, 2002 and must be paid by the purchaser for
the period from October 22, 2002 to the date of delivery. See "Underwriting" for
a discussion of expenses in connection with this offering.
---------------------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this Prospectus Supplement or the accompanying Prospectus. Any
representation to the contrary is a criminal offense.
---------------------------
GOLDMAN, SACHS & CO.
ABI CAPITAL MANAGEMENT LLC
CREDIT LYONNAIS SECURITIES
November 20, 2002
In making your investment decision, you should rely only on the information
contained or incorporated by reference in this Prospectus Supplement and the
attached Prospectus. We have not authorized anyone to provide you with any other
information. If you receive any unauthorized information, you must not rely on
it.
We are offering to sell the Series Q Senior Notes only in places where
sales are permitted.
You should not assume that the information contained or incorporated by
reference in this Prospectus Supplement or the attached Prospectus, including
information incorporated by reference, is accurate as of any date other than its
respective date.
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TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
The Company S-3
Selected Financial Information S-3
Use of Proceeds S-4
Description of the Series Q Senior
Notes S-4
Underwriting S-8
PAGE
----
PROSPECTUS
About this Prospectus 2
Available Information 2
Incorporation of Certain Documents by
Reference 2
Selected Information 4
Alabama Power Company 4
The Trusts 5
Accounting Treatment of Trusts 6
Use of Proceeds 6
Description of the New Bonds 6
Description of the New Stock 9
Description of the Senior Notes 11
Description of the Junior Subordinated
Notes 15
Description of the Preferred
Securities 20
Description of the Guarantees 21
Relationship Among the Preferred
Securities, the Junior Subordinated
Notes and the Guarantees 23
Plan of Distribution 24
Legal Matters 25
Experts 25
S-2
THE COMPANY
Alabama Power Company (the "Company") is a corporation organized under the
laws of the State of Alabama on November 10, 1927, by the consolidation of a
predecessor Alabama Power Company, Gulf Electric Company and Houston Power
Company. The Company has its principal office at 600 North 18th Street,
Birmingham, Alabama 35291, telephone (205) 257-1000. The Company is a wholly
owned subsidiary of The Southern Company ("Southern").
The Company is a regulated public utility engaged in the generation,
transmission, distribution and sale of electric energy within an approximately
44,500 square mile service area comprising most of the State of Alabama.
SELECTED FINANCIAL INFORMATION
The following data is qualified in its entirety by reference to and,
therefore, should be read together with the detailed information and financial
statements appearing in the documents incorporated herein by reference.
NINE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ -------------
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ -------------
(MILLIONS, EXCEPT RATIOS) (UNAUDITED)
Operating Revenues........................ $3,149 $3,386 $3,385 $3,667 $3,586 $2,846
Earnings Before Interest and Income
Taxes................................... 836 892 900 959 922 834
Net Income After Dividends on Preferred
Stock................................... 376 377 400 420 387 389
Ratio of Earnings to Fixed Charges(1)..... 3.46 3.12 3.59 3.46 3.31 4.36
CAPITALIZATION
AS OF SEPTEMBER 30, 2002
-------------------------------
ACTUAL AS ADJUSTED(2)
------ ----------------------
(MILLIONS, EXCEPT PERCENTAGES)
Common Stock Equity......................................... $3,379 $3,379 46.5%
Cumulative Preferred Stock.................................. 248 248 3.4
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Company Junior
Subordinated Notes........................................ 347 300 4.1
Senior Notes................................................ 2,814 2,824 38.8
Other Long-Term Debt........................................ 519 519 7.2
------ ------ -----
Total, excluding amounts due within one year of $488
million................................................ $7,307 $7,270 100.0%
====== ====== =====
---------------
(1) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Earnings Before Interest and Income Taxes" the debt portion of
allowance for funds used during construction; and (ii) "Fixed Charges"
consist of "Net Interest Charges" plus the debt portion of allowance for
funds used during construction.
(2) Reflects: (i) the issuance in October 2002 of $100,000,000 aggregate
liquidation amount of Alabama Power Capital Trust IV Flexible Trust
Preferred Securities (Five Year Initial Fixed Rate Period) for the benefit
of the Company; (ii) the issuance in October 2002 of $200,000,000 aggregate
liquidation amount of Alabama Power Capital Trust V Flexible Trust Preferred
Securities (Seven Year Initial Fixed Rate Period) for the benefit of the
Company; (iii) the redemption in October 2002 of $97,000,000 aggregate
liquidation amount of Alabama Power Capital Trust I 7.375% Trust Preferred
Securities; (iv) the redemption in October 2002 of $200,000,000 aggregate
liquidation amount of Alabama Power Capital Trust II 7.60% Trust Preferred
Securities; (v) the issuance in October 2002 of $225,000,000 aggregate
principal amount of Series Q 5.50% Senior Notes due October 15, 2017; (vi)
the proposed redemption in November 2002 of $217,875,000 aggregate principal
amount of Series D 6.50% Senior Insured Quarterly Notes due September 30,
2018; (vii) the proposed redemption in November 2002 of $50,000,000
aggregate liquidation amount of Alabama Power Capital Trust III Capital
Auction Preferred Securities;
S-3
(viii) the issuance in November 2002 of $100,000,000 aggregate principal
amount of Series R 4.70% Senior Notes due December 1, 2010; (ix) the
proposed redemption in December 2002 of $96,791,000 aggregate principal
amount of Series F 6.375% Senior Insured Quarterly Notes due September 30,
2018; and (x) the issuance of the Series Q Senior Notes and the application
of the use of proceeds as described herein.
USE OF PROCEEDS
The proceeds from the sale of the Series Q Senior Notes will be applied by
the Company to redeem all of its Series E 6.25% Senior Notes due September 30,
2010 currently outstanding in the aggregate principal amount of $99,562,000 at a
redemption price of 100% of the principal amount thereof plus accrued interest
and for other general corporate purposes.
DESCRIPTION OF THE SERIES Q SENIOR NOTES
Set forth below is a description of the specific terms of the Series Q
5.50% Senior Notes due October 15, 2017 (the "Series Q Senior Notes"). This
description supplements, and should be read together with, the description of
the general terms and provisions of the Senior Notes set forth in the
accompanying Prospectus under the caption "Description of the Senior Notes." The
following description does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the description in the accompanying
Prospectus and the Senior Note Indenture (the "Senior Note Indenture") dated as
of December 1, 1997, as supplemented, between the Company and JPMorgan Chase
Bank (formerly known as The Chase Manhattan Bank), as trustee (the "Senior Note
Indenture Trustee").
GENERAL
The Series Q Senior Notes will be issued as a series of senior notes under
the Senior Note Indenture. The Series Q Senior Notes offered by this Prospectus
Supplement constitute a further issuance of, and are consolidated and form a
single series with, the Company's outstanding Series Q 5.50% Senior Notes due
October 15, 2017 issued on October 22, 2002 in the aggregate principal amount of
$225,000,000. Upon completion of this offering, the aggregate principal amount
of outstanding Series Q Senior Notes will be $325,000,000. The Series Q Senior
Notes offered hereby will be issued in the aggregate principal amount of
$100,000,000.
The Company may, without the consent of the holders of the Series Q Senior
Notes, issue additional notes having the same ranking and interest rate,
maturity and other terms (except for the issue price and issue date) as the
Series Q Senior Notes. Any additional notes having such similar terms, together
with the Series Q Senior Notes, will constitute a single series of senior notes
under the Senior Note Indenture.
The entire principal amount of the Series Q Senior Notes will mature and
become due and payable, together with any accrued and unpaid interest thereon,
on October 15, 2017. The Series Q Senior Notes are not subject to any sinking
fund provision. The Series Q Senior Notes are available for purchase in
denominations of $1,000 and any integral multiple thereof.
INTEREST
Each Series Q Senior Note shall bear interest at the rate of 5.50% per
annum (the "Securities Rate") from October 22, 2002, payable semiannually in
arrears on April 15 and October 15 of each year (each, an "Interest Payment
Date") to the person in whose name such Series Q Senior Note is registered at
the close of business on the fifteenth calendar day prior to such payment date.
The initial Interest Payment Date is April 15, 2003. The amount of interest
payable will be computed on the basis of a 360-day year of twelve 30-day months.
In the event that any date on which interest is payable on the Series Q Senior
Notes is not a Business Day, then payment of the interest payable on such date
will be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), with the same force and
effect as if made on such date.
S-4
RANKING
The Series Q Senior Notes will be direct, unsecured and unsubordinated
obligations of the Company and will rank equally with all other unsecured and
unsubordinated obligations of the Company. The Series Q Senior Notes will be
effectively subordinated to all secured debt of the Company, including its first
mortgage bonds, aggregating approximately $302,000,000 outstanding at September
30, 2002. The Senior Note Indenture contains no restrictions on the amount of
additional indebtedness that may be incurred by the Company.
OPTIONAL REDEMPTION
The Series Q Senior Notes will be subject to redemption at the option of
the Company in whole or in part at any time upon not less than 30 nor more than
60 days' notice, at redemption prices (each, a "Redemption Price") equal to the
greater of (i) 100% of the principal amount of the Series Q Senior Notes being
redeemed or (ii) the sum of the present values of the remaining scheduled
payments of principal of and interest on the Series Q Senior Notes being
redeemed discounted to the date of redemption on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months) at a discount rate equal to the
Treasury Yield plus 20 basis points, plus, for (i) and (ii) above, whichever is
applicable, accrued interest on the Series Q Senior Notes to the date of
redemption.
"Treasury Yield" means, with respect to any redemption date, the rate per
annum equal to the semiannual 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 Series Q Senior Notes 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 Series Q Senior Notes.
"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 in New York City 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 "H.15(519)" or (ii) if such
release (or any successor release) is not published or does not contain such
prices on such Business Day, the Reference Treasury Dealer Quotation for such
redemption date.
"Independent Investment Banker" means an independent investment banking
institution of national standing appointed by the Company and reasonably
acceptable to the Senior Note Indenture Trustee.
"Reference Treasury Dealer" means a primary U.S. Government securities
dealer in New York City appointed by the Company and reasonably acceptable to
the Senior Note Indenture Trustee.
"Reference Treasury Dealer Quotation" means, with respect to the Reference
Treasury Dealer and any redemption date, the average, as determined by the
Senior Note Indenture Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount
and quoted in writing to the Senior Note Indenture Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third Business Day in New York City
preceding such redemption date).
If notice of redemption is given as aforesaid, the Series Q Senior Notes so
to be redeemed shall, on the date of redemption, become due and payable at the
applicable Redemption Price together with any accrued interest thereon, and from
and after such date (unless the Company shall default in the payment of the
applicable Redemption Price and accrued interest) such Series Q Senior Notes
shall cease to bear interest. If any Series Q Senior Note called for redemption
shall not be paid upon surrender thereof for redemption, the principal shall,
until paid, bear interest from the date of redemption at the Securities Rate.
See "Description of the Senior Notes -- Events of Default" in the accompanying
Prospectus.
S-5
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), the Company or its
affiliates may, at any time and from time to time, purchase outstanding Series Q
Senior Notes by tender, in the open market or by private agreement.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as the initial securities
depository for the Series Q Senior Notes. The Series Q Senior Notes will be
issued only as fully registered securities registered in the name of Cede & Co.,
DTC's nominee or such other name as may be requested by an authorized
representative of DTC. One or more fully registered global Series Q Senior Notes
certificates will be issued, representing in the aggregate the total principal
amount of the Series Q Senior Notes, and will be deposited with DTC.
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, as amended. DTC holds and provides asset servicing for over 2
million issues of U.S. and non-U.S. equity issues, corporate and municipal debt
issues and money market instruments from over 85 countries that DTC's
participants ("Direct Participants") deposit with DTC. DTC also facilitates the
post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized book-entry
transfers and pledges between Direct Participants' accounts. This eliminates the
need for physical movement of securities certificates. Direct Participants
include both U.S. and non-U.S. securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is a
wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC").
DTCC, in turn, is owned by a number of Direct Participants of DTC and members of
the National Securities Clearing Corporation, Government Securities Clearing
Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation
(NSCC, GSCC, MBSCC and EMCC, also subsidiaries of DTCC), as well as by the New
York Stock Exchange, Inc., the American Stock Exchange LLC and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as both U.S. and non-U.S. securities brokers and
dealers, banks, trust companies and clearing corporations that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The DTC rules applicable to its
Participants are on file with the Securities and Exchange Commission. More
information about DTC can be found at www.dtcc.com.
Purchases of Series Q Senior Notes under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Series Q Senior
Notes on DTC's records. The ownership interest of each actual purchaser of
Series Q Senior Notes ("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 purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Series Q Senior
Notes. Transfers of ownership interests in the Series Q Senior Notes are to be
accomplished by entries made on the books of Direct and Indirect Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Series Q Senior Notes,
except in the event that use of the book-entry system for the Series Q Senior
Notes is discontinued.
To facilitate subsequent transfers, all Series Q Senior Notes deposited by
Direct Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of Series Q Senior Notes with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect
any changes in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Series Q Senior Notes. DTC's records reflect only the
identity of the Direct Participants to whose accounts such Series Q Senior Notes
are credited, which may or may not be the Beneficial Owners. The Direct and
Indirect Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
S-6
Redemption notices shall be sent to DTC. If less than all of the Series Q
Senior Notes are being redeemed, DTC's practice is to determine by lot the
amount of interest of each Direct Participant in such Series Q Senior Notes to
be redeemed.
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.
Although voting with respect to the Series Q Senior Notes is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. (nor any other
DTC nominee) will consent or vote with respect to Series Q Senior 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
Series Q Senior Notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Payments on the Series Q Senior Notes will be made to Cede & Co., or such
other nominee as may be requested by an authorized representative of DTC. DTC's
practice is to credit Direct Participants' accounts upon DTC's receipt of funds
and corresponding detail information from the Company or the Senior Note
Indenture Trustee on the relevant payment date in accordance with their
respective holdings shown on DTC's records. Payments by Direct or Indirect
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers registered in "street name," and will be the responsibility of such
Direct or Indirect Participant and not of DTC or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment to Cede & Co. (or such other nominee as may be requested by an
authorized representative of DTC) is the responsibility of the Company,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner of a global Series Q Senior
Note will not be entitled to receive physical delivery of Series Q Senior Notes.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Series Q Senior Notes. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. Such laws may impair the ability to
transfer beneficial interests in a global Series Q Senior Note.
DTC may discontinue providing its services as securities depository with
respect to the Series Q Senior Notes at any time by giving reasonable notice to
the Company. Under such circumstances, in the event that a successor securities
depositary is not obtained, Series Q Senior Notes certificates will be printed
and delivered to the holders of record. Additionally, the Company may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary) with respect to the Series Q Senior Notes. In that event,
certificates for the Series Q Senior Notes will be printed and delivered to the
holders of record.
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 Company has no
responsibility for the performance by DTC or its Direct or Indirect Participants
of their respective obligations as described herein or under the rules and
procedures governing their respective operations.
S-7
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement (the
"Underwriting Agreement"), the Company has agreed to sell to the underwriters
named below (the "Underwriters") and each of the Underwriters has severally
agreed to purchase from the Company the principal amount of the Series Q Senior
Notes set forth opposite its name below:
PRINCIPAL AMOUNT OF
SERIES Q SENIOR
NAME NOTES
---- ---------------------
Goldman, Sachs & Co. ....................................... $ 70,000,000
ABI Capital Management LLC.................................. 15,000,000
Credit Lyonnais Securities (USA) Inc. ...................... 15,000,000
------------
Total............................................. $100,000,000
============
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Series Q Senior
Notes offered hereby if any of the Series Q Senior Notes are purchased.
The Underwriters propose to offer the Series Q Senior Notes directly to the
public at the initial public offering prices set forth on the cover page of this
Prospectus Supplement, and may offer them to certain securities dealers at such
price less a concession not in excess of 0.45% of the principal amount per
Series Q Senior Note. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of 0.25% of the principal amount per Series Q Senior
Note to certain brokers and dealers. After the Series Q Senior Notes are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the Underwriters.
It is expected that delivery of the Series Q Senior Notes will be made
against payment therefor on or about the fourth business day following the date
hereof. Trades in the secondary market generally are required to settle in three
business days, unless the parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade the Series Q Senior Notes before final
settlement will be required, by virtue of the fact that the Series Q Senior
Notes will settle in T+4, to specify an alternative settlement cycle at the time
of any such trade to prevent a failed settlement.
Prior to this offering, there has been no public market for the Series Q
Senior Notes. The Underwriters have advised the Company that they intend to make
a market in the Series Q Senior Notes. The Underwriters will have no obligation
to make a market in the Series Q Senior Notes, however, and may cease market
making activities, if commenced, at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Company's expenses associated with the offer and sale of the Series Q
Senior Notes are estimated to be $225,000.
The Company has agreed with the Underwriters, that during the period of 15
days from the date of the Underwriting Agreement, not to sell, offer to sell,
grant any option for the sale of, or otherwise dispose of any Series Q Senior
Notes, any security convertible into, exchangeable into or exercisable for the
Series Q Senior Notes or any debt securities substantially similar to the Series
Q Senior Notes (except for the Series Q Senior Notes issued pursuant to the
Underwriting Agreement and $100,000,000 aggregate principal amount of the
Company's Series R 4.70% Senior Notes due December 1, 2010), without the prior
written consent of Goldman, Sachs & Co. This agreement does not apply to
issuances of commercial paper or other debt securities with scheduled maturities
of less than one year.
In order to facilitate the offering of the Series Q Senior Notes, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Series Q Senior Notes. Specifically, the Underwriters
may over-allot in connection with the offering, creating short positions in the
Series Q Senior
S-8
Notes for their own account. In addition, to cover over-allotments or to
stabilize the price of the Series Q Senior Notes, the Underwriters may bid for,
and purchase, Series Q Senior Notes in the open market. The Underwriters may
reclaim selling concessions allowed to an Underwriter or dealer for distributing
Series Q Senior Notes in the offering, if the Underwriters repurchase previously
distributed Series Q Senior Notes in transactions to cover short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Series Q Senior Notes above independent
market levels. The Underwriters are not required to engage in these activities,
and may end any of these activities at any time.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Series Q Senior Notes. In addition,
neither the Company nor the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions once
commenced will not be discontinued without notice.
The Underwriters and their affiliates engage in transactions with, and,
from time to time, have performed investment banking and/or commercial banking
services for, the Company and its affiliates in the ordinary course of business
and may do so in the future.
S-9
PROSPECTUS
ALABAMA POWER COMPANY
FIRST MORTGAGE BONDS
CLASS A PREFERRED STOCK
CUMULATIVE, PAR VALUE $1 PER SHARE
SENIOR NOTES
JUNIOR SUBORDINATED NOTES
ALABAMA POWER CAPITAL TRUST VI
ALABAMA POWER CAPITAL TRUST VII
ALABAMA POWER CAPITAL TRUST VIII
TRUST PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
ALABAMA POWER COMPANY
A SUBSIDIARY OF THE SOUTHERN COMPANY
We will provide the specific terms of these securities in supplements to this
Prospectus. You should read this Prospectus and the applicable Prospectus
Supplement carefully before you invest.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus is dated November 6, 2002
ABOUT THIS PROSPECTUS
This Prospectus is part of a registration statement filed with the
Securities and Exchange Commission (the "Commission") using a "shelf"
registration process under the Securities Act of 1933, as amended (the "1933
Act"). Under the shelf process, Alabama Power Company (the "Company") may sell,
in one or more transactions,
- first mortgage bonds (the "new Bonds")
- class A preferred stock (the "new Stock")
- senior notes (the "Senior Notes")
- junior subordinated notes (the "Junior Subordinated Notes")
and Alabama Power Capital Trust VI, Alabama Power Capital Trust VII and Alabama
Power Capital Trust VIII (individually, a "Trust" and collectively, the
"Trusts") may sell,
- trust preferred securities (the "Preferred Securities")
in one or more offerings up to a total dollar amount of $2,070,000,000. This
Prospectus provides a general description of those securities. Each time we sell
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering ("Prospectus Supplement"). The
Prospectus Supplement may also add, update or change information contained in
this Prospectus. You should read this Prospectus and the applicable Prospectus
Supplement together with additional information under the heading "Available
Information."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports and other information with the Commission. Such reports and other
information can be inspected and copied at the Public Reference Room of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 233 Broadway, New York, New York 10279. Information on the
operation of the Public Reference Room may be obtained by calling the Commission
at 1-800-SEC-0330. Copies of such material can also be obtained at prescribed
rates by writing to the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants including the Company that file electronically at
http://www.sec.gov. In addition, reports and other material concerning the
Company can be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, on which Exchange certain of the Company's
securities are listed.
No separate financial statements of any Trust are included herein. The
Company considers that such statements would not be material to holders of the
Preferred Securities because each Trust has no independent operations and exists
for the sole purpose of investing the proceeds of the sale of its Trust
Securities (as defined below) in Junior Subordinated Notes.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission pursuant to the
1934 Act and are incorporated herein by reference and made a part of this
Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2002 and June 30, 2002; and
2
(c) the Company's Current Reports on Form 8-K dated February 13, 2002,
March 28, 2002, June 21, 2002, September 26, 2002 and October 16,
2002.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated herein by reference and made a part of this Prospectus from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any 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 THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN THE
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE). SUCH REQUESTS SHOULD BE DIRECTED TO WILLIAM E. ZALES, JR., VICE
PRESIDENT AND CORPORATE SECRETARY, ALABAMA POWER COMPANY, 600 NORTH 18TH STREET,
BIRMINGHAM, ALABAMA 35203, TELEPHONE: (205) 257-2714.
3
SELECTED INFORMATION
The following material, which is presented herein solely to furnish limited
introductory information regarding the Company, has been selected from, or is
based upon, the detailed information and financial statements appearing in the
documents incorporated herein by reference or elsewhere in this Prospectus, is
qualified in its entirety by reference thereto and, therefore, should be read
together therewith.
ALABAMA POWER COMPANY
Business......................... Generation, transmission, distribution and
sale of electric energy
Service Area..................... Approximately 44,500 square miles
comprising most of the State of Alabama
Service Area Population (2000
Census).......................... Approximately 3,537,815
Customers at December 31, 2001... 1,341,638
Generating Capacity at December
31, 2001 (kilowatts)............. 12,153,000
Sources of Generation during 2001
(kilowatt-hours)............... Coal (64%), Nuclear (18%), Hydro (6%), Oil
and Gas (12%)
CERTAIN RATIOS
The following table sets forth the Ratios of Earnings to Fixed Charges and
Earnings to Fixed Charges Plus Preferred Dividend Requirements (Pre-Income Tax
Basis) for the periods indicated.
SIX
MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------- JUNE 30,
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- --------
Ratio of Earnings to Fixed Charges(1)(2)................ 3.46 3.12 3.59 3.46 3.31 3.44
Ratio of Earnings to Fixed Charges Plus
Preferred Dividend Requirements
(Pre-Income Tax Basis)(2)(3).......................... 3.18 2.90 3.26 3.18 3.05 3.16
---------------
(1) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Earnings Before Interest and Income Taxes" the debt portion of
allowance for funds used during construction; and (ii) "Fixed Charges"
consist of "Net Interest Charges" plus the debt portion of allowance for
funds used during construction.
(2) These ratios have been revised to reflect a reclassification of income and
expense of the Company's external nuclear decommissioning trust funds as
presented in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.
(3) In computing this ratio, "Preferred Dividend Requirements" represent the
before-tax earnings necessary to pay such dividends, computed at the
effective tax rates for the applicable periods.
ALABAMA POWER COMPANY
The Company is a corporation organized under the laws of the State of
Alabama on November 10, 1927, by the consolidation of the predecessor Alabama
Power Company, Gulf Electric Company and Houston Power Company. The predecessor
Alabama Power Company had a continuous existence since its incorpora-
4
tion in 1906. The principal executive offices of the Company are located at 600
North 18th Street, Birmingham, Alabama 35203, and the telephone number is (205)
257-1000.
The Company is a wholly owned subsidiary of The Southern Company
("Southern"), a holding company registered under the Public Utility Holding
Company Act of 1935, as amended (the "1935 Act"). The Company is engaged, within
the State of Alabama, in the generation and purchase of electricity and the
distribution and sale of such electricity at retail in over 1,000 communities
(including Anniston, Birmingham, Gadsden, Mobile, Montgomery and Tuscaloosa),
and at wholesale to 15 municipally owned electric distribution systems, 11 of
which are served indirectly through sales to the Alabama Municipal Electric
Authority, and two rural distributing cooperative associations. The Company also
supplies steam service in downtown Birmingham. The Company owns coal reserves
near its Gorgas Steam Electric Generating Plant and uses the output of coal from
the reserves in its generating plants. It also sells, and cooperates with
dealers in promoting the sale of, electric appliances.
The Company and one of its affiliates, Georgia Power Company ("GEORGIA"),
each own 50% of the common stock of Southern Electric Generating Company
("SEGCO"). SEGCO owns generating units with an aggregate capacity of 1,019,680
kilowatts at the Ernest C. Gaston Steam Plant ("Plant Gaston") on the Coosa
River near Wilsonville, Alabama. The Company and GEORGIA are each entitled to
one-half of the capacity and energy of these units. The Company acts as SEGCO's
agent in the operation of SEGCO's units and furnishes coal to SEGCO as fuel for
its units. SEGCO also owns three 230,000 volt transmission lines extending from
Plant Gaston to the Georgia state line.
THE TRUSTS
Each Trust is a statutory trust created under Delaware law pursuant to the
filing of a certificate of trust with the Delaware Secretary of State on October
21, 2002. Each Trust's business is defined in a trust agreement, executed by the
Company, as Depositor, and the Delaware Trustee thereunder. This trust agreement
of each Trust will be amended and restated in its entirety substantially in the
form filed as an exhibit to the Registration Statement of which this Prospectus
forms a part (the "Trust Agreement"). Each Trust Agreement will be qualified as
an indenture under the Trust Indenture Act of 1939, as amended (the "1939 Act").
The Company will own all the common securities (the "Common Securities" and,
together with the Preferred Securities, the "Trust Securities"). The Trust
Securities represent undivided beneficial interests in the assets of the
respective Trusts. Each Trust exists for the exclusive purposes of (i) issuing
its Trust Securities representing undivided beneficial interests in the assets
of such Trust, (ii) investing the gross proceeds of its Trust Securities in a
related series of Junior Subordinated Notes, and (iii) engaging in only those
other activities necessary, appropriate, convenient or incidental thereto. The
payment of periodic cash distributions on the Preferred Securities of each Trust
and payments on liquidation and redemption with respect to the Preferred
Securities of each Trust, in each case to the extent each Trust has funds
legally and immediately available therefor, will be guaranteed by the Company
(individually, a "Guarantee" and collectively, the "Guarantees"). See
"Description of the Guarantees."
Each Trust's business and affairs will be conducted by its trustees, which
shall be appointed by the Company as the holder of the Common Securities: two
employees of the Company as Administrative Trustees; JPMorgan Chase Bank
(formerly known as The Chase Manhattan Bank) as Property Trustee; and Chase
Manhattan Bank USA, National Association as Delaware Trustee (collectively, the
"Securities Trustees"). The Property Trustee of each Trust will act as the
indenture trustee with respect to such Trust for purposes of compliance with the
provisions of the 1939 Act.
The principal place of business of each Trust shall be c/o the Company, 600
North 18th Street, Birmingham, Alabama 35203, telephone (205) 257-2714, Attn:
Corporate Secretary.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of each Trust for further information concerning such Trust.
5
ACCOUNTING TREATMENT OF TRUSTS
For financial reporting purposes, the Trusts will be treated as
subsidiaries of the Company and, accordingly, the accounts of the Trusts will be
included in the consolidated financial statements of the Company. The Preferred
Securities will be presented as a separate line item in the consolidated balance
sheet of the Company, and appropriate disclosures concerning the Preferred
Securities, the Guarantees and the Junior Subordinated Notes will be included in
the notes to the consolidated financial statements. For financial reporting
purposes, the Company will record distributions payable on the Preferred
Securities as an expense.
USE OF PROCEEDS
Each Trust will invest the proceeds received from the sale of its Preferred
Securities in Junior Subordinated Notes. Except as may be otherwise described in
an applicable Prospectus Supplement, the net proceeds received by the Company
from such investment and any proceeds received from the sale of its new Bonds,
new Stock or Senior Notes or other sales of its Junior Subordinated Notes will
be used in connection with its ongoing construction program, to pay scheduled
maturities and/or refundings of its securities, to repay short-term indebtedness
to the extent outstanding and for other general corporate purposes.
DESCRIPTION OF THE NEW BONDS
Set forth below is a description of the general terms of the Company's new
Bonds. The following description does not purport to be complete and is subject
to, and is qualified by reference to, the Indenture, dated as of January 1,
1942, between the Company and JPMorgan Chase Bank (formerly known as The Chase
Manhattan Bank), as trustee (the "First Mortgage Bond Trustee"), as to be
supplemented by a supplemental indenture (the "Supplemental Indenture") thereto
establishing the new Bonds of each series (the Indenture, as so supplemented, is
hereinafter referred to as the "First Mortgage Bond Indenture"), the forms of
which are filed as exhibits to the Registration Statement of which this
Prospectus forms a part. The terms of such new Bonds will include those stated
in the First Mortgage Bond Indenture and those made a part of the First Mortgage
Bond Indenture by reference to the 1939 Act. Certain capitalized terms used
herein are defined in the First Mortgage Bond Indenture.
The new Bonds will mature on the date shown in their title as set forth in
the Prospectus Supplement.
The new Bonds in definitive form will be issued only as registered bonds
without coupons in denominations of $1,000 or authorized multiples thereof or in
such other denominations as set forth in the Prospectus Supplement. New Bonds
will be exchangeable for a like aggregate principal amount of new Bonds of other
authorized denominations, and are transferable, at the principal corporate trust
office of the First Mortgage Bond Trustee in New York City, or at such other
office or agency of the Company as the Company may from time to time designate,
without payment of any charge other than for any tax or taxes or other
governmental charge.
Any proposed listing of the new Bonds on a securities exchange will be
described in the Prospectus Supplement.
Except as otherwise may be indicated in the Prospectus Supplement, there
are no provisions of the First Mortgage Bond Indenture which are specifically
intended to afford holders of the new Bonds protection in the event of a highly
leveraged transaction involving the Company.
Interest Rate Provisions: The Prospectus Supplement will set forth the
interest rate provisions of the new Bonds, including payment dates, the record
dates and the rate or rates, or the method of determining the rate or rates
(which may involve periodic interest rate settings through remarketing or
auction procedures or pursuant to one or more formulae, as described in the
Prospectus Supplement).
Redemption Provisions: The redemption provisions applicable to the new
Bonds will be described in the Prospectus Supplement.
6
Priority and Security: The new Bonds will rank equally as to security with
the bonds of other series presently outstanding under the First Mortgage Bond
Indenture, which is a direct first lien on substantially all of the Company's
fixed property and franchises, used or useful in its public utility business,
subject only to excepted encumbrances, as defined in the First Mortgage Bond
Indenture (Section 1.02).
The First Mortgage Bond Indenture permits, within certain limitations
specified in Section 7.05, the acquisition of property subject to prior liens.
Under certain conditions specified in Section 7.14, additional indebtedness
secured by such prior liens may be issued to the extent of 60% of the cost to
the Company or the fair value at date of acquisition, whichever is less, of the
net property additions made by the Company to the property subject to such prior
lien.
Improvement Fund Requirement: Pursuant to the Supplemental Indenture and
similar provisions of the supplemental indentures creating other series of bonds
currently outstanding under the First Mortgage Bond Indenture (other than bonds
aggregating $146,800,000 in principal amount issued and outstanding as of June
30, 2002 as collateral security for certain obligations), the annual improvement
fund requirement applicable to the new Bonds and the bonds of each such other
series, which must be satisfied on or before June 1 in each year, is equal to 1%
of the principal amount of bonds authenticated of each such series prior to
January 1 of that year (less bonds of such series retired directly or indirectly
as a result of the release of property). The improvement fund requirements may
be satisfied in cash or in principal amount of bonds authenticated under the
First Mortgage Bond Indenture or to the extent of 60% of the cost or fair value,
whichever is less, of unfunded net property additions. Any cash so deposited is
to be used by the First Mortgage Bond Trustee for the redemption at their then
special redemption prices or other retirement of bonds of such series as may be
designated by the Company (subject to such limitation, if any, as to the new
Bonds as set forth in the Prospectus Supplement and except as to limitations
which have been or may be established in the supplemental indentures creating
other series of bonds) or may be withdrawn by the Company against the deposit of
bonds or to the extent of 60% of unfunded net property additions.
Replacement Requirement: By Section 4 of the Supplemental Indenture dated
as of October 1, 1981, the Company is required to certify to the First Mortgage
Bond Trustee unfunded net property additions or to deposit with the First
Mortgage Bond Trustee cash or bonds in an amount equal to the amount by which
annual expenditures for renewals and replacements are less than 2.25% of the
average annual amount of depreciable mortgaged property or such revised
percentage as shall be authorized or approved by the Commission, or any
successor commission, under the 1935 Act. Any available replacement credit may
be carried forward and deposited cash or bonds may be withdrawn, used or applied
in accordance with the provisions of said section.
Any limitation on the right of the Company to redeem new Bonds through the
operation of the replacement provisions of the First Mortgage Bond Indenture
will be described in the Prospectus Supplement.
The First Mortgage Bond Indenture (Section 7.16) provides for an
examination of the mortgaged property by an independent engineer at least once
every five years. The Company covenants to make good any maintenance deficiency
shown by the certificate of such engineer and to record retirements as called
for thereby.
Issuance of Additional Bonds: Additional bonds may be issued under the
First Mortgage Bond Indenture (a) under Article IV to the extent of 60% of the
cost or fair value at date of acquisition, whichever is less, of unfunded net
property additions, as defined in the First Mortgage Bond Indenture (Sections
1.08 through 1.11, as amended), or (b) under Article V against the retirement of
other bonds theretofore outstanding under the First Mortgage Bond Indenture, or
(c) under Article VI against the deposit of cash equal to the principal amount
of bonds to be issued. Such additional bonds, however, may be issued, except in
certain cases when issued under Article V, only if, for a period of twelve
consecutive calendar months within the fifteen preceding calendar months, the
net earnings of the Company, as defined in the First Mortgage Bond Indenture
(Section 1.03, as amended), shall have been at least twice the interest
requirements for one year on all bonds outstanding, including the additional
bonds applied for and all outstanding prior lien bonds and other indebtedness of
the character described in the First Mortgage Bond Indenture. Such net earnings
are computed, in effect, after making certain deductions including (i) all
operating expenses other than
7
income and excess profits taxes and (ii) the amount, if any, by which the
aggregate charges to expense or income to provide for depreciation are less than
2.25% of the average amount of depreciable mortgaged property. Under this
provision, no amount is included in interest requirements on account of
$32,600,000 principal amount of first mortgage bonds (out of a total of
$146,800,000 principal amount) issued and outstanding as of June 30, 2002, as
collateral for certain obligations for which such bonds are pledged as security.
No interest is payable on any such bonds unless and until default occurs on such
obligations.
Cash deposited as the basis for the issuance of bonds may be applied to the
retirement of bonds or be withdrawn against the deposit of bonds or be withdrawn
to the extent of 60% of the cost or fair value, whichever is less, of unfunded
net property additions (Article VI).
Release and Substitution of Property: The First Mortgage Bond Indenture
(Article X) provides that, subject to various limitations, property may be
released from the lien thereof when sold or exchanged, upon the basis of cash
deposited with the First Mortgage Bond Trustee, bonds or purchase money
obligations delivered to the First Mortgage Bond Trustee, prior lien bonds
delivered to the First Mortgage Bond Trustee or reduced or assumed, property
additions acquired in exchange for the property released or unfunded net
property additions certified to the First Mortgage Bond Trustee.
The First Mortgage Bond Indenture (Section 10.05) permits the cash proceeds
of released property and other funds to be withdrawn either upon a showing that
unfunded net property additions exist or against the deposit of bonds and also
permits such proceeds and other funds to be applied to the retirement of bonds.
Restrictions on Common Stock Dividends: There are various restrictions on
Common Stock dividends in the First Mortgage Bond Indenture (which are to remain
in effect so long as certain series of bonds are outstanding). Any restrictions
on dividends and distributions on Common Stock in the Supplemental Indenture
will be set forth in the Prospectus Supplement.
Amendments to the First Mortgage Bond Indenture: By Section 6(g) of the
Supplemental Indenture dated as of October 1, 1981, the First Mortgage Bond
Indenture may be modified with the consent of the holders of not less than a
majority in principal amount of the bonds at the time outstanding which would be
affected by the action proposed to be taken. However, the bondholders shall have
no power (i) to extend the fixed maturity of any bonds, or reduce the rate or
extend the time of payment of interest thereon, or reduce the principal amount
thereof, without the express consent of the holder of each bond which would be
so affected, or (ii) to reduce the aforesaid percentage of bonds, the holders of
which are required to consent to any such modification, without the consent of
the holders of all bonds outstanding, or (iii) to permit the creation by the
Company of any mortgage or pledge or lien in the nature thereof, not otherwise
permitted under the First Mortgage Bond Indenture, ranking prior to or equal
with the lien of the First Mortgage Bond Indenture on any of the mortgaged and
pledged property, or (iv) to deprive the holder of any bond outstanding under
the First Mortgage Bond Indenture of the lien thereof on any of the mortgaged
and pledged property. The First Mortgage Bond Trustee shall not be obligated to
enter into a supplemental indenture which would affect its own rights, duties or
immunities under the First Mortgage Bond Indenture or otherwise.
Regarding the First Mortgage Bond Trustee: JPMorgan Chase Bank (formerly
known as The Chase Manhattan Bank), the First Mortgage Bond Trustee, also serves
as Senior Note Indenture Trustee, as Subordinated Note Indenture Trustee, as
Property Trustee and as Guarantee Trustee. The Company and certain of its
affiliates maintain deposit accounts and banking relationships with JPMorgan
Chase Bank. JPMorgan Chase Bank also serves as trustee under other indentures
pursuant to which securities of the Company and affiliates of the Company are
outstanding.
Enforcement Provisions: The First Mortgage Bond Indenture (Section 11.05)
provides that, upon the occurrence of certain events of default, the First
Mortgage Bond Trustee or the holders of not less than 20% in principal amount of
outstanding bonds may declare the principal of all outstanding bonds immediately
due and payable, but that, upon the curing of any such default, the holders of a
majority in principal amount of outstanding bonds may waive such default and its
consequences.
The holders of a majority in principal amount of outstanding bonds may
direct the time, method and place of conducting any proceeding for the
enforcement of the First Mortgage Bond Indenture (Sections 11.01
8
and 11.12). No holder of any bond has any right to institute any proceedings to
enforce the First Mortgage Bond Indenture or any remedy thereunder, unless such
holder shall previously have given to the First Mortgage Bond Trustee written
notice of a default, and unless such holder or holders shall have tendered to
the First Mortgage Bond Trustee indemnity against costs, expenses and
liabilities, and unless the holders of not less than 20% in principal amount of
outstanding bonds shall have tendered such indemnity and requested the First
Mortgage Bond Trustee to take action and the First Mortgage Bond Trustee shall
have failed to take action within 60 days (Section 11.14).
Defaults: By Section 11.01 of the First Mortgage Bond Indenture, the
following events are defined as "defaults": failure to pay principal; failure
for 60 days to pay interest; failure for 90 days to pay any sinking or other
purchase fund installment; certain events in bankruptcy, insolvency or
reorganization; and failure for 90 days after notice to perform other covenants.
By Section 9.03 of the First Mortgage Bond Indenture, a failure by the Company
to deposit or direct the application of money for the redemption of bonds called
for redemption also constitutes a default.
Evidence as to Compliance with Conditions and Covenants: The First
Mortgage Bond Indenture requires the Company to furnish to the First Mortgage
Bond Trustee, among other things, a certificate of officers and an opinion of
counsel as evidence of compliance with conditions precedent provided for
therein; a certificate of an engineer (who, in certain instances, must be an
independent engineer) with respect to the fair value of property certified or
released; and a certificate of an accountant (who, in certain instances, must be
an independent public accountant) as to compliance with the earnings,
improvement fund and replacement requirements. Various certificates and other
documents are required to be filed periodically or upon the happening of certain
events; however, no general periodic evidence is required by the First Mortgage
Bond Indenture to be furnished as to the absence of default or as to compliance
with the terms of the First Mortgage Bond Indenture in general.
DESCRIPTION OF THE NEW STOCK
Set forth below is a description of the general terms of the new Stock.
The statements herein concerning the new Stock are an outline and do not
purport to be complete. Such statements make use of defined terms and are
qualified in their entirety by express reference to the cited provisions of the
charter of the Company, as amended (the "charter"), a copy of which is filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
The general provisions which apply to the preferred stock of the Company of all
classes, which are now or may hereafter be authorized or created, are set forth
in the charter.
General: The new Stock is to be established by resolutions of the Board of
Directors of the Company (the "Resolutions"), a copy of which is an exhibit to
the Registration Statement (or incorporated by reference therein) to which
reference is hereby made. The Resolutions shall include a provision fixing the
stated capital of the new Stock.
At June 30, 2002, there were outstanding 8,000,000 shares of Class A
Preferred Stock with a stated capital of $25 per share, 500,000 shares of Class
A Preferred Stock with a stated capital of $100 per share and 200 shares of
Class A Preferred Stock with a stated capital of $100,000 per share.
Additionally, at June 30, 2002, the Company had outstanding 475,115 shares of
Preferred Stock which have a par value of $100 per share. The Class A Preferred
Stock ranks on a parity as to dividends and assets with the outstanding
Preferred Stock and has the same rights and preferences as the outstanding
Preferred Stock. On all matters submitted to a vote of the holders of the
Preferred Stock and the Class A Preferred Stock (other than a change in the
rights and preferences of only one, but not the other, such kind of stock), both
kinds of stock vote together as a single class, and each share of Preferred
Stock and Class A Preferred Stock shall have the relative voting rights
described in "Voting Rights" herein.
The new Stock will not be subject to further calls or to assessment by the
Company.
9
Any proposed listing of the new Stock on a securities exchange will be
described in the Prospectus Supplement.
Transfer Agent and Registrar: Unless otherwise indicated in the applicable
Prospectus Supplement, the new Stock will be transferable at the office of
Southern Company Services, Inc., 270 Peachtree Street, N.W., Atlanta, Georgia
30303, which will also serve as the Registrar.
Dividend Rights: The holders of the Preferred Stock and Class A Preferred
Stock of each class are entitled to receive cumulative dividends, payable when
and as declared by the Board of Directors, at the rates determined for the
respective classes, before any dividends may be declared or paid on the Common
Stock. Dividends on the Preferred Stock and Class A Preferred Stock must have
been or be contemporaneously declared and set apart for payment, or paid, on the
Preferred Stock and Class A Preferred Stock of all classes for all dividend
periods terminating on the same or an earlier date (Charter -- A. Preferred
Stock -- 2. General Provisions -- a and b).
The Prospectus Supplement will set forth the dividend rate provisions of
the new Stock, including the payment dates and the rate or rates, or the method
of determining the rate or rates (which may involve periodic dividend rate
settings through remarketing or auction procedures or pursuant to one or more
formulae, as described in the Prospectus Supplement). Dividends payable on the
new Stock will be cumulative from the date of original issue.
Redemption Provisions: The redemption provisions applicable to the new
Stock will be described in the Prospectus Supplement.
The charter provides that the Company shall not redeem, purchase or
otherwise acquire any shares of Preferred Stock or Class A Preferred Stock if,
at the time of such redemption, purchase or other acquisition, dividends payable
on the Preferred Stock or Class A Preferred Stock of any class shall be in
default in whole or in part unless, prior to or concurrently with such
redemption, purchase or other acquisition, all such defaults shall be cured or
unless such action has been ordered, approved or permitted under the 1935 Act by
the Commission or any successor commission or regulatory authority of the United
States of America (Charter -- A. Preferred Stock -- 2. General Provisions -- d).
Voting Rights: At the election of directors at each annual meeting of the
shareholders, the holders of the Preferred Stock and Class A Preferred Stock
shall have full voting rights with the holders of the Common Stock, all voting
together as a single class. Each share of Preferred Stock and Class A Preferred
Stock with a stated capital of $100 will have two-fifths vote, each share of
Preferred Stock and Class A Preferred Stock with a stated capital of $25 will
have one-tenth vote, each share of Preferred Stock and Class A Preferred Stock
with a stated capital of $100,000 will have 400 votes and each share of Common
Stock will have one vote. On all other matters, except as otherwise provided by
law or in the charter, the right to vote is vested in the holders of the Common
Stock; provided, however, that, if and so long as four quarterly dividends
payable on the Preferred Stock or Class A Preferred Stock of any class shall be
in default, the holders of the Preferred Stock and Class A Preferred Stock of
all classes shall have the exclusive right, voting separately and as a single
class, to elect the smallest number of directors which shall constitute a
majority of the then authorized number of directors and, on all other matters,
the right to vote together with the holders of the Common Stock. In each
instance in which the holders of the Preferred Stock and the Class A Preferred
Stock are entitled to vote separately and as a single class or to vote together
with the holders of the Common Stock, the relative voting power of the various
classes of stock shall be computed as hereinafter provided. Stockholders are
entitled to cumulative voting at elections of directors (Charter -- C. Voting
Powers).
The affirmative vote of at least two-thirds of the total voting power of
the outstanding shares of Preferred Stock and Class A Preferred Stock will be
required for
(a) the authorization or creation of any kind of stock preferred as to
dividends or assets over the Preferred Stock or Class A Preferred Stock or
the issue (such issuance to be within twelve months after such vote) of any
shares of any kind of stock preferred as to dividends or assets over the
Preferred Stock or Class A Preferred Stock or any security convertible into
such kind of stock or a change in any of the rights and preferences of the
then outstanding Preferred Stock or Class A Preferred Stock in any manner
10
so as to affect adversely the holders thereof; provided, however, that, if
any such change would adversely affect the holders of only one, but not the
other, such kind of stock, only the vote of the holders of at least
two-thirds of the total voting power of the outstanding shares of the kind
so affected will be required; or
(b) the issue, sale or other disposition of any shares of Preferred
Stock if the total number of shares thereof to be outstanding would exceed
300,000, or the issue, sale or other disposition of any shares of Class A
Preferred Stock, or the issue, sale or other disposition of any senior or
equally ranking stock, or the reissue, sale or other disposition of any
shares of Preferred Stock or Class A Preferred Stock or senior or equally
ranking stock which have been redeemed, purchased or otherwise acquired by
the Company, unless, in any such case, (i) net income available for
dividends for a period of twelve consecutive calendar months within the 15
preceding calendar months is at least equal to two times the annual
dividend requirements on all outstanding shares of Preferred Stock and
Class A Preferred Stock and on senior or equally ranking stock to be
outstanding; (ii) gross income available for interest for a period of
twelve consecutive calendar months within the 15 preceding calendar months
is at least equal to one and one-half times the aggregate of annual
interest requirements and annual dividend requirements on all outstanding
shares of Preferred Stock and Class A Preferred Stock and on senior or
equally ranking stock to be outstanding; and (iii) the aggregate of common
stock capital and surplus is not less than the aggregate amount payable
upon involuntary liquidation on all shares of Preferred Stock and Class A
Preferred Stock and on senior or equally ranking stock to be outstanding
(Charter -- A. Preferred Stock -- 2. General Provisions -- e.).
The charter provides that relative voting power of each share of Preferred
Stock and Class A Preferred Stock shall be in the same proportion to all the
outstanding shares of Preferred Stock and Class A Preferred Stock as the ratio
of (i) the stated capital of such share to (ii) the aggregate stated capital of
all then outstanding shares of Preferred Stock and Class A Preferred Stock.
Thus, a share of Class A Preferred Stock having a stated capital of $25 per
share will have one-fourth the voting power of a share of Preferred Stock or
Class A Preferred Stock having a stated capital of $100 per share. In voting by
holders of Preferred Stock and Class A Preferred Stock together with the holders
of the Common Stock, each share of Common Stock will have one vote, each share
of Preferred Stock will have one vote and each share of Class A Preferred Stock
having a stated capital of other than $100 per share will have that number of
votes which is proportionate to such one vote as determined above in this
paragraph (Charter -- C. Voting Powers).
Liquidation Rights: Upon voluntary or involuntary liquidation, the holders
of the Preferred Stock and Class A Preferred Stock of each class, without
preference between classes, will be entitled to receive the amounts specified to
be payable on the shares of such class (which, in the case of the new Stock, is
an amount equal to the stated capital per share on involuntary liquidation, or
an amount equal to the then current regular redemption price per share on
voluntary liquidation, plus accrued dividends in each case) before any
distribution of assets may be made to the holders of the Common Stock. Available
assets, if insufficient to pay such amounts to the holders of the Preferred
Stock and Class A Preferred Stock, are to be distributed pro rata to the
payment, first, of the amount per share payable in the event of involuntary
liquidation, second, of accrued dividends, and third, of any premium
(Charter -- A. Preferred Stock -- 2. General Provisions -- c.).
Sinking Fund: The terms and conditions of a sinking fund or purchase fund,
if any, for the benefit of the holders of the new Stock will be set forth in the
Prospectus Supplement.
Other Rights: The holders of the new Stock do not have any preemptive or
conversion rights unless otherwise indicated in the Prospectus Supplement.
DESCRIPTION OF THE SENIOR NOTES
Set forth below is a description of the general terms of the Senior Notes.
The following description does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the Senior Note Indenture, dated
as of December 1, 1997, between the Company and JP Morgan Chase Bank (formerly
known as The Chase Manhattan Bank), as trustee (the "Senior Note Indenture
Trustee"), as to be supplemented by a supplemental indenture thereto
establishing the Senior Notes of each series (the Senior Note Indenture, as so
supplemented, is hereinafter referred to as the "Senior Note Indenture"), the
forms of which are filed as exhibits to the Registration Statement of which this
Prospectus forms a part. The terms of
11
the Senior Notes will include those stated in the Senior Note Indenture and
those made a part of the Senior Note Indenture by reference to the 1939 Act.
Certain capitalized terms used herein are defined in the Senior Note Indenture.
GENERAL
The Senior Notes will be issued as unsecured senior debt securities under
the Senior Note Indenture and will rank pari passu with all other unsecured and
unsubordinated debt of the Company. The Senior Notes will be effectively
subordinated to all secured debt of the Company, including its first mortgage
bonds, aggregating approximately $648,000,000 outstanding at June 30, 2002. The
Senior Note Indenture does not limit the aggregate principal amount of Senior
Notes that may be issued thereunder and provides that Senior Notes may be issued
from time to time in one or more series pursuant to an indenture supplemental to
the Senior Note Indenture. The Senior Note Indenture gives the Company the
ability to reopen a previous issue of Senior Notes and issue additional Senior
Notes of such series, unless otherwise provided.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Senior Notes being offered
thereby: (i) the title of such Senior Notes; (ii) any limit on the aggregate
principal amount of such Senior Notes; (iii) the date or dates on which the
principal of such Senior Notes is payable; (iv) the rate or rates at which such
Senior Notes shall bear interest, if any, or any method by which such rate or
rates will be determined, the date or dates from which such interest will
accrue, the interest payment dates on which such interest shall be payable, and
the regular record date for the interest payable on any interest payment date;
(v) the place or places where the principal of (and premium, if any) and
interest, if any, on such Senior Notes shall be payable; (vi) the period or
periods within which, the price or prices at which and the terms and conditions
on which such Senior Notes may be redeemed, in whole or in part, at the option
of the Company; (vii) the obligation, if any, of the Company to redeem or
purchase such Senior Notes; (viii) the denominations in which such Senior Notes
shall be issuable; (ix) if other than the principal amount thereof, the portion
of the principal amount of such Senior Notes which shall be payable upon
declaration of acceleration of the maturity thereof; (x) any deletions from,
modifications of or additions to the Events of Default or covenants of the
Company as provided in the Senior Note Indenture pertaining to such Senior
Notes; (xi) whether such Senior Notes shall be issued in whole or in part in the
form of a Global Security; and (xii) any other terms of such Senior Notes.
The Senior Note Indenture does not contain provisions that afford holders
of Senior Notes protection in the event of a highly leveraged transaction
involving the Company.
EVENTS OF DEFAULT
The Senior Note Indenture provides that any one or more of the following
described events with respect to the Senior Notes of any series, which has
occurred and is continuing, constitutes an "Event of Default" with respect to
the Senior Notes of such series:
(a) failure for 10 days to pay interest on the Senior Notes of such
series, when due on an interest payment date other than at maturity or upon
earlier redemption; or
(b) failure to pay principal or premium, if any, or interest on the
Senior Notes of such series when due at maturity or upon earlier
redemption; or
(c) failure for three Business Days to deposit any sinking fund
payment when due by the terms of a Senior Note of such series; or
(d) failure to observe or perform any other covenant or warranty of
the Company in the Senior Note Indenture (other than a covenant or warranty
which has expressly been included therein solely for the benefit of one or
more series of Senior Notes other than such series) for 90 days after
written notice to the Company from the Senior Note Indenture Trustee or the
holders of at least 25% in principal amount of the outstanding Senior Notes
of such series; or
(e) certain events of bankruptcy, insolvency or reorganization of the
Company.
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The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Senior Note Indenture Trustee with respect to the Senior Notes of such series.
If a Senior Note Indenture Event of Default occurs and is continuing with
respect to the Senior Notes of any series, then the Senior Note Indenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of the Senior Notes of such series may declare the principal amount
thereof due and payable immediately by notice in writing to the Company (and to
the Senior Note Indenture Trustee if given by the holders), and upon any such
declaration such principal amount shall become immediately due and payable. At
any time after such a declaration of acceleration with respect to the Senior
Notes of any series has been made and before a judgment or decree for payment of
the money due has been obtained as provided in Article Five of the Senior Note
Indenture, the holders of not less than a majority in aggregate outstanding
principal amount of the Senior Notes of such series may rescind and annul such
declaration and its consequences if the default has been cured or waived and the
Company has paid or deposited with the Senior Note Indenture Trustee a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration and all sums paid or advanced by the Senior Note
Indenture Trustee, including reasonable compensation and expenses of the Senior
Note Indenture Trustee.
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series may, on behalf of the holders of all
the Senior Notes of such series, waive any past default with respect to such
series, except (i) a default in the payment of principal or interest or (ii) a
default in respect of a covenant or provision which under Article Nine of the
Senior Note Indenture cannot be modified or amended thereunder without the
consent of the holder of each outstanding Senior Note of such series affected
thereby.
REGISTRATION AND TRANSFER
The Company shall not be required to (i) issue, register the transfer of or
exchange Senior Notes of any series during a period of 15 days immediately
preceding the date notice is given identifying the Senior Notes of such series
called for redemption, or (ii) register the transfer of or exchange any Senior
Notes so selected for redemption, in whole or in part, except the unredeemed
portion of any Senior Note being redeemed in part.
PAYMENT AND PAYING AGENT
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Senior Notes will be made only against surrender to the
Paying Agent of such Senior Notes. Principal of and interest on Senior Notes
will be payable, subject to any applicable laws and regulations, at the office
of such Paying Agent or Paying Agents as the Company may designate from time to
time, except that, at the option of the Company, payment of any interest may be
made by wire transfer or by check mailed to the address of the person entitled
thereto as such address shall appear in the Security Register with respect to
the Senior Notes. Payment of interest on Senior Notes on any interest payment
date will be made to the person in whose name the Senior Notes (or predecessor
security) are registered at the close of business on the record date for such
interest payment.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Senior Note Indenture Trustee will act as Paying Agent with respect to the
Senior Notes. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agents or approve a change in the office
through which any Paying Agent acts.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or interest on the Senior Notes of any series which remain
unclaimed at the end of two years after such principal or interest shall have
become due and payable will be repaid to the Company, and the holder of such
Senior Notes will thereafter look only to the Company for payment thereof.
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MODIFICATION
The Senior Note Indenture contains provisions permitting the Company and
the Senior Note Indenture Trustee, with the consent of the holders of not less
than a majority in principal amount of the outstanding Senior Notes of each
series affected thereby, to modify the Senior Note Indenture or the rights of
the holders of the Senior Notes of such series; provided, that no such
modification may, without the consent of the holder of each outstanding Senior
Note affected thereby, (i) change the stated maturity of the principal of, or
any installment of principal of or interest on, any Senior Note, or reduce the
principal amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or change the method of calculating the rate of
interest thereon, or impair the right to institute suit for the enforcement of
any such payment on or after the stated maturity thereof (or, in the case of
redemption, on or after the redemption date), or (ii) reduce the percentage of
principal amount of the outstanding Senior Notes of any series, the consent of
whose holders is required for any such supplemental indenture, or the consent of
whose holders is required for any waiver (of compliance with certain provisions
of the Senior Note Indenture or certain defaults thereunder and their
consequences) provided for in the Senior Note Indenture, or (iii) modify any of
the provisions of the Senior Note Indenture relating to supplemental indentures,
waiver of past defaults, or waiver of certain covenants, except to increase any
such percentage or to provide that certain other provisions of the Senior Note
Indenture cannot be modified or waived without the consent of the holder of each
outstanding Senior Note affected thereby.
In addition, the Company and the Senior Note Indenture Trustee may execute,
without the consent of any holders of Senior Notes, any supplemental indenture
for certain other usual purposes, including the creation of any new series of
senior notes.
CONSOLIDATION, MERGER AND SALE
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such other corporation or person
expressly assumes, by supplemental indenture executed and delivered to the
Senior Note Indenture Trustee, the payment of the principal of (and premium, if
any) and interest on all the Senior Notes and the performance of every covenant
of the Senior Note Indenture on the part of the Company to be performed or
observed; (2) immediately after giving effect to such transactions, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have happened and be continuing; and (3) the Company
has delivered to the Senior Note Indenture Trustee an officers' certificate and
an opinion of counsel, each stating that such transaction complies with the
provisions of the Senior Note Indenture governing consolidation, merger,
conveyance, transfer or lease and that all conditions precedent thereto have
been complied with.
INFORMATION CONCERNING THE SENIOR NOTE INDENTURE TRUSTEE
The Senior Note Indenture Trustee, prior to an Event of Default with
respect to Senior Notes of any series, undertakes to perform, with respect to
Senior Notes of such series, only such duties as are specifically set forth in
the Senior Note Indenture and, in case an Event of Default with respect to
Senior Notes of any series has occurred and is continuing, shall exercise, with
respect to Senior Notes of such series, the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
such provision, the Senior Note Indenture Trustee is under no obligation to
exercise any of the powers vested in it by the Senior Note Indenture at the
request of any holder of Senior Notes of any series, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Senior Note Indenture Trustee is not required to expend
or risk its own funds or otherwise incur any financial liability in the
performance of its duties if the Senior Note Indenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), the
Senior Note Indenture Trustee, also serves as First Mortgage Bond Trustee, as
Subordinated Note Indenture Trustee, as Property Trustee and as Guarantee
Trustee. The Company and certain of its affiliates maintain deposit accounts and
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banking relationships with JPMorgan Chase Bank. JPMorgan Chase Bank also serves
as trustee under other indentures pursuant to which securities of the Company
and affiliates of the Company are outstanding.
GOVERNING LAW
The Senior Note Indenture and the Senior Notes will be governed by, and
construed in accordance with, the internal laws of the State of New York.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Senior Note Indenture to a direct or indirect wholly-owned
subsidiary of the Company; provided, that, in the event of any such assignment,
the Company will remain primarily liable for all such obligations. Subject to
the foregoing, the Senior Note Indenture will be binding upon and inure to the
benefit of the parties thereto and their respective successors and assigns.
DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES
Set forth below is a description of the general terms of the Junior
Subordinated Notes. The following description does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Subordinated Note Indenture, dated as of January 1, 1997, between the Company
and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as trustee
(the "Subordinated Note Indenture Trustee"), as to be supplemented by a
supplemental indenture thereto establishing the Junior Subordinated Notes of
each series (the Subordinated Note Indenture, as so supplemented, is hereinafter
referred to as the "Subordinated Note Indenture"), the forms of which are filed
as exhibits to the Registration Statement of which this Prospectus forms a part.
The terms of the Junior Subordinated Notes will include those stated in the
Subordinated Note Indenture and those made a part of the Subordinated Note
Indenture by reference to the 1939 Act. Certain capitalized terms used herein
are defined in the Subordinated Note Indenture.
GENERAL
The Junior Subordinated Notes will be issued as unsecured junior
subordinated debt securities under the Subordinated Note Indenture. The
Subordinated Note Indenture does not limit the aggregate principal amount of
Junior Subordinated Notes that may be issued thereunder and provides that Junior
Subordinated Notes may be issued from time to time in one or more series
pursuant to an indenture supplemental to the Subordinated Note Indenture. The
Subordinated Note Indenture gives the Company the ability to reopen a previous
issue of Junior Subordinated Notes and issue additional Junior Subordinated
Notes of such series, unless otherwise indicated in an applicable Prospectus
Supplement.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Junior Subordinated Notes
being offered thereby: (i) the title of such Junior Subordinated Notes; (ii) any
limit on the aggregate principal amount of such Junior Subordinated Notes; (iii)
the date or dates on which the principal of such Junior Subordinated Notes is
payable; (iv) the rate or rates at which such Junior Subordinated Notes shall
bear interest, if any, or any method by which such rate or rates will be
determined, the date or dates from which such interest will accrue, the interest
payment dates on which such interest shall be payable, and the regular record
date for the interest payable on any interest payment date; (v) the place or
places where the principal of (and premium, if any) and interest, if any, on
such Junior Subordinated Notes shall be payable; (vi) the period or periods
within which, the price or prices at which and the terms and conditions on which
such Junior Subordinated Notes may be redeemed, in whole or in part, at the
option of the Company; (vii) the obligation, if any, of the Company to redeem or
purchase such Junior Subordinated Notes; (viii) the denominations in which such
Junior Subordinated Notes shall be issuable; (ix) if other than the principal
amount thereof, the portion of the principal amount of such Junior Subordinated
Notes which shall be payable upon declaration of acceleration of the maturity
thereof; (x) any deletions from, modifications of or additions to the Events of
Default or covenants of the Company as provided in the Subordinated Note
Indenture pertaining to such Junior Subordinated Notes; (xi) whether such Junior
15
Subordinated Notes shall be issued in whole or in part in the form of a Global
Security; (xii) the right, if any, of the Company to extend the interest payment
periods of such Junior Subordinated Notes; and (xiii) any other terms of such
Junior Subordinated Notes. The terms of each series of Junior Subordinated Notes
issued to a Trust will correspond to those of the related Preferred Securities
of such Trust as described in the Prospectus Supplement relating to such
Preferred Securities.
The Subordinated Note Indenture does not contain provisions that afford
holders of Junior Subordinated Notes protection in the event of a highly
leveraged transaction involving the Company.
SUBORDINATION
The Junior Subordinated Notes are subordinated and junior in right of
payment to all Senior Indebtedness (as defined below) of the Company. No payment
of principal of (including redemption payments, if any), or premium, if any, or
interest on (including Additional Interest (as defined below)) the Junior
Subordinated Notes may be made if (a) any Senior Indebtedness is not paid when
due and any applicable grace period with respect to such default has ended with
such default not being cured or waived or otherwise ceasing to exist, or (b) the
maturity of any Senior Indebtedness has been accelerated because of a default,
or (c) notice has been given of the exercise of an option to require repayment,
mandatory payment or prepayment or otherwise. Upon any payment or distribution
of assets of the Company to creditors upon any liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of creditors, marshalling
of assets or liabilities, or any bankruptcy, insolvency or similar proceedings
of the Company, the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due or to become due on or in respect of all
Senior Indebtedness before the holders of the Junior Subordinated Notes are
entitled to receive or retain any payment or distribution. Subject to the prior
payment of all Senior Indebtedness, the rights of the holders of the Junior
Subordinated Notes will be subrogated to the rights of the holders of Senior
Indebtedness to receive payments and distributions applicable to such Senior
Indebtedness until all amounts owing on the Junior Subordinated Notes are paid
in full.
The term "Senior Indebtedness" means, with respect to the Company, (i) any
payment due in respect of indebtedness of the Company, whether outstanding at
the date of execution of the Subordinated Note Indenture or thereafter incurred,
created or assumed, (a) in respect of money borrowed (including any financial
derivative, hedging or futures contract or similar instrument) and (b) evidenced
by securities, debentures, bonds, notes or other similar instruments issued by
the Company that, by their terms, are senior or senior subordinated debt
securities including, without limitation, all obligations under its indentures
with various trustees; (ii) all capital lease obligations; (iii) all obligations
issued or assumed as the deferred purchase price of property, all conditional
sale obligations and all obligations of the Company under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business and long-term purchase obligations); (iv) all obligations for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction; (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise; and (vi)
all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of the Company
(whether or not such obligation is assumed by the Company), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Junior Subordinated Notes and (2) any unsecured indebtedness between or among
the Company or its affiliates. Such Senior Indebtedness shall continue to be
Senior Indebtedness and be entitled to the benefits of the subordination
provisions contained in the Subordinated Note Indenture irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
The Subordinated Note Indenture does not limit the aggregate amount of
Senior Indebtedness that may be issued by the Company. As of June 30, 2002,
Senior Indebtedness of the Company aggregated approximately $4,285,000,000.
16
ADDITIONAL INTEREST
"Additional Interest" is defined in the Subordinated Note Indenture as (i)
such additional amounts as may be required so that the net amounts received and
retained by a holder of Junior Subordinated Notes (if the holder is a Trust)
after paying taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed by the United States or any other
taxing authority will not be less than the amounts the holder would have
received had no such taxes, duties, assessments, or other governmental charges
been imposed; and (ii) any interest due and not paid on an interest payment
date, together with interest thereon from such interest payment date to the date
of payment, compounded quarterly, on each interest payment date.
CERTAIN COVENANTS
The Company covenants in the Subordinated Note Indenture, for the benefit
of the holders of each series of Junior Subordinated Notes, that, (i) if at such
time the Company shall have given notice of its election to extend an interest
payment period for such series of Junior Subordinated Notes and such extension
shall be continuing, (ii) if at such time the Company shall be in default with
respect to its payment or other obligations under the Guarantee with respect to
the Trust Securities, if any, related to such series of Junior Subordinated
Notes, or (iii) if at such time an Event of Default thereunder with respect to
such series of Junior Subordinated Notes shall have occurred and be continuing,
(a) the Company shall not declare or pay any dividend or make any distributions
with respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock, and (b) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees other than the Guarantees)
issued by the Company which rank pari passu with or junior to the Junior
Subordinated Notes. None of the foregoing, however, shall restrict (i) any of
the actions described in the preceding sentence resulting from any
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock, or (ii) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged.
The Subordinated Note Indenture further provides that, for so long as the
Trust Securities of any Trust remain outstanding, the Company covenants (i) to
directly or indirectly maintain 100% ownership of the Common Securities of such
Trust; provided, however, that any permitted successor of the Company under the
Subordinated Note Indenture may succeed to the Company's ownership of such
Common Securities, and (ii) to use its reasonable efforts to cause such Trust
(a) to remain a statutory trust, except in connection with the distribution of
Junior Subordinated Notes to the holders of Trust Securities in liquidation of
such Trust, the redemption of all of the Trust Securities of such Trust, or
certain mergers, consolidations or amalgamations, each as permitted by the
related Trust Agreement, and (b) to otherwise continue to be classified as a
grantor trust for United States federal income tax purposes.
EVENTS OF DEFAULT
The Subordinated Note Indenture provides that any one or more of the
following described events with respect to the Junior Subordinated Notes of any
series, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Junior Subordinated Notes of such series:
(a) failure for 10 days to pay interest on the Junior Subordinated
Notes of such series, including any Additional Interest (as defined in
clause (ii) of the definition thereof in the Subordinated Note Indenture)
in respect thereof, when due on an interest payment date other than at
maturity or upon earlier redemption; provided, however, that a valid
extension of the interest payment period by the Company shall not
constitute a default in the payment of interest for this purpose; or
(b) failure for 10 days to pay Additional Interest (as defined in
clause (i) of the definition thereof in the Subordinated Note Indenture);
or
17
(c) failure to pay principal or premium, if any, or interest,
including Additional Interest (as defined in clause (ii) of the definition
thereof in the Subordinated Note Indenture), on the Junior Subordinated
Notes of such series when due at maturity or upon earlier redemption; or
(d) failure for three Business Days to deposit any sinking fund
payment when due by the terms of a Junior Subordinated Note of such series;
or
(e) failure to observe or perform any other covenant or warranty of
the Company in the Subordinated Note Indenture (other than a covenant or
warranty which has expressly been included therein solely for the benefit
of one or more series of Junior Subordinated Notes other than such series)
for 90 days after written notice to the Company from the Subordinated Note
Indenture Trustee or the holders of at least 25% in principal amount of the
outstanding Junior Subordinated Notes of such series; or
(f) certain events of bankruptcy, insolvency or reorganization of the
Company.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Subordinated Note Indenture Trustee with respect to the Junior
Subordinated Notes of such series. If a Subordinated Note Indenture Event of
Default occurs and is continuing with respect to the Junior Subordinated Notes
of any series, then the Subordinated Note Indenture Trustee or the holders of
not less than 25% in aggregate outstanding principal amount of the Junior
Subordinated Notes of such series may declare the principal amount thereof due
and payable immediately by notice in writing to the Company (and to the
Subordinated Note Indenture Trustee if given by the holders), and upon any such
declaration such principal amount shall become immediately due and payable. At
any time after such a declaration of acceleration with respect to the Junior
Subordinated Notes of any series has been made and before a judgment or decree
for payment of the money due has been obtained as provided in Article Five of
the Subordinated Note Indenture, the holders of not less than a majority in
aggregate outstanding principal amount of the Junior Subordinated Notes of such
series may rescind and annul such declaration and its consequences if the
default has been cured or waived and the Company has paid or deposited with the
Subordinated Note Indenture Trustee a sum sufficient to pay all matured
installments of interest (including any Additional Interest) and principal due
otherwise than by acceleration and all sums paid or advanced by the Subordinated
Note Indenture Trustee, including reasonable compensation and expenses of the
Subordinated Note Indenture Trustee.
A holder of Preferred Securities may institute a legal proceeding directly
against the Company, without first instituting a legal proceeding against the
Property Trustee or any other person or entity, for enforcement of payment to
such holder of principal of or interest on the Junior Subordinated Notes of the
related series having a principal amount equal to the aggregate stated
liquidation amount of the Preferred Securities of such holder on or after the
due dates specified in the Junior Subordinated Notes of such series.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series may, on behalf of the
holders of all the Junior Subordinated Notes of such series, waive any past
default with respect to such series, except (i) a default in the payment of
principal or interest or (ii) a default in respect of a covenant or provision
which under Article Nine of the Subordinated Note Indenture cannot be modified
or amended thereunder without the consent of the holder of each outstanding
Junior Subordinated Note of such series affected thereby.
REGISTRATION AND TRANSFER
The Company shall not be required to (i) issue, register the transfer of or
exchange Junior Subordinated Notes of any series during a period of 15 days
immediately preceding the date notice is given identifying the Junior
Subordinated Notes of such series called for redemption, or (ii) register the
transfer of or exchange any Junior Subordinated Notes so selected for
redemption, in whole or in part, except the unredeemed portion of any Junior
Subordinated Note being redeemed in part.
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PAYMENT AND PAYING AGENT
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Junior Subordinated Notes will be made only against
surrender to the Paying Agent of such Junior Subordinated Notes. Principal of
and interest on Junior Subordinated Notes will be payable, subject to any
applicable laws and regulations, at the office of such Paying Agent or Paying
Agents as the Company may designate from time to time, except that, at the
option of the Company, payment of any interest may be made by wire transfer or
by check mailed to the address of the person entitled thereto as such address
shall appear in the Security Register with respect to the Junior Subordinated
Notes. Payment of interest on Junior Subordinated Notes on any interest payment
date will be made to the person in whose name the Junior Subordinated Notes (or
predecessor security) are registered at the close of business on the record date
for such interest payment.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Subordinated Note Indenture Trustee will act as Paying Agent with respect to the
Junior Subordinated Notes. The Company may at any time designate additional
Paying Agents or rescind the designation of any Paying Agents or approve a
change in the office through which any Paying Agent acts.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or interest on the Junior Subordinated Notes of any series which
remain unclaimed at the end of two years after such principal or interest shall
have become due and payable will be repaid to the Company, and the holder of
such Junior Subordinated Notes will thereafter look only to the Company for
payment thereof.
MODIFICATION
The Subordinated Note Indenture contains provisions permitting the Company
and the Subordinated Note Indenture Trustee, with the consent of the holders of
not less than a majority in principal amount of the outstanding Junior
Subordinated Notes of each series affected thereby, to modify the Subordinated
Note Indenture or the rights of the holders of the Junior Subordinated Notes of
such series; provided, that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Note affected thereby, (i) change
the stated maturity of the principal of, or any installment of principal of or
interest on, any Junior Subordinated Note, or reduce the principal amount
thereof or the rate of interest (including Additional Interest) thereon or any
premium payable upon the redemption thereof, or change the method of calculating
the rate of interest thereon, or impair the right to institute suit for the
enforcement of any such payment on or after the stated maturity thereof (or, in
the case of redemption, on or after the redemption date), or (ii) reduce the
percentage of principal amount of the outstanding Junior Subordinated Notes of
any series, the consent of whose holders is required for any such supplemental
indenture, or the consent of whose holders is required for any waiver (of
compliance with certain provisions of the Subordinated Note Indenture or certain
defaults thereunder and their consequences) provided for in the Subordinated
Note Indenture, or (iii) modify any of the provisions of the Subordinated Note
Indenture relating to supplemental indentures, waiver of past defaults, or
waiver of certain covenants, except to increase any such percentage or to
provide that certain other provisions of the Subordinated Note Indenture cannot
be modified or waived without the consent of the holder of each outstanding
Junior Subordinated Note affected thereby, or (iv) modify the provisions of the
Subordinated Note Indenture with respect to the subordination of the Junior
Subordinated Notes in a manner adverse to such holder.
In addition, the Company and the Subordinated Note Indenture Trustee may
execute, without the consent of any holders of Junior Subordinated Notes, any
supplemental indenture for certain other usual purposes, including the creation
of any new series of junior subordinated notes.
CONSOLIDATION, MERGER AND SALE
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such other corporation or person
expressly assumes, by supplemental indenture executed and delivered to the
Subordinated Note Indenture Trustee, the payment of the principal of (and
premium, if any) and interest (including Additional Interest) on all the Junior
Subordinated Notes and the performance of
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every covenant of the Subordinated Note Indenture on the part of the Company to
be performed or observed; (2) immediately after giving effect to such
transactions, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have happened and be
continuing; and (3) the Company has delivered to the Subordinated Note Indenture
Trustee an officers' certificate and an opinion of counsel, each stating that
such transaction complies with the provisions of the Subordinated Note Indenture
governing consolidation, merger, conveyance, transfer or lease and that all
conditions precedent thereto have been complied with.
INFORMATION CONCERNING THE SUBORDINATED NOTE INDENTURE TRUSTEE
The Subordinated Note Indenture Trustee, prior to an Event of Default with
respect to Junior Subordinated Notes of any series, undertakes to perform, with
respect to Junior Subordinated Notes of such series, only such duties as are
specifically set forth in the Subordinated Note Indenture and, in case an Event
of Default with respect to Junior Subordinated Notes of any series has occurred
and is continuing, shall exercise, with respect to Junior Subordinated Notes of
such series, the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provision, the
Subordinated Note Indenture Trustee is under no obligation to exercise any of
the powers vested in it by the Subordinated Note Indenture at the request of any
holder of Junior Subordinated Notes of any series, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Subordinated Note Indenture Trustee is not required to
expend or risk its own funds or otherwise incur any financial liability in the
performance of its duties if the Subordinated Note Indenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), the
Subordinated Note Indenture Trustee, also serves as First Mortgage Bond Trustee,
as Senior Note Indenture Trustee, as Property Trustee and as Guarantee Trustee.
The Company and certain of its affiliates maintain deposit accounts and banking
relationships with JPMorgan Chase Bank. JPMorgan Chase Bank also serves as
trustee under other indentures pursuant to which securities of the Company and
affiliates of the Company are outstanding.
GOVERNING LAW
The Subordinated Note Indenture and the Junior Subordinated Notes will be
governed by, and construed in accordance with, the internal laws of the State of
New York.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Subordinated Note Indenture to a direct or indirect
wholly-owned subsidiary of the Company; provided, that, in the event of any such
assignment, the Company will remain primarily liable for all such obligations.
Subject to the foregoing, the Subordinated Note Indenture will be binding upon
and inure to the benefit of the parties thereto and their respective successors
and assigns.
DESCRIPTION OF THE PREFERRED SECURITIES
Each Trust may issue only one series of Preferred Securities having terms
described in the Prospectus Supplement relating thereto. The Trust Agreement of
each Trust will authorize the Administrative Trustees, on behalf of the Trust,
to issue the Preferred Securities of such Trust. The Preferred Securities of
each Trust will have such terms, including distributions, redemption, voting,
liquidation rights and such other preferred, deferral or other special rights or
such restrictions as shall be set forth in the Trust Agreement of such Trust.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a Trust for specific terms, including (i) the distinctive
designation of such Preferred Securities; (ii) the number of Preferred
Securities issued by such Trust; (iii) the distribution rate (or method of
determining such rate) for Preferred Securities of such Trust and the date or
dates on which such distributions shall be payable; (iv) whether distributions
on such Preferred Securities shall be cumulative and, in the case of Preferred
Securities having cumulative distribution rights, the date or dates, or method
of determining the date or dates, from which distributions on such Preferred
Securities shall be cumulative; (v) the amount or amounts that shall be paid
20
out of the assets of such Trust to the holders of the Preferred Securities of
such Trust upon voluntary or involuntary dissolution, winding-up or termination
of such Trust; (vi) the obligation, if any, of such Trust to purchase or redeem
such Preferred Securities and the price or prices at which, the period or
periods within which, and the terms and conditions upon which such Preferred
Securities shall be purchased or redeemed, in whole or in part, pursuant to such
obligation; (vii) the voting rights, if any, of such Preferred Securities in
addition to those required by law, including the number of votes per Preferred
Security and any requirement for the approval by the holders of Preferred
Securities as a condition to specified action or amendments to the Trust
Agreement of such Trust; (viii) the rights, if any, to defer distributions on
the Preferred Securities by extending the interest payment period on the related
Junior Subordinated Notes; and (ix) any other relative rights, preferences,
privileges, limitations or restrictions of such Preferred Securities not
inconsistent with the Trust Agreement of such Trust or applicable law. All
Preferred Securities offered hereby will be guaranteed by the Company to the
extent set forth under "Description of the Guarantees." Any material United
States federal income tax considerations applicable to an offering of Preferred
Securities will be described in the Prospectus Supplement relating thereto.
DESCRIPTION OF THE GUARANTEES
Set forth below is a summary of information concerning the Guarantees that
will be executed and delivered by the Company for the benefit of the holders of
Preferred Securities of the respective Trusts from time to time. Each Guarantee
will be qualified as an indenture under the 1939 Act. JPMorgan Chase Bank
(formerly known as The Chase Manhattan Bank) will act as indenture trustee under
each Guarantee (the "Guarantee Trustee") for purposes of the 1939 Act. The terms
of the respective Guarantees will be those set forth therein and those made part
thereof by the 1939 Act. The following summary does not purport to be complete
and is subject in all respects to the provisions of, and is qualified in its
entirety by reference to, the Guarantees, the form of which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, and
the 1939 Act. Each Guarantee will be held by the Guarantee Trustee for the
benefit of holders of the Preferred Securities to which it relates.
GENERAL
Pursuant to each Guarantee, the Company will irrevocably and
unconditionally agree, to the extent set forth therein, to pay in full, to the
holders of the related Preferred Securities, the Guarantee Payments (as defined
herein), to the extent not paid by, or on behalf of, the related Trust,
regardless of any defense, right of set-off or counterclaim that the Company may
have or assert against any person. The following payments or distributions with
respect to the Preferred Securities of any Trust to the extent not paid or made
by, or on behalf of, such Trust will be subject to the Guarantee related thereto
(without duplication): (i) any accrued and unpaid distributions required to be
paid on the Preferred Securities of such Trust but if and only if and to the
extent that such Trust has funds legally and immediately available therefor,
(ii) the redemption price, including all accrued and unpaid distributions to the
date of redemption (the "Redemption Price"), with respect to any Preferred
Securities called for redemption by such Trust, but if and only to the extent
such Trust has funds legally and immediately available therefor, and (iii) upon
a dissolution, winding-up or termination of such Trust (other than in connection
with the distribution of Junior Subordinated Notes to the holders of Trust
Securities of such Trust or the redemption of all of the Preferred Securities of
such Trust), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Preferred Securities of such Trust to
the date of payment, to the extent such Trust has funds legally and immediately
available therefor, and (b) the amount of assets of such Trust remaining
available for distribution to holders of Preferred Securities of such Trust in
liquidation of such Trust (the "Guarantee Payments"). The Company's obligation
to make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Company to the holders of the related Preferred Securities or by
causing the related Trust to pay such amounts to such holders.
Each Guarantee will be a guarantee of the Guarantee Payments with respect
to the related Preferred Securities from the time of issuance of such Preferred
Securities, but will not apply to the payment of distributions and other
payments on such Preferred Securities when the related Trust does not have
sufficient
21
funds legally and immediately available to make such distributions or other
payments. IF THE COMPANY DOES NOT MAKE INTEREST PAYMENTS ON THE JUNIOR
SUBORDINATED NOTES HELD BY THE PROPERTY TRUSTEE UNDER ANY TRUST, SUCH TRUST WILL
NOT MAKE DISTRIBUTIONS ON ITS PREFERRED SECURITIES.
SUBORDINATION
The Company's obligations under each Guarantee to make the Guarantee
Payments will constitute an unsecured obligation of the Company and will rank
(i) subordinate and junior in right of payment to all other liabilities of the
Company, including the Junior Subordinated Notes, except those obligations or
liabilities made pari passu or subordinate by their terms, (ii) pari passu with
the most senior preferred or preference stock now or hereafter issued by the
Company and with any guarantee now or hereafter entered into by the Company in
respect of any preferred or preference securities of any affiliate of the
Company, and (iii) senior to all common stock of the Company. The terms of the
Preferred Securities will provide that each holder of Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of the
Guarantee related thereto. The Company has outstanding preferred stock that
ranks pari passu to the Guarantees and common stock that ranks junior to the
Guarantees.
Each Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the guarantor to enforce its rights under the guarantee without first
instituting a legal proceeding against any other person or entity).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially and adversely
affect the rights of holders of the related Preferred Securities (in which case
no consent will be required), each Guarantee may be amended only with the prior
approval of the holders of not less than 66 2/3% in liquidation amount of such
outstanding Preferred Securities. The manner of obtaining any such approval of
holders of the Preferred Securities will be as set forth in an accompanying
Prospectus Supplement. All guarantees and agreements contained in each Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the holders of the related
Preferred Securities then outstanding.
TERMINATION
Each Guarantee will terminate and be of no further force and effect as to
the related Preferred Securities upon full payment of the Redemption Price of
all such Preferred Securities, upon distribution of Junior Subordinated Notes to
the holders of such Preferred Securities, or upon full payment of the amounts
payable upon liquidation of the related Trust. Each Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
holder of the related Preferred Securities must restore payment of any sums paid
with respect to such Preferred Securities or under such Guarantee.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure by the
Company to perform any of its payment obligations thereunder. The holders of a
majority in liquidation amount of the Preferred Securities to which any
Guarantee relates have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such Guarantee. Any holder of the
related Preferred Securities may institute a legal proceeding directly against
the Company to enforce its rights under such Guarantee without first instituting
a legal proceeding against the Guarantee Trustee or any other person or entity.
The holders of a majority in liquidation amount of Preferred Securities of any
series may, by vote, on behalf of the holders of all the Preferred Securities of
such series, waive any past event of default and its consequences.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of any event of default with
respect to any Guarantee and after the curing or waiving of all events of
default with respect to such Guarantee, undertakes to perform only
22
such duties as are specifically set forth in such Guarantee and, in case an
event of default has occurred, shall exercise the same degree of care as a
prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the Guarantee Trustee is under no obligation to
exercise any of the powers vested in it by any Guarantee at the request of any
holder of the related Preferred Securities, unless offered reasonable indemnity
against the costs, expenses and liabilities which might be incurred thereby.
JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), the
Guarantee Trustee, also serves as Property Trustee, as First Mortgage Bond
Trustee, as Senior Note Indenture Trustee and as Subordinated Note Indenture
Trustee. The Company and certain of its affiliates maintain deposit accounts and
banking relationships with JPMorgan Chase Bank. JPMorgan Chase Bank serves as
trustee under other indentures pursuant to which securities of the Company and
affiliates of the Company are outstanding.
GOVERNING LAW
Each Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
THE AGREEMENTS AS TO EXPENSES AND LIABILITIES
Pursuant to an Agreement as to Expenses and Liabilities to be entered into
by the Company under each Trust Agreement, the Company will irrevocably and
unconditionally guarantee to each person or entity to whom each Trust becomes
indebted or liable the full payment of any indebtedness, expenses or liabilities
of such Trust, other than obligations of such Trust to pay to the holders of the
related Preferred Securities or other similar interests in such Trust the
amounts due such holders pursuant to the terms of such Preferred Securities or
such other similar interests, as the case may be.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED NOTES AND THE GUARANTEES
As long as payments of interest and other payments are made when due on
each series of Junior Subordinated Notes issued to a Trust, such payments will
be sufficient to cover distributions and payments due on the related Trust
Securities of such Trust primarily because (i) the aggregate principal amount of
each series of Junior Subordinated Notes will be at least equal to the sum of
the aggregate stated liquidation amount of the related Trust Securities; (ii)
the interest rate and interest and other payment dates on each series of Junior
Subordinated Notes will match the distribution rate and distribution and other
payment dates for the related Preferred Securities; (iii) the Company shall pay
for all costs and expenses of each Trust pursuant to the Agreements as to
Expenses and Liabilities; and (iv) each Trust Agreement provides that the
Securities Trustees thereunder shall not cause or permit the Trust to, among
other things, engage in any activity that is not consistent with the purposes of
the Trust.
Payments of distributions (to the extent funds therefor are legally and
immediately available) and other payments due on the Preferred Securities (to
the extent funds therefor are legally and immediately available) will be
guaranteed by the Company as and to the extent set forth under "Description of
the Guarantees." If the Company does not make interest payments on any series of
Junior Subordinated Notes, it is not expected that the related Trust will have
sufficient funds to pay distributions on its Preferred Securities. Each
Guarantee is a guarantee from the time of its issuance, but does not apply to
any payment of distributions unless and until the related Trust has sufficient
funds legally and immediately available for the payment of such distributions.
If the Company fails to make interest or other payments on any series of
Junior Subordinated Notes when due (taking into account any extension period as
described in the applicable Prospectus Supplement), the Trust Agreement provides
a mechanism whereby the holders of the related Preferred Securities may appoint
a substitute Property Trustee. Such holders may also direct the Property Trustee
to enforce its rights under the Junior Subordinated Notes of such series,
including proceeding directly against the Company to enforce such Junior
Subordinated Notes. If the Property Trustee fails to enforce its rights under
any series of
23
Junior Subordinated Notes, to the fullest extent permitted by applicable law,
any holder of related Preferred Securities may institute a legal proceeding
directly against the Company to enforce the Property Trustee's rights under such
series of Junior Subordinated Notes without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, a holder of Preferred Securities may institute a
legal proceeding directly against the Company, without first instituting a legal
proceeding against the Property Trustee or any other person or entity, for
enforcement of payment to such holder of principal of or interest on Junior
Subordinated Notes of the related series having a principal amount equal to the
aggregate stated liquidation amount of the Preferred Securities of such holder
on or after the due dates specified in the Junior Subordinated Notes of such
series.
If the Company fails to make payments under any Guarantee, such Guarantee
provides a mechanism whereby the holders of the Preferred Securities to which
such Guarantee relates may direct the Guarantee Trustee to enforce its rights
thereunder. In addition, any holder of Preferred Securities may institute a
legal proceeding directly against the Company to enforce the Guarantee Trustee's
rights under the related Guarantee without first instituting a legal proceeding
against the Guarantee Trustee or any other person or entity.
Each Guarantee, the Subordinated Note Indenture, the Junior Subordinated
Notes of the related series, the related Trust Agreement and the related
Agreement as to Expenses and Liabilities, as described above, constitute a full
and unconditional guarantee by the Company of the payments due on the related
series of Preferred Securities.
Upon any voluntary or involuntary dissolution, winding-up or termination of
any Trust, unless Junior Subordinated Notes of the related series are
distributed in connection therewith, the holders of Preferred Securities of such
Trust will be entitled to receive, out of assets legally available for
distribution to holders, a liquidation distribution in cash as described in the
applicable Prospectus Supplement. Upon any voluntary or involuntary liquidation
or bankruptcy of the Company, the Property Trustee, as holder of the related
series of Junior Subordinated Notes, would be a subordinated creditor of the
Company, subordinated in right of payment to all Senior Indebtedness, but
entitled to receive payment in full of principal and interest, before any
stockholders of the Company receive payments or distributions. Because the
Company is guarantor under each Guarantee and has agreed to pay for all costs,
expenses and liabilities of each Trust (other than the Trust's obligations to
holders of the Preferred Securities) pursuant to the related Agreement as to
Expenses and Liabilities, the positions of a holder of Preferred Securities and
a holder of Junior Subordinated Notes of the related series relative to other
creditors and to stockholders of the Company in the event of liquidation or
bankruptcy of the Company would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Subordinated Note Indenture.
However, in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Junior Subordinated Notes
provide that no payments may be made in respect of the Junior Subordinated Notes
until such Senior Indebtedness has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on the
Junior Subordinated Notes of any series would constitute an Event of Default
under the Subordinated Note Indenture with respect to the Junior Subordinated
Notes of such series except that failure to make interest payments on the Junior
Subordinated Notes of such series will not be an Event of Default during an
extension period as described in the applicable Prospectus Supplement.
PLAN OF DISTRIBUTION
The Company may sell the new Bonds, new Stock, Senior Notes and the Junior
Subordinated Notes and the Trusts may sell the Preferred Securities in one or
more of the following ways from time to time: (i) to underwriters for resale to
the public or to institutional investors; (ii) directly to institutional
investors; or (iii) through agents to the public or to institutional investors.
The Prospectus Supplement with respect to each series of new Bonds, new Stock,
Senior Notes, Junior Subordinated Notes or Preferred Securities will set forth
the terms of the offering of such new Bonds, new Stock, Senior Notes, Junior
Subordinated Notes or Preferred Securities, including the name or names of any
underwriters or agents, the purchase price of such new Bonds,
24
new Stock, Senior Notes, Junior Subordinated Notes or Preferred Securities and
the proceeds to the Company or the applicable Trust from such sale, any
underwriting discounts or agency fees and other items constituting underwriters'
or agents' compensation, any initial public offering price, any discounts or
concessions allowed or reallowed or paid to dealers and any securities exchange
on which such new Bonds, new Stock, Senior Notes, Junior Subordinated Notes or
Preferred Securities may be listed.
If underwriters participate in the sale, such new Bonds, new Stock, Senior
Notes, Junior Subordinated Notes or Preferred 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 sale.
Unless otherwise set forth in the Prospectus Supplement, the obligations of
the underwriters to purchase any series of new Bonds, new Stock, Senior Notes,
Junior Subordinated Notes or Preferred Securities will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all of
such series of new Bonds, new Stock, Senior Notes, Junior Subordinated Notes or
Preferred Securities, if any are purchased.
Underwriters and agents may be entitled under agreements entered into with
the Company and/or the applicable Trust to indemnification against certain civil
liabilities, including liabilities under the 1933 Act. Underwriters and agents
may engage in transactions with, or perform services for, the Company in the
ordinary course of business.
Each series of new Bonds, new Stock, Senior Notes, Junior Subordinated
Notes or Preferred Securities will be a new issue of securities and will have no
established trading market. Any underwriters to whom new Bonds, new Stock,
Senior Notes, Junior Subordinated Notes or Preferred Securities are sold for
public offering and sale may make a market in such new Bonds, new Stock, Senior
Notes, Junior Subordinated Notes or Preferred Securities, but such underwriters
will not be obligated to do so and may discontinue any market making at any time
without notice. The new Bonds, new Stock, Senior Notes, Junior Subordinated
Notes or Preferred Securities may or may not be listed on a national securities
exchange.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Company and the Trusts by
Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel
to the Company and the Trusts. The validity of the new Bonds, new Stock, Senior
Notes, Junior Subordinated Notes, Guarantees and certain matters relating
thereto will be passed upon on behalf of the Company by Balch & Bingham LLP,
Birmingham, Alabama, and by Troutman Sanders LLP, Atlanta, Georgia. Certain
legal matters will be passed upon for the underwriters by Dewey Ballantine LLP,
New York, New York.
EXPERTS
Certain of the Company's financial statements incorporated by reference in
this Registration Statement were audited by Arthur Andersen LLP ("Andersen"). On
March 28, 2002, Southern's Board of Directors, upon recommendation of its Audit
Committee, decided not to engage Andersen as the Company's principal public
accountants. The Company has been unable to obtain, after reasonable efforts,
Andersen's written consent to incorporate by reference Andersen's reports on the
financial statements. Under these circumstances, Rule 437a under the 1933 Act
permits this Registration Statement to be filed without a written consent from
Andersen. The absence of such written consent from Andersen may limit a
shareholder's ability to assert claims against Andersen under Section 11(a) of
the 1933 Act for any untrue statement of a material fact contained in the
financial statements audited by Andersen or any omissions to state a material
fact required to be stated therein.
25
$100,000,000
(ALABAMA POWER LOGO)
SERIES Q 5.50% SENIOR NOTES
DUE OCTOBER 15, 2017
---------------------------
PROSPECTUS SUPPLEMENT
November 20, 2002
---------------------------
GOLDMAN, SACHS & CO.
ABI CAPITAL MANAGEMENT LLC
CREDIT LYONNAIS SECURITIES