Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-110950
333-110950-01
333-110950-02
333-110950-03
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 19, 2003)
(ALABAMA POWER LOGO)
4,000,000 SHARES
5.30% CLASS A PREFERRED STOCK
CUMULATIVE, PAR VALUE $1 PER SHARE
(STATED CAPITAL $25 PER SHARE)
---------------------------
This is a public offering by Alabama Power Company of 4,000,000 shares of
5.30% Class A Preferred Stock, Cumulative, Par Value $1 Per Share (Stated
Capital $25 Per Share).
On or after April 1, 2009, Alabama Power Company may redeem shares of the
new Stock, in whole or in part, at a redemption price equal to $25.00 per share
plus accrued and unpaid dividends.
Dividends on the new Stock will be cumulative from the date of issuance and
are payable quarterly on January 1, April 1, July 1 and October 1 of each year,
beginning April 1, 2004.
See "RISK FACTORS" beginning on page S-3 for a description of certain risks
associated with investing in the new Stock.
Application will be made to list the new Stock on the New York Stock
Exchange. If approved, Alabama Power Company expects trading of the new Stock to
begin within 30 days after the new Stock is first issued.
PUBLIC PROCEEDS TO
OFFERING UNDERWRITING ALABAMA POWER COMPANY
PRICE(L) DISCOUNT BEFORE EXPENSES
------------ ------------ ---------------------
Per Share................................. $ 25.00 $ .50 $ 24.50
Total..................................... $100,000,000 $2,000,000 $98,000,000
---------------
(1) Plus accrued dividends, if any, from the date of original issuance.
The new Stock should be delivered in book-entry form through The Depository
Trust Company on or about February 17, 2004.
---------------------------
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.
---------------------------
LEHMAN BROTHERS
February 5, 2004
In making your investment decision, you should rely only on the information
contained or incorporated by reference in this Prospectus Supplement and the
accompanying 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 new Stock 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
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PROSPECTUS SUPPLEMENT
Risk Factors S-3
The Company S-3
Selected Financial Information S-3
Recent Results of Operations S-4
Use of Proceeds S-4
Certain Terms of the New Stock S-5
Underwriting S-8
Legal Opinions S-9
PAGE
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PROSPECTUS
About this Prospectus 2
Risk Factors 2
Available Information 2
Incorporation of Certain Documents by
Reference 3
Selected Information 4
Alabama Power Company 4
The Trusts 5
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 14
Description of the Preferred
Securities 20
Description of the Guarantees 20
Relationship Among the Preferred
Securities, the Junior Subordinated
Notes and the Guarantees 23
Plan of Distribution 24
Legal Matters 25
Experts 25
S-2
RISK FACTORS
Investing in the new Stock involves risk. Please see the risk factors in
Alabama Power Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002, which is incorporated by reference in this Prospectus
Supplement. Before making an investment decision, you should carefully consider
these risks as well as other information contained or incorporated by reference
in this Prospectus Supplement and the accompanying Prospectus. The risks and
uncertainties not presently known to Alabama Power Company or that Alabama Power
Company currently deems immaterial may also impair its business operations, its
financial results and the value of the new Stock.
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 selected financial data for the years ended December 31, 1998
through December 31, 2002 has been derived from the Company's audited financial
statements and related notes, incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus. The following selected financial
data for the nine months ended September 30, 2003 has been derived from the
Company's unaudited financial statements and related notes, incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus. The
information set forth below is qualified in its entirety by reference to and,
therefore, should be read together with management's discussion and analysis of
results of operations and financial condition, the financial statements and
related notes and other financial information incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus.
NINE
MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------ SEPTEMBER 30,
1998 1999 2000 2001 2002 2003(1)
------ ------ ------ ------ ------ -------------
(MILLIONS, EXCEPT RATIOS)
Operating Revenues........................ $3,386 $3,385 $3,667 $3,586 $3,711 $3,056
Earnings Before Income Taxes.............. 610 658 698 650 768 679
Net Income After Dividends on Preferred
Stock................................... 377 400 420 387 461 415
Ratio of Earnings to Fixed Charges(2)..... 3.12 3.59 3.46 3.31 3.98 4.75
Ratio of Earnings to Fixed Charges Plus
Preferred Dividend Requirements (Pre-
Income Tax Basis)(3).................... 2.90 3.26 3.18 3.05 3.66 4.26
S-3
CAPITALIZATION
AS OF SEPTEMBER 30, 2003
--------------------------------
ACTUAL AS ADJUSTED(4)
--------- --------------------
(MILLIONS, EXCEPT PERCENTAGES)
Common Stock Equity......................................... $3,507 $3,552 46.2%
Cumulative Preferred Stock.................................. 373 473 6.2
Shares Subject to Mandatory Redemption...................... 300 300 3.9
Senior Notes................................................ 2,475 2,825 36.8
Other Long-Term Debt........................................ 537 537 6.9
------ ------ -----
Total, excluding amounts due within one year of $1,032
million................................................ $7,192 $7,687 100.0%
====== ====== =====
---------------
(1) Due to seasonal variations in the demand for energy, operating results for
the nine months ended September 30, 2003 do not necessarily indicate
operating results for the entire year.
(2) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Earnings Before Income Taxes" "Interest expense, net of amounts
capitalized," "Distributions on shares subject to mandatory redemption" and
the debt portion of allowance for funds used during construction; and (ii)
"Fixed Charges" consist of "Interest expense, net of amounts capitalized,"
"Distributions on shares subject to mandatory redemption" and the debt
portion of allowance for funds used during construction.
(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.
(4) Reflects: (i) the issuance in November 2003 of $350,000,000 aggregate
principal amount of Series Y 2.80% Senior Notes due December 1, 2006; (ii)
the issuance in December 2003 of 625,000 shares of common stock to Southern
at $40.00 per share; (iii) the proposed issuance prior to the sale of the
new Stock of 500,000 shares of common stock to Southern at $40.00 per share
and (iv) the issuance of the new Stock.
RECENT RESULTS OF OPERATIONS
For the year ended December 31, 2003, the unaudited amounts of "Operating
Revenues," "Earnings Before Income Taxes" and "Net Income After Dividends on
Preferred Stock" were $3,968,165,000, $781,455,000 and $472,810,000,
respectively. In the opinion of management of the Company, the above amounts for
the year ended December 31, 2003 reflect all adjustments necessary to present
fairly the results of operations for such period. The "Ratio of Earnings to
Fixed Charges" and the "Ratio of Earnings to Fixed Charges Plus Preferred
Dividend Requirements (Pre-Income Tax Basis)" for the year ended December 31,
2003 were 4.29 and 3.83, respectively.
USE OF PROCEEDS
The proceeds from the sale of the new Stock will be used by the Company to
repay a portion of its outstanding short-term indebtedness, which aggregated
approximately $52,000,000 as of February 5, 2004, and for other general
corporate purposes, including the Company's continuous construction program. The
Company's current estimate of construction costs for 2004 is approximately
$791,000,000 and for 2005 is approximately $863,000,000.
S-4
CERTAIN TERMS OF THE NEW STOCK
The following is a summary of the terms of the Class A Preferred Stock
offered hereby (the "new Stock"). This summary is not complete and should be
read together with the general terms and provisions of the new Stock in the
accompanying Prospectus under the caption "Description of the New Stock." To the
extent this summary is inconsistent with information in the accompanying
Prospectus, this summary controls.
Dividends
The holders of new Stock will be entitled to receive, when, as and if
declared by the Company's board of directors out of funds legally available,
cumulative cash dividends at a rate per annum equal to 5.30%.
Dividends on the new Stock will be cumulative from the date on which the
Company originally issues the new Stock and are payable on January 1, April 1,
July 1 and October 1 of each year (each, a "Dividend Payment Date"), commencing
April 1, 2004, or, if any such date is not a business day, on the next business
day.
Redemption
The Company shall have the right to redeem the new Stock, in whole or in
part, without premium, from time to time, on or after April 1, 2009, upon not
less than 30 nor more than 60 days' notice, at a redemption price equal to
$25.00 per share plus accrued and unpaid dividends to the redemption date. For
any shares of new Stock to be redeemed, dividends will cease to accrue and all
rights of holders of such shares, except the right to receive the redemption
price, will cease as of the redemption date.
No sinking fund will be provided for the purchase or redemption of the new
Stock.
Transfer Agent, Registrar and Paying Agent
The Bank of New York will be the transfer agent, registrar and paying agent
for the new Stock.
Book-Entry Only Issuance -- The Depository Trust Company
The Depository Trust Company ("DTC") will act as the initial securities
depository for the new Stock. The new Stock 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 new Stock certificates will be issued,
representing in the aggregate the total principal amount of the new Stock, and
will be deposited with The Bank of New York on behalf of 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
S-5
a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The DTC rules applicable to its Direct and
Indirect Participants are on file with the Securities and Exchange Commission.
More information about DTC can be found at www.dtcc.com.
Purchases of new Stock under the DTC system must be made by or through
Direct Participants, which will receive a credit for the new Stock on DTC's
records. The ownership interest of each actual purchaser of new Stock
("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 new Stock. Transfers of ownership
interests in the new Stock 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 new Stock, except in the event that use of the book-entry system
for the new Stock is discontinued.
To facilitate subsequent transfers, the new Stock deposited by Direct
Participants with DTC is 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 the new Stock with DTC and its
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 new Stock. DTC's records reflect only the identity of
the Direct Participants to whose accounts such new Stock is 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.
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.
Redemption notices will be sent to DTC. If less than all of the shares of
new Stock are being redeemed, DTC's practice is to determine by lot the number
of shares of new Stock of each Direct Participant to be redeemed.
Although voting with respect to the new Stock 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 the new Stock. Under its usual procedures,
DTC mails an Omnibus Proxy to the Company as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts the new Stock are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Payments on the new Stock 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 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 the global new Stock will
not be entitled to receive physical delivery of the new Stock. Accordingly, each
Beneficial Owner must rely on the procedures of DTC to exercise any rights under
the new Stock. The laws of some jurisdictions require that certain purchasers of
S-6
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global new Stock.
DTC may discontinue providing its services as securities depository with
respect to the new Stock at any time by giving reasonable notice to the Company.
Under such circumstances, in the event that a successor securities depositary is
not obtained, new Stock 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 new Stock. In that event, certificates for the new Stock 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 Lehman Brothers
Inc. (the "Underwriter") and the Underwriter has agreed to purchase from the
Company the new Stock.
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all of the new Stock offered
hereby if any of the new Stock is purchased.
The Underwriter proposes to offer the new Stock directly to the public at
the initial public offering price set forth on the cover page of this Prospectus
Supplement, and may offer the new Stock to certain securities dealers at such
price less a concession not in excess of $.35 per share of the new Stock. The
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $.15 per share of the new Stock to certain brokers and dealers. After the new
Stock is released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Underwriter.
It is expected that delivery of the new Stock will be made against payment
therefor on or about the seventh 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 new Stock before final settlement will be
required, by virtue of the fact that the new Stock will settle in T+7, 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 new Stock.
The Underwriter has advised the Company that it intends to make a market in the
new Stock. The Underwriter will have no obligation to make a market in the new
Stock, however, and may cease market making activities, if commenced, at any
time.
The Company has agreed to indemnify the Underwriter 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 new Stock
are estimated to be $295,000. The Underwriter has agreed to reimburse the
Company for certain expenses incurred in connection with the offer and sale of
the new Stock.
The Company has agreed with the Underwriter, 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 preferred stock of
the Company, any security convertible into, exchangeable into or exercisable for
the preferred stock of the Company or any securities substantially similar to
the new Stock (except for the new Stock issued pursuant to the Underwriting
Agreement), without the prior written consent of the Underwriter.
In order to facilitate the offering of the new Stock, the Underwriter may
engage in transactions that stabilize, maintain or otherwise affect the price of
the new Stock. Specifically, the Underwriter may over-allot in connection with
the offering, creating short positions in the new Stock for its own account. In
addition, to cover over-allotments or to stabilize the price of the new Stock,
the Underwriter may bid for, and purchase, new Stock in the open market. The
Underwriter may reclaim selling concessions allowed to an underwriter or dealer
for distributing new Stock in the offering, if the Underwriter repurchases
previously distributed new Stock in transactions to cover short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the new Stock above independent market levels.
The Underwriter is 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 Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the new Stock. In
S-8
addition, neither the Company nor the Underwriter makes any representation that
the Underwriter will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Company will apply to list the new Stock on the New York Stock Exchange
and expects, if the application is approved, trading to begin within 30 days
after the initial delivery of the new Stock.
The Underwriter and its affiliates engage in transactions with, and, from
time to time, have performed investment banking services for, the Company and
its affiliates in the ordinary course of business and may do so in the future.
LEGAL OPINIONS
The validity of the new Stock 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 Underwriter by Dewey Ballantine LLP, New York, New
York.
S-9
PROSPECTUS
$1,330,000,000
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.
See "Risk Factors" on page 2 for information on certain risks related to the
purchase of these securities.
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 December 19, 2003
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 $1,330,000,000. This
Prospectus provides a general description of those securities. Each time the
Company sells securities, the Company 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."
RISKS FACTORS
Investing in the Company's securities involves risk. Please see the risk
factors described in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2002, which is incorporated by reference in this
Prospectus. Before making an investment decision, you should carefully consider
these risks as well as other information contained or incorporated by reference
in this Prospectus. The risks and uncertainties described are not the only ones
facing the Company. Additional risks and uncertainties not presently known to
the Company or that the Company deems immaterial may also impair its business
operations, its financial results and the value of its securities.
AVAILABLE INFORMATION
The Company and the Trusts have filed with the Commission a combined
registration statement on Form S-3 (the "Registration Statement," which term
encompasses any amendments of and exhibits to the Registration Statement) under
the 1933 Act. As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules to the Registration Statement.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance with the
1934 Act 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 175 W. Jackson Boulevard, Suite 900, Chicago,
Illinois 60604, 801 Brickell Avenue, Suite 1800, Miami, Florida 33131 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
2
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 in this
Prospectus. 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 by reference in this Prospectus 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, 2003, June 30, 2003 and September 30, 2003; and
(c) the Company's Current Reports on Form 8-K dated February 5, 2003,
February 11, 2003, March 12, 2003, April 15, 2003, May 1, 2003,
November 14, 2003 and December 2, 2003.
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 in this Prospectus by reference and made a part of this Prospectus
from the date of filing of such documents; provided, however, the Company is not
incorporating any information furnished under Items 9 or 12 of any Current
Report on Form 8-K. Any statement contained in a document incorporated or deemed
to be incorporated by reference in this Prospectus shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in this
Prospectus 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 IN THIS PROSPECTUS 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 35291, TELEPHONE: (205) 257-2714.
3
SELECTED INFORMATION
The following material, which is presented in this Prospectus 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 in this Prospectus by
reference or elsewhere in this Prospectus, is qualified in its entirety by
reference to such documents and, therefore, should be read together with those
documents.
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
Customers at December 31, 2002... 1,357,325
Generating Capacity at December
31, 2002 (kilowatts)............. 12,153,000
Sources of Generation during 2002
(kilowatt-hours)............... Coal (62%), Nuclear (19%), Hydro (6%), Gas
(13%)
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.
NINE
MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------- SEPTEMBER 30,
1998 1999 2000 2001 2002 2003(1)
---- ---- ---- ---- ---- -------------
Ratio of Earnings to Fixed Charges(2)............... 3.12 3.59 3.46 3.31 3.98 4.75
Ratio of Earnings to Fixed Charges Plus
Preferred Dividend Requirements
(Pre-Income Tax Basis)(3)......................... 2.90 3.26 3.18 3.05 3.66 4.26
---------------
(1) Due to seasonal variations in the demand for energy, operating results for
the nine months ended September 30, 2003 do not necessarily indicate
operating results for the entire year.
(2) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Earnings Before Income Taxes" "Interest expense, net of amounts
capitalized," "Distributions on shares subject to mandatory redemption" and
the debt portion of allowance for funds used during construction; and (ii)
"Fixed Charges" consist of "Interest expense, net of amounts capitalized,"
"Distributions on shares subject to mandatory redemption" and the debt
portion of allowance for funds used during construction.
(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 incorporation in
1906. The principal executive offices of the Company are located at 600 North
18th Street, Birmingham, Alabama 35291, and the telephone number is (205)
257-1000.
4
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 of each Trust. 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 to these purposes. 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 for these
purposes, 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 35291, 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
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 successor to Chemical Bank and Trust Company)), as trustee
(the "First Mortgage Bond Trustee"), as to be supplemented by a supplemental
indenture (the "Supplemental Indenture") establishing the new Bonds of each
series (the Indenture, as so supplemented, is 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 in this Prospectus 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 of $1,000 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.
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.
6
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 such Section 4.
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 by the First Mortgage Bond Indenture.
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 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 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 September 30, 2003,
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 of the First Mortgage Bond Indenture 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.
7
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 on any bonds, or reduce the principal
amount of any bonds, without the express consent of the holder of each bond
which would be so affected, or (ii) to reduce the percentage of bonds as
mentioned above, 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 of any bonds, 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 of the First Mortgage Bond Indenture 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, 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 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 under the First Mortgage Bond
Indenture, 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 in the
First Mortgage Bond Indenture; 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 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.
8
(ALABAMA POWER LOGO)
4,000,000 SHARES
5.30% CLASS A PREFERRED STOCK
CUMULATIVE, PAR VALUE $1 PER SHARE
(STATED CAPITAL $25 PER SHARE)
---------------------------
PROSPECTUS SUPPLEMENT
February 5, 2004
---------------------------
LEHMAN BROTHERS
PROSPECTUS
$1,330,000,000
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.
See "Risk Factors" on page 2 for information on certain risks related to the
purchase of these securities.
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 December 19, 2003
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 $1,330,000,000. This
Prospectus provides a general description of those securities. Each time the
Company sells securities, the Company 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."
RISKS FACTORS
Investing in the Company's securities involves risk. Please see the risk
factors described in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2002, which is incorporated by reference in this
Prospectus. Before making an investment decision, you should carefully consider
these risks as well as other information contained or incorporated by reference
in this Prospectus. The risks and uncertainties described are not the only ones
facing the Company. Additional risks and uncertainties not presently known to
the Company or that the Company deems immaterial may also impair its business
operations, its financial results and the value of its securities.
AVAILABLE INFORMATION
The Company and the Trusts have filed with the Commission a combined
registration statement on Form S-3 (the "Registration Statement," which term
encompasses any amendments of and exhibits to the Registration Statement) under
the 1933 Act. As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules to the Registration Statement.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance with the
1934 Act 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 175 W. Jackson Boulevard, Suite 900, Chicago,
Illinois 60604, 801 Brickell Avenue, Suite 1800, Miami, Florida 33131 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
2
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 in this
Prospectus. 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 by reference in this Prospectus 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, 2003, June 30, 2003 and September 30, 2003; and
(c) the Company's Current Reports on Form 8-K dated February 5, 2003,
February 11, 2003, March 12, 2003, April 15, 2003, May 1, 2003,
November 14, 2003 and December 2, 2003.
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 in this Prospectus by reference and made a part of this Prospectus
from the date of filing of such documents; provided, however, the Company is not
incorporating any information furnished under Items 9 or 12 of any Current
Report on Form 8-K. Any statement contained in a document incorporated or deemed
to be incorporated by reference in this Prospectus shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in this
Prospectus 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 IN THIS PROSPECTUS 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 35291, TELEPHONE: (205) 257-2714.
3
SELECTED INFORMATION
The following material, which is presented in this Prospectus 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 in this Prospectus by
reference or elsewhere in this Prospectus, is qualified in its entirety by
reference to such documents and, therefore, should be read together with those
documents.
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
Customers at December 31, 2002... 1,357,325
Generating Capacity at December
31, 2002 (kilowatts)............. 12,153,000
Sources of Generation during 2002
(kilowatt-hours)............... Coal (62%), Nuclear (19%), Hydro (6%), Gas
(13%)
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.
NINE
MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------- SEPTEMBER 30,
1998 1999 2000 2001 2002 2003(1)
---- ---- ---- ---- ---- -------------
Ratio of Earnings to Fixed Charges(2)............... 3.12 3.59 3.46 3.31 3.98 4.75
Ratio of Earnings to Fixed Charges Plus
Preferred Dividend Requirements
(Pre-Income Tax Basis)(3)......................... 2.90 3.26 3.18 3.05 3.66 4.26
---------------
(1) Due to seasonal variations in the demand for energy, operating results for
the nine months ended September 30, 2003 do not necessarily indicate
operating results for the entire year.
(2) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Earnings Before Income Taxes" "Interest expense, net of amounts
capitalized," "Distributions on shares subject to mandatory redemption" and
the debt portion of allowance for funds used during construction; and (ii)
"Fixed Charges" consist of "Interest expense, net of amounts capitalized,"
"Distributions on shares subject to mandatory redemption" and the debt
portion of allowance for funds used during construction.
(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 incorporation in
1906. The principal executive offices of the Company are located at 600 North
18th Street, Birmingham, Alabama 35291, and the telephone number is (205)
257-1000.
4
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 of each Trust. 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 to these purposes. 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 for these
purposes, 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 35291, 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
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 successor to Chemical Bank and Trust Company)), as trustee
(the "First Mortgage Bond Trustee"), as to be supplemented by a supplemental
indenture (the "Supplemental Indenture") establishing the new Bonds of each
series (the Indenture, as so supplemented, is 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 in this Prospectus 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 of $1,000 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.
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.
6
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 such Section 4.
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 by the First Mortgage Bond Indenture.
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 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 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 September 30, 2003,
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 of the First Mortgage Bond Indenture 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.
7
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 on any bonds, or reduce the principal
amount of any bonds, without the express consent of the holder of each bond
which would be so affected, or (ii) to reduce the percentage of bonds as
mentioned above, 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 of any bonds, 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 of the First Mortgage Bond Indenture 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, 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 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 under the First Mortgage Bond
Indenture, 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 in the
First Mortgage Bond Indenture; 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 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.
8
DESCRIPTION OF THE NEW STOCK
Set forth below is a description of the general terms of the new Stock. The
statements in this Prospectus 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 at a later time 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). The Resolutions shall
include a provision fixing the stated capital of the new Stock.
At September 30, 2003, there were outstanding 8,000,000 shares of Class A
Preferred Stock with a stated capital of $25 per share and 1,250 shares of
Flexible Money Market Class A Preferred Stock with a stated capital of $100,000
per share. Additionally, at September 30, 2003, 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" in this Prospectus.
The new Stock will not be subject to further calls or to assessment by the
Company.
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).
9
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 provided below. 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
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 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
10
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 JPMorgan Chase Bank (formerly
known as The Chase Manhattan Bank), as trustee (the "Senior Note Indenture
Trustee"), as to be supplemented by a supplemental indenture establishing the
Senior Notes of each series (the Senior Note Indenture, as supplemented, is
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 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 in this Prospectus 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 equally 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 $302,000,000 outstanding at September 30, 2003.
The Senior Note Indenture does not limit the aggregate principal amount of
Senior Notes that may be issued under the Senior Note Indenture 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
by such Prospectus Supplement: (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 or at the option of the holder prior to their
maturity; (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 of such
11
Senior Notes, the portion of the principal amount of such Senior Notes which
shall be payable upon declaration of acceleration of the maturity of such Senior
Notes; (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 in the Senior Note Indenture 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.
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 of
the Senior Notes 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 without the consent of the
holder of each outstanding Senior Note of such series affected.
12
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) issue, 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
to an interest payment 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 from that time forward will look only to the Company for payment of
such principal and interest.
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 that is affected, 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 that is affected, (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 of any Senior Note or the rate of interest on any Senior Note
or any premium payable upon the redemption of any Senior Note, or change the
method of calculating the rate of interest on any Senior Note, or impair the
right to institute suit for the enforcement of any such payment on or after the
stated maturity of any Senior Note (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 under the Senior Note Indenture 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 that is affected.
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.
13
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 in the United States 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 to the transaction 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 by the Senior Note Indenture Trustee. 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
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 to the Senior Note Indenture 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 to the Subordinated Note Indenture establishing the
Junior Subordinated Notes of each series (the Subordinated Note Indenture, as so
supplemented, is
14
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 in this
Prospectus 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 under the Subordinated Note
Indenture 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 provided.
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 by such Prospectus Supplement: (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 or at the option of the holder
prior to their maturity; (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 of the Junior Subordinated Notes, the portion of the principal
amount of such Junior Subordinated Notes which shall be payable upon declaration
of acceleration of the maturity of the Junior Subordinated Notes; (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
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
15
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 incurred, created or
assumed after such date, (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
that ranks equally 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 September 30, 2003,
Senior Indebtedness of the Company aggregated approximately $4,068,000,000.
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 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 under the Subordinated Note
Indenture 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 equally with or
junior to the Junior Subordinated Notes. None of the foregoing, however, shall
restrict (i) any of the actions described
16
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 of Additional Interest in the Subordinated
Note Indenture) on such unpaid interest, 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 of Additional Interest in the Subordinated
Note Indenture); or
(c) failure to pay principal or premium, if any, or interest,
including Additional Interest (as defined in clause (ii) of the definition
of Additional Interest 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 in the Subordinated Note
Indenture 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 of the Junior
Subordinated Notes 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
17
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 without the consent of the holder of each outstanding Junior
Subordinated Note of such series affected.
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) issue, 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.
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 to an interest payment 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 from that time forward look only to the
Company for payment of such principal and interest.
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, to modify the Subordinated Note
Indenture or
18
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, (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 of any Junior
Subordinated Note or the rate of interest (including Additional Interest) on any
Junior Subordinated Note or any premium payable upon the redemption of any
Junior Subordinated Note, or change the method of calculating the rate of
interest on any Junior Subordinated Note, or impair the right to institute suit
for the enforcement of any such payment on or after the stated maturity of any
Junior Subordinated Note (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 under the Subordinated Note
Indenture 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 in the United States 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 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 to the transaction 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 by the Subordinated Note Indenture Trustee. 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.
19
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 to the Subordinated Note Indenture 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 to such Trust. 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 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 by this Prospectus 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 to the Preferred Securities.
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 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 in such Guarantee and those made part of such
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Guarantee 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 in the Guarantee, to pay in full,
to the holders of the related Preferred Securities, the Guarantee Payments (as
defined below), 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 to the
Preferred Securities (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 for these distributions, (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 to pay such Redemption Price, 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 for such purpose, 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 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 equal to or subordinate by their terms, (ii) equal to the most
senior preferred or preference stock now issued by the Company or issued at a
later date by the Company and with any guarantee now entered into by the Company
or entered into at a later date 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 of Preferred Securities
agrees to the subordination provisions and other terms of the Guarantee related
to the Preferred Securities. The Company has outstanding preferred stock that
ranks equal 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).
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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 under such Guarantee. 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 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 by the Guarantee Trustee.
JPMorgan Chase 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.
22
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 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 under each Trust Agreement 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 for such purpose are legally
and immediately available) and other payments due on the Preferred Securities
(to the extent funds for such purpose 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 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 that allows the holders of the Preferred Securities to
which such Guarantee relates to direct the Guarantee Trustee to enforce its
rights under such Guarantee. 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.
23
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 with such action, 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 of
Senior Indebtedness 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, 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.
24
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 to
such securities 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
The financial statements and the related financial statement schedule as of
and for the year ended December 31, 2002 incorporated by reference in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports, which are incorporated by reference in this Prospectus,
and have been so incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
Certain of the Company's financial statements and schedules incorporated by
reference in this Prospectus have been audited by Arthur Andersen LLP
("Andersen"), independent public accountants, as indicated in their reports with
respect to the financial statements and schedules, and are incorporated by
reference in this Prospectus, in reliance upon the authority of Andersen as
experts in giving such reports. 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 Prospectus 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 in the financial
statements.
25
(ALABAMA POWER LOGO)
4,000,000 SHARES
5.30% CLASS A PREFERRED STOCK
CUMULATIVE, PAR VALUE $1 PER SHARE
(STATED CAPITAL $25 PER SHARE)
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PROSPECTUS SUPPLEMENT
February 5, 2004
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LEHMAN BROTHERS