<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 1996.
SUBJECT TO AMENDMENT.
REGISTRATION NOS. 33-64125
33-64125-01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
ALABAMA POWER COMPANY
(Exact name of registrant as specified in its charter or governing document)
---------------------
<TABLE>
<S> <C>
ALABAMA 63-0004250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
ALABAMA POWER CAPITAL TRUST I
(Exact name of registrant as specified in its charter or governing document)
---------------------
<TABLE>
<S> <C>
DELAWARE 63-6196329
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
600 NORTH 18TH STREET,
BIRMINGHAM, ALABAMA 35291
(205) 250-1000
(Address, including zip code and telephone number, including area code, of
registrants' principal executive offices)
---------------------
ART P. BEATTIE
VICE PRESIDENT, SECRETARY AND TREASURER
ALABAMA POWER COMPANY
600 NORTH 18TH STREET, BIRMINGHAM, ALABAMA 35291
(205) 250-2505
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C> <C>
W.L. WESTBROOK JOHN D. MCLANAHAN, ESQ. WALTER M. BEALE, JR., ESQ.
EXECUTIVE VICE PRESIDENT TROUTMAN SANDERS LLP BALCH & BINGHAM
SOUTHERN COMPANY SERVICES, INC. 600 PEACHTREE STREET, N.E. 1901 SIXTH AVENUE NORTH
64 PERIMETER CENTER EAST SUITE 5200 SUITE 2600
ATLANTA, GEORGIA 30346 ATLANTA, GEORGIA 30308-2216 BIRMINGHAM, ALABAMA 35203
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF AMOUNT OFFERING AGGREGATE AMOUNT OF
EACH CLASS OF SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama Power Capital Trust I Trust Preferred Securities 3,880,000
(Liquidation Amount $25 Per Preferred Security)................... Preferred 100% $97,000,000 $33,450.00*
Securities
- -----------------------------------------------------------------------------------------------------------------------------
Alabama Power Company Series A Junior Subordinated Notes(2).........
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Alabama Power Company Guarantee with respect to Alabama Power
Capital Trust I Trust Preferred Securities(2)(3)..................
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</TABLE>
(1) Estimated solely for calculating the registration fee.
(2) Pursuant to Rule 457(n), no separate consideration is to be received for the
Junior Subordinated Notes or the Guarantee.
(3) Includes the rights of the holders of Preferred Securities under the
Guarantee Agreement and certain backup undertakings relating to the
Company's covenant to pay all costs and expenses of the Trust as described
in the Registration Statement.
* Previously paid.
---------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 11, 1996
PROSPECTUS
3,880,000 PREFERRED SECURITIES
ALABAMA POWER CAPITAL TRUST I
% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
ALABAMA POWER COMPANY
---------------------------
The % Trust Preferred Securities (the "Preferred Securities") offered
hereby evidence preferred undivided beneficial interests, representing 97%
undivided beneficial ownership of the assets of Alabama Power Capital Trust I, a
statutory business trust formed under the laws of the State of Delaware (the
"Trust"). Alabama Power Company, an Alabama corporation (the "Company"), will
own all the common securities (the "Common Securities" and, together with the
Preferred Securities, the "Trust Securities") representing the remaining 3%
undivided beneficial ownership of the assets of the Trust. The Trust exists for
the sole purpose of issuing the Preferred Securities and Common Securities and
investing the proceeds thereof in an equivalent amount of the Company's Series A
% junior subordinated deferrable interest notes (the "Junior Subordinated
Notes") due , 2026.
The Junior Subordinated Notes will be unsecured obligations of the Company
and will be subordinate and junior in right of payment to Senior Indebtedness of
the Company, as described herein. See "Description of the Junior Subordinated
Notes -- Subordination." Holders of the Preferred Securities are entitled to
receive cumulative cash distributions at the rate of % per annum (the
"Securities Rate"), accruing from the date of original issuance and payable,
unless deferred, quarterly in arrears on March 31, June 30, September 30, and
December 31 of each year (each, a "Distribution Date"). Because March 31, 1996
is not a Business Day, the initial Distribution Date will be April 1, 1996.
(continued on page 2)
---------------------------
See "Risk Factors" at page 8 for certain information relevant to an
investment in the Preferred Securities, including the period and circumstances
during and under which payments of distributions on the Preferred Securities may
be deferred and the related United States Federal Income Tax Considerations of
such deferral.
---------------------------
Application has been made to list the Preferred Securities on the New York
Stock Exchange, Inc. (the "NYSE"). If approved, trading of the Preferred
Securities on the NYSE is expected to commence within a 30 day period after the
initial delivery of the Preferred Securities. See "Underwriting."
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2)(3) TRUST(2)(3)(4)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security.................
- ------------------------------------------------------------------------------------------------------
Total..................................
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</TABLE>
(1) Plus accrued distributions, if any, from the Issue Date.
(2) The Company and the Trust have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(3) Because the proceeds of the sale of the Preferred Securities will be
invested in Junior Subordinated Notes, the Company has agreed to pay to the
Underwriters as compensation (the "Underwriters' Compensation") for
arranging the investment therein of such proceeds, $ per Preferred
Security, except for Preferred Securities sold to certain institutions, for
which the Underwriters' Compensation will be $ per Preferred
Security. Therefore, to the extent that Preferred Securities are sold to
such institutions, the actual amount of Underwriters' Compensation will be
less than and the Proceeds to Trust will be greater than the aggregate
amounts specified above. See "Underwriting."
(4) Expenses of the offering to be paid by the Company are estimated to be
approximately $335,000.
---------------------------
The Preferred Securities are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that delivery of
the Preferred Securities will be made in book-entry only form through the
facilities of The Depository Trust Company on or about January , 1996 (the
"Issue Date").
---------------------------
LEHMAN BROTHERS
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
PRUDENTIAL SECURITIES INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
January , 1996
<PAGE>
(CONTINUED FROM PAGE 1)
The Securities Rate and the Distribution Dates for the Preferred Securities
will correspond to the interest rate and interest and other payment dates on the
Junior Subordinated Notes, which notes will constitute substantially all the
assets of the Trust. As a result, if principal or interest is not paid on the
Junior Subordinated Notes, no amounts will be paid on the Preferred Securities.
THE COMPANY HAS THE RIGHT TO DEFER PAYMENTS OF INTEREST ON THE JUNIOR
SUBORDINATED NOTES BY EXTENDING THE INTEREST PAYMENT PERIOD ON THE JUNIOR
SUBORDINATED NOTES, AT ANY TIME AND FROM TIME TO TIME, FOR UP TO 20 CONSECUTIVE
QUARTERS (EACH, AN "EXTENSION PERIOD"). If interest payments are so deferred,
distributions on the Preferred Securities also will be deferred. During any
Extension Period, holders of Preferred Securities will continue to accrue income
for United States federal income tax purposes in advance of the receipt of the
cash payments attributable to such deferred interest. See "Description of the
Junior Subordinated Notes -- Option to Extend Interest Payment Period," "Risk
Factors -- Option to Extend Interest Payment Period" and "Certain Federal Income
Tax Considerations -- Original Issue Discount" and "-- Market Discount."
Deferred installments of interest on the Junior Subordinated Notes will bear
interest, compounded quarterly, at a rate per annum equal to the Securities
Rate. The payment of such deferred interest, together with interest thereon,
will be distributed to the holders of the Preferred Securities as received at
the end of any Extension Period.
The Trust Securities are subject to mandatory redemption upon repayment of
the Junior Subordinated Notes at maturity or their earlier redemption. The
Junior Subordinated Notes are redeemable at the option of the Company (in whole
or in part), from time to time, on or after , 2001, or at any time in
whole upon the occurrence of a Tax Event or Investment Company Act Event
(either, a "Special Event"). Upon the occurrence of a Special Event, the Company
will have the option to redeem the Junior Subordinated Notes (and the Trust
Securities will also be redeemed) or distribute the Junior Subordinated Notes
pro rata to the holders of the Trust Securities. The Junior Subordinated Notes
are subordinated and junior in right of payment to all Senior Indebtedness (as
defined herein) of the Company. See "Description of the Junior Subordinated
Notes -- Subordination." As of September 30, 1995, Senior Indebtedness of the
Company aggregated approximately $2,450,196,000. If the Junior Subordinated
Notes are distributed to the holders of the Preferred Securities, the Company
will use its best efforts to have the Junior Subordinated Notes listed on the
NYSE or on such other exchange as the Preferred Securities are then listed. See
"Description of the Preferred Securities -- Special Event Redemption or
Distribution" and "Description of the Junior Subordinated Notes."
The payment of distributions on the Preferred Securities is guaranteed by
the Company under the Guarantee Agreement, but only to the extent that the Trust
has funds legally and immediately available therefor (the "Guarantee"). If the
Company fails to make required payments on the Junior Subordinated Notes, the
Trust will not have sufficient funds to pay such distributions, and the
Guarantee does not cover the payment of distributions when the Trust does not
have sufficient funds legally available therefor. In such event, the remedy of a
holder of Preferred Securities is to enforce the rights of the Trust as holder
of the Junior Subordinated Notes. See "Description of the Junior Subordinated
Notes." The Company's obligations under the Guarantee are subordinate and junior
in right of payment to all of its other liabilities and will rank pari passu
(equal in priority) with the most senior preferred stock of the Company. See
"Description of the Guarantee." The Company has, through the Guarantee, the
Subordinated Note Indenture, the Junior Subordinated Notes, the Trust Agreement
and the Agreement as to Expenses and Liabilities, fully and unconditionally
guaranteed, subject to certain subordination provisions, all the Trust's
obligations with respect to the Preferred Securities.
In the event of the redemption of the Junior Subordinated Notes or the
voluntary or involuntary dissolution, winding-up or termination of the Trust,
the holders of the Preferred Securities will be entitled to receive, for each
Preferred Security, a liquidation amount of $25 plus accrued and unpaid
distributions thereon (including interest thereon) to the date of payment (the
"Redemption Price"), unless in connection with such dissolution, winding-up or
termination, the Junior Subordinated Notes are distributed to the holders of the
Preferred Securities. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Dissolution."
The Preferred Securities initially will be represented by a global
certificate registered in the name of The Depository Trust Company ("DTC") or
its nominee. Beneficial interests in the Preferred Securities will be shown on,
and transfers thereof will be effected only through, records maintained by
Participants (as defined herein) in DTC. Except as described herein, Preferred
Securities in certificated form will not be issued in exchange for the global
certificates. See "Description of the Preferred Securities -- Book-Entry Only
Issuance -- The Depository Trust Company."
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NYSE, IN THE OVER THE COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
2
<PAGE>
AVAILABLE INFORMATION
The Company and the Trust have filed with the Securities and Exchange
Commission (the "Commission") a combined registration statement on Form S-3 (the
"Registration Statement," which term encompasses any amendments thereof and
exhibits thereto) under the Securities Act of 1933, as amended (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 thereto, to which reference is hereby made.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports and other information with the Commission. Such reports and other
information can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. 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. In addition, reports and other material concerning
the Company can be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005, on which Exchange certain of the
Company's securities are listed.
No separate financial statements of the Trust are included herein. The
Company has determined that such statements would not be material to holders of
the Preferred Securities because the Trust has no independent operations and
exists for the sole purpose of investing the proceeds of the sale of the Trust
Securities in the Junior Subordinated Notes. The Trust is currently not subject
to the informational reporting requirements of the 1934 Act.
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission pursuant to the
1934 Act and are incorporated herein by reference and made a part of this
Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1995, June 30, 1995 and September 30, 1995; and
(c) the Company's Current Report on Form 8-K, dated February 15, 1995.
All documents filed by the Company or the Trust, as the case may be, with
the Commission pursuant to Sections 13(a), 13(c) or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of this
offering shall be deemed to be incorporated herein by reference and made a part
of this Prospectus from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all documents incorporated herein by reference (other than the
exhibits to such documents unless such exhibits are specifically incorporated by
reference). Such requests should be directed to Art P. Beattie, Vice President,
Secretary and Treasurer, Alabama Power Company, 600 North 18th Street,
Birmingham, Alabama 35291, telephone: (205) 250-2505.
PROPOSED TAX LAW CHANGES
On December 7, 1995, the U.S. Treasury Department proposed a series of tax
law changes that would, among other things, prevent companies from deducting
interest on debt instruments with a maximum term of more than 20 years which are
not shown as indebtedness on the consolidated balance sheet of the issuer. This
proposal, if enacted, would prevent the Company from deducting interest paid on
the Junior Subordinated Notes. However, on December 19, 1995, the Treasury
Department recommended to Congress that transitional relief from the proposed
changes be granted for financial instruments that are issued pursuant to a
registration statement that was filed with the Commission on or before December
7, 1995. Financial instruments would be eligible for this transitional relief
only to the extent of the aggregate amount of such instruments described in the
registration statement as of December 7, 1995. The Company cannot predict
whether the proposed tax law changes will become law. However, if the proposed
tax law changes and the proposed transitional relief are enacted, the Company
should be able to deduct interest on the Junior Subordinated Notes pursuant to
the transitional relief described above. If legislation is enacted limiting, in
whole or in part, the deductibility by the Company of interest on the Junior
Subordinated Notes for United States federal income tax purposes, such enactment
would be a Tax Event. See "Risk Factors -- Proposed Tax Law Changes" and
"-- Special Event Redemption or Distribution". Under certain circumstances
following a Tax Event, the Company may cause the Junior Subordinated Notes and
the Preferred Securities to be redeemed. See "Description of the Preferred
Securities -- Special Event Redemption or Distribution." The December 7, 1995
proposed tax law changes would not alter the United States federal income tax
consequences of the purchase, ownership and disposition of the Preferred
Securities. See "Certain Federal Income Tax Considerations."
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Capitalized terms
not otherwise defined shall have the meanings assigned in the Glossary.
The 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)
250-1000. The Company is a wholly owned
subsidiary of The Southern Company ("Southern
Company").
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.
The Trust.................. Alabama Power Capital Trust I is a statutory
business trust organized under Delaware law
solely for the purpose of holding the Company's
Junior Subordinated Notes and issuing Preferred
Securities and Common Securities evidencing the
entire beneficial interest therein (and engaging
in activities necessary, appropriate, convenient
or incidental thereto).
The Trustees............... Chemical Bank will act as property trustee (the
"Property Trustee") of the Trust. Two employees
of the Company also will act as trustees (the
"Administrative Trustees") of the Trust. Chemical
Bank Delaware will be an additional trustee (the
"Delaware Trustee") of the Trust. Chemical Bank
also will act as trustee (the "Indenture
Trustee") under the Subordinated Note Indenture
pursuant to which the Junior Subordinated Notes
will be issued and will act as trustee under the
Guarantee (the "Guarantee Trustee").
The Property Trustee, Delaware Trustee and
Administrative Trustees are sometimes referred to
as the "Securities Trustees."
Preferred Securities
Offered.................... The Trust will offer 3,880,000 Preferred Securities
evidencing preferred undivided beneficial
interests in the assets of the Trust. Holders of
the Preferred Securities are entitled to receive
cumulative cash distributions at the Securities
Rate, accruing from the date of original issuance
and payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each
year, commencing on April 1, 1996 (each, a
"Distribution Date"). The Securities Rate and the
Distribution Dates for the Preferred Securities
will correspond to the interest rate and payment
dates on the Junior Subordinated Notes, which
notes will constitute substantially all the
assets of the Trust. As a result, if principal or
interest is not paid on the Junior Subordinated
Notes, no amounts will be paid on the Preferred
Securities. See "Description of the Preferred
Securities" herein.
Record Date................ The record date for each Distribution Date will be
the close of business on the 15th calendar day
prior to such Distribution Date.
Junior Subordinated
Notes...................... The Trust will invest the proceeds from the
issuance of the Preferred Securities and Common
Securities in an equivalent amount of
5
<PAGE>
Series A % junior subordinated deferrable
interest notes due , 2026. The
Junior Subordinated Notes will be subordinate and
junior in right of payment to all current
indebtedness for borrowed money and other
obligations of the Company included in the
definition of Senior Indebtedness. See
"Description of the Junior Subordinated
Notes -- Subordination."
Guarantee.................. The payment of distributions on the Preferred
Securities is guaranteed by the Company under the
Guarantee, but only to the extent the Trust has
funds legally and immediately available to make
such distributions. If the Company does not make
principal or interest payments on the Junior
Subordinated Notes, the Trust will not have
sufficient funds to make distributions on the
Preferred Securities, in which event the
Guarantee will not apply to such distributions
until the Trust has sufficient funds legally
available therefor. The obligations of the
Company under the Guarantee will be subordinate
and junior in right of payment to all other
liabilities of the Company and will rank pari
passu with the most senior preferred stock issued
by the Company. See "Risk Factors -- Ranking of
and Rights Under the Guarantee" and "Description
of the Guarantee" herein. The Company has,
through the Guarantee, the Indenture, the Junior
Subordinated Notes, the Trust Agreement and the
Agreement as to Expenses and Liabilities, fully
and unconditionally guaranteed, subject to
certain subordination provisions, all the Trust's
obligations with respect to the Preferred
Securities.
Interest Deferral.......... The Company has the right to defer payments of
interest on the Junior Subordinated Notes by
extending the interest payment period on the
Junior Subordinated Notes, at any time and from
time to time, for up to 20 consecutive quarters
(each, an "Extension Period"). The only
restrictions on the Company's ability to defer
payments of interest are that during the
Extension Period the Company may not (i) pay
dividends on or redeem any of its capital stock
or (ii) pay principal or interest on any debt
securities ranking pari passu or subordinate to
the Junior Subordinated Notes. There could be
multiple Extension Periods of varying lengths
throughout the term of the Junior Subordinated
Notes.
If interest payments on the Junior Subordinated
Notes are deferred, distributions on the
Preferred Securities will also be deferred.
During an Extension Period, holders of Preferred
Securities will continue to accrue income for
federal income tax purposes in advance of the
receipt of the cash payments attributable to such
deferred interest. See "Description of the Junior
Subordinated Notes -- Option to Extend Interest
Payment Period" and "Certain Federal Income Tax
Considerations -- Original Issue Discount" and
"-- Market Discount." Deferred interest will bear
interest, compounded quarterly, at a rate per
annum equal to the Securities Rate from the date
of deferral to the date of payment.
Redemption................. The Preferred Securities are subject to mandatory
redemption upon repayment of the Junior
Subordinated Notes at maturity or their earlier
redemption. The Junior Subordinated Notes are
redeemable by the Company (in whole or in part),
from time to time on or after ,
2001, or at any time in whole upon the occurrence
of a
6
<PAGE>
Special Event. Upon the occurrence of a Special
Event, the Company will have the option to redeem
the Junior Subordinated Notes (and thus causing
the redemption of the Preferred Securities), in
whole, or, subject to certain conditions,
distribute the Junior Subordinated Notes pro rata
to the holders of the Trust Securities. If a
partial redemption of the Junior Subordinated
Notes would result in the delisting of the
Preferred Securities, the Company may only redeem
the Junior Subordinated Notes in whole. Any
partial redemption of the Junior Subordinated
Notes will be effected by the redemption of an
equivalent amount of Trust Securities, to be
allocated approximately 97% to the Preferred
Securities and 3% to the Common Securities. See
"Description of the Preferred
Securities -- Redemption" and "-- Special Event
Redemption or Distribution."
Special Event.............. A Special Event means a Tax Event or an Investment
Company Act Event. A "Tax Event" means that the
Administrative Trustees and the Company shall
have received an opinion from independent tax
counsel experienced in such matters (which may be
counsel to the Company) to the effect that, as a
result of (a) any amendment to, or change
(including any announced prospective change) in,
the laws (or any regulations thereunder) of the
United States or any political subdivision or
taxing authority thereof or therein or (b) any
amendment to, or change in, an interpretation or
application of such laws or regulations, there is
more than an insubstantial risk that (i) the
Trust would be subject to United States federal
income tax with respect to income accrued or
received on the Junior Subordinated Notes, (ii)
interest payable to the Trust on the Junior
Subordinated Notes would not be deductible by the
Company for United States federal income tax
purposes, or (iii) the Trust would be subject to
more than a de minimis amount of other taxes,
duties or other governmental charges, which
change or amendment becomes effective on or after
the Issue Date. An "Investment Company Act Event"
means that the Administrative Trustees and the
Company shall have received an opinion of
independent counsel (which may be counsel to the
Company) to the effect that, as a result of a
change in law or regulation or a written change
in interpretation or application of law or
regulation by any legislative body, court,
governmental agency or regulatory authority after
the Issue Date, there is more than an
insubstantial risk that the Trust is or will be
considered an investment company under the
Investment Company Act of 1940, as amended (the
"1940 Act").
Redemption Price........... In the event of the redemption of the Trust
Securities or other termination of the Trust
without distribution of the Junior Subordinated
Notes, each Preferred Security shall be entitled
to receive a liquidation amount of $25 plus
accrued and unpaid distributions thereon
(including interest thereon) to the date of
payment.
7
<PAGE>
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus and should consider
particularly the following matters:
RANKING OF AND RIGHTS UNDER THE JUNIOR SUBORDINATED NOTES
No amounts will be available to make payments on the Preferred Securities
except from payments made on the Junior Subordinated Notes. The obligations of
the Company under the Junior Subordinated Notes are subordinate and junior in
right of payment to all present and future Senior Indebtedness of the Company.
At September 30, 1995, Senior Indebtedness of the Company aggregated
approximately $2,450,196,000. There are no terms in the Preferred Securities,
the Junior Subordinated Notes or the Guarantee that limit the Company's ability
to incur additional indebtedness, including indebtedness that ranks senior to
the Junior Subordinated Notes. See "Description of the Guarantee" and
"Description of the Junior Subordinated Notes -- Subordination."
RANKING OF AND RIGHTS UNDER THE GUARANTEE
The Company's obligations under the Guarantee are subordinate and junior in
right of payment to all liabilities of the Company and will be pari passu with
the most senior preferred stock issued by the Company. If the Company were to
default in its obligation to pay amounts payable on the Junior Subordinated
Notes, the Trust would lack available funds for the payment of distributions or
amounts payable on redemption of the Preferred Securities or otherwise, and in
such event holders of the Preferred Securities would not be able to rely upon
the Guarantee for payment of such amounts.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Subordinated Note Indenture, and at any
time, and from time to time, to defer payments of interest on the Junior
Subordinated Notes for a period of up to 20 consecutive quarters (each, an
"Extension Period"), but not beyond the stated maturity of the Junior
Subordinated Notes. Prior to the termination of any Extension Period, the
Company may further defer payments of interest, provided that such Extension
Period, together with all such previous and further extensions thereof, may not
exceed 20 consecutive quarters. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may select a new Extension
Period, subject to the above requirements. There could be multiple Extension
Periods of varying lengths throughout the term of the Junior Subordinated Notes.
Deferred installments of interest on the Junior Subordinated Notes will bear
interest, compounded quarterly, at a rate per annum equal to the Securities
Rate. The payment of such deferred interest, together with interest thereon,
will be passed through to the holders of the Preferred Securities as received at
the end of any Extension Period.
The only restrictions on the Company's ability to defer payments of
interest are that during any Extension Period the Company may not (i) pay
dividends on or redeem any of its capital stock or (ii) pay principal or
interest on any debt securities ranking pari passu or subordinate to the Junior
Subordinated Notes. See "Description of the Preferred
Securities -- Distributions" and "Description of the Junior Subordinated
Notes -- Option to Extend Interest Payment Period."
Should the Company exercise its rights to defer payments of interest, each
holder of Preferred Securities will continue to accrue income (as original issue
discount -- OID) for United States federal income tax purposes in respect of the
deferred interest allocable to its Preferred Securities. As a result, holders of
Preferred Securities will recognize income for United States federal income tax
purposes in advance of the receipt of cash and will not receive the cash from
the Trust related to such income if such holders dispose of their Preferred
Securities prior to the record date for the date on which distributions of such
amounts are made. See "Certain Federal Income Tax Considerations -- Original
Issue Discount" and "-- Sale of Preferred Securities." INVESTORS SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF AN
INVESTMENT IN THE PREFERRED SECURITIES.
8
<PAGE>
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Notes. However, should the Company determine to exercise such right
in the future, the market price of the Preferred Securities is likely to be
affected. A holder that disposes of its Preferred Securities during an Extension
Period, therefore, might not receive the same return on its investment as a
holder that continues to hold its Preferred Securities. In addition, as a result
of the existence of the Company's right to defer interest payments, the market
price of the Preferred Securities (which represent an undivided beneficial
interest in the Junior Subordinated Notes) may be more volatile than other
securities on which OID accrues that do not have such rights.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If a Special Event shall occur and be continuing, the Company will have the
option either to redeem the Junior Subordinated Notes in cash (with the result
that the Preferred Securities shall be redeemed) or cause the termination of the
Trust, with the result that Junior Subordinated Notes with an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the Securities Rate of, and accrued and unpaid
interest equal to accrued and unpaid distributions on, the Trust Securities
would be distributed to the holders of the Trust Securities, in liquidation of
such holders' interests in the Trust on a pro rata basis, within 90 days
following the occurrence of such Special Event; provided, however, that in the
case of the occurrence of a Special Event, as a condition of such termination
and distribution, the Property Trustee shall have received an opinion from
independent tax counsel experienced in such matters (a "No Recognition
Opinion"), which opinion may rely on published revenue rulings of the Internal
Revenue Service, to the effect that the holders of the Trust Securities will not
recognize any gain or loss for United States federal income tax purposes as a
result of such termination and distribution of Junior Subordinated Notes; and,
provided, further that, if at the time there is available to the Company or the
Trust the opportunity to eliminate, within such 90 day period, the Special Event
by taking some ministerial action, such as filing a form or making an election,
or pursuing some other similar reasonable measure, which would have no adverse
effect on the Company or the Trust, the holders of the Trust Securities, the
Company or the Trust will pursue such measure in lieu of redemption or
termination. See "Proposed Tax Law Changes" and "Description of the Preferred
Securities -- Special Event Redemption or Distribution."
There can be no assurance as to the market price for the Junior
Subordinated Notes that may be distributed in exchange for Preferred Securities
if a termination or liquidation of the Trust were to occur. Accordingly, the
Junior Subordinated Notes that the investor may receive on termination and
liquidation of the Trust may trade at a discount to the price that the investor
paid to purchase the Preferred Securities offered hereby. See "Description of
the Junior Subordinated Notes."
PROPOSED TAX LAW CHANGES
On December 7, 1995, the U.S. Treasury Department proposed a series of tax
law changes that would, among other things, prevent companies from deducting
interest on debt instruments with a maximum term of more than 20 years which are
not shown as indebtedness on the consolidated balance sheet of the issuer. This
proposal, if enacted, would prevent the Company from deducting interest paid on
the Junior Subordinated Notes. However, on December 19, 1995, the Treasury
Department recommended to Congress that transitional relief from the proposed
changes be granted for financial instruments that are issued pursuant to a
registration statement that was filed with the Commission on or before December
7, 1995. Financial instruments would be eligible for this transitional relief
only to the extent of the aggregate amount of such instruments described in the
registration statement as of December 7, 1995. The Company cannot predict
whether the proposed tax law changes will become law. However, if the proposed
tax law changes and the proposed transitional relief are enacted, the Company
should be able to deduct interest on the Junior Subordinated Notes pursuant to
the transitional relief described above. If legislation is enacted limiting, in
whole or in part, the deductibility by the Company of interest on the Junior
Subordinates Notes for United States federal income tax purposes, such enactment
would be a Tax Event. Under certain circumstances following a Tax Event, the
Company may cause the Junior Subordinated Notes and the Preferred Securities to
be redeemed. See "Proposed Tax Law Changes" and "Description of the Preferred
Securities -- Special Event Redemption or Distribution." The
9
<PAGE>
December 7, 1995 proposed tax law changes would not alter the United States
federal income tax consequences of the purchase, ownership and disposition of
the Preferred Securities. See "Certain Federal Income Tax Considerations."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and, except
for the rights of holders of Preferred Securities to appoint a Substitute
Property Trustee upon the occurrence of certain events described herein, will
not be entitled to vote to appoint, remove or replace the Securities Trustees,
which voting rights are vested exclusively in the holder of the Common
Securities.
TRADING CHARACTERISTICS OF PREFERRED SECURITIES
The Preferred Securities are expected to be listed on the NYSE, subject to
official notice of issuance. Accordingly, the Preferred Securities are expected
to trade at a price that takes into account the value, if any, of accrued but
unpaid distributions; thus, purchasers will not pay and sellers will not receive
accrued and unpaid interest with respect to the Preferred Securities that is not
included in the trading price thereof. Nonetheless, interest on the Junior
Subordinated Notes will be included in the gross income of U.S. holders of
Preferred Securities as it accrues rather than when it is paid. To the extent
the selling price is less than the holder's adjusted tax basis (which will
include, in the form of OID, all accrued but unpaid interest), a holder
generally will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes. See "Certain Federal Income Tax
Considerations -- Original Issue Discount" and "Sale of Preferred Securities."
The trading price of the Preferred Securities is likely to be sensitive to
the level of interest rates generally. If interest rates rise in general, the
trading price of the Preferred Securities may decline to reflect the additional
yield requirements of the purchasers. Conversely, a decline in interest rates
may increase the trading price of the Preferred Securities, although any
increase will be moderated by the Company's ability to call the Junior
Subordinated Notes at any time on or after , 2001 at a redemption
price equal to 100% of the principal amount to be redeemed plus accrued but
unpaid interest. In addition, because holders of Preferred Securities will be
paid only from payments on the Junior Subordinated Notes and may receive Junior
Subordinated Notes upon the occurrence of a Special Event, prospective
purchasers of Preferred Securities are making an investment decision with regard
to the Junior Subordinated Notes and should carefully review all the information
regarding the Junior Subordinated Notes contained herein. See "Description of
the Preferred Securities -- Special Event Redemption or Distribution" and
"Description of the Junior Subordinated Notes."
ALABAMA POWER CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to the filing of a certificate of trust with the Delaware Secretary of State on
November 8, 1995. The Trust's business is defined in a trust agreement, executed
by the Company, as Depositor, and the Delaware Trustee thereunder. This trust
agreement will be amended and restated in its entirety on the Issue Date
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part (the "Trust Agreement"). The Trust Agreement
will be qualified as an indenture under the Trust Indenture Act of 1939, as
amended (the "1939 Act"). The Trust exists for the exclusive purposes of (i)
issuing the Trust Securities representing undivided beneficial interests in the
assets of the Trust, (ii) investing the gross proceeds of the Trust Securities
in the Junior Subordinated Notes, and (iii) engaging in only those other
activities necessary, appropriate, convenient or incidental thereto. The Trust
has a term of approximately 30 years, but may terminate earlier as provided in
the Trust Agreement.
Upon issuance of the Preferred Securities, the purchasers thereof will own
all of the Preferred Securities. The Company will acquire all of the Common
Securities, which will have an aggregate liquidation amount equal to
approximately 3% of the total capital of the Trust. The Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the Preferred
Securities, except that upon the occurrence and continuance of a Trust Agreement
Event of Default, the rights of the holders of Common Securities to
10
<PAGE>
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the Preferred
Securities.
The Trust's business and affairs will be conducted by the Securities
Trustees, which shall be appointed by the Company as the holder of the Common
Securities. Two employees of the Company initially will serve as Administrative
Trustees. Chemical Bank will serve as Property Trustee and will hold legal title
to the Junior Subordinated Notes issued by the Company on behalf of the Trust
and the holders of the Trust Securities. Chemical Bank Delaware will serve as
Delaware Trustee. In certain circumstances, the holders of a majority in
liquidation amount of the Preferred Securities will be entitled to appoint a
Substitute Property Trustee. See "Description of the Preferred
Securities -- Voting Rights."
The Property Trustee will hold legal title to the Junior Subordinated Notes
for the benefit of the Trust and the holders of the Trust Securities and will
have the power to exercise all rights, powers and privileges under the
Subordinated Note Indenture as the holder of the Junior Subordinated Notes. The
Property Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities.
Subject to the right of the holders of the Preferred Securities to appoint a
Substitute Property Trustee in certain instances, the Company, as the holder of
all the Common Securities, will have the right to appoint, remove or replace all
the Securities Trustees. The Company will pay all fees and expenses related to
the Trust and the offering of the Trust Securities. See "Description of the
Junior Subordinated Notes -- Miscellaneous."
The Junior Subordinated Notes will constitute substantially all of the
assets of the Trust. Other assets that may constitute "Trust Property" (as that
term is defined in the Trust Agreement) include any cash on deposit in, or owing
to, the payment account as established under the Trust Agreement, as well as any
other property or assets held by the Trustee pursuant to the Trust Agreement. In
addition, the Trust may, from time to time, receive cash pursuant to the
Agreement as to Expenses and Liabilities.
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the Trust
Agreement, the Delaware Business Trust Act, and the 1939 Act. See "Description
of the Preferred Securities."
The Trust's registered office in the State of Delaware is c/o Chemical Bank
Delaware, 1201 Market Street, Wilmington, Delaware 19801. The principal place of
business of the Trust shall be c/o the Company, 600 North 18th Street,
Birmingham, Alabama 35291, telephone (205) 250-2505, Attn: Treasurer.
SELECTED INFORMATION
The following material, which is presented herein solely to furnish limited
introductory information regarding the Company, has been selected from, or is
based upon, the detailed information and financial statements appearing in the
documents incorporated herein by reference or elsewhere in this Prospectus, is
qualified in its entirety by reference thereto, and, therefore, should be read
together therewith.
ALABAMA POWER COMPANY
Business......................... Generation, transmission, distribution and
sale of electric energy
Service Area..................... Approximately 44,500 square miles
comprising most of the State of Alabama
Service Area Population (1990
Census).......................... Approximately 3,224,000
Customers at December 31, 1994... 1,211,270
Generating Capacity at December
31, 1994 (kilowatts)............. 9,921,263
Sources of Generation during 1994
(kilowatt-hours)............... Coal (68%), Nuclear (23%), Hydro (9%), Oil
and Gas (less than 0.5%)
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<PAGE>
Sources of Generation Estimated
for 1995 (kilowatt-hours)........ Coal (74%), Nuclear (19%), Hydro (7%), Oil
and Gas (less than 0.5%)
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
12 MONTHS
ENDED
YEAR ENDED DECEMBER 31, NOVEMBER 30,
-------------------------------------------------------------- 1995(1)
1990 1991 1992 1993 1994 (UNAUDITED)
---------- ---------- ---------- ---------- ---------- -------------
(THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues(2)............. $2,722,424 $2,846,794 $2,846,840 $3,007,609 $2,935,142 $ 2,993,771
Income before interest charges.... 576,576 613,955 605,673 606,093 592,540 621,997
Net income after dividends on
Preferred Stock................. 312,803 339,666 338,555 346,494 356,338 367,410
Ratio of earnings to fixed
charges(3)...................... 3.10 3.30 3.41 3.45 3.75 3.61
Ratio of earnings to fixed charges
plus preferred dividend
requirements (pre-income tax
basis)(4)....................... 2.53 2.71 2.79 2.90 3.16 3.07
</TABLE>
CAPITALIZATION
<TABLE>
<CAPTION>
CAPITALIZATION (UNAUDITED) AS
OF
SEPTEMBER 30, 1995
-------------------------------
ACTUAL AS ADJUSTED(5)
---------- ------------------
(THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Common Stock equity...................................................... $2,726,029 $2,726,029 48.2%
Cumulative Preferred Stock............................................... 440,400 440,400 7.8
Long-term debt........................................................... 2,396,963 2,396,963 42.3
Company obligated mandatorily redeemable preferred securities of Alabama
Power Capital Trust I(6)............................................... -- 97,000 1.7
---------- ---------- -----
Total, excluding amounts due within one year.................... $5,563,392 $5,660,392 100.0%
========== ========== =====
</TABLE>
- ---------------
(1) See "Recent Results of Operations" herein.
(2) "Operating Revenues" for the year ended December 31, 1990, include amounts
relating to certain energy sales (including sales to affiliates) that
formerly were classified as purchased and interchanged power, net. Such
amounts were reclassified to "Operating Revenues" effective December 31,
1991, in accordance with accounting requirements of the Federal Energy
Regulatory Commission. "Operating Revenues" for the year ended December 31,
1994, and the twelve months ended November 30, 1995, include an adjustment
due to a change in the estimating procedure for unbilled kilowatt-hours and
associated revenues. See note 3 to the financial statements of the Company
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, incorporated herein by reference.
(3) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Income Before Interest Charges" all income taxes deducted
therefrom and the debt portion of allowance for funds used during
construction; and (ii) "Fixed Charges" consist of "Net Interest Charges"
plus the debt portion of allowance for funds used during construction.
(4) In computing this ratio, "Preferred Dividend Requirements" represent the
before income tax earnings necessary to pay such dividends, computed at the
effective tax rates for the applicable periods.
(5) Reflects the issuance of Junior Subordinated Notes and Preferred Securities.
(6) As described in this Prospectus, substantially all of the assets of the
Trust will be the % Junior Subordinated Notes due , 2026 of
the Company with a principal amount of $100,000,000, and upon redemption of
such debt, the Preferred Securities will be mandatorily redeemable. In
addition to the Junior Subordinated Notes, the Trust may hold, from time to
time, accounts receivable under the Agreement as to Expenses and
Liabilities. For a more complete description of the Trust's assets, see
"Alabama Power Capital Trust I."
12
<PAGE>
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 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)
250-1000.
The Company is a wholly owned subsidiary of The Southern Company, a holding
company registered under the Public Utility Holding Company Act of 1935. 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 these 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.
USE OF PROCEEDS
The proceeds from the sale of the Preferred Securities will be used in
connection with the Company's 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.
RECENT RESULTS OF OPERATIONS
For the twelve months ended November 30, 1995, the unaudited amounts of
"Operating Revenues," "Income Before Interest Charges," and "Net Income After
Dividends on Preferred Stock" were $2,993,771,000, $621,997,000, and
$367,410,000, respectively. In the opinion of the management of the Company, the
above amounts for the twelve months ended November 30, 1995 reflect all
adjustments (which were only normal recurring adjustments, except as indicated
in Note 2 to the Selected Financial Information above) 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 twelve months ended
November 30, 1995 were 3.61 and 3.07, respectively.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement will be qualified as an indenture under the 1939
Act. The Property Trustee will act as the indenture trustee with respect to the
Trust, as well as the Guarantee, for purposes of compliance with the provisions
of the 1939 Act. The terms of the Preferred Securities will include those stated
in the Trust Agreement, the Delaware Business Trust Act, and those made part of
the Trust Agreement by the 1939 Act. The following summary of the principal
terms and provisions of the Preferred Securities does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the Trust
Agreement, a copy of which is filed as an exhibit to the Registration Statement,
of which this Prospectus is a part, as well as the 1939 Act.
13
<PAGE>
GENERAL
The Trust Agreement authorizes the Administrative Trustees, on behalf of
the Trust, to issue the Preferred Securities, which represent preferred
undivided beneficial interests in the assets of the Trust, and the Common
Securities, which represent common undivided beneficial interests in the assets
of the Trust. All of the Common Securities will be owned by the Company. The
Common Securities rank pari passu, and payments will be made thereon on a pro
rata basis with, the Preferred Securities, except that upon the occurrence of a
Trust Agreement Event of Default, the rights of the holders of the Common
Securities to receive payment of periodic distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the Preferred Securities. The Trust Agreement does not permit the
issuance by the Trust of any securities other than the Trust Securities or the
incurrence of any indebtedness by the Trust. Pursuant to the Trust Agreement,
the Property Trustee will own and hold the Junior Subordinated Notes for the
benefit of the Trust and the holders of the Trust Securities. The payment of
distributions out of money held by the Trust, and payments upon redemption of
the Preferred Securities or liquidation of the Trust, are guaranteed by the
Company on a subordinated basis as and to the extent described under
"Description of the Guarantee." The Guarantee does not cover payment of
distributions on the Preferred Securities when the Trust does not have legally
available funds sufficient to make such distributions. In such event, the remedy
of a holder of Preferred Securities is to direct the Property Trustee to enforce
its rights under the Junior Subordinated Notes. The above mechanisms and
obligations constitute a full and unconditional guarantee by the Company of
payments due on the Preferred Securities. See "-- Voting Rights" below.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at the Securities
Rate and will accrue from the Issue Date and, except in the event of an
Extension Period, will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year. Because March 31, 1996 is not a
Business Day, the initial Distribution Date will be April 1, 1996. In the event
that any date on which distributions are to be made on the Preferred Securities
is not a Business Day, then payment of the distributions payable on such date
will be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. A "Business Day" shall mean any day other than
Saturday, Sunday or any day on which banking institutions in New York City (or
in the jurisdiction in which the Indenture Trustee's or Property Trustee's
principal offices are located) are authorized or required by law to close.
Distributions payable on any Distribution Date will be payable to the
holders of record on the Record Date for such Distribution Date, which is the
close of business on the fifteenth calendar day preceding such Distribution
Date. Subject to any applicable laws and regulations and the provisions of the
Trust Agreement, each such payment will be made as described under
"-- Book-Entry Only Issuance -- The Depository Trust Company" below. The amount
of distributions payable for any period will be computed on the basis of a
360-day year of twelve 30-day months.
The Company has the right under the Subordinated Note Indenture to defer
payments of interest on the Junior Subordinated Notes by extending the interest
payment period from time to time on the Junior Subordinated Notes (each, an
"Extension Period") which, if exercised, would defer quarterly distributions on
the Preferred Securities during any such extended interest payment period.
Deferred installments of interest on the Junior Subordinated Notes will bear
interest, compounded quarterly, at a rate per annum equal to the Securities
Rate. If distributions are deferred, the deferred distributions and accrued
interest thereon shall be paid, if funds are legally available therefor, to
holders of record of the Preferred Securities as they appear on the books and
records of the Trust on the Record Date next following the termination of such
Extension Period. See "Description of the Junior Subordinated Notes -- Interest"
and "-- Option to Extend Interest Payment Period."
14
<PAGE>
Distributions on the Preferred Securities must be paid on the Distribution
Dates to the extent that the Trust has funds legally and immediately available
for the payment of such distributions. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received under the Junior Subordinated Notes. See "Description of the
Junior Subordinated Notes."
REDEMPTION
The Preferred Securities are subject to mandatory redemption upon repayment
of the Junior Subordinated Notes at maturity or their earlier redemption. The
Junior Subordinated Notes will mature on , 2026 and may be redeemed,
in whole or in part, at the option of the Company, at any time on or after
, 2001, or at any time in whole in certain circumstances upon the
occurrence of a Special Event. Upon the repayment of the Junior Subordinated
Notes, whether at maturity or upon redemption, the proceeds from such repayment
or payment shall simultaneously be applied to redeem a like amount of Trust
Securities upon not less than 30 nor more than 60 days notice, at the Redemption
Price (as defined below). See "Description of the Junior Subordinated
Notes -- Optional Redemption." If a partial redemption of the Junior
Subordinated Notes would result in the delisting of the Preferred Securities,
the Company may only redeem the Junior Subordinated Notes in whole. In the event
that fewer than all of the outstanding Trust Securities are to be redeemed, the
Preferred Securities to be redeemed will be selected as described under
"Book-Entry Only Issuance -- The Depository Trust Company." If the Preferred
Securities are no longer in book-entry only form, the Preferred Securities to be
redeemed will be selected by such method as the Property Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of
portions (equal to $25 or integral multiples thereof) of the aggregate
liquidation amount of Preferred Securities of a denomination larger than $25;
provided, however, that before undertaking the redemption of the Preferred
Securities on other than a pro rata basis, the Property Trustee shall have
received an opinion of counsel that the status of the Trust as a grantor trust
for federal income tax purposes would not be adversely affected.
The Redemption Price for each Preferred Security shall equal the stated
liquidation amount of $25 plus accrued and unpaid distributions thereon to the
date of payment.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event, the Company will have the option to
redeem the Junior Subordinated Notes (and thus causing the redemption of the
Preferred Securities) or, subject to certain conditions, cause the distribution
of the Junior Subordinated Notes pro rata to the holders of the Trust
Securities; provided, however, that, if at the time there is available to the
Company or the Trust the opportunity to eliminate, within such 90 day period,
the Special Event by taking some ministerial action, such as filing a form or
making an election, or pursuing some other similar reasonable measure, which
would have no adverse effect on the Trust, the Company or the holders of the
Trust Securities, the Company or the Trust will pursue such measure in lieu of
redemption or dissolution. A Special Event is either an Investment Company Act
Event or a Tax Event.
An "Investment Company Act Event" means that the Administrative Trustees
and the Company shall have received an opinion of independent counsel (which may
be counsel to the Company) to the effect that, as a result of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority after the Issue Date, there is more than an insubstantial risk that
the Trust is or will be considered an investment company under the 1940 Act.
"Tax Event" means that the Administrative Trustees and the Company shall
have received an opinion from independent tax counsel experienced in such
matters (which may be counsel to the Company) to the effect that, as a result of
(a) any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to, or
change in, an interpretation or application of such laws or regulations, there
is more than an insubstantial risk that (i) the Trust would be subject to United
States federal income tax with respect to income accrued or received on the
Junior Subordinated Notes, (ii) interest
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payable to the Trust on the Junior Subordinated Notes would not be deductible by
the Company for United States federal income tax purposes or (iii) the Trust
would be subject to more than a de minimis amount of other taxes, duties or
other governmental charges, which change or amendment becomes effective on or
after the date of this Prospectus. See "Proposed Tax Law Changes."
Prior to the distribution of Junior Subordinated Notes in connection with
the occurrence of a Special Event, the Property Trustee shall have received a No
Recognition Opinion.
If Junior Subordinated Notes are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to have the Junior
Subordinated Notes listed on the NYSE or on such other exchange as the Preferred
Securities are then listed. After the date for any distribution of Junior
Subordinated Notes upon termination of the Trust, (i) the Preferred Securities
and the Guarantee will no longer be deemed to be outstanding, (ii) the
depositary or its nominee, as the record holder of the Preferred Securities,
will receive a registered global certificate or certificates representing the
Junior Subordinated Notes to be delivered upon such distribution and (iii) any
certificates representing Preferred Securities and the Guarantee not held by the
depositary or its nominee will be deemed to represent Junior Subordinated Notes
having an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the Securities Rate of, and
accrued and unpaid interest equal to accrued and unpaid distribution on, such
Preferred Securities, until such certificates are presented to the Company or
its agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Notes that may be distributed in exchange
for the Preferred Securities if a termination and liquidation of the Trust were
to occur. Accordingly, the Preferred Securities that an investor may purchase,
or the Junior Subordinated Notes that the investor may receive on termination
and liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
In the event that fewer than all of the Trust Securities are to be
redeemed, then the aggregate liquidation preference for the Trust Securities to
be redeemed shall be allocated 97% to the Preferred Securities and 3% to the
Common Securities.
The Preferred Securities redeemed on each redemption date shall be redeemed
at the Redemption Price with the proceeds from the contemporaneous redemption of
the Junior Subordinated Notes. Redemption of Preferred Securities shall be
deemed payable on each redemption date only to the extent that the Trust has
funds legally available for payment of such Redemption Price.
If the Property Trustee gives a notice of redemption in respect of
Preferred Securities (which notice will be irrevocable), then, by 2:00 P.M., New
York City time, on the redemption date, subject to the immediately preceding
paragraph, the Property Trustee will irrevocably deposit with the securities
depositary, so long as the Preferred Securities are in book-entry only form,
sufficient funds to pay the applicable Redemption Price. See "Book-Entry Only
Issuance -- The Depository Trust Company." If the Preferred Securities are no
longer in book-entry only form, the Property Trustee, subject to the immediately
preceding paragraph, shall irrevocably deposit with the Paying Agent funds
sufficient to pay the applicable Redemption Price and will give the Paying Agent
irrevocable instructions to pay the Redemption Price to the Holders thereof upon
surrender of their Preferred Securities certificates. If notice of redemption
shall have been given and funds deposited as required, then immediately prior to
the close of business on the date of such deposit, distributions will cease to
accrue and all rights of holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price. In the event that any date fixed for redemption of Preferred
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of Preferred Securities is improperly withheld or
refused and not paid either by the Trust or by the Company pursuant to the
Guarantee,
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distributions on such Preferred Securities will continue to accrue at the then
applicable rate, from such redemption date originally established by the Trust
for such Preferred Securities to the date such redemption price is actually
paid. See "-- Events of Default" below, "Description of the Guarantee -- Events
of Default" and "Relationship Among the Preferred Securities, Junior
Subordinated Notes and the Guarantee."
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), the Company or its
affiliates may, at any time and from time to time, purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as fully
registered securities registered in the name of Cede & Co., DTC's nominee. One
or more fully registered global Preferred Securities certificates will be
issued, representing in the aggregate the total number of Preferred Securities,
and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the NYSE, the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
Preferred Securities ("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 Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Preferred Securities, except in the event that use
of the book-entry system for the Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities. DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
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 shall be sent to DTC. If less than all of the Preferred
Securities are being redeemed, DTC will reduce the amount of the interest of
each Direct Participant in the Preferred Securities in accordance with its
procedures.
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Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust 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 Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Distribution payments on the Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by participants to Beneficial Owners will be governed by
standing instructions and customary practices, as in the case with securities
held for the account of customers registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Trust, any trustee or the
Company, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of distributions to DTC is the responsibility of the
Trust, 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 in a global Preferred
Security will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. Such laws may impair the ability to
transfer beneficial interests in a global Preferred Security.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities 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 Preferred Securities. In that event,
certificates for the Preferred Securities 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 and the Trust believe to be
reliable, but the Company and the Trust take no responsibility for the accuracy
thereof. The Trust has no responsibility for the performance by DTC or its
Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Trust shall terminate on January 31,
2026, or earlier upon (i) the occurrence of a Bankruptcy Event (as defined in
the Trust Agreement), dissolution or liquidation of the Company, or termination
of the Trust pursuant to a judicial decree; (ii) the occurrence of a Special
Event followed by the distribution of the Junior Subordinated Notes; provided,
however, that the Trust will have the opportunity to eliminate the Special Event
as provided in the Trust Agreement; or (iii) the payment at maturity or
redemption of all of the Junior Subordinated Notes, and the consequent payment
of the Trust Securities.
If an early termination occurs as described in clause (i) above, the Trust
shall be liquidated, and the Property Trustee shall, subject to the receipt of
an opinion of counsel, distribute to each holder of Preferred Securities and
Common Securities a like amount of Junior Subordinated Notes, unless such
distribution is determined by the Administrative Trustee not to be practical, in
which event such holders will be entitled to receive, out of the assets of the
Trust available for distribution to holders after satisfaction of liabilities to
creditors, an amount equal to the aggregate of the stated liquidation preference
of $25 per Trust Security plus accrued and unpaid distributions thereon to the
date of payment (such amount being the "Liquidation Distribution"). If such
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then subject to the next succeeding
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sentence, the amounts payable directly by the Trust on the Trust Securities
shall be paid on a pro rata basis. The holder of the Common Securities will be
entitled to receive distributions upon any such dissolution pro rata with the
holders of the Preferred Securities, except that if a Trust Agreement Event of
Default has occurred and is continuing, the holders of Preferred Securities
shall have a preference over the holders of Common Securities.
If an early termination occurs as described in clause (ii) above, the
Junior Subordinated Notes shall not be distributed unless prior thereto the
Property Trustee shall have received a No Recognition Opinion.
EVENTS OF DEFAULT
Any one of the following events constitutes an "Event of Default" under the
Trust Agreement ("Trust Agreement Event of Default") with respect to the Trust
Securities issued thereunder (whatever the reason for such Event of Default, and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) the occurrence of an "Event of Default" as defined in Section 501
of the Subordinated Note Indenture (see "Description of Junior Subordinated
Securities -- Events of Default"); or
(ii) default by the Property Trustee in the payment of any
distribution when it becomes due and payable, and the continuation of such
default for a period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Preferred Security or Common Security when it becomes due and
payable; or
(iv) default in the performance, or breach of any covenant or warranty
of the Securities Trustees in the Trust Agreement (other than a covenant or
warranty a default in the performance of which or the breach of which is
dealt with in clause (ii) or (iii) above), and continuation of such default
or breach for a period of 60 days after there has been given, by registered
or certified mail, to such Securities Trustee by the holders of at least
10% in liquidation amount of the outstanding Preferred Securities a written
notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" under the Trust
Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Securities Trustees.
Within 90 Business Days after the occurrence of any Trust Agreement Event
of Default, the Property Trustee shall transmit notice of any default known to
the Property Trustee to the holders of Trust Securities and the Company, unless
such Trust Agreement Event of Default shall have been cured or waived.
If a Trust Agreement Event of Default occurs and is continuing, then,
pursuant to the Trust Agreement, holders of a majority in aggregate liquidation
amount of Preferred Securities have the right to direct the exercise of any
trust or power conferred upon the Property Trustee under the Trust Agreement,
including the right to direct the Property Trustee under the Trust Agreement to
exercise the remedies available to it as holder of the Junior Subordinated
Notes. If the Property Trustee fails to enforce its rights under the Junior
Subordinated Notes, a holder of Preferred Securities may, to the extent
permitted by applicable law, institute a legal proceeding directly against the
Company to enforce its rights under the Trust Agreement without first
instituting any legal proceeding against the Property Trustee or the Trust. See
"Description of the Guarantee -- Events of Default" and "Relationship Among the
Preferred Securities, Junior Subordinated Notes and the Guarantee".
Unless a Trust Agreement Event of Default shall have occurred and be
continuing, the Securities Trustees may be removed at any time by act of the
holder of the Common Securities. If a Trust Agreement Event of Default has
occurred and is continuing, any Securities Trustee may be removed at such time
by act of the holders of a majority in liquidation preference of the Preferred
Securities, delivered to the appropriate Securities Trustee (in its individual
capacity and on behalf of the Trust). No resignation or removal of any
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Securities Trustee and no appointment by the successor shall be effective until
the acceptance of appointment by the successor Trustee in accordance with the
provisions of the Trust Agreement.
If a Trust Agreement Event of Default has occurred and is continuing, the
holders of Preferred Securities shall have a preference over the holders of
Common Securities upon dissolution of the Trust as described above. See
"-- Liquidation Distribution Upon Dissolution."
VOTING RIGHTS
Except as provided below and under "Description of the
Guarantee -- Amendments and Assignment" and as otherwise required by law and the
Trust Agreement, the holders of the Preferred Securities will have no voting
rights.
If any proposed amendment to the Trust Agreement provides for, or the
Securities Trustees otherwise propose to effect (i) any action that would
adversely affect the powers, preferences or special rights of the holders of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise or (ii) the dissolution, winding up or termination of the Trust, other
than pursuant to the Trust Agreement, then the holders of outstanding Preferred
Securities will be entitled to vote as a class on such amendment or proposal of
the Securities Trustees, and such amendment or proposal shall not be effective
except with the approval of the holders of 66 2/3% in liquidation preference of
such outstanding Preferred Securities.
So long as any Junior Subordinated Notes are held by the Property Trustee,
the Securities Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee (as
defined herein), or executing any trust or power conferred on the Indenture
Trustee with respect to the Junior Subordinated Notes, (ii) waive any past
default which is waivable under Section 513 of the Subordinated Note Indenture,
(iii) exercise any right to rescind or annul a declaration that the principal of
all the Junior Subordinated Notes shall be due and payable, or (iv) consent to
any amendment, modification or termination of the Subordinated Note Indenture or
the Junior Subordinated Notes, where such consent shall be required, or to any
other action, as the holder of the Junior Subordinated Notes, under the
Subordinated Note Indenture, without, in each case, obtaining the prior approval
of the holders of at least 66 2/3% in liquidation preference of the outstanding
Preferred Securities; provided, however, that where a consent under the
Subordinated Note Indenture would require the consent of each holder of Junior
Subordinated Notes affected thereby, no such consent shall be given by the
Securities Trustees without the prior consent of each holder of Preferred
Securities. The Securities Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Preferred Securities. The
Property Trustee shall notify all holders of the Preferred Securities of any
notice of default received from the Indenture Trustee with respect to the Junior
Subordinated Notes. In addition to obtaining the foregoing approvals of the
holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Securities Trustees shall obtain an opinion of counsel experienced
in such matters to the effect that the Trust will not be classified as other
than a grantor trust for federal income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given at a
separate meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Administrative Trustees will cause a notice of
any meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be given to each holder of record of Preferred Securities in the manner set
forth in the Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Company, the Securities Trustees or any
affiliate of the Company or any Securities Trustee, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
CO-PROPERTY TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless a Trust Agreement Event of Default shall have occurred and be
continuing, at any time or times, for the purpose of meeting the legal
requirements of the 1939 Act or of any jurisdiction in which any part of
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the Trust Property (as defined in the Trust Agreement) may at the time be
located, the holder of the Common Securities and the Property Trustee shall have
power to appoint, and upon the written request of the Property Trustee, the
Company, as depositor, shall for such purpose join with the Property Trustee in
the execution, delivery and performance of all instruments and agreements
necessary or proper to appoint one or more persons approved by the Property
Trustee either to act as co-property trustee, jointly with the Property Trustee,
of all or any part of such Trust Property, or to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such person or persons in such
capacity, any property, title, right or power deemed necessary or desirable,
subject to the provisions of the Trust Agreement. If the Company, as depositor,
does not join in such appointment within 15 days after the receipt by it of a
request so to do, or in case an Event of Default under the Subordinated Note
Indenture has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.
MODIFICATION OF THE TRUST AGREEMENT
The Trust Agreement may be amended or modified by the Company and the
Securities Trustees without the consent of the holders of the Trust Securities
(i) to cure any ambiguity, provided that the amendment does not adversely and
materially affect any holder of Trust Securities, or (ii) to ensure that the
Trust will not be classified as other than a grantor trust for federal income
tax purposes. Except as provided in the succeeding paragraph, other amendments
to the Trust Agreement may be made (i) upon approval of the holders of not less
than 66 2/3% in aggregate liquidation amount of the Trust Securities then
outstanding and (ii) upon receipt by the Securities Trustees of an opinion of
counsel to the effect that such amendment will not affect the Trust's status as
a grantor trust or the Trust's exemption from the 1940 Act.
Notwithstanding the foregoing, without the consent of each affected holder
of Trust Securities, the Trust Agreement may not be amended to (i) change the
amount or timing of any distribution on the Trust Securities or otherwise
adversely affect the amount of any distribution required to be made in respect
of the Trust Securities as of a specific date, (ii) restrict the right of a
holder of Trust Securities to institute suit for enforcement of any payment, or
(iii) change the consent required to amend the Trust Agreement.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. The Trust may at the request of the Company, with the consent
of the Administrative Trustees and without the consent of the holders of the
Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by
a trust organized as such under the laws of any state; provided, that (i) such
successor entity either (x) expressly assumes all of the obligations of the
Trust with respect to the Trust Securities or (y) substitutes for the Preferred
Securities other securities having substantially the same terms as the Trust
Securities (the "Successor Securities") so long as the Successor Securities rank
the same as the Trust Securities rank in priority with respect to distributions
and payments upon liquidation, redemption and otherwise, (ii) the Company
expressly appoints a trustee of such successor entity possessing the same powers
and duties as the Property Trustee as the holder of the Junior Subordinated
Notes, (iii) the Preferred Securities or any Successor Securities are listed, or
any Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed, (iv) such merger, consolidation, amalgamation or
replacement does not cause the Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the holders of
the Trust Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose identical to that of the
Trust, (vii) prior to such merger, consolidation, amalgamation or replacement,
the Company has received an opinion from independent counsel to the Trust
experienced in such matters to the effect that (A) such merger, consolidation,
amalgamation or replacement does not adversely affect the rights, preferences
and privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect, and (B) following such
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merger, consolidation, amalgamation or replacement, neither the Trust nor such
successor entity will be required to register as an investment company under the
1940 Act, and (viii) the Company guarantees the obligations of such successor
entity under the Successor Securities at least to the extent provided by the
Guarantee. Notwithstanding the foregoing, the Trust shall not, except with the
consent of holders of 100% in liquidation amount of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger or replacement would
cause the Trust or the successor entity to be classified as other than a grantor
trust for federal income tax purposes.
Any corporation or other body into which any of the Property Trustee, the
Delaware Trustee or any Administrative Trustee that is not a natural person may
be merged or converted or with which it may be consolidated, or any corporation
or other body resulting from any merger, conversion or consolidation to which
any such Securities Trustee shall be a party, or any corporation or other body
succeeding to all or substantially all the corporate trust business of any such
Securities Trustee, shall be the successor to such Securities Trustee under the
Trust Agreement, provided such corporation is otherwise qualified and eligible.
PAYMENT AND PAYING AGENT
So long as DTC is acting as securities depositary for the Preferred
Securities, payments in respect of the Preferred Securities shall be made to
DTC, which is to credit the relevant accounts at DTC on the applicable
Distribution Dates. If the Preferred Securities are not held by DTC, such
payments shall be made by check mailed to the address of the holder entitled
thereto as such address shall appear on the Securities Register (as such term is
defined in the Trust Agreement). The Paying Agent shall initially be the
Property Trustee. The Paying Agent shall be permitted to resign as Paying Agent
upon 30 days written notice to the Administrative Trustees and the Company. In
such event, the Administrative Trustees shall appoint a successor to act as
Paying Agent.
REGISTRAR AND TRANSFER AGENT
It is anticipated that the Property Trustee, or one of its affiliates, will
act as registrar and transfer agent (the "Securities Registrar") for the
Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment in respect of any tax or
other governmental charges which may be imposed in relation to it.
The Securities Registrar will not be required to register or cause to be
registered any transfer of Preferred Securities after they have been called for
redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a Trust Agreement Event of
Default with respect to the Trust Securities, undertakes to perform only such
duties as are specifically set forth in the Trust Agreement and, after default,
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 Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Trust Agreement at the request of any holder of Preferred Securities, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The holders of Preferred Securities
will not be required to offer such indemnity in the event such holders, by
exercising their voting rights, direct the Property Trustee to take any action
following a Trust Agreement Event of Default.
Chemical Bank, the Property Trustee, also serves as Indenture Trustee and
Guarantee Trustee. The Company and certain of its affiliates maintain a deposit
account and a banking relationship with Chemical Bank. Chemical Bank serves as
trustee under the Company's First Mortgage Bond Indenture and under another
indenture pursuant to which first mortgage bonds of an affiliate of the Company
are outstanding.
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GOVERNING LAW
The Trust Agreement and the Trust Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware;
provided that the immunities and standard of care of the Property Trustee shall
be governed by New York law.
MISCELLANEOUS
The Securities Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or characterized as other than a
grantor trust for federal income tax purposes. The Company is authorized and
directed to conduct its affairs so that the Junior Subordinated Notes will be
treated as indebtedness of the Company for federal income tax purposes. In this
connection, the Securities Trustees and the Company are authorized to take any
action, not inconsistent with applicable law, the Trust Agreement or the charter
of the Company, that the Securities Trustees and the Company determine in their
discretion to be necessary or desirable for such purposes, as long as such
action does not materially and adversely affect the interests of the holders of
the Preferred Securities.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by the Company for the benefit of the holders of
Preferred Securities from time to time. The Guarantee will be qualified as an
indenture under the 1939 Act. Chemical Bank will act as indenture trustee under
the Guarantee (the "Guarantee Trustee") for purposes of the 1939 Act. The terms
of the Guarantee will be those set forth therein and those made part thereof by
the 1939 Act. The following summary does not purport to be complete and is
subject in all respects to the provisions of, and is qualified in its entirety
by reference to the Guarantee, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and the 1939 Act. The Guarantee
will be held by the Guarantee Trustee for the benefit of holders of the
Preferred Securities.
GENERAL
Pursuant to the Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth therein, to pay in full, to the holders of the
Preferred Securities, the Guarantee Payments (as defined herein), to the extent
not paid by, or on behalf of, the 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
to the extent not paid or made by, or on behalf of, the Trust will be subject to
the Guarantee (without duplication): (i) any accrued and unpaid distributions
required to be paid on the Preferred Securities but if and only if and to the
extent that the Trust has funds legally and immediately available therefor, (ii)
the Redemption Price, with respect to any Preferred Securities called for
redemption by the Trust, but only to the extent the Trust has funds legally and
immediately available therefor, and (iii) upon a dissolution, winding-up or
termination of the Trust (other than in connection with the distribution of
Junior Subordinated Notes to the holders of Trust Securities or the redemption
of all of the Preferred Securities), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on the Preferred
Securities to the date of payment, to the extent the Trust has funds legally and
immediately available therefor, and (b) the amount of assets of the Trust
remaining available for distribution to holders of Preferred Securities in
liquidation of the 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 Preferred Securities or by causing the
Trust to pay such amounts to such holders.
The Guarantee will be a full and unconditional guarantee of the Guarantee
Payments with respect to the Preferred Securities from the time of issuance of
the Preferred Securities, but will not apply to the payment of distributions and
other payments on the Preferred Securities when the Trust does not have
sufficient funds legally and immediately available to make such distributions or
other payments. IF THE COMPANY DOES NOT
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MAKE INTEREST PAYMENTS ON THE JUNIOR SUBORDINATED NOTES HELD BY THE PROPERTY
TRUSTEE, THE TRUST WILL NOT MAKE DISTRIBUTIONS ON THE PREFERRED SECURITIES.
SUBORDINATION
The Company's obligations under the Guarantee to make the Guarantee
Payments will constitute an unsecured obligation of the Company and will rank
(i) subordinate and junior in right of payment to all other liabilities of the
Company, including the Junior Subordinated Notes, except those obligations or
liabilities made pari passu or subordinate by their terms, (ii) pari passu with
the most senior preferred or preference stock now or hereafter issued by the
Company and with any guarantee now or hereafter entered into by the Company in
respect of any preferred or preference securities of any affiliate of the
Company, and (iii) senior to all common stock of the Company. The terms of the
Preferred Securities provide that each holder of Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of the
Guarantee. The Company has outstanding preferred stock that ranks pari passu to
the Guarantee and common stock that ranks junior to the Guarantee. See "Selected
Financial Information."
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the guarantor to enforce its rights under the guarantee without first
instituting a legal proceeding against any other person or entity).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially and adversely
affect the rights of holders of Preferred Securities (in which case no consent
will be required), the Guarantee may be amended only with the prior approval of
the holders of not less than 66 2/3% in liquidation amount of the outstanding
Preferred Securities. The manner of obtaining any such approval of holders of
the Preferred Securities is set forth under "Description of the Preferred
Securities -- Voting Rights." All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Preferred Securities then outstanding.
TERMINATION
The Guarantee will terminate and be of no further force and effect as to
the Preferred Securities upon full payment of the Redemption Price of all
Preferred Securities, upon distribution of the Junior Subordinated Notes to the
holders of Preferred Securities, or upon full payment of the amounts payable
upon liquidation of the Trust. The Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sums paid to them under the Preferred
Securities or the Guarantee.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure by the
Company to perform any of its payment obligations thereunder. The holders of a
majority in liquidation amount of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of the Guarantee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Guarantee. If the Guarantee Trustee fails to enforce the Guarantee, any holder
of 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 may, by
majority vote, on behalf of the holders of all the Preferred Securities, 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 the Guarantee and after the curing of all events of default with
respect to the Guarantee, undertakes to perform only such duties
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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 the Guarantee at the request of any holder of Preferred
Securities, unless offered reasonable indemnity against the costs, expenses and
liabilities which might be incurred thereby.
Chemical Bank, the Guarantee Trustee, also serves as Property Trustee and
as Indenture Trustee. The Company and certain of its affiliates maintain a
deposit account and a banking relationship with Chemical Bank. Chemical Bank
serves as trustee under the Company's First Mortgage Bond Indenture and under
another indenture pursuant to which first mortgage bonds of an affiliate of the
Company are outstanding.
GOVERNING LAWS
The Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES
Set forth below is a description of the 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 , 1996, between the Company and Chemical
Bank, as trustee (the "Indenture Trustee"), as supplemented by a First
Supplemental Indenture, dated as of , 1996 (the Subordinated Note
Indenture, as so supplemented, is hereinafter referred to as the "Subordinated
Note Indenture"), the forms of which are filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The terms of the Junior
Subordinated Notes will include those stated in the Subordinated Note Indenture
and those made a part of the Subordinated Note Indenture by reference to the
1939 Act. Certain capitalized terms used herein are defined in the Subordinated
Note Indenture.
GENERAL
The Junior Subordinated Notes will be issued as unsecured junior
subordinated debt securities under the Subordinated Note Indenture. The Junior
Subordinated Notes will be limited in aggregate principal amount to $100
million, such amount being the amount of the purchase price of the Trust
Securities.
The Junior Subordinated Notes are not subject to a sinking fund provision.
The entire principal amount of the Junior Subordinated Notes will mature and
become due and payable, together with any accrued and unpaid interest thereon,
including Additional Interest (as defined herein), if any, on ,
2026.
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 herein)), 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 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 dissolution, winding up,
liquidation or reorganization, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, then all principal
of, premium, if any, and interest due or to become due on, all Senior
Indebtedness must be paid in full before the holders of Junior Subordinated
Notes are entitled to receive or retain any payment. Subject to the prior
payment of all Senior Indebtedness, the rights of the holders of the Junior
Subordinated Notes will be subordinated to the rights of the holders of
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Senior Indebtedness to receive payments or 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 Subordinate Note Indenture or thereafter incurred,
created or assumed (a) in respect of money borrowed (including any financial
derivative, hedging or futures contract or similar instrument) and (b) evidenced
by securities, debentures, bonds, notes or other similar instruments issued by
the Company that, by their terms, are senior or senior subordinated debt
securities including, without limitation, all obligations under its indentures
with various trustees; (ii) all capital lease obligations; (iii) all obligations
issued or assumed as the deferred purchase price of property, all conditional
sale obligations and all obligations of the Company under any title retention
agreements (but excluding trade accounts payable arising in the ordinary course
of business and long-term purchase obligations); (iv) all obligations for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction; (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise; and (vi)
all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of the Company
(whether or not such obligation is assumed by the Company), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Junior Subordinated Notes and (2) any unsecured indebtedness between or among
the Company or its affiliates. Such Senior Indebtedness shall continue to be
Senior Indebtedness and be entitled to the benefits of the subordination
provisions contained in the Subordinated Note Indenture irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
The Subordinated Note Indenture does not limit the aggregate amount of
Senior Indebtedness that may be issued by the Company. As of September 30, 1995,
Senior Indebtedness of the Company aggregated approximately $2,450,196,000.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Junior Subordinated Notes,
in whole or in part, without premium, from time to time, on or after
, 2001, or at any time in whole in certain circumstances upon the
occurrence of a Special Event as described under "Description of the Preferred
Securities -- Special Event Redemption or Distribution," upon not less than 30
nor more than 60 days notice, at a Redemption Price equal to 100% of the
principal amount to be redeemed plus any accrued and unpaid interest, including
Additional Interest, if any, to the Redemption Date. If a partial redemption of
the Junior Subordinated Notes would result in the delisting of the Preferred
Securities, the Company may only redeem the Junior Subordinated Notes in whole.
INTEREST
Each Junior Subordinated Note shall bear interest at the Securities Rate
from the Issue Date, payable quarterly in arrears on March 31, June 30,
September 30, and December 31 of each year to the person in whose name such
Junior Subordinated Note is registered at the close of business on the fifteenth
calendar day prior to such payment date. Because March 31, 1996 is not a
Business Day, the initial payment of interest will be made on April 1, 1996. The
amount of interest payable will be computed on the basis of a 360-day year of
twelve 30-day months. In the event that any date on which interest is payable on
the Junior Subordinated Notes is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date.
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OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time, to
extend payments of interest on the Junior Subordinated Notes by extending the
interest payment period for up to 20 consecutive quarters, but not beyond the
maturity date. At the end of an Extension Period, the Company shall pay all
interest then accrued and unpaid (including any Additional Interest) (together
with interest thereon at the Securities Rate compounded quarterly); provided,
that if the Company shall have given notice of its election to select an
Extension Period, (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 or make any
guarantee payments with respect to the foregoing, 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
Guarantee) issued by the Company which rank pari passu with or junior to the
Junior Subordinated Notes. Prior to the termination of any Extension Period, the
Company may further defer payments of interest by extending the interest payment
period, provided that such Extension Period, together with all such previous and
further extensions thereof, may not exceed 20 consecutive quarters. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Company may select a new Extension Period, subject to the above requirements.
The Company has no present intention of exercising its rights to defer payments
of interest by extending the interest payment period on the Junior Subordinated
Notes.
The Company shall give the holder or holders of the Junior Subordinated
Notes and Indenture Trustee notice of its selection of such Extension Period at
least one Business Day prior to the earlier of (i) the record date relating to
the interest payment date on which the Extension Period is to commence or
relating to the interest payment date on which an Extension Period that is being
extended would otherwise terminate or (ii) the date the Administrative Trustees
are required to give such notice to the NYSE or other applicable self-regulatory
organization of the record date or the date such distributions are payable.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, the Company will pay as additional interest ("Additional Interest")
such additional amounts as shall be required so that the net amounts received
and retained by the Trust after paying such taxes, duties, assessments or other
governmental charges will be not less than the amounts the Trust would have
received had no such taxes, duties, assessments or other governmental charges
been imposed.
CERTAIN COVENANTS
The Subordinated Note Indenture provides that (i) if at such time the
Company shall have given notice of its election to extend an interest payment
period with respect to the 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 the Junior Subordinated Notes, or (iii) if at
such time an Event of Default hereunder with respect to the 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
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 Guarantee) issued by the Company which rank pari passu with or
junior to the Junior Subordinated Notes. None of the foregoing, however, shall
restrict (i) any of the actions described in the preceding sentence resulting
from any reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, (ii) the declaration and payment
of a dividend or distribution or similar share purchase rights in the future, or
(iii) 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.
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The Subordinated Note Indenture further provides that, for so long as the
Trust Securities remain outstanding, the Company will covenant (i) to directly
or indirectly maintain 100% ownership of the Common Securities of the 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 the Trust (a)
to remain a statutory business trust, except in connection with the distribution
of Junior Subordinated Notes to the holders of Trust Securities in liquidation
of the Trust, the redemption of all of the Trust Securities of the Trust, or
certain mergers, consolidations or amalgamations, each as permitted by the 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, which has occurred and is continuing, constitutes an
"Event of Default" with respect to the Junior Subordinated Notes:
(a) failure for 10 days to pay interest on the Junior Subordinated
Notes, including any Additional Interest (as defined in clause (ii) of the
definition thereof in the Subordinated Note Indenture) in respect thereof,
when due on an Interest Payment Date other than at maturity or upon earlier
redemption; provided, however, that a valid extension of the interest
payment period by the Company shall not constitute a default in the payment
of interest for this purpose; or
(b) failure for 10 days to pay Additional Interest (as defined in
clause (i) of the definition thereof in the Subordinated Note Indenture).
(c) failure to pay principal or premium, if any, or interest,
including Additional Interest (as defined in clause (ii) of the definition
thereof in the Subordinated Note Indenture) on the Junior Subordinated
Notes when due at maturity or upon earlier redemption; or
(d) failure to observe or perform any other covenant (other than those
specifically relating to another series of junior subordinated notes)
contained in the Subordinated Note Indenture for 90 days after written
notice to the Company from the Indenture Trustee or the holders of at least
25% in principal amount of the outstanding Junior Subordinated Notes; 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 Junior Subordinated Notes have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Indenture Trustee. If a Subordinated Note Indenture Event of Default occurs and
is continuing, then the Indenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Junior Subordinated Notes may
declare the principal due and payable immediately by notice in writing to the
Company (and to the Indenture Trustee if given by the holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. At any time after such a declaration of
acceleration has been made and before a judgment or decree for payment of the
money due has been obtained as provided in Article Five of the Subordinated Note
Indenture, the holders of not less than a majority in aggregate outstanding
principal amount of the Junior Subordinated Notes 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 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 Indenture Trustee, including reasonable compensation and expenses of the
Indenture Trustee.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes on behalf of the holders of all the
Junior Subordinated Notes, 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 warranty under Article Nine of the Subordinated Note
Indenture which cannot be modified or amended thereunder without the consent of
the holder of each outstanding Junior Subordinated Note affected thereby. A
Subordinated Note Indenture Event of Default also constitutes a Trust Agreement
Event of Default. The holders of Preferred Securities in certain circumstances
have the right to direct the Property
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Trustee to exercise its rights as the holder of the Junior Subordinated Notes.
See "Description of the Preferred Securities -- Events of Default" and
"-- Voting Rights."
A voluntary or involuntary dissolution of the Trust prior to redemption or
maturity of the Junior Subordinated Notes would not constitute an Event of
Default with respect to the Junior Subordinated Notes. If the Trust is
dissolved, an event the Company and the Trust consider to be remote, the
following events, among others, could occur: (i) a distribution of the Junior
Subordinated Notes to the holders of the Preferred Securities, or (ii) a
permitted redemption at par of the Junior Subordinated Notes, and a consequent
redemption of a like amount of the Preferred Securities, at the option of the
Company under the circumstances described in "-- Optional Redemption". See
"Description of the Preferred Securities -- Liquidation Distribution Upon
Dissolution."
BOOK-ENTRY AND ISSUANCE
If distributed to holders of Trust Securities in connection with the
voluntary or involuntary dissolution, winding up or liquidation of the Trust as
a result of the occurrence of a Special Event, the Junior Subordinated Notes are
expected to be issued in the form of one or more global certificates registered
in the name of the securities depositary or its nominee. In such event, the
procedures applicable to the transfer and payment of the Junior Subordinated
Notes are expected to be substantially similar to those described with respect
to the Preferred Securities in "Description of the Preferred
Securities -- Book-Entry Only Issuance -- The Depository Trust Company."
The Company shall not be required to (i) issue, register the transfer of or
exchange Junior Subordinated Notes during a period beginning at the opening of
business 15 days before any mailing of notice of selection for redemption of
Junior Subordinated Notes and ending at the close of business on the day of
mailing and (ii) register the transfer of or exchange any Junior Subordinated
Notes so selected for redemption, in whole or in part, except the unredeemed
position of any Junior Subordinated Notes being redeemed in part.
PAYMENT AND PAYING AGENT
Payment of principal of the Junior Subordinated Notes will be made only
against surrender to the Paying Agent of the Junior Subordinated Notes.
Principal of and interest on Junior Subordinated Notes will be payable, subject
to any applicable laws and regulations, at the office of such Paying Agent or
Paying Agents as the Company may designate from time to time, except that, at
the option of the Company, payment of any interest may be made by wire transfer
or by check mailed to the address of the person entitled thereto as such address
shall appear in the Note 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) is registered at the close of business on the Record Date
for such interest payment (the fifteenth calendar day before such interest
payment date).
The 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 which remain unclaimed
at the end of two years after such principal or interest shall have become due
and payable will be repaid to the Company, and the holder of such Junior
Subordinated Notes will thereafter look only to the Company for payment thereof.
MODIFICATION
The Subordinated Note Indenture contains provisions permitting the Company
and the Indenture Trustee, with the consent of the holders of not less than a
majority in principal amount of the Junior Subordinated Notes, to modify the
Subordinated Note Indenture or any supplemental indenture affecting that series
or the rights of the holders of the Junior Subordinated Notes; provided, that no
such modification may, without the consent of the holder of each outstanding
Junior Subordinated Note affected thereby, (i) change
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the stated maturity of the principal of, or any installment of principal of or
interest on, any Junior Subordinated Note, or reduce the principal amount
thereof or the rate of interest (including Additional Interest) thereon or any
premium payable upon the redemption thereof, or change the method of calculating
the rate of interest thereon, or impair the right to institute suit for the
enforcement of any such payment on or after the stated maturity thereof (or, in
the case of redemption, on or after the redemption date), or (ii) reduce the
percentage of principal amount of the outstanding Junior Subordinated Notes of
any series, the consent of whose holders is required for any such supplemental
indenture, or the consent of whose holders is required for any waiver (of
compliance with certain provisions of the Subordinated Note Indenture or certain
defaults thereunder and their consequences) provided for in the Subordinated
Note Indenture, or (iii) modify any of the provisions of the Subordinated Note
Indenture relating to supplemental indentures, waiver of past defaults, or
waiver of certain covenants, except to increase any such percentage or to
provide that certain other provisions of the Subordinated Note Indenture cannot
be modified or waived without the consent of the holder of each outstanding
Junior Subordinated Note affected thereby, or (iv) modify the provisions of the
Subordinated Note Indenture with respect to the subordination of the Junior
Subordinated Notes in a manner adverse to such holder.
In addition, the Company and the Indenture Trustee may execute, without the
consent of holders of the Junior Subordinated Notes, any supplemental indenture
for certain other usual purposes, including the creation of any new series of
junior subordinated notes.
CONSOLIDATION, MERGER AND SALE
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such other corporation or person
expressly assumes, by supplemental indenture executed and delivered to the
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 Indenture on the part of the
Company thereto; (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 Indenture Trustee an officers' certificate and
an opinion of counsel each stating that such transaction complies with the
provisions of the Subordinated Note Indenture governing consolidation, merger,
conveyance, transfer or lease and that all conditions precedent thereto have
been complied with.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to an Event of Default, undertakes to perform
only such duties as are specifically set forth in the Subordinated Note
Indenture and, in case an Event of Default has occurred and is continuing, 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 provision, the 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, unless offered reasonable indemnity by such holder against the costs,
expenses and liabilities which might be incurred thereby. The Indenture Trustee
is not required to expand or risk its own funds or otherwise incur personal
financial liability in the performance of its duties if the Indenture Trustee
reasonably believes that repayment or adequate indemnity is not reasonably
assured to it.
Chemical Bank, the Indenture Trustee, also serves as Property Trustee and
as Guarantee Trustee. The Company and certain of its affiliates maintain a
deposit account and a banking relationship with Chemical Bank. Chemical Bank
also serves as trustee under the Company's First Mortgage Bond Indenture and
under another indenture pursuant to which first mortgage bonds of an affiliate
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.
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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 liable for all of its obligations. Subject
to the foregoing, the Subordinated Note Indenture will be binding upon and inure
to the benefit of the parties thereto and their respective successors and
assigns. The Subordinated Note Indenture provides that it may not otherwise be
assigned by the parties thereto.
The Subordinated Note Indenture will also provide that the Company will pay
all fees and expenses related to (i) the offering of the Junior Subordinated
Notes, (ii) the organization, maintenance and dissolution of the Trust, (iii)
the retention of the Trustees, and (iv) the enforcement by the Indenture Trustee
of the rights of holders of Preferred Securities.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES,
JUNIOR SUBORDINATED NOTES AND THE GUARANTEE
As long as payments of interest and other payments are made when due on the
Junior Subordinated Notes, such payments will be sufficient to cover
distributions and payments due on the Trust Securities primarily because (i) the
aggregate principal amount of Junior Subordinated Notes will be equal to the sum
of the aggregate stated liquidation amount of the Trust Securities; (ii) the
interest rate and interest and other payment dates on the Junior Subordinated
Notes will match the distribution rate and distribution and other payment dates
for the Preferred Securities; (iii) the Company shall pay for all costs and
expenses of the Trust pursuant to the Agreement as to Expenses and Liabilities;
and (iv) the Trust Agreement provides that the Securities Trustees shall not
cause or permit the Trust to, among other things, engage in any activity that is
not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are legally
available) and other payments due on the Preferred Securities (to the extent
funds therefor are legally available) are guaranteed by the Company as and to
the extent set forth under "Description of the Guarantee." If the Company does
not make interest payments on the Junior Subordinated Notes, it is not expected
that the Trust will have sufficient funds to pay distributions on the Preferred
Securities. The Guarantee is a full and unconditional guarantee from the time of
its issuance, but does not apply to any payment of distributions unless and
until the Trust has sufficient funds legally available for the payment of such
distributions.
If the Company fails to make interest or other payments on the Junior
Subordinated Notes when due (taking into account any Extension Period), the
Trust Agreement provides a mechanism whereby the holders of the 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, including proceeding directly against the Company to enforce the Junior
Subordinated Notes. If the Property Trustee fails to enforce its rights under
the Junior Subordinated Notes, to the fullest extent permitted by applicable
law, any holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce the Property Trustee's rights under the
Junior Subordinated Notes without first instituting any legal proceeding against
the Property Trustee or any other person or entity.
If the Company fails to make payments under the Guarantee, the Guarantee
provides a mechanism whereby the holders of the Preferred Securities may direct
the Guarantee Trustee to enforce its rights thereunder. If the Guarantee Trustee
fails to enforce the Guarantee, any holder of Preferred Securities may institute
a legal proceeding directly against the Company to enforce the Guarantee
Trustee's rights under the Guarantee without first instituting a legal
proceeding against the Guarantee Trustee or any other person or entity.
The Guarantee, the Subordinated Note Indenture, the Junior Subordinated
Notes, the Trust Agreement and the Agreement as to Expenses and Liabilities, as
described above, constitute a full and unconditional guarantee by the Company of
the payments due on the Preferred Securities.
Upon any voluntary or involuntary dissolution, winding-up or termination of
the Trust, the holders of Preferred Securities will be entitled to receive, out
of assets, legally available for distribution to holders, the Liquidation
Distribution in cash. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Dissolution." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the 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 the Guarantee and has agreed to pay for all costs,
expenses and liabilities of the Trust (other than the Trust's obligations to
holders of the Preferred Securities) pursuant to the Agreement as to Expenses
and Liabilities, the positions of a holder of Preferred Securities and a holder
of Junior Subordinated Notes 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.
32
<PAGE>
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Subordinated Note Indenture.
However, in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Junior Subordinated Notes
provide that no payments may be made in respect of the Junior Subordinated Notes
until such Senior Indebtedness has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on the
Junior Subordinated Notes would constitute an Event of Default under the
Subordinated Note Indenture except that failure to make interest payments on the
Junior Subordinated Notes will not be an Event of Default during an Extension
Period; provided, however, that any Extension Period may not exceed 20
consecutive quarters or extend beyond the stated maturity of the Junior
Subordinated Notes.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain material United States federal income tax
consequences of the ownership and disposition of the Preferred Securities is the
opinion of Balch & Bingham, counsel to the Company. This summary deals only with
Preferred Securities held as capital assets within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended to the date hereof (the Code),
by Holders (as defined herein). Moreover, it does not discuss all of the tax
consequences that may be relevant to a Holder in light of his particular
circumstances or to Holders subject to special rules, such as certain financial
institutions, insurance companies, dealers in securities, individual retirement
and certain tax deferred accounts, and persons who engage in a straddle or a
hedge relating to a Preferred Security. Prospective investors should consult
their own tax advisors with regard to the application of the tax considerations
discussed below to their particular situations as well as the application of any
state, local or other tax laws. This summary is based on laws, existing and
proposed regulations, and applicable judicial and administrative determinations,
all of which are subject to change at any time, and any such changes may be
retroactively applied in a manner that could adversely affect Holders. As used
herein, the term "Holder" means a beneficial owner of a Preferred Security that
for United States federal income tax purposes is (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source. Thus, the
following summary does not address any tax consequences that apply specifically
to nonresident aliens or foreign entities.
TREATMENT OF THE TRUST AND PREFERRED SECURITIES FOR FEDERAL INCOME TAX PURPOSES
The Trust will be treated as a "grantor trust" and not as an association
taxable as a corporation for federal income tax purposes. Thus, for federal
income tax purposes, each Holder will be treated as the beneficial owner of a
pro rata undivided interest in the Junior Subordinated Notes and, consequently,
will be required to include in income the Holder's pro rata share of the entire
income from the Junior Subordinated Notes. Each Holder generally will determine
its net income or loss with respect to the Trust in accordance with its own
method of accounting, although income arising from original issue discount
("OID") must be taken into account under the accrual method of accounting even
if the Holder otherwise would use the cash receipts and disbursements method.
ORIGINAL ISSUE DISCOUNT
The Junior Subordinated Notes will be issued with OID within the meaning of
Section 1273 of the Code. Because the Holders will be treated for federal income
tax purposes as the owners of the Junior Subordinated Notes, the Holders will be
required to include in income their pro rata share of OID accruing on the Junior
Subordinated Notes in advance of the receipt of some or all of the related cash
payments on the Preferred Securities. Holders (including Holders who are cash
basis taxpayers) will include such OID in income currently as interest as it
accrues over the life of the Junior Subordinated Notes under a formula based
upon the quarterly compounding of interest at a rate that provides for a
constant yield to maturity. If (as expected) the issue price of the Junior
Subordinated Notes equals the stated principal amount of such Notes, the amount
of OID accruing during each quarterly interest period will be approximately the
same as the amount of stated interest accruing during such period on the Junior
Subordinated Notes.
33
<PAGE>
The amount of OID on a Junior Subordinated Note will equal the excess of
the "stated redemption price at maturity" over the "issue price" of the Junior
Subordinated Note. The issue price of each Junior Subordinated Note is expected
to equal the stated principal amount of such Note. Because the terms of the
Junior Subordinated Notes permit the Company to suspend payments of interest on
the Notes for up to 20 consecutive quarters, the stated redemption price at
maturity of the Junior Subordinated Notes will equal the aggregate of all
payments due on the Junior Subordinated Notes, whether designated as principal
or interest. Accordingly, the quarterly interest payments on the Junior
Subordinated Notes will be included in the stated redemption price at maturity
for purposes of determining the amount of OID with which a Junior Subordinated
Note is issued, and if (as expected) the issue price equals the stated principal
amount of the Junior Subordinated Notes, the OID will equal the total amount of
interest that will be payable (assuming no redemption before maturity) on the
Junior Subordinated Notes.
In general, the amount of OID that must be included in a Holder's income
for a taxable year is the sum of the "daily portions" of OID on the Junior
Subordinated Notes for all days during the taxable year that the Holder owns a
Preferred Security. Such daily portions are determined by allocating to each day
in the accrual period a ratable portion of the OID allocable to that accrual
period. An accrual period is each successive quarterly period that ends on an
Interest Payment Date. In the case of an initial Holder, the amount of OID
allocable to each accrual period is determined by multiplying the "adjusted
issue price" of the related Junior Subordinated Notes at the beginning of the
period by their yield to maturity (based on compounding at the close of each
accrual period and taking into account the length of the accrual period). The
adjusted issue price of a Junior Subordinated Note at the beginning of any
accrual period will be the sum of its issue price and the amount of OID
allocable to all prior accrual periods, reduced by the amount of any payments
actually made with respect to such Junior Subordinated Note in all prior accrual
periods (and thus will equal approximately the stated principal amount if the
issue price is the stated principal amount and all accrued interest is paid on
each Interest Payment Date). A subsequent Holder also will be required to
include in gross income its pro rata daily portion of OID with respect to the
Junior Subordinated Notes. However, if a Holder acquires Preferred Securities
for an amount greater than the adjusted issue price of the Junior Subordinated
Notes (i.e., at an acquisition premium), such Holder's daily portion of OID with
respect to the Junior Subordinated Notes will be reduced by an allocable portion
of the acquisition premium.
MARKET DISCOUNT
A purchaser of a Preferred Security at a discount from the adjusted issue
price of such purchaser's pro rata share of the Junior Subordinated Notes
acquires such Preferred Security with "market discount." However, market
discount with respect to a Preferred Security will be considered to be zero if
it is de minimis. Market discount will be de minimis with respect to a Preferred
Security if it is less than the product of (i) 0.25% of the adjusted issue price
of the purchaser's pro rata share of the Junior Subordinated Notes multiplied by
(ii) the number of complete years to maturity of such Junior Subordinated Notes
after the date of purchase. The purchaser of a Preferred Security with more than
a de minimis amount of market discount generally will be required to treat any
gain on the sale, exchange, redemption or other disposition of all or part of
the Preferred Securities (or related Junior Subordinated Notes) as ordinary
income to the extent of accrued (but not previously taxed) market discount.
Market discount generally will accrue ratably during the period from the date of
purchase of such Preferred Security to the maturity date of the Junior
Subordinated Notes, unless the Holder irrevocably elects to accrue such market
discount on the basis of a constant interest rate.
A Holder who has acquired a Preferred Security at a market discount
generally will be required to defer any deductions of interest expense
attributable to any indebtedness incurred or continued to purchase or carry the
Preferred Security, to the extent such interest expense exceeds the related OID
income. Any such deferred interest expense generally will be allowable as a
deduction not later than the year in which the related market discount income is
recognized. As an alternative to the inclusion of market discount in income upon
disposition of all or a portion of a Preferred Security or the related Junior
Subordinated Notes (including redemptions thereof), a Holder may make an
election (which may not be revoked without the Internal Revenue Service's
consent) to include market discount in income as it accrues on all market
discount instruments acquired by the Holder during or after the taxable year for
which the election is made. In that case, the preceding deferral rule for
interest expense will not apply.
34
<PAGE>
In lieu of the foregoing treatment of market discount and interest expense,
a Holder may elect to treat any market discount (including a de minimis amount)
as OID and accrue such discount on a constant-yield basis in the same manner as
the Holder accrues OID.
SALE OF PREFERRED SECURITIES
Upon the sale, retirement (including redemption) or other taxable
disposition of all or part of a Preferred Security, a Holder thereof will
recognize gain or loss equal to the difference between the amount realized on
such sale, retirement or other disposition and such Holder's adjusted tax basis
in the Preferred Security or part thereof. Any recognized gain or loss will be
capital gain or loss, except to the extent of any accrued market discount (see
"Market Discount" above), and such capital gain or loss will be long-term if the
holding period for the Preferred Security is more than one year at the time of
sale, retirement or other disposition. A Holder's adjusted tax basis in a
Preferred Security acquired by purchase will equal the cost of such Preferred
Security to the Holder, increased by the amount of any related accrued OID and
market discount included in taxable income by the Holder and reduced by any
prior payments on the Junior Subordinated Notes distributed on the Preferred
Security. The redemption of only part of a Preferred Security will require an
allocation of the Holder's pro rata share of the adjusted issue price of the
related Junior Subordinated Notes between the portion of the Junior Subordinated
Notes redeemed and retained by the Holder in order to determine gain or loss and
future accruals of OID.
RECEIPT OF JUNIOR SUBORDINATED NOTES UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under "Description of the
Preferred Securities -- Special Event Redemption or Distribution," Junior
Subordinated Notes may be distributed to Holders in exchange for the Preferred
Securities and in liquidation of the Trust. Such a distribution would be treated
as a non-taxable event to each Holder and each Holder would receive an aggregate
tax basis in the Holder's Junior Subordinated Notes equal to the Holder's
aggregate tax basis in its Preferred Securities. A Holder's holding period with
respect to the Junior Subordinated Notes so received in liquidation of the Trust
would include the period for which the Preferred Securities were held by such
Holder. See "Proposed Tax Law Changes."
INFORMATION REPORTING TO HOLDERS
Income on the Preferred Securities will be reported to Holders on Form
1099, which form should be mailed to Holders of Preferred Securities by January
31 following each calendar year.
BACKUP WITHHOLDING
A Holder may be subject to "backup withholding" under certain
circumstances. Backup withholding applies to a Holder if the Holder, among other
things, (i) fails to furnish his social security number or other taxpayer
identification number ("TIN") to the payor responsible for backup withholding
(for example, the Holder's securities broker), (ii) furnishes such payor an
incorrect TIN, (iii) fails to provide such payor with a certified statement,
signed under penalties of perjury, that the TIN provided to the payor is correct
and that the Holder is not subject to backup withholding, or (iv) fails to
report properly interest and dividends on his tax return. Backup withholding,
however, does not apply to payments made to certain exempt recipients, such as
corporations and tax-exempt organizations. The backup withholding rate is 31% of
"reportable payments," which generally will include distributions of interest
and principal payments on the Junior Subordinated Notes.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE MAY NOT BE APPLICABLE TO
A HOLDER, DEPENDING UPON A HOLDER'S PARTICULAR SITUATION, AND THEREFORE EACH
HOLDER SHOULD CONSULT HIS TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF
THE OWNERSHIP AND DISPOSITION OF PREFERRED SECURITIES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAW.
35
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to the Underwriters
named below, and the Underwriters, for whom Lehman Brothers Inc. is acting as
representative (the "Representative"), have severally agreed to purchase the
number of Preferred Securities set forth opposite their respective names below.
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Preferred
Securities offered hereby if any of the Preferred Securities are purchased.
<TABLE>
<CAPTION>
NUMBER OF
NAME PREFERRED SECURITIES
------------------------------------------------------------ --------------------
<S> <C>
Lehman Brothers Inc.........................................
Dean Witter Reynolds Inc....................................
A.G. Edwards & Sons, Inc....................................
Prudential Securities Incorporated..........................
The Robinson-Humphrey Company, Inc..........................
---------------
Total............................................. 3,880,000
===============
</TABLE>
The Underwriters have advised the Trust that they propose to offer the
Preferred Securities in part directly to the public at the price to the public,
as set forth on the cover page of this Prospectus, and in part to certain
securities dealers at such price less a concession not in excess of $ per
Preferred Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per Preferred Security to certain other
dealers. After the Preferred Securities are released for sale to the public, the
offering price and other selling terms may from time to time be varied by the
Underwriters.
The Preferred Securities are expected to be approved for listing on the
NYSE, subject to official notice of issuance. Trading of the Preferred
Securities on the NYSE is expected to commence within a 30 day period after the
initial delivery of the Preferred Securities. The Representative has advised the
Trust that it intends to make a market in the Preferred Securities prior to the
commencement of trading on the NYSE. The Representative will have no obligation
to make a market in the Preferred Securities, however, and may cease market
making activities, if commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the NYSE, the Underwriters will undertake to sell lots of 100 or
more Preferred Securities to a minimum of 400 beneficial holders.
The Company and the Trust have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the 1933 Act.
The Underwriters engage in transactions with, and, from time to time, have
performed services for, the Company and its affiliates in the ordinary course of
business.
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 Trust by
Richards, Layton & Finger, Wilmington, Delaware, special Delaware counsel to the
Company and the Trust. The validity of the Junior Subordinated Notes, the
Guarantee and certain matters relating thereto will be passed upon on behalf of
the Company by Balch & Bingham, Birmingham, Alabama and by Troutman Sanders LLP,
Atlanta, Georgia. Certain United States federal income taxation matters will be
passed upon for the Company and the Trust by Balch & Bingham. Certain legal
matters will be passed upon for the Underwriters by Dewey Ballantine, New York,
New York.
EXPERTS
The financial statements and schedules of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994,
incorporated by reference in this Prospectus, have been
36
<PAGE>
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are incorporated herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports. With respect to the Company's unaudited interim financial information
for the periods ended March 31, 1995 and 1994, June 30, 1995 and 1994 and
September 30, 1995 and 1994, included in the Company's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1995, June 30, 1995 and September 30,
1995, respectively, and incorporated by reference herein, Arthur Andersen LLP
has applied limited procedures in accordance with professional standards for
review of such information. However, their separate reports thereon state that
they did not audit and they do not express an opinion on such interim financial
information. Accordingly, the degree of reliance on their reports on such
information should be restricted in light of the limited nature of the review
procedures employed. In addition, the accountants are not subject to the
liability provisions of Section 11 of the Securities Act of 1933, as amended,
for their reports on the unaudited interim financial information because these
reports are not "reports" or "parts" of the registration statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of said
Act.
Statements as to matters of law and legal conclusions in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994, relating to
titles to property of the Company under "Item 2 -- Properties -- Titles to
Property", relating to the Company and SEGCO under "Item 1 -- Business --
Regulation" and relating to the Company under "Item 1 -- Business -- Rate
Matters" and "Item 1 -- Business -- Competition", have been reviewed by Balch &
Bingham, general counsel for the Company and such statements are made upon the
authority of such firm as experts.
The statements made as to matters of law and legal conclusions as set forth
under "Certain Federal Income Tax Considerations" herein have been reviewed by
Balch & Bingham, general counsel to the Company, and such statements are made
upon the authority of such firm as experts.
37
<PAGE>
GLOSSARY
1933 Act................... The Securities Act of 1933, as amended.
1934 Act................... The Securities Exchange Act of 1934, as amended.
1939 Act................... The Trust Indenture Act of 1939, as amended.
1940 Act................... The Investment Company Act of 1940, as amended.
Additional Interest........ Amounts payable by the Company to cover certain
governmental charges, as described in "Description
of the Junior Subordinated Notes -- Additional
Interest."
Administrative Trustees.... William E. Zales, Jr. and J. Randy DeRieux.
Agreement as to Expenses
and Liabilities............ The agreement between the Company and the Trust
pursuant to which the Company has agreed to pay all
indebtedness, expenses or liabilities of the Trust,
other than the Trust's obligations to the holders
of the Preferred Securities.
Code....................... The Internal Revenue Code of 1986, as amended.
Common Securities.......... The Trust Securities being sold to the Company.
Company.................... Alabama Power Company
Delaware Trustee........... Chemical Bank Delaware
Southern Company........... The Southern Company, the parent of the Company.
DTC........................ The Depository Trust Company, a "clearing
corporation" that initially will hold (through its
agents) a global certificate evidencing the
Preferred Securities.
Distribution Dates......... March 31, June 30, September 30, and December 31 of
each year.
Event of Default........... As described under "Description of the Junior
Subordinated Notes -- Events of Default."
Extension Period........... Any period during which interest is not paid on the
Junior Subordinated Notes (and, consequently, on
the Preferred Securities) at the election of the
Company to the extent permitted under the terms of
the Junior Subordinated Notes.
Guarantee.................. The guarantee by the Company of the payments by the
Trust on the Preferred Securities from funds
available in the Trust.
Guarantee Payments......... Payments required to be made pursuant to the
Guarantee as described in "Description of
Guarantee -- General."
Guarantee Trustee.......... The trustee under the Guarantee; initially,
Chemical Bank.
Indenture Trustee.......... The trustee under the Subordinated Note Indenture;
initially, Chemical Bank.
Issue Date................. The date set forth on the cover page on which the
Junior Subordinated Notes and Preferred Securities
are scheduled to be issued.
Investment Company
Act Event................ An event of the type described in "Description of
the Preferred Securities -- Special Event
Redemption or Distribution."
38
<PAGE>
Junior Subordinated
Notes...................... The fixed rate junior subordinated deferred
interest notes of the Company due ,
2026.
NYSE....................... New York Stock Exchange.
Preferred Securities....... The Trust Securities being offered to investors
pursuant to this Prospectus.
Property Trustee........... A trustee under the Trust designated to hold the
trust property; initially Chemical Bank.
Record Date................ The close of business on the 15th calendar day
prior to a Distribution Date.
Redemption Price........... The stated liquidation amount of $25 per Preferred
Security, plus accrued and unpaid distributions
thereon (and interest thereon) to the date of
payment.
Securities Rate............ The per annum interest rate expressed as a
percentage of the stated liquidation amount of $25
per Preferred Security, and set forth on the cover
page.
Securities Trustees........ The Property Trustee, Administrative Trustees and
Delaware Trustee.
Senior Indebtedness........ Indebtedness of the company described hereunder
under "Description of the Junior Subordinated
Notes -- Subordination."
Special Event.............. A Tax Event or Investment Company Act Event.
Subordinated Note
Indenture.................. The indenture pursuant to which the Company's
Junior Subordinated Notes will be issued.
Tax Event.................. An event of the type described in "Description of
the Preferred Securities -- Special Event
Redemption or Distribution."
Trust...................... Alabama Power Capital Trust I, a Delaware business
trust that will issue the Trust Securities.
Trust Agreement............ The agreement pursuant to which the Trust is
organized as it may be amended and restated from
time to time.
Trust Agreement Event of
Default.................. As described under "Description of Preferred
Securities -- Events of Default."
Trust Securities........... The Preferred Securities and the Common Securities.
39
<PAGE>
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ALABAMA POWER
CAPITAL TRUST I OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR ALABAMA POWER CAPITAL
TRUST I, SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 3
Incorporation of Certain Documents by
Reference........................... 4
Proposed Tax Law Changes.............. 4
Prospectus Summary.................... 5
Risk Factors.......................... 8
Alabama Power Capital Trust I......... 10
Selected Information.................. 11
Selected Financial Information........ 12
Alabama Power Company................. 13
Use of Proceeds....................... 13
Recent Results of Operations.......... 13
Description of the Preferred
Securities.......................... 13
Description of the Guarantee.......... 23
Description of the Junior
Subordinated Notes.................. 25
Relationship among the Preferred
Securities, Junior Subordinated
Notes and the Guarantee............. 32
Certain Federal Income Tax
Considerations...................... 33
Underwriting.......................... 36
Legal Matters......................... 36
Experts............................... 36
Glossary.............................. 38
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
PREFERRED SECURITIES
ALABAMA POWER
CAPITAL TRUST I
% TRUST PREFERRED
SECURITIES
(LIQUIDATION AMOUNT
$25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
ALABAMA POWER
COMPANY
---------------------------
PROSPECTUS
January , 1996
---------------------------
LEHMAN BROTHERS
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
PRUDENTIAL SECURITIES INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission Fee............................................ $ 33,450
Fees and Expense of Trustees...................................................... 30,000
Printing Expenses................................................................. 30,000
Counsel Fees...................................................................... 125,000
Rating Agency Fees................................................................ 40,000
Listing Fees...................................................................... 44,300
Accountant's Fees................................................................. 25,000
Miscellaneous..................................................................... 7,250
--------
Total................................................................... $335,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Code of Alabama, 1975, Sections 10-2B-8.51 and 10-2B-8.56 gives a
corporation power to indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and whether
formal or informal by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, penalties, fines and amounts paid in settlement
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in the best
interests of the corporation, when acting in his or her official capacity with
the corporation, or, in all other cases, not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The same Sections also
give a corporation power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees) reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
the best interests of the corporation, when acting in his or her official
capacity with the corporation or, in all other cases, not opposed to the best
interests of the corporation. No indemnification shall be made, however, in
respect of any claim, issue or matter as to which such person shall have not met
the applicable standard of conduct, shall have been adjudged to be liable to the
corporation or, in connection with any other action, suit or proceeding charging
improper personal benefit to such person,if such person was adjudged liable on
the basis that personal benefit was improperly received by him, unless and only
to the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
Also, Section 10-2B-8.52 states that, to the extent that a director, officer,
employee or agent of a corporation has been successful on the merits or
otherwise in defense of any such action, suit or proceeding, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) reasonably incurred by him in connection therewith,
notwithstanding that he has not been successful on any other claim, issue or
matter in any such action, suit or proceeding.
II-1
<PAGE>
Article XIII of the By-laws of the Company provides in pertinent part as
follows:
Each person who is or was a director of the corporation, officer of
the corporation or employee of the corporation holding one or more
positions of management and who was or is a party or was or is threatened
to be made a party to any threatened, pending or completed claim, action,
suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director of the
corporation or officer of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, agent or
trustee of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, shall be indemnified by the corporation
as a matter of right against any and all expenses (including attorneys'
fees) actually and reasonably incurred by him and against any and all
claims, judgments, fines, penalties, liabilities and amounts paid in
settlement actually incurred by him in defense of such claim, action, suit
or proceeding, including appeals, to the full extent permitted by
applicable law. The indemnification provided by this Section shall inure to
the benefit of the heirs, executors and administrators of such person.
Expenses (including attorneys' fees) incurred by a director or officer
of the corporation, or by an employee of the corporation holding one or
more positions of management, with respect to the defense of any such
claim, action, suit or proceeding may be advanced by the corporation prior
to the final disposition of such claim, action, suit or proceeding, as
authorized by the board of directors in the specific case, upon receipt of
an undertaking by or on behalf of such person to repay such amount unless
it shall ultimately be determined that such person is entitled to be
indemnified by the corporation under this Section or otherwise; provided,
however, that the advancement of such expenses shall not be deemed to be
indemnification unless and until it shall ultimately be determined that
such person is entitled to be indemnified by the corporation.
The corporation may purchase and maintain insurance at the expense of
the corporation on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or any person who is or was serving
at the request of the corporation as a director (or the equivalent),
officer, employee, agent or trustee of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
any liability or expense (including attorneys' fees) asserted against him
and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability or expense under this Section or otherwise.
Without limiting the generality of the foregoing provisions of this
Section, no present or future director or officer of the corporation, or
his heirs, executors, or administrators, shall be liable for any act,
omission, step, or conduct taken or had in good faith, which is required,
authorized, or approved by any order or orders issued pursuant to the
Public Utility Holding Company Act of 1935, the Federal Power Act, or any
federal or state statute or municipal ordinance regulating the corporation,
its parent or its subsidiaries by reason of their being holding or
investment companies, public utility companies, public utility holding
companies, or subsidiaries of public utility holding companies. In any
action, suit, or proceeding based on any act, omission, step, or conduct,
as in this paragraph described, the provisions hereof shall be brought to
the attention of the court. In the event that the foregoing provisions of
this paragraph are found by the court not to constitute a valid defense on
the grounds of not being applicable to the particular class of plaintiff,
each such director and officer, and his heirs, executors, and
administrators, shall be reimbursed for, or indemnified against, all
expenses and liabilities incurred by him or imposed on him, in connection
with, or arising out of, any such action, suit, or proceeding based on any
act, omission, step, or conduct taken or had in good faith as in this
paragraph described. Such expenses and liabilities shall include, but shall
not be limited to, judgments, court costs, and attorneys' fees.
The foregoing rights shall not be exclusive of any other rights to
which any such director or officer may otherwise be entitled and shall be
available whether or not the director or officer continues to be a director
or officer at the time of incurring any such expenses and liabilities.
II-2
<PAGE>
The Company has an insurance policy covering its liabilities and expenses
which might arise in connection with its lawful indemnification of its directors
and officers for certain of their liabilities and expenses and also covering its
officers and directors against certain other liabilities and expenses.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------
<C> <S> <C>
1 -- Form of Underwriting Agreement for Preferred Securities.*
4(a) -- Form of Subordinated Note Indenture between Alabama Power Company and Chemical
Bank, as Trustee.*
4(b) -- Form of Supplemental Indenture to Subordinated Note Indenture between Alabama
Power Company and Chemical Bank, as Trustee.*
4(c) -- Trust Agreement of Alabama Power Capital Trust I.*
4(d) -- Form of Amended and Restated Trust Agreement.*
4(e) -- Form of Preferred Security (included in Exhibit 4(d) above).
4(f) -- Form of Junior Subordinated Notes (included in Exhibit 4(b) above).
4(g) -- Form of Guarantee with respect to Preferred Securities.*
4(h) -- Certificate of Trust (included in Exhibit 4(d) above).
4(i) -- Form of Agreement as to Expenses and Liabilities (included in Exhibit 4(d) above).
5(a) -- Opinion and Consent of Balch & Bingham.*
5(b) -- Opinion and Consent of Richards, Layton & Finger.*
8 -- Tax Opinion of Balch & Bingham.*
12 -- Computations of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges Plus Preferred Stock Dividend Requirements (pre-income tax basis).
15 -- Letter Re: Unaudited Interim Financial Information.
23(a) -- Consent of Arthur Andersen LLP.
23(b) -- Consent of Balch & Bingham is contained in Exhibits 5(a) and 8.
23(c) -- Consent of Richards, Layton & Finger is contained in Exhibit 5(b).
24 -- Powers of Attorney with respect to the Company officers and directors.*
25(a) -- Statement of eligibility and qualification of Chemical Bank with respect to the
Subordinated Note Indenture and the Guarantee.*
25(b) -- Statement of eligibility and qualification of Chemical Bank with respect to the
Trust.*
</TABLE>
- ---------------
* Previously Filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant, Alabama Power Company, hereby undertakes
that, for purposes of determining any liability under the Securities Act of 1933
(the "Act"), each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, each of the Registrants have
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event
II-3
<PAGE>
that a claim for indemnification against such liabilities (other than the
payment by either of the Registrants of expenses incurred or paid by a director,
officer or controlling person of such Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, each of
the Registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(c) The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ALABAMA POWER
COMPANY CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF
THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF BIRMINGHAM AND STATE OF ALABAMA, ON
JANUARY 11, 1996.
ALABAMA POWER COMPANY
By ELMER B. HARRIS,
President and Chief Executive
Officer
By WAYNE BOSTON,
Attorney-in-Fact
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ALABAMA POWER
CAPITAL TRUST I CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BIRMINGHAM, ALABAMA, ON
JANUARY 11, 1996.
ALABAMA POWER CAPITAL TRUST I
By ALABAMA POWER COMPANY,
as Depositor
By WAYNE BOSTON,
Assistant Secretary
II-5
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING DIRECTORS AND
OFFICERS OF ALABAMA POWER COMPANY IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<C> <S> <C>
ELMER B. HARRIS President, Chief Executive
Officer and Director
(Principal Executive
Officer)
WILLIAM B. HUTCHINS, III Executive Vice President and
Chief Financial Officer
(Principal Financial
Officer)
DAVID L. WHITSON Vice President and
Comptroller (Principal
Accounting Officer)
WHIT ARMSTRONG )
PHILIP E. AUSTIN )
MARGARET A. CARPENTER )
A. W. DAHLBERG )
PETER V. GREGERSON, SR. )
BILL M. GUTHRIE )
CARL E. JONES, JR. ) Directors
WALLACE D. MALONE, JR. )
WILLIAM V. MUSE )
JOHN T. PORTER )
GERALD H. POWELL )
ROBERT D. POWERS )
JOHN W. ROUSE )
JAMES H. SANFORD )
JOHN COX WEBB, IV )
JOHN W. WOODS )
By WAYNE BOSTON January 11, 1996
(WAYNE BOSTON, ATTORNEY-IN-FACT)
</TABLE>
<PAGE>
Index of Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------
<C> <S> <C>
1 -- Form of Underwriting Agreement for Preferred Securities.*
4(a) -- Form of Subordinated Note Indenture between Alabama Power Company and Chemical
Bank, as Trustee.*
4(b) -- Form of Supplemental Indenture to Subordinated Note Indenture between Alabama
Power Company and Chemical Bank, as Trustee.*
4(c) -- Trust Agreement of Alabama Power Capital Trust I.*
4(d) -- Form of Amended and Restated Trust Agreement.*
4(e) -- Form of Preferred Security (included in Exhibit 4(d) above).
4(f) -- Form of Junior Subordinated Notes (included in Exhibit 4(b) above).
4(g) -- Form of Guarantee with respect to Preferred Securities.*
4(h) -- Certificate of Trust (included in Exhibit 4(d) above).
4(i) -- Form of Agreement as to Expenses and Liabilities (included in Exhibit 4(d) above).
5(a) -- Opinion and Consent of Balch & Bingham.*
5(b) -- Opinion and Consent of Richards, Layton & Finger.*
8 -- Tax Opinion of Balch & Bingham.*
12 -- Computations of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges Plus Preferred Stock Dividend Requirements (pre-income tax basis).
15 -- Letter Re: Unaudited Interim Financial Information.
23(a) -- Consent of Arthur Andersen LLP.
23(b) -- Consent of Balch & Bingham is contained in Exhibits 5(a) and 8.
23(c) -- Consent of Richards, Layton & Finger is contained in Exhibit 5(b).
24 -- Powers of Attorney with respect to the Company officers and directors.*
25(a) -- Statement of eligibility and qualification of Chemical Bank with respect to the
Subordinated Note Indenture and the Guarantee.*
25(b) -- Statement of eligibility and qualification of Chemical Bank with respect to the
Trust.*
</TABLE>
- ---------------
* Previously Filed.
<TABLE>
Exhibit 12
1/11/96
ALABAMA POWER COMPANY
Computation of ratio of earnings to fixed charges for the
the five years ended December 31, 1994
and the twelve months ended November 30, 1995
Twelve
Months
Ended
Year ended December 31, November 30,
1990 1991 1992 1993 1994 1995
-----------------------Thousands of Dollars-----------------------------------
EARNINGS AS DEFINED IN ITEM 503 OF REGULATION S-K:
<S> <C> <C> <C> <C> <C> <C>
Income Before Interest Charges $ 579,686 $ 616,561 $ 607,696 $ 608,050 $ 594,669 $ 624,455
Federal and state income taxes 111,882 202,354 172,003 167,021 242,569 184,372
Deferred income taxes, net 64,887 (6,058) 23,307 34,467 (32,536) 39,178
Deferred investment tax credits 132 (1,089) 0 (2,106) (4) 0
AFUDC - Debt funds 23,573 7,101 2,564 3,016 3,590 6,567
----------- ----------- ----------- ----------- ----------- ----------
Earnings as defined $ 780,160 $ 818,869 $ 805,570 $ 810,448 $ 808,288 $ 854,572
=========== =========== =========== =========== =========== ==========
FIXED CHARGES AS DEFINED IN ITEM 503 OF REGULATION S-K:
Interest on long-term debt $ 225,328 $ 217,338 $ 209,184 $ 186,779 $ 180,182 $ 183,475
Interest on interim obligations 10,252 13,385 3,704 3,760 5,939 16,114
Amort of debt disc, premium and expense, net 3,249 2,205 4,250 8,999 9,655 9,929
Other interest charges 13,115 14,929 19,382 35,475 19,909 26,987
----------- ----------- ----------- ----------- ----------- ----------
Fixed charges as defined $ 251,944 $ 247,857 $ 236,520 $ 235,013 $ 215,685 $ 236,505
=========== =========== =========== =========== =========== ==========
RATIO OF EARNINGS TO FIXED CHARGES 3.10 3.30 3.41 3.45 3.75 3.61
==== ==== ==== ==== ==== ====
Note: The above figures have been adjusted to give effect to Alabama
Power Company's 50% ownership of Southern Electric Generating
Company.
ALABAMA POWER COMPANY
Computation of ratio of earnings to fixed charges plus preferred dividend
requirements for the five years ended December 31, 1994 and the twelve months
ended November 30, 1995
Twelve
Months
Ended
Year ended December 31, November 30,
1990 1991 1992 1993 1994 1995
-----------------------Thousands of Dollars-----------------------------------
EARNINGS AS DEFINED IN ITEM 503 OF REGULATION S-K:
Income Before Interest Charges $ 579,686 $ 616,561 $ 607,696 $ 608,050 $ 594,669 $ 624,455
Federal and state income taxes 111,882 202,354 172,003 167,021 242,569 184,372
Deferred income taxes, net 64,887 (6,058) 23,307 34,467 (32,536) 39,178
Deferred investment tax credits 132 (1,089) 0 (2,106) (4) 0
AFUDC - Debt funds 23,573 7,101 2,564 3,016 3,590 6,567
----------- ----------- ----------- ----------- ----------- ----------
Earnings as defined $ 780,160 $ 818,869 $ 805,570 $ 810,448 $ 808,288 $ 854,572
=========== =========== =========== =========== =========== ==========
FIXED CHARGES AS DEFINED IN ITEM 503 OF REGULATION S-K:
Interest on long-term debt $ 225,328 $ 217,338 $ 209,184 $ 186,779 $ 180,182 $ 183,475
Interest on interim obligations 10,252 13,385 3,704 3,760 5,939 16,114
Amort of debt disc, premium and expense, net 3,249 2,205 4,250 8,999 9,655 9,929
Other interest charges 13,115 14,929 19,382 35,475 19,909 26,987
----------- ----------- ----------- ----------- ----------- ----------
Fixed charges as defined 251,944 247,857 236,520 235,013 215,685 236,505
Tax deductible preferred dividends 1,884 1,884 1,884 1,830 1,605 1,605
----------- ----------- ----------- ----------- ----------- ----------
253,828 249,741 238,404 236,843 217,290 238,110
----------- ----------- ----------- ----------- ----------- ----------
Non-tax deductible preferred dividends 36,628 34,255 33,302 27,729 24,630 25,502
Ratio of net income before taxes to net income x 1.504 x 1.519 x 1.523 x 1.530 x 1.549 x 1.567
----------- ----------- ----------- ----------- ----------- ----------
Pref dividend requirements before income taxes 55,089 52,033 50,719 42,425 38,152 39,962
----------- ----------- ----------- ----------- ----------- ----------
Fixed charges plus pref dividend requirements $ 308,917 $ 301,774 $ 289,123 $ 279,268 $ 255,442 $ 278,072
=========== =========== =========== =========== =========== ==========
RATIO OF EARNINGS TO FIXED CHARGES PLUS
PREFERRED DIVIDEND REQUIREMENTS 2.53 2.71 2.79 2.90 3.16 3.07
==== ==== ==== ==== ==== ====
Note: The above figures have been adjusted to give effect to Alabama
Power Company's 50% ownership of Southern Electric Generating
Company.
</TABLE>
EXHIBIT 15
ARTHUR
ANDERSEN
ARTHUR ANDERSEN & CO. SC
------------------------
January 11, 1996 Arthur Andersen LLP
------------------------
Alabama Power Company Suite 1800
600 North 18th Street 420 North 20th Street
Birmingham, AL 35291 Birmingham AL 35203-3204
205 252 8600
Ladies and Gentlemen:
We are aware that Alabama Power Company has incorporated by reference in this
Registration Statement its Form 10-Q for the quarters ended March 31, June 30,
and September 30, 1995, which include our reports dated May 5, August 9, and
November 8, 1995, respectively, covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the Securities Act of
1933 (the "Act"), such reports are not considered a part of the Registration
Statement prepared or certified by our firm or reports prepared or certified by
our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ARTHUR ANDERSEN LLP
EXHIBIT 23(a)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-3 (relating to Alabama Power
Capital Trust I Preferred Securities, Alabama Power Company Junior Subordinated
Notes and Alabama Power Company Preferred Securities Guarantee) of our reports
on Alabama Power Company dated February 15, 1995 included in Alabama Power
Company's Form 10-K for the year ended December 31, 1994 and to all references
to our firm included in this Registration Statement.
/s/ARTHUR ANDERSEN LLP
Birmingham, Alabama
January 11, 1996
