Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-67453
333-67453-01
333-67453-02
333-67453-03
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED.
Subject to Completion. Dated February 15, 1999.
Prospectus Supplement to Prospectus Dated December 4, 1998.
1,000 Preferred Securities
ALABAMA POWER CAPITAL TRUST III
Capital Auction Preferred Securities(CAPS)
(Liquidation Amount $50,000 per Preferred Security)
Fully and unconditionally guaranteed, as described herein, by
(Alabama Power Logo)
---------------------------
The initial distribution rate on the Capital Auction Preferred
Securities(CAPS) will be % per annum and the initial distribution period
will be a 28-day short-term distribution period. Thereafter, except under
certain circumstances, the distribution rate for the Preferred Securities will
be set by auction and the distribution period will be set by the administrative
trustees of Alabama Power Capital Trust III.
A brief description of the Preferred Securities can be found under "Summary
Information -- Q&A" in this Prospectus Supplement.
See "Risk Factors" section beginning on page S-6 for a description of
specific risks associated with these Preferred Securities.
---------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
<TABLE>
<CAPTION>
Per
Preferred Security Total
------------------ -----
<S> <C> <C>
Initial public offering price(1)........................ $ $
Underwriting commissions to be paid by Alabama Power
Company............................................... (2) (2)
Proceeds to Alabama Power Capital Trust III............. $ $
</TABLE>
- -------------------------
(1) Plus accumulated distributions, if any, from the date of original issuance,
which is expected to be February , 1999.
(2) Underwriting commissions of $ per Preferred Security will be paid by
Alabama Power Company; except that for sales of five or more Preferred
Securities to a single purchaser, the commissions will be $ per
Preferred Security.
---------------------------
The Underwriters expect to deliver the Preferred Securities in book-entry
form only through The Depository Trust Company against payment in New York, New
York on February , 1999.
GOLDMAN, SACHS & CO. LEHMAN BROTHERS
---------------------------
Prospectus Supplement dated February , 1999.
<PAGE>
SUMMARY INFORMATION--Q&A
The following information supplements, and should be read together with,
the information contained in other parts of this Prospectus Supplement and in
the accompanying Prospectus. This summary highlights selected information from
this Prospectus Supplement and the accompanying Prospectus to help you
understand the Capital Auction Preferred Securities (CAPS) (the "Preferred
Securities"). You should carefully read this Prospectus Supplement and the
accompanying Prospectus to understand fully the terms of the Preferred
Securities as well as the tax and other considerations that are important to you
in making a decision about whether to invest in the Preferred Securities. You
should pay special attention to the "Risk Factors" section beginning on page S-6
of this Prospectus Supplement to determine whether an investment in the
Preferred Securities is appropriate for you.
WHAT ARE THE PREFERRED SECURITIES?
Each Preferred Security represents an undivided beneficial interest in the
assets of Alabama Power Capital Trust III (the "Trust"). Each Preferred Security
will entitle the holder to receive cash distributions as described in this
Prospectus Supplement. The Trust is offering 1,000 Preferred Securities at a
price of $50,000 for each Preferred Security.
WHO IS THE TRUST?
The Trust is a Delaware business trust. Its principal place of business is
c/o Alabama Power Company, 600 North 18th Street, Birmingham, Alabama 35291, and
its telephone number is (205) 257-2905.
The Trust will sell its Preferred Securities to the public and its common
securities (the "Common Securities") to Alabama Power Company (the "Company").
The Trust will use the proceeds from these sales to buy a series of junior
subordinated notes due February 28, 2029 (the "Series C Junior Subordinated
Notes") from the Company with the same financial terms as the Preferred
Securities.
The Chase Manhattan Bank will act as property trustee (the "Property
Trustee") of the Trust. Two officers of the Company also will act as trustees
(the "Administrative Trustees") of the Trust. Chase Manhattan Bank Delaware will
be an additional trustee (the "Delaware Trustee") of the Trust. The Chase
Manhattan Bank will act as trustee (the "Indenture Trustee") under the
Subordinated Note Indenture, as supplemented (the "Subordinated Note
Indenture"), pursuant to which the Series C Junior Subordinated Notes will be
issued and will act as trustee (the "Guarantee Trustee") under the Preferred
Securities Guarantee of the Company (the "Guarantee"). The Property Trustee,
Delaware Trustee and Administrative Trustees are sometimes referred to as the
"Securities Trustees."
WHO IS 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) 257-1000. The Company is a wholly owned subsidiary of The
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.
S-2
<PAGE>
WHAT IS A DISTRIBUTION PERIOD?
The periods for which distributions (each, a "Distribution") are payable
(each, a "Distribution Period") will be either a Distribution Period of from
seven days to 364 days and will always be evenly divisible by seven (each, a
"Short-Term Distribution Period") or a Distribution Period of 365 days or longer
(each, a "Long-Term Distribution Period"). In most circumstances, Distribution
Periods will be selected by the Administrative Trustees on behalf of the Trust
prior to the end of the current Distribution Period. See "The Preferred
Securities -- Distribution Periods."
The initial Distribution Period will be a 28-day Short-Term Distribution
Period ending on March , 1999 (the "Initial Distribution Period").
HOW IS A DISTRIBUTION RATE DETERMINED?
After the Initial Distribution Period, the distribution rate for each
subsequent Distribution Period (the "Distribution Rate") is expected to be
determined by auction (each, an "Auction"). See "The Auction" for a complete
description of the auction procedures (the "Auction Procedures"). A Distribution
Rate determined by Auction is an "Applicable Rate." However, under certain
circumstances as described in "The Auction," the Distribution Rate will not be
determined by an Auction and instead will be calculated by formulae described
herein. See "The Auction."
The date on which an Auction will be held to determine the Distribution
Rate for the next succeeding Distribution Period (each, an "Auction Date") will
be determined based on the length of the current Distribution Period. See "The
Auction."
The initial Distribution Rate is %. The initial Auction Date will be
March , 1999. The Chase Manhattan Bank will initially act as the Auction Agent
(the "Auction Agent").
WHEN WILL YOU RECEIVE DISTRIBUTIONS?
If you purchase the Preferred Securities, you are entitled to receive
Distributions at the Distribution Rate on the applicable distribution payment
date (each, a "Distribution Payment Date"). The Distribution Payment Date for
the Initial Distribution Period is March , 1999. After the Initial
Distribution Period, the Distribution Payment Date will be determined based on
the length of each Distribution Period. See "The Preferred
Securities -- Distributions."
WHEN CAN PAYMENT OF YOUR DISTRIBUTIONS BE DEFERRED?
The Company can, on one or more occasions, defer interest payments on the
Series C Junior Subordinated Notes for up to five years (each, an "Extension
Period"). A deferral of interest payments cannot extend, however, beyond the
maturity date of the Series C Junior Subordinated Notes (which is February ,
20 ). See "Description of the Series C Junior Subordinated Notes -- Option to
Extend Interest Payment Period."
If the Company defers interest payments on the Series C Junior Subordinated
Notes, the Trust will also defer Distributions on the Preferred Securities.
During any Extension Period, (i) Distributions will continue to accrue on the
Preferred Securities, (ii) Auctions will be discontinued, (iii) regardless of
any notice by the Administrative Trustees to the contrary, each subsequent
Distribution Period commencing during such Extension Period will be a 28-day
Short-Term Distribution Period and (iv) the Distribution Rate for each such
Distribution Period will be the Maximum Applicable Rate (as defined herein)
(which will be reset at the end of each 28-day Short-Term Distribution Period
during such Extension Period). Also, the deferred Distributions will themselves
accrue interest at the prevailing Distribution Rate (to the extent permitted by
law). Once the Company makes all interest payments on the Series C Junior
Subordinated
S-3
<PAGE>
Notes, with accrued interest, it can again defer interest payments on the Series
C Junior Subordinated Notes.
During any period in which the Company defers interest payments on the
Series C Junior Subordinated Notes, the Company will not be permitted to (with
limited exceptions):
- pay a dividend or make any distributions on its capital stock or redeem,
purchase, acquire or make a liquidation payment on any of its capital
stock, or make any guarantee payments with respect to the foregoing; or
- make an interest, principal or premium payment on, or repurchase or
redeem, any of its debt securities that rank equal with or junior to the
Series C Junior Subordinated Notes.
If the Company defers payments of interest on the Series C Junior
Subordinated Notes, the Preferred Securities will, from the time of deferral, be
treated as being issued with original issue discount ("OID") for United States
federal income tax purposes. This means you will be required to recognize
interest income with respect to Distributions and include such amounts in your
gross income for United States federal income tax purposes even though you will
not have received any cash Distributions relating to such interest income. See
"Certain Federal Income Tax Considerations -- Original Issue Discount."
WHEN CAN THE TRUST REDEEM THE PREFERRED SECURITIES?
The Trust must redeem all of the outstanding Preferred Securities and
Common Securities (together, the "Trust Securities") when the Series C Junior
Subordinated Notes are paid at maturity on February , 20 or are otherwise
due. In addition, if the Company redeems any Series C Junior Subordinated Notes
before their maturity, the Trust will use the cash it receives from the
redemption to redeem, on a pro rata basis, Preferred Securities and Common
Securities having a combined liquidation amount equal to the principal amount of
the Series C Junior Subordinated Notes redeemed.
The Company can redeem some or all of the Series C Junior Subordinated
Notes before their maturity on any interest payment date at 100% of their
principal amount plus accrued and unpaid interest to that interest payment date.
The Company also has the option to redeem the Series C Junior Subordinated
Notes, in whole, but not in part, at any time if certain changes in tax or
investment company law occur and certain other conditions are satisfied, as more
fully described under "Description of the Preferred Securities -- Special Event
Redemption; Distribution of Series C Junior Subordinated Notes." In any case,
the Company will pay accrued interest to the date of redemption.
WHAT IS THE COMPANY'S GUARANTEE OF THE PREFERRED SECURITIES?
The Company will guarantee the Preferred Securities based on:
- its obligations to make payments on the Series C Junior Subordinated
Notes;
- its obligations under the Guarantee; and
- its obligations under the Trust Agreement and the Agreement as to
Expenses and Liabilities.
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 Distributions.
S-4
<PAGE>
The Company's obligations under the Guarantee are:
- subordinate and junior in right of payment to its other liabilities;
- equal in rank to its most senior preferred stock; and
- senior to its common stock.
WHEN COULD THE SERIES C JUNIOR SUBORDINATED NOTES BE DISTRIBUTED TO YOU?
The Company has the right to terminate the Trust at any time. If the
Company terminates the Trust, the Trust will liquidate by distributing the
Series C Junior Subordinated Notes to holders of the Preferred Securities and
the Common Securities on a pro rata basis. For a discussion of the Company's
ability to distribute the Series C Junior Subordinated Notes, see "Description
of the Preferred Securities -- Special Event Redemption; Distribution of Series
C Junior Subordinated Notes" and "-- Liquidation Distribution Upon Dissolution."
WILL THE PREFERRED SECURITIES BE LISTED ON A STOCK EXCHANGE?
The Preferred Securities will not be listed on a stock exchange.
WILL HOLDERS OF THE PREFERRED SECURITIES HAVE ANY VOTING RIGHTS?
Generally, the holders of the Preferred Securities will not have any voting
rights. See "Description of the Preferred Securities -- Voting Rights."
IN WHAT FORM WILL THE PREFERRED SECURITIES BE ISSUED?
The Preferred Securities will be represented by one or more global
securities that will be deposited with and registered in the name of a
securities depository or its nominee. This means that you will not receive a
certificate for your Preferred Securities and that your broker will maintain
your position in the Preferred Securities. The Company expects that the
Preferred Securities will be ready for delivery through a securities depository
on or about February , 1999. The Depository Trust Company ("DTC") will act as
the initial securities depository for the Preferred Securities.
S-5
<PAGE>
RISK FACTORS
Your investment in the Preferred Securities will involve certain risks. You
should carefully consider the following discussion of risks, and the other
information in this Prospectus Supplement and the accompanying Prospectus,
before deciding whether an investment in the Preferred Securities is suitable
for you.
THE COMPANY'S OBLIGATIONS UNDER THE GUARANTEE AND THE SERIES C JUNIOR
SUBORDINATED NOTES ARE SUBORDINATED.
The Company's obligations under the Series C Junior Subordinated Notes will
rank junior in priority of payment to all of the Company's Senior Indebtedness
(as defined under "Description of the Junior Subordinated
Notes -- Subordination" in the accompanying Prospectus). This means that the
Company cannot make any payments on the Series C Junior Subordinated Notes if it
defaults on a payment of Senior Indebtedness and does not cure such default
within the applicable grace period or if the Senior Indebtedness becomes
immediately due because of a default and has not yet been paid in full. The
Company's Senior Indebtedness was approximately $3,093,000,000 as of September
30, 1998.
The Company's obligations under the Guarantee will rank in priority of
payment as follows:
- subordinate and junior in right of payment to its other liabilities;
- equal in rank to its most senior preferred stock; and
- senior to its common stock
This means that the Company cannot make any payments on the Guarantee if it
defaults on a payment on any of its other liabilities. In addition, in the event
of the bankruptcy, liquidation or dissolution of the Company, its assets would
be available to pay obligations under the Guarantee only after the Company made
all payments on its other liabilities.
Neither the Preferred Securities, the Series C Junior Subordinated Notes
nor the Guarantee limit the ability of the Company to incur additional
indebtedness, including indebtedness that ranks senior in priority of payment to
the Series C Junior Subordinated Notes and the Guarantee. See "Description of
the Guarantees -- Subordination" and "Description of the Junior Subordinated
Notes -- Subordination" in the accompanying Prospectus.
THE GUARANTEE ONLY COVERS PAYMENTS IF THE TRUST HAS CASH AVAILABLE.
The ability of the Trust to pay scheduled Distributions on the Preferred
Securities, the redemption price of the Preferred Securities and the liquidation
amount of each Preferred Security is solely dependent upon the Company making
the related payments on the Series C Junior Subordinated Notes when due.
If the Company defaults on its obligations to pay principal or interest on
the Series C Junior Subordinated Notes, the Trust will not have sufficient funds
to pay Distributions, the redemption price or the liquidation amount of each
Preferred Security. In those circumstances, you will not be able to rely upon
the Guarantee for payment of these amounts.
Instead, you:
- may directly sue the Company or seek other remedies to collect your
pro rata share of payments owed; or
- may rely on the Property Trustee to enforce the Trust's rights under
the Series C Junior Subordinated Notes.
S-6
<PAGE>
DEFERRAL OF DISTRIBUTIONS WOULD HAVE TAX CONSEQUENCES FOR YOU AND MAY AFFECT THE
TRADING PRICE OF THE PREFERRED SECURITIES.
The Company can, on one or more occasions, defer interest payments on the
Series C Junior Subordinated Notes for up to five years. If the Company defers
interest payments on the Series C Junior Subordinated Notes, the Trust will
defer Distributions on the Preferred Securities during any deferral period.
However, Distributions would still accumulate and such deferred Distributions
would themselves accrue interest at the prevailing Distribution Rate (to the
extent permitted by law).
If the Company defers payments of interest on the Series C Junior
Subordinated Notes, you will be required to recognize interest income for United
States federal income tax purposes (based on your pro rata share of the interest
on the Series C Junior Subordinated Notes held by the Trust) before you receive
any cash relating to such interest. In addition, you will not receive such cash
if you sell the Preferred Securities before the end of any deferral period or
before the record date relating to Distributions which are paid.
The Company has no current intention of deferring interest payments on the
Series C Junior Subordinated Notes. However, if the Company exercises its right
in the future, the Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest on the Series C Junior
Subordinated Notes. If you sell the Preferred Securities during an interest
deferral period, you may not receive the same return on investment as someone
else who continues to hold the Preferred Securities. In addition, the existence
of the Company's right to defer payments of interest on the Series C Junior
Subordinated Notes may mean that the market price for the Preferred Securities
(which represent an undivided beneficial interest in the Series C Junior
Subordinated Notes) may be more volatile than other securities that do not have
these rights.
See "Certain Federal Income Tax Considerations" for more information
regarding the tax consequences of purchasing, holding and selling the Preferred
Securities.
PREFERRED SECURITIES MAY BE REDEEMED AT ANY TIME IF CERTAIN CHANGES IN TAX OR
INVESTMENT COMPANY LAW OCCUR.
If certain changes in tax or investment company law occur and are
continuing, and certain other conditions are satisfied, the Company has the
right to redeem the Series C Junior Subordinated Notes, in whole, but not in
part, at any time. Any such redemption will cause a mandatory redemption of all
Preferred Securities and Common Securities at a redemption price equal to
$50,000 per Preferred Security plus any accrued and unpaid Distributions. See
"Description of the Preferred Securities -- Special Event Redemption;
Distribution of Series C Junior Subordinated Notes."
PREFERRED SECURITIES MAY BE REDEEMED AT THE OPTION OF THE COMPANY.
At the option of the Company, the Series C Junior Subordinated Notes may be
redeemed, in whole, or in part, on any interest payment date (the "Redemption
Date") at a redemption price equal to the principal amount to be redeemed plus
any accrued and unpaid interest to the Redemption Date (the "Redemption Price").
See "Description of the Series C Junior Notes -- Optional Redemption." You
should assume that the Company will exercise its redemption option if the
Company is able to refinance at a lower interest rate or it is otherwise in the
interest of the Company to redeem the Series C Junior Subordinated Notes. If the
Series C Junior Subordinated Notes are redeemed, the Trust must redeem the
Preferred Securities and the Common Securities having an aggregate liquidation
amount equal to the aggregate principal amount of Series C Junior Subordinated
Notes to be redeemed. See "Description of the Preferred Securities --
Redemption."
S-7
<PAGE>
THERE CAN BE NO ASSURANCE AS TO THE LIQUIDITY OF THE PREFERRED SECURITIES.
The ability of a holder of the Preferred Securities to sell such Preferred
Securities may depend on the success of the Auction, which is based on the
receipt by the Auction Agent of Sufficient Clearing Bids (as defined under "The
Auction -- Determination of Distribution Rate"). There may be times when
Sufficient Clearing Bids are not received in an Auction. The Company, the Trust
and any of their affiliates, the Auction Agent and brokers and dealers that
participate in the Auctions (the "Broker-Dealers") are not obligated to take any
action to ensure that Sufficient Clearing Bids are made. If Sufficient Clearing
Bids are not received in an Auction, the holders of the Preferred Securities may
not be able to sell Preferred Securities in such Auction. In the absence of
successful Auctions, there is no assurance that a secondary market for the
Preferred Securities will develop or, if such a market develops, that the
Preferred Securities will trade at or close to their stated liquidation amount.
In addition, the Auctions require the active participation of
Broker-Dealers. While the Auction Agent has initially entered into a
non-exclusive agreement with each of Goldman, Sachs & Co. ("Goldman Sachs") and
Lehman Brothers Inc. ("Lehman Brothers") to act as the Broker-Dealers and, under
certain circumstances, may enter into similar agreements with one or more other
Broker-Dealers, the marketability of the Preferred Securities and the efficient
functioning of the Auctions could be reduced to the extent that Goldman Sachs or
Lehman Brothers resigns or ceases to participate actively in the Auctions and no
additional Broker-Dealers are appointed or, if appointed, resigns or ceases to
participate actively in the Auctions.
THERE CAN BE NO ASSURANCE AS TO THE MARKET PRICES FOR THE PREFERRED SECURITIES
OR THE SERIES C JUNIOR SUBORDINATED NOTES.
There can be no assurance as to the market prices for the Preferred
Securities or the Series C Junior Subordinated Notes that may be distributed in
exchange for Preferred Securities upon a termination of the Trust. Accordingly,
the Preferred Securities that an investor may purchase, whether pursuant to the
offer made by this Prospectus Supplement, in an Auction, or in the secondary
market, or the Series C Junior Subordinated Notes that a holder of Preferred
Securities may receive upon a termination of the Trust, may trade at a discount
to the price that the investor paid to purchase the Preferred Securities offered
by this Prospectus Supplement. As a result of the Company's right to defer
interest payments on the Series C Junior Subordinated Notes, the market price of
the Preferred Securities (which represent undivided beneficial ownership
interests in the Trust, substantially all the assets of which consist of the
Series C Junior Subordinated Notes) may be more volatile than the market prices
of other securities that are not subject to such optional deferrals.
THE COMPANY MAY TERMINATE THE TRUST AT ANY TIME.
The Company has the right to terminate the Trust at any time. If the
Company decides to exercise its right to terminate the Trust, the Trust will
liquidate by distributing the Series C Junior Subordinated Notes to holders of
the Preferred Securities and the Common Securities on a pro rata basis.
Under current United States federal income tax law, a distribution of
Series C Junior Subordinated Notes to you on the dissolution of the Trust should
not be a taxable event to you. However, if the Trust is characterized for United
States federal income tax purposes as an association taxable as a corporation at
the time it is dissolved or if there is a change in law, the distribution of
Series C Junior Subordinated Notes to you may be a taxable event to you.
The Company has no current intention of causing the termination of the
Trust and the distribution of the Series C Junior Subordinated Notes. The
Company anticipates that it would consider exercising this right in the event
that expenses associated with maintaining the Trust were substantially greater
than currently expected such as if certain changes in tax law or investment
company law occurred. See "Description of the Preferred Securities -- Special
Event
S-8
<PAGE>
Redemption; Distribution of Series C Junior Subordinated Notes." The Company
cannot predict the other circumstances under which this right would be
exercised.
YOU HAVE LIMITED VOTING RIGHTS.
Generally, you will not have any voting rights. In particular, subject to
certain exceptions, only the Company can appoint or remove any of the Securities
Trustees. See "Description of the Preferred Securities -- Voting Rights."
ALABAMA POWER CAPITAL TRUST III
The Trust is a statutory business trust created under Delaware law pursuant
to the filing of a certificate of trust with the Delaware Secretary of State on
November 27, 1996. 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 date of
original issuance of the Preferred Securities (the "Issue Date") substantially
in the form filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and the accompanying Prospectus form 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 Series C Junior Subordinated
Notes, and (iii) engaging in only those other activities necessary, appropriate,
convenient or incidental thereto. The Trust has a term of approximately 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 on a parity with, and payments will be made thereon pro rata, with the
Preferred Securities, except that upon the occurrence and continuance of a
Subordinated Note Indenture Event of Default (as defined below), the rights of
the holders of Common Securities to 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 officers of the Company initially will serve as the
Administrative Trustees. The Chase Manhattan Bank will serve as Property Trustee
and will hold legal title to the Series C Junior Subordinated Notes issued by
the Company on behalf of the Trust and the holders of the Trust Securities.
Chase Manhattan 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 Series C 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 Series C 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 Series C 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 Property 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.
S-9
<PAGE>
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 Chase
Manhattan 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) 257-2905, Attn:
Treasurer.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1998, and as adjusted to reflect the transactions described in
note (1) below. The following data is qualified in its entirety by reference to
and, therefore, should be read together with the detailed information and
financial statements appearing in the documents incorporated herein by
reference. See also "Selected Information" in the accompanying Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
---------------------------------
ACTUAL AS ADJUSTED(1)
---------- -------------------
(THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Common Stock Equity..................................... $2,837,278 $2,837,278 46.2%
Cumulative Preferred Stock.............................. 317,512 317,512 5.2
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Company Junior
Subordinated Notes.................................... 297,000 347,000 5.6
Senior Notes............................................ 1,008,800 1,550,000 25.2
Other Long-Term Debt.................................... 1,666,093 1,096,093 17.8
---------- ---------- -----
Total, excluding amounts due within one year....... $6,126,683 $6,147,883 100.0%
========== ========== =====
</TABLE>
- ---------------
(1) Reflects (i) the issuance in October 1998 of $160,000,000 aggregate
principal amount of Series G 5 3/8% Senior Notes due October 1, 2008; (ii)
the issuance in November 1998 of $225,000,000 aggregate principal amount of
Series H 5.49% Senior Notes due November 1, 2005; (iii) the issuance in
November 1998 of $156,200,000 aggregate principal amount of Series I 5.35%
Senior Notes due November 15, 2003; (iv) the redemption in December 1998 of
the outstanding $100,000,000 aggregate principal amount of First Mortgage
Bonds, 6.85% Series due August 1, 2002; (v) the redemption in January 1999
of the outstanding $125,000,000 aggregate principal amount of First Mortgage
Bonds, 7.00% Series due January 1, 2003; (vi) the redemption in February
1999 of the outstanding $175,000,000 aggregate principal amount of First
Mortgage Bonds, 6 3/4% Series due February 1, 2003; (vii) the scheduled
maturity of the outstanding $170,000,000 aggregate principal amount of First
Mortgage Bonds, 6 3/8% Series due August 1, 1999; and (viii) the proposed
issuance of the Preferred Securities.
USE OF PROCEEDS
The Trust will invest the proceeds received from the sale of the Preferred
Securities in Series C Junior Subordinated Notes. The net proceeds received by
the Company from such investment will be used by the Company to repay a portion
of the Company's outstanding short-term indebtedness, which aggregated
approximately $280,000,000 as of February 12, 1999.
RECENT RESULTS OF OPERATIONS
For the year ended December 31, 1998, the unaudited amounts of "Operating
Revenues," "Income Before Interest Charges" and "Net Income After Dividends on
Preferred Stock" were
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$3,386,373,000, $700,160,000 and $377,223,000, respectively. In the opinion of
the management of the Company, the above amounts for the year ended December 31,
1998 reflect all adjustments necessary to present fairly the results of
operations for such period. The "Ratio of Earnings to Fixed Charges" and the
"Ratio of Earnings to Fixed Charges Plus Preferred Dividend Requirements
(Pre-Income Tax Basis)" for the year ended December 31, 1998 were 2.94 and 2.75,
respectively.
RECENT DEVELOPMENTS
On November 30, 1998, total judgments of nearly $53,000,000 were entered in
favor of five plaintiffs against the Company and two large textile
manufacturers. The plaintiffs alleged that such manufacturers had discharged
certain polluting substances into a stream that empties into Lake Martin, a
hydroelectric reservoir owned by the Company, and that such discharges had
reduced the value of the plaintiffs' residential lots on Lake Martin. Of the
total amount of the judgments, $155,000 was compensatory damages and the
remainder was punitive damages. The damages were assessed against all three
defendants jointly. Post-trial motions have been filed, and, if relief is not
granted at the trial court level, the Company will appeal these judgments to the
Supreme Court of Alabama. While the Company believes that these judgments should
be reversed or set aside, the final outcome of this matter cannot now be
determined.
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, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and the accompanying Prospectus
are a part, as well as the 1939 Act.
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 on a parity with, and payments will be made thereon on a
pro rata basis, with the Preferred Securities, except that upon the occurrence
of a Subordinated Note Indenture 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 Series C 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 Guarantees" in the accompanying Prospectus. The
Guarantee does not cover payment of Distributions on the Preferred Securities
when the Trust does not have legally and immediately available funds sufficient
to make such Distributions. In such event, the remedy of a
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holder of Preferred Securities is to direct the Property Trustee to enforce its
rights under the Series C Junior Subordinated Notes. In addition, a holder of
Preferred Securities may institute a legal proceeding directly against the
Company, without first instituting a legal proceeding against the Property
Trustee or any other person or entity, for enforcement of payment to such holder
of principal of or interest on the Series C Junior Subordinated Notes having a
principal amount equal to the aggregate stated liquidation amount of the
Preferred Securities of such holder on or after the due dates specified in the
Series C Junior Subordinated Notes. The above mechanisms and obligations,
together with the Company's obligations under the Agreement as to Expenses and
Liabilities, constitute a full and unconditional guarantee by the Company of
payments due on the Preferred Securities. See "-- Voting Rights" below.
DISTRIBUTIONS
The Distribution Payment Date in respect of a Short-Term Distribution
Period including the Initial Distribution Period will be on the last day of such
Short-Term Distribution Period and, in the case of a Short-Term Distribution
Period in excess of 90 days, on such additional Distribution Payment Dates, if
any, as the Administrative Trustees, on behalf of the Trust may specify in
connection with the establishment of such Short-Term Distribution Period.
Distributions shall be payable on the Distribution Payment Date to the
holders of record as of the opening of business on the Business Day immediately
preceding such Distribution Payment Date (the "Record Date").
If either (i) any additional Distribution Payment Date for a Short-Term
Distribution Period in excess of 90 days is not a Business Day (as defined
herein) or (ii) the day immediately succeeding any such additional Distribution
Payment Date is not a Business Day, then Distributions will be payable on the
first Business Day prior to the Distribution Payment Date that is immediately
succeeded by a Business Day, except that if the securities depository changes
its current practice of paying Distributions in next-day funds to paying
Distributions in same-day funds and the Distribution Payment Date is not a
Business Day, then Distributions will be payable on the first Business Day
following such Distribution Payment Date, in each case with the same force and
effect as if payment was made on the date such payment was originally payable.
If either (i) the Distribution Payment Date for a Short-Term Distribution
Period which is not an additional Distribution Payment Date described in the
preceding paragraph or the final Distribution Payment Date for a Short-Term
Distribution Period in excess of 90 days is not a Business Day or (ii) the day
immediately succeeding the Distribution Payment Date for such Distribution
Period is not a Business Day, then such Short-Term Distribution Period will end
on the first Business Day prior to the Distribution Payment Date that is
immediately succeeded by a Business Day, except that if the securities
depository changes its current practice of paying Distributions in next-day
funds to paying Distributions in same-day funds and the Distribution Payment
Date is not a Business Day, then the Short-Term Distribution Period will end on
the first Business Day following such Distribution Payment Date.
Distribution Payment Dates in respect of a Long-Term Distribution Period
generally will be on the first day of a month selected by the Administrative
Trustees on behalf of the Trust that is not more than four calendar months after
the commencement of such Long-Term Distribution Period and quarterly thereafter
on the first day of each succeeding third month and on the last day of such
Long-Term Distribution Period. Distributions shall be payable on the
Distribution Payment Date to the holders of record on the Record Date. If any
such Distribution Payment Date is not a Business Day, Distributions on the
Preferred Securities will be payable on the immediately succeeding Business Day,
with the same force and effect as if payment was made on the date such payment
was originally payable. If the final Distribution Payment Date for a Long-Term
Distribution Period would otherwise be a day that is not a Business Day, the
immediately
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succeeding Business Day will be the final Distribution Payment Date for such
Long-Term Distribution Period, with the same force and effect as if payment was
made on the date such payment was originally payable.
"Business Day" means any day other than (i) a Saturday or a Sunday, (ii) a
day on which banks in New York, New York are authorized or obligated by law or
executive order to remain closed, or (iii) a day on which the Indenture
Trustee's corporate trust office or the Property Trustee's principal corporate
trust office is closed for business.
The amount of Distributions per Preferred Security payable on each
Distribution Payment Date in respect of a Short-Term Distribution Period (or a
portion thereof) will be computed by multiplying the per annum Distribution Rate
in effect for such Short-Term Distribution Period by a fraction, the numerator
of which will be the actual number of days in such Short-Term Distribution
Period (or portion thereof) (determined by including the first day thereof and
excluding the last thereof) and the denominator of which will be 360, and
multiplying the rate so obtained by $50,000. The amount of Distributions per
Preferred Security payable on each Distribution Payment Date in respect of a
Long-Term Distribution Period will be computed on the basis of a 360-day year
consisting of twelve 30-day months and, in the case of a Long-Term Distribution
Period beginning or ending on a date other than the first date of a month,
portions of any 30-day month based upon the actual number of days elapsed.
The Company has the right under the Subordinated Note Indenture to defer
payments of interest on the Series C Junior Subordinated Notes by extending the
interest payment period from time to time on the Series C Junior Subordinated
Notes which, if exercised, would defer Distributions on the Preferred Securities
during any Extension Period. During this Extension Period, (i) Distributions
will continue to accrue on the Preferred Securities, (ii) Auctions will be
discontinued, (iii) regardless of any notice by the Administrative Trustees to
the contrary, each subsequent Distribution Period during such Extension Period
will be a 28-day Short-Term Distribution Period and (iv) the Distribution Rate
for each such Distribution Period will be the Maximum Applicable Rate (which
will be reset at the end of each 28-day Short-Term Distribution Period during
the Extension Period). See "The Auction -- Extension Period."
If the Company decides to defer interest payments on the Series C Junior
Subordinated Notes, the Extension Period shall consist of consecutive 28-day
Short-Term Distribution Periods which in the aggregate shall not exceed five
years (which approximates to a maximum of 65 consecutive 28-day Short-Term
Distribution Periods). An Extension Period shall not extend beyond the stated
maturity of the Series C Junior Subordinated Notes. Prior to the termination of
any Extension Period, the Company may further defer payments of interest
provided that the Extension Period, together with all such previous and further
extensions thereof, may not exceed 65 consecutive 28-day Short-Term Distribution
Periods. 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 Series C Junior Subordinated Notes.
Deferred installments of interest on the Series C Junior Subordinated Notes
will bear interest, compounded on each Interest Payment Date, at a rate per
annum equal to the Interest Rate (as defined herein). Any 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 Series C Junior Subordinated
Notes -- Interest" and "-- Option to Extend Interest Payment Period."
Distributions on the Preferred Securities must be paid on the Distribution
Payment 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
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will be limited to payments received under the Series C Junior Subordinated
Notes. See "Description of the Series C Junior Subordinated Notes."
DETERMINATION OF DISTRIBUTION RATE
The Distribution Rate on the Preferred Securities for each Distribution
Period following the Initial Distribution Period will be the Applicable Rate,
the Maximum Applicable Rate, the Non-Auction Rate (as defined herein) or the
Default Rate (as defined herein). Except in the event of (i) the failure to hold
an Auction for any reason (other than because a Trust Agreement Event of Default
(as defined herein) exists) on the Auction Date scheduled to occur at the end of
the preceding Distribution Period or (ii) the occurrence of a Trust Agreement
Event of Default, the Distribution Rate for each subsequent Distribution Period
will be the Applicable Rate. See "The Auction -- General" and "The
Auction -- Determination of Distribution Rate."
The "Non-Auction Rate" will apply automatically to any Distribution Period
if there is a failure to hold an Auction for any reason on the Auction Date
scheduled to occur at the end of the preceding Distribution Period, except for
circumstances in which the Distribution Rate is the Default Rate or during an
Extension Period, as described herein. The Non-Auction Rate will be equal to the
Maximum Applicable Rate as in effect on the date of such failure to hold an
Auction, except to the extent otherwise provided herein. If an Auction is not
held on two consecutive scheduled Auction Dates, the Distribution Rate for the
Distribution Period relating to the second such scheduled Auction Date will be
the Special Maximum Applicable Rate (as defined herein) on the Business Day
immediately preceding the first day of such Distribution Period.
If a Trust Agreement Event of Default has occurred and is continuing, (i)
Auctions will be discontinued, (ii) regardless of any notice by the
Administrative Trustees on behalf of the Trust to the contrary, each subsequent
Distribution Period commencing after such Trust Agreement Event of Default but
before Auctions are resumed will be a 28-day Short-Term Distribution Period, and
(iii) the Distribution Rate for each such 28-day Short-Term Distribution Period
will be equal to the Default Rate. The foregoing will continue until the earlier
of (i) the occurrence of a Distribution Payment Date at least one Business Day
prior to which the Trust Agreement Event of Default has been cured or waived in
which case Auctions will resume as described herein for the Distribution Period
commencing with such Distribution Payment Date or (ii) the Preferred Securities
are redeemed.
A Trust Agreement Event of Default will be deemed to be cured or waived if,
at any time, (a) after a Trust Agreement Event of Default exists and payment of
interest and principal on the Series C Junior Subordinated Notes has been
accelerated under the terms of the Subordinated Note Indenture or (b) prior to a
judgment or decree for the payment of the money due on the Preferred Securities
has been obtained, the following events occur: (i) the holders of at least
66 2/3% in liquidation amount of the outstanding Preferred Securities give
written notice to the Property Trustee, the Administrative Trustees and the
Company to rescind and annul such declaration of acceleration of the Series C
Junior Subordinated Notes and its consequences, (ii) the Trust pays and deposits
with the securities depository a sum sufficient to pay all Distributions
(including any accrued interest) and liquidation amount due on the Preferred
Securities otherwise than caused by the acceleration of the Series C Junior
Subordinated Notes and (iii) all other Trust Agreement Events of Default are no
longer continuing or have been waived.
The "Default Rate" in respect of the Preferred Securities will be the
higher of: (i) the product of the Commercial Paper Rate (as defined herein)
applicable to a 28-day Short-Term Distribution Period, determined as of the date
of the related Trust Agreement Event of Default that gives rise to the
application of such Default Rate, multiplied by the Applicable Percentage (as
defined herein) (as in effect on such date) that would be applicable if the
Preferred Securities had a Prevailing Rating (as defined herein) of below
"baa3"/BBB-; or (ii) the
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Distribution Rate in effect for the Distribution Period in respect of which such
Trust Agreement Event of Default occurred.
In the event that the Company elects an Extension Period under the terms of
the Subordinated Note Indenture: (i) Distributions will continue to accrue on
the Preferred Securities, (ii) Auctions will be discontinued, (iii) regardless
of any notice by the Administrative Trustees to the contrary, each subsequent
Distribution Period commencing during such Extension Period will be a 28-day
Short-Term Distribution Period and (iv) the Distribution Rate for each such
28-day Short-Term Distribution Period will be equal to the Maximum Applicable
Rate (which will be reset at the end of each 28-day Short-Term Distribution
Period during such Extension Period). The foregoing will continue until the
Extension Period terminates and the Company provides notice to the Auction Agent
that Auctions shall commence for the succeeding Distribution Period in
accordance with the Auction Procedures. See "The Auction -- Extension Period."
DISTRIBUTION PERIODS
Except as otherwise provided herein, prior to the end of each Distribution
Period, the Administrative Trustees acting in their sole discretion, except in
limited circumstances, will select either a Short-Term Distribution Period or a
Long-Term Distribution Period as the subsequent Distribution Period by giving
written notice thereof to the Auction Agent and the securities depository. See
"Description of the Preferred Securities -- Distribution Periods -- Distribution
Period Selection." The Initial Distribution Period will be a 28-day Short-Term
Distribution Period.
SHORT-TERM DISTRIBUTION PERIODS
A Short-Term Distribution Period (other than the Initial Distribution
Period) will begin on the last day of the preceding Distribution Period and will
end on the day specified by the Administrative Trustees, but no earlier than the
seventh day and no later than the 364th day following the last day of such
preceding Distribution Period and will always be evenly divisible by seven.
LONG-TERM DISTRIBUTION PERIODS
A Long-Term Distribution Period will begin on the last day of the preceding
Distribution Period and, unless it is the Final Distribution Period, will end on
a Distribution Payment Date specified by the Administrative Trustees, but no
earlier than the 365th day following the last day of such preceding Distribution
Period.
The Trust may select a Long-Term Distribution Period which extends to the
maturity of the Series C Junior Subordinated Notes and would eliminate the need
for future Auctions (the "Final Distribution Period"). If the Final Distribution
Period is selected, subject to the provisions described in the second paragraph
under "Description of the Preferred Securities -- Distribution
Periods -- Distribution Period Selection," and Sufficient Clearing Bids are
received at the Auction immediately prior to the commencement of such
Distribution Period: (i) such Auction will be the final Auction; (ii) the
services of the Auction Agent and of the Broker-Dealers will end and (iii) there
will be no adjustment to the Distribution Rate following the commencement of
such Final Distribution Period, except upon a Trust Agreement Event of Default
or during an Extension Period.
DISTRIBUTION PERIOD SELECTION
Upon not less than five Business Days, nor more than 20 days, written
notice to the Auction Agent and the securities depository prior to (i) the last
day of any Distribution Period or (ii) the last day of the final Distribution
Period of any Extension Period or the last day of the final Distribution Period
for which the Default Rate will be in effect, the Administrative Trustees will
select a Long-Term Distribution Period or a Short-Term Distribution Period as
the next
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Distribution Period; provided that, if the Distribution Period existing prior to
such Extension Period or prior to the first Distribution Period during which the
Default Rate was applicable was a Final Distribution Period or a Long-Term
Distribution Period that would still be in effect but for such Extension Period
or Trust Agreement Event of Default, the next Distribution Period shall be the
remaining term of such Final Distribution Period or Long-Term Distribution
Period. The Administrative Trustees will not be obligated to provide notice of
the selection of a subsequent Distribution Period, and failure to send notice by
the fifth Business Day prior to the end of the then current Distribution Period
will be deemed a selection of a 28-day Short-Term Distribution Period as the
next Distribution Period. Notwithstanding the foregoing, (i) if the Trust had
duly given notice of a Long-Term Distribution Period, the Trust may, (a) upon
written notice provided by the Administrative Trustees to the Auction Agent and
the securities depository not later than 10:00 a.m., New York City time, on the
Auction Date scheduled to occur at the end of the then-current Distribution
Period, elect to change such subsequent Long-Term Distribution Period (which may
be a Final Distribution Period) to a Short-Term Distribution Period or (b) upon
written notice provided by the Administrative Trustees to the Auction Agent and
the securities depository not less than one Business Day prior to the Auction
Date scheduled to occur at the end of the then-current Distribution Period,
elect to change the length of such Long-Term Distribution Period; or (ii) if the
Administrative Trustees have selected a Short-Term Distribution Period
(including a deemed selection as discussed above), the Administrative Trustees
may (a) upon written notice provided by the Administrative Trustees to the
Auction Agent and the securities depository not less than one Business Day prior
to the Auction Date scheduled to occur at the end of the then-current
Distribution Period elect to change such subsequent Short-Term Distribution
Period to a Long-Term Distribution Period (which may be a Final Distribution
Period), or (b) upon written notice provided by the Administrative Trustees to
the Auction Agent and the securities depository not later than 10:00 a.m., New
York City time, on the Auction Date scheduled to occur at the end of the
then-current Distribution Period, elect to change the length of such Short-Term
Distribution Period. Any notice regarding the next Distribution Period will
specify: (i) whether the next succeeding Distribution Period will be a
Short-Term Distribution Period or a Long-Term Dividend Period and the length
thereof; (ii) in the case of a Long-Term Distribution Period, the initial
Distribution Payment Date; and (iii) in the case of a Short-Term Distribution
Period of more than 90 days, the additional Distribution Payment Dates, if any,
selected by the Administrative Trustees.
Notwithstanding the preceding paragraph:
(i) the Administrative Trustees may select a Long-Term Distribution
Period only if on the date of notice of that selection Distribution
payments on the Preferred Securities are current; and
(ii) a 28-day Short-Term Distribution Period will automatically follow
the expiration of the preceding Distribution Period if:
(a) the Administrative Trustees do not select a Long-Term
Distribution Period or a Short-Term Distribution Period; or
(b) Sufficient Clearing Bids are not made for any reason (other
than because all of the Preferred Securities are the subject of
Submitted Hold Orders (as defined herein)) in the Auction occurring at
the end of such preceding Distribution Period; or
(c) an Auction is not held, for any reason, on the Auction Date
scheduled to occur at the end of such preceding Distribution Period.
The circumstances resulting in an automatic adjustment to or establishment
of certain Distribution Periods described above may also affect the Distribution
Rate for such subsequent Distribution Periods. See "Description of the Preferred
Securities -- Distributions" and "The Auction -- Determination of Distribution
Rate." In certain of these events, Existing Holders that
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have placed Sell Orders (as defined herein) for the Preferred Securities may not
be able to sell those Preferred Securities in the Auction. See "The
Auction -- Acceptance and Rejection of Orders and Allocation of Preferred
Securities."
REDEMPTION
The Preferred Securities are subject to mandatory redemption upon repayment
of the Series C Junior Subordinated Notes at maturity, their earlier redemption
or when they are otherwise due. The Series C Junior Subordinated Notes will
mature on February , 20 and may be redeemed, in whole or in part, at the
option of the Company, on any interest payment date or at any time in whole upon
the occurrence of a Special Event (as defined herein). Upon the repayment of the
Series C Junior Subordinated Notes, whether at maturity, upon redemption or when
they are otherwise due, 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. See
"Description of the Series C Junior Subordinated Notes -- Optional Redemption."
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" below. 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 $50,000 or integral multiples thereof) of
the aggregate liquidation amount of Preferred Securities of a denomination
larger than $50,000; 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.
Except to the extent otherwise provided with respect to redemptions during
a Long-Term Distribution Period, the redemption price for each Preferred
Security shall equal the stated liquidation amount of $50,000 plus accrued and
unpaid Distributions thereon to the date of payment.
SPECIAL EVENT REDEMPTION; DISTRIBUTION OF SERIES C JUNIOR SUBORDINATED NOTES
Upon the occurrence of a Special Event at any time, the Company will have
the option to redeem the Series C Junior Subordinated Notes in whole (and thus
cause the redemption of the Preferred Securities in whole). 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 Investment
Company Act of 1940, as amended (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
Series C Junior Subordinated Notes, (ii) interest
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payable on the Series C 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.
The Company will have the right at any time to terminate the Trust and,
after satisfaction of liabilities to creditors of the Trust, if any, cause the
Series C Junior Subordinated Notes to be distributed to the holders of the
Preferred Securities in liquidation of the Trust. See "-- Liquidation
Distribution Upon Dissolution" below. This right is optional and wholly within
the discretion of the Company. Circumstances under which the Company may
determine to exercise such right could include the occurrence of an Investment
Company Act Event or a Tax Event, adverse tax consequences to the Company or the
Trust that are not within the definition of a Tax Event because they do not
result from an amendment or change described in such definition, and changes in
the accounting requirements applicable to the Preferred Securities as described
under "Accounting Treatment of the Trusts" in the accompanying Prospectus.
If Series C Junior Subordinated Notes are distributed to the holders of the
Preferred Securities, the Interest Rate on the Series C Junior Subordinated
Notes will be determined in the same manner as the Distribution Rate for the
Preferred Securities and the associated Auction Procedures shall remain the same
except (i) the effects of Trust Agreement Events of Default shall be occassioned
only by the Subordinated Note Indenture Events of Default and (ii) the cure and
waiver provisions relating to Trust Agreement Events of Default shall be
superceded by the cure and waiver provisions relating to Subordinated Note
Indenture Events of Default. See "Description of Junior Subordinated
Notes -- Events of Default" in the accompanying Prospectus. After the date for
any distribution of Series C 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 securities depositary or its nominee, as the record
holder of the Preferred Securities, will receive a registered global certificate
or certificates representing the Series C Junior Subordinated Notes to be
delivered upon such distribution and (iii) any certificates representing
Preferred Securities and the Guarantee not held by the securities depositary or
its nominee will be deemed to represent Series C Junior Subordinated Notes
having an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an Interest Rate identical to the Distribution Rate of, and
accrued and unpaid interest equal to accrued and unpaid Distributions 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 Series C 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 Series C 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 amount of 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 Series C Junior Subordinated Notes. The redemption price of Preferred
Securities shall be deemed payable on each redemption date only to the extent
that the Trust has funds legally and immediately available for payment of such
Redemption Price.
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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" below. 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, Distributions on such Preferred
Securities will continue to accrue at the Distribution 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, "Relationship Among the Preferred Securities, the Junior
Subordinated Notes and the Guarantees" and "Description of the Guarantees --
Events of Default" in the accompanying Prospectus.
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 Auction, by tender, in the open market or by private
agreement.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will act as the initial 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 Securities Exchange
Act of 1934, as amended (the "1934 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 New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a
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custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Securities and Exchange Commission (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.
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 is 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.
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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 December 31,
20 , or earlier upon (i) the occurrence of a Bankruptcy Event (as defined in
the Trust Agreement) in respect of the Company, dissolution or liquidation of
the Company, or dissolution of the Trust pursuant to a judicial decree; (ii) the
delivery of written direction to the Property Trustee by the Company, as
Depositor, at any time (which direction is optional and wholly within the
discretion of the Company, as Depositor) to terminate the Trust and distribute
the Series C Junior Subordinated Notes to the holders of the Preferred
Securities in liquidation of the Trust (see "-- Special Event Redemption;
Distribution of Series C Junior Subordinated Notes" above); or (iii) the payment
at maturity, upon redemption, or otherwise when due of all of the Series C
Junior Subordinated Notes, and the consequent payment of the Trust Securities.
If an early termination occurs as described in clause (i) or (ii) above,
the Trust shall be liquidated, and the Property Trustee shall distribute to each
holder of Preferred Securities and Common Securities a like amount of Series C
Junior Subordinated Notes, unless in the case of an event described in clause
(i) such distribution is determined by the Administrative Trustees 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 $50,000 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 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 Subordinated Note Indenture Event of
Default has occurred and is continuing, the holders of Preferred Securities
shall have a preference over the holders of Common Securities.
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 ("Subordinated Note Indenture Event of
Default") (see "Description of the Junior Subordinated Notes -- Events of
Default" in the accompanying Prospectus); or
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(ii) default by the Trust 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, if the Distribution Period in which such default occurs is
less than 32 days, the continuation of such default for a period of days
that is two days less than the length of such Distribution Period; or
(iii) default by the Trust 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 Trustees 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 Trust.
Within 90 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. For a
description of the cure and waiver procedures with respect to a Trust Agreement
Event of Default, see "-- Distributions."
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 Series C Junior
Subordinated Notes. If the Property Trustee fails to enforce its rights under
the Series C Junior Subordinated Notes, a holder of Preferred Securities may, to
the fullest 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. Notwithstanding the foregoing, a holder of Preferred Securities may
institute a legal proceeding directly against the Company, without first
instituting a legal proceeding against the Property Trustee or any other person
or entity, for enforcement of payment to such holder of principal of or interest
on the Series C Junior Subordinated Notes having a principal amount equal to the
aggregate stated liquidation amount of the Preferred Securities of such holder
on or after the due dates specified in the Series C Junior Subordinated Notes.
See "Relationship Among the Preferred Securities, the Junior Subordinated Notes
and the Guarantees" and "Description of the Guarantees -- Events of Default" in
the accompanying Prospectus.
Unless a Subordinated Note Indenture 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 Subordinated Note Indenture 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 amount 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 Securities Trustee and no appointment of a successor shall be effective
until the acceptance of appointment by the successor Trustee in accordance with
the requirements of the Trust Agreement.
If a Subordinated Note Indenture Event of Default has occurred and is
continuing, the holders of Preferred Securities shall have a preference over the
holders of Common Securities
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upon dissolution of the Trust as described above. See "-- Liquidation
Distribution Upon Dissolution."
VOTING RIGHTS
Except as provided below and under "-- Distributions" herein and
"Description of the Guarantees -- Amendments and Assignment" in the accompanying
Prospectus 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 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 at least 66 2/3% in liquidation
amount of such outstanding Preferred Securities.
So long as any Series C 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,
or executing any trust or power conferred on the Indenture Trustee with respect
to the Series C 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 Series
C Junior Subordinated Notes shall be due and payable, or (iv) consent to any
amendment, modification or termination of the Subordinated Note Indenture or the
Series C Junior Subordinated Notes, where such consent shall be required, or to
any other action, as the holder of the Series C 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 amount of the
outstanding Preferred Securities; provided, however, that where a consent under
the Subordinated Note Indenture would require the consent of each holder of
Series C 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, except pursuant to a subsequent vote of such holders. 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 Series C 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 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.
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CO-PROPERTY TRUSTEES AND SEPARATE PROPERTY TRUSTEE
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 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 a Subordinated Note Indenture Event of Default has occurred and
is continuing, the Property Trustee alone shall have power to make such
appointment.
AMENDMENT OF THE TRUST AGREEMENT
The Trust Agreement may be amended from time to time by the Company and the
Securities Trustees without the consent of the holders of the Trust Securities
(i) to cure any ambiguity, correct or supplement any provision therein which may
be inconsistent with any other provision therein, or to make any other
provisions with respect to matters or questions arising under the Trust
Agreement, which shall not be inconsistent with the other provisions of the
Trust Agreement, provided that the amendment does not adversely affect in any
material respect the interests of any holder of Trust Securities, or (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such extent
as shall be necessary 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 specified date, (ii) restrict the right of a
holder of Trust Securities to institute suit for the enforcement of any such
payment on or after such date, 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
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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 substantially identical to that of the Trust, (vii) prior to such
merger, consolidation, amalgamation or replacement, the Company has received an
opinion of counsel 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 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 of such Securities Trustee under the
Trust Agreement, provided such corporation is otherwise qualified and eligible
under the Trust Agreement.
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 Payment 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.
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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 Chase Manhattan Bank, the Property Trustee, also serves as Auction
Agent, Indenture Trustee and Guarantee Trustee. The Company and certain of its
affiliates maintain deposit accounts and banking relationships with The Chase
Manhattan Bank. The Chase Manhattan Bank serves as trustee under other
indentures pursuant to which securities of the Company and affiliates of the
Company are outstanding.
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 Administrative Trustees are authorized and directed to operate the
Trust so that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or taxed as other than a grantor
trust for federal income tax purposes and so that the Series C Junior
Subordinated Notes will be treated as indebtedness of the Company for federal
income tax purposes. In this connection, the Administrative Trustees and the
Company are authorized to take any action, not inconsistent with applicable law,
the Trust's certificate of trust or the Trust Agreement, that the Administrative
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 SERIES C JUNIOR SUBORDINATED NOTES
Set forth below is a description of the specific terms of the Series C
Junior Subordinated Notes. This description supplements, and should be read
together with, the description of the general terms and provisions of the Junior
Subordinated Notes set forth in the accompanying Prospectus under the caption
"Description 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 description in the accompanying Prospectus and the
Subordinated Note Indenture.
GENERAL
The Series C Junior Subordinated Notes will be issued as a series of Junior
Subordinated Notes under the Subordinated Note Indenture. The Series C Junior
Subordinated Notes will be limited in aggregate principal amount to $51,550,000,
such amount being the approximate aggregate liquidation amount of the Trust
Securities.
The entire principal amount of the Series C Junior Subordinated Notes will
mature and become due and payable, together with any accrued and unpaid interest
thereon, including
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Additional Interest (as defined in the Subordinated Note Indenture), if any, on
February , 20 . The Series C Junior Subordinated Notes are not subject to any
sinking fund provision.
The terms of the Series C Junior Subordinated Notes correspond to those of
the Preferred Securities, as described herein.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Series C Junior Subordinated
Notes, in whole or in part, without premium, from time to time, on any Interest
Payment Date (as defined herein) or at any time in whole upon the occurrence of
a Special Event as described under "Description of the Preferred
Securities -- Special Event Redemption; Distribution of Series C Junior
Subordinated Notes," upon not less than 30 nor more than 60 days' notice, at the
Redemption Price.
INTEREST
Each Series C Junior Subordinated Note shall bear interest at a rate equal
to the Distribution Rate payable on the Preferred Securities (the "Interest
Rate"). The periods for which interest is payable shall be the same as the
Distribution Periods for the Preferred Securities (each an "Interest Period").
Interest shall be payable on the same dates as Distributions are payable on the
Preferred Securities (each, an "Interest Payment Date") to the person in whose
name such Series C Junior Subordinated Note is registered at the close of
business on the Record Date. The Interest Rate payable on each Interest Payment
Date and the length of each Interest Period shall be determined pursuant to
procedures conforming to the Auction Procedures and shall be computed in the
same manner as Distributions and Distribution Periods are computed for the
Preferred Securities.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time, to
defer payments of interest on the Series C Junior Subordinated Notes by
extending the interest payment period for up to five years, but not beyond the
stated maturity date. During this deferral period, (i) Distributions and
interest will continue to accrue on the Preferred Securities and the Series C
Junior Subordinated Notes, (ii) Auctions will be discontinued, (iii) regardless
of any notice by the Administrative Trustee to the contrary, each subsequent
Distribution Period and Interest Period during such Extension Period will be a
28-day Short-Term Distribution Period and (iv) the Distribution Rate and
Interest Rate for each such Distribution Period and Interest Period will be the
Maximum Applicable Rate (which will be reset at the end of each 28-day
Short-Term Distribution Period during the Extension Period). See "The
Auction -- Extension Period."
If the Company decides to defer interest payments on the Series C Junior
Subordinated Notes, the Extension Period shall consist of consecutive 28-day
Short-Term Distribution Periods which in the aggregate shall not exceed five
years (which approximates to a maximum of 65 consecutive 28-day Short-Term
Distribution Periods). An Extension Period shall not extend beyond the stated
maturity of the Series C Junior Subordinated Notes. Prior to the termination of
any Extension Period, the Company may further defer payments of interest,
provided that the Extension Period, together with all such previous and further
extensions thereof, may not exceed 65 consecutive 28-day Short-Term Distribution
Periods. 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 Series C Junior Subordinated Notes.
At the end of an Extension Period, the Company shall pay all interest then
accrued and unpaid (together with interest thereon at the prevailing Interest
Rate, to the extent permitted by law, compounded on each Interest Payment Date);
provided, that if the Company shall have
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given notice of its election to select an Extension Period, (a) the Company
shall not declare or pay any dividend or distribution on, 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 on a parity with or junior
to the Series C Junior Subordinated Notes.
The Company has no present intention of exercising its rights to defer
payments of interest by extending the interest payment period on the Series C
Junior Subordinated Notes. See "Certain Federal Income Tax
Considerations -- Original Issue Discount."
The Company shall give the holder or holders of the Series C Junior
Subordinated Notes and the Indenture Trustee notice of its selection or
extension of an 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 Company or the Trust is required to give notice to any
applicable self-regulatory organization of the Record Date or the date such
interest or Distributions are payable.
EVENTS OF DEFAULT
For a description of Subordinated Note Indenture Events of Default with
respect to the Series C Junior Subordinated Notes, see "Description of the
Junior Subordinated Notes -- Events of Default" in the accompanying Prospectus;
provided, however, that with respect to Series C Junior Subordinated Notes that
are in an Interest Period of less than 12 days, the "grace period" with respect
to defaults on the payment of interest and Additional Interest shall be a period
of days that is two days less than the length of such Interest Period.
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,
the Series C 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 Series C 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 AUCTION
The Auction Procedures with respect to the Preferred Securities are set
forth in the Trust Agreement. The procedures to be used for settlement of
purchases of the Preferred Securities pursuant to the Auctions (the "Settlement
Procedures") are attached as Annex B hereto. The summaries of the Auction
Procedures and the Settlement Procedures contained herein are qualified in their
entirety by reference to the Trust Agreement which includes the Auction
Procedures and the Settlement Procedures. Persons who have signed Purchaser's
Letters (in substantially the form of Annex A attached hereto), if required, may
obtain a copy of the Trust Agreement from the Auction Agent.
GENERAL
The Trust Agreement provides that the Distribution Rate for the Preferred
Securities for each Distribution Period after the Initial Distribution Period
will be equal to the Applicable Rate, except that: (i) if a Trust Agreement
Event of Default has occurred, the Distribution Rate for each
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succeeding Distribution Period (until such Trust Agreement Event of Default has
been cured or waived or until the Preferred Securities are redeemed) will be the
Default Rate and each such Distribution Period will be a 28-day Short-Term
Distribution Period; (ii) if an Auction is not held because the Company has
elected an Extension Period the Distribution Rate will be the Maximum Applicable
Rate; and (iii) if an Auction is not held (for any reason other than because a
Trust Agreement Event of Default or an Extension Period exists), the
Distribution Rate for the next succeeding Distribution Period will be the
Non-Auction Rate and such Distribution Period will be a 28-day Short-Term
Distribution Period. See "Description of the Preferred Securities --
Distributions -- Determination of Distribution Rate."
The Applicable Rate will ordinarily be the rate per annum that the Auction
Agent advises results from the implementation of the Auction Procedures.
Pursuant to the Auction Procedures, persons determine to hold or offer to
purchase or sell the Preferred Securities based on the distribution rates bid by
them. The Auction Procedures will be implemented on a specified day preceding
the last day of the then-current Distribution Period.
The Company and any affiliate of the Company may submit an Order (as
defined herein) in any Auction, subject to compliance with all applicable
securities and other laws. Neither the Company nor any of its affiliates has any
obligation, or any present plan or intention, to place Orders in any Auction.
The bid for the Preferred Securities in an Auction by a Potential Holder,
including the Company or an affiliate of the Company, could cause the Applicable
Rate set in such Auction to be lower than would otherwise be the case. See "The
Auction -- Determination of Distribution Rate" and "The Auction -- Acceptance
and Rejection of Orders and Allocation of Preferred Securities."
The Preferred Securities for which a notice of redemption has been given by
the Administrative Trustees will not be eligible to participate in any Auction
for a Distribution Period commencing on or after the date specified for
redemption, and such Preferred Securities will not be included for purposes of
such Auction, whether or not such redemption actually occurs. See "Description
of the Preferred Securities -- Redemption Procedures."
AUCTION AGENT AGREEMENT
Prior to the issuance of the Preferred Securities, the Company and the
Trust will enter into an agreement (the "Auction Agent Agreement") with The
Chase Manhattan Bank, as auction agent (The Chase Manhattan Bank, its successors
or assigns, or such other bank or trust company appointed to such capacity by
the Administrative Trustees on behalf of the Trust, being referred to herein as
the "Auction Agent"), providing, among other things, that the Auction Agent will
follow the Auction Procedures for the purposes of determining the Applicable
Rate. The Company will pay the Auction Agent compensation for its services under
the Auction Agent Agreement.
The Auction Agent will act solely as agent for the Trust in connection with
each Auction and will not be a fiduciary for holders of the Preferred
Securities. In the absence of bad faith or negligence on its part, the Auction
Agent will not be liable for any action taken, suffered or omitted or for any
error of judgment made by it in the performance of its duties under the Auction
Agent Agreement and will not be liable for any error of judgment made in good
faith unless the Auction Agent has been negligent in ascertaining the pertinent
facts. The Company and the Trust will indemnify the Auction Agent for, and hold
it harmless against, any loss, liability or expense incurred without negligence
or bad faith on its part arising out of or in connection with its acceptance or
administration of its agency duties or functions under the Auction Agent
Agreement.
The Auction Agent may terminate the Auction Agent Agreement upon notice to
the Administrative Trustees on behalf of the Trust, with such termination being
effective on the earlier of (i) the first Business Day after the second
Distribution Payment Date occurring after the
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delivery of such notice or 90 days after the delivery of such notice or (ii) the
date on which a successor Auction Agent is appointed by the Administrative
Trustees, on behalf of the Trust, pursuant to an agreement containing
substantially the same terms and conditions as the Auction Agent Agreement. The
Administrative Trustees may also terminate the Auction Agent Agreement upon 30
days written notice to the Auction Agent but only if, prior to such termination,
the Company and the Trust have entered into an agreement with a successor
Auction Agent containing substantially the same terms and conditions as the
Auction Agent Agreement. The Trust Agreement provides that the Company and the
Trust will use their best efforts to maintain an Auction Agent with respect to
the Preferred Securities pursuant to an agreement containing terms and
conditions substantially similar to the terms and conditions of the Auction
Agent Agreement described herein.
BROKER-DEALER AGREEMENTS
The Auction Procedures require the participation of one or more
broker-dealers. The Auction Agent will initially enter into a non-exclusive
agreement with each of Goldman Sachs and Lehman Brothers and, under certain
circumstances, may enter into similar agreements with one or more other
broker-dealers (collectively, the "Broker-Dealer Agreements") that provide for
the participation by broker-dealers in Auctions as broker-dealers. These
broker-dealers, including Goldman Sachs and Lehman Brothers, who are parties to
effective Broker-Dealer Agreements from time to time are referred to herein
collectively as the "Broker-Dealers." Subject to certain exceptions, Goldman
Sachs and Lehman Brothers will initially be the Broker-Dealers. After each
Auction, the Company will pay a service charge to each Broker-Dealer. Existing
Holders and Potential Holders (as defined herein) must submit Orders for the
Preferred Securities through any Broker-Dealer in order to participate in an
Auction. Each Broker-Dealer may submit Orders and purchase the Preferred
Securities for its own account, either in an Auction or otherwise and, in such
capacity, each Broker-Dealer shall be considered an Existing Holder or a
Potential Holder, as the case may be.
PURCHASER'S LETTER
As a condition to purchasing the Preferred Securities in this offering or
participating in an Auction or otherwise acquiring the Preferred Securities,
each prospective purchaser of the Preferred Securities may be required to sign
and deliver to any Broker-Dealer a Purchaser's Letter in substantially the form
attached as Annex A hereto (each, a "Purchaser's Letter"). Prospective
purchasers should consult their Broker-Dealers as to the necessity of delivering
a Purchaser's Letter. Each Broker-Dealer will be required to inform the Auction
Agent whether the Broker-Dealer required the holder or prospective purchaser to
execute a Purchaser's Letter. Each holder or prospective purchaser of the
Preferred Securities may be required to deliver an updated Purchaser's Letter no
less frequently than annually.
In the Purchaser's Letter, the prospective purchaser will agree, among
other things:
(i) to offer, sell, transfer or otherwise dispose of the Preferred
Securities only pursuant to a Bid or a Sell Order in an Auction, or to or
through any Broker-Dealer or to the Company, provided that, in the case of
all transfers other than those pursuant to an Auction, the selling Existing
Holder or its Broker-Dealer advises the Auction Agent of such transfer and
such transfer is made in compliance with the applicable Purchaser's Letter;
(ii) that any Bid or Sell Order (each as defined herein) placed by
such purchaser will constitute an irrevocable offer to purchase or sell the
Preferred Securities subject to such Bid or Sell Order, or such lesser
number of Preferred Securities as such purchaser will be required to
purchase or sell, respectively, as a result of such Auction, at a price of
$50,000 per Preferred Security, and that a failure by such purchaser or any
Broker-Dealer to place a
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Bid or Sell Order with respect to any Preferred Securities owned by that
purchaser will be deemed to constitute a Hold Order with respect to those
Preferred Securities; and
(iii) that it understands and agrees that: (a) so long as there is a
securities depository for the Preferred Securities, the ownership of the
Preferred Securities as to which that purchaser is the Existing Holder will
be maintained in book-entry form by such securities depository, in the
account of that purchaser's agent which is a member of the securities
depository ("Agent Member"), which in turn will maintain records of that
purchaser's ownership; (b) such Agent Member is authorized to disclose to
the Auction Agent such information with respect to such purchaser's
beneficial ownership as the Auction Agent may request; and (c) so long as
there is a securities depository for the Preferred Securities or unless
otherwise required by law, such purchaser will not be entitled to receive
certificates evidencing the Preferred Securities.
Execution of a Purchaser's Letter, if required, is not a commitment to
purchase the Preferred Securities in the offering being made hereby or in any
Auction, but may be a condition precedent to purchasing the Preferred Securities
in an Auction or otherwise.
The Auction Agent may rely upon, as evidence of the identities of the
Existing Holders, a list of the initial owners of the Preferred Securities
provided by the Administrative Trustees or any Broker-Dealer and the results of
Auctions and notices from selling Existing Holders (or any Broker-Dealer and
Agent Members) with respect to transfers of the Preferred Securities. The
Auction Agent will be required to register a transfer of beneficial ownership of
the Preferred Securities from an Existing Holder to another person only if such
transfer is made to a person that has delivered or caused to be delivered a
signed Purchaser's Letter, if required, to any Broker-Dealer and if (i) such
transfer is pursuant to an Auction or (ii) the Auction Agent has been notified
of such transfer in writing by the selling Existing Holder or its Broker-Dealer,
and, in either case, that such transfer is being made in compliance with the
terms of the selling Existing Holder's Purchaser's Letter, if any. The Auction
Agent is not required to accept any notice of transfer prior to an Auction
unless it is received by the Auction Agent by 3:00 p.m., New York City time, on
the Business Day immediately preceding the related Auction Date. If there has
been a failure by the seller of the Preferred Securities to deliver such
Preferred Securities to a purchaser as a result of an Auction, or if a purchaser
of the Preferred Securities has failed to make payment to the seller of such
Preferred Securities, a Broker-Dealer must send written notice of such failure
to the Auction Agent.
Any transfer of the Preferred Securities contrary to the terms of a
Purchaser's Letter may, among other things, affect the right of the person
acquiring such Preferred Securities to participate in future Auctions.
AUCTION DATE
Except as otherwise provided herein, an Auction will be held at the end of
each Distribution Period to determine the Applicable Rate for the subsequent
Distribution Period. Each such Auction will be held (i) in the case of an
Auction held at the end of a Short-Term Distribution Period, on the Business Day
immediately preceding the last day of such Short-Term Distribution Period, and
(ii) in the case of an Auction held at the end of a Long-Term Distribution
Period, on the third Business Day preceding the last day of such Long-Term
Distribution Period.
ORDERS
The communication to any Broker-Dealer of the information described below
is referred to herein as an "Order." An Existing Holder or a Potential Holder
placing an Order is referred to herein as a "Bidder." The Auction Agent is
entitled to rely upon the terms of any Order submitted to it by a Broker-Dealer.
The Auction Agent will, if necessary, round any rate specified in any
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Order (expressed as a percentage) that contains more than three figures to the
right of the decimal point up to the next highest one-thousandth of one percent
(.001%).
Prior to 12:30 p.m., New York City time, on each Auction Date or such other
time on the Auction Date specified by the Auction Agent (the "Submission
Deadline"), each Broker-Dealer participating in the Auction will submit to the
Auction Agent in writing all Orders obtained by it for such Auction to be
conducted on such Auction Date. The Broker-Dealer Agreements provide that in
each Auction each Broker-Dealer must submit separate Orders for each customer
and may not net or aggregate the Orders of different customers. The Company
intends that any Orders submitted by the Company or any of its affiliates would
be submitted as close as practicable to the applicable Submission Deadline.
EXISTING HOLDERS
Prior to the Submission Deadline for each Auction, each Broker-Dealer will
contact Existing Holders of the Preferred Securities, by telephone or otherwise,
to notify such Existing Holders as to: (i) whether the next Distribution Period
is a Short-Term Distribution Period or a Long-Term Distribution Period and the
length thereof; (ii) additional Distribution Payment Dates, if any, with respect
to a Short-Term Distribution Period of more than 90 days; (iii) the initial
Distribution Payment Date, with respect to a Long-Term Distribution Period; and
(iv) the Maximum Applicable Rate then in effect; and to determine whether such
Existing Holders desire to place Orders. Each Existing Holder, with respect to
the Preferred Securities that it then holds, may submit to a Broker-Dealer by
telephone or otherwise a:
(i) "Hold Order" -- indicating the number of Preferred Securities that
such Existing Holder desires to continue to hold without regard to the
Applicable Rate for the next Distribution Period;
(ii) "Bid" -- indicating the number of Preferred Securities that such
Existing Holder desires to continue to hold, provided that the Applicable
Rate for the next Distribution Period is not less than the rate per annum
specified in such Bid; or
(iii) "Sell Order" -- indicating the number of Preferred Securities
that such Existing Holder desires to sell without regard to the Applicable
Rate for the next Distribution Period.
A Sell Order submitted by an Existing Holder will constitute an irrevocable
offer to sell the Preferred Securities subject to that Order, and a Bid
submitted by an Existing Holder will constitute an irrevocable offer to sell the
Preferred Securities subject to that Bid if the rate specified in such Bid is
higher than the Applicable Rate determined in the Auction. Any Bid submitted by
an Existing Holder specifying a rate higher than the Maximum Applicable Rate
will be deemed to be a Sell Order.
If, for any Auction, Orders covering all of the outstanding Preferred
Securities held by an Existing Holder are not submitted to the Auction Agent
(through a Broker-Dealer) prior to the Submission Deadline, whether because any
Broker-Dealer failed to contact such Existing Holder, such Existing Holder
failed to place a Bid or Sell Order or such Broker-Dealer failed to submit the
Existing Holder's Orders or for any other reason, the Auction Agent will deem a
Hold Order to have been submitted by such Existing Holder covering the number of
Preferred Securities held by such Existing Holder and not subject to any Order
submitted to the Auction Agent.
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An Existing Holder may submit different types of Orders in an Auction with
respect to Preferred Securities then held by that Existing Holder. In any
Auction, if one or more Orders covering in the aggregate more than the number of
Preferred Securities held by an Existing Holder are submitted to the Auction
Agent (through a Broker-Dealer), those Orders will be considered valid as
follows and in the following order of priority:
(i) any Hold Order submitted on behalf of such Existing Holder will be
considered valid up to and including the Preferred Securities held by such
Existing Holder, except that if more than one Hold Order is submitted on
behalf of such Existing Holder and the number of Preferred Securities
subject to such Hold Orders exceeds the number of Preferred Securities held
by such Existing Holder, the number of Preferred Securities subject to each
such Hold Order will be reduced pro rata so that such Hold Orders will
cover exactly the number of Preferred Securities held by such Existing
Holder.
(ii) (a) any Bid submitted on behalf of such Existing Holder will be
considered valid up to and including the excess of the number of Preferred
Securities held by such Existing Holder over the number of Preferred
Securities subject to any Hold Orders referred to in clause (i) above; (b)
subject to subclause (a), if more than one Bid with the same rate is
submitted on behalf of such Existing Holder and the number of Preferred
Securities subject to such Bids is greater than such excess, the number of
Preferred Securities subject to each such Bid will be reduced pro rata so
that such Bids will cover exactly the number of Preferred Securities equal
to such excess; (c) subject to subclause (a), if more than one Bid with
different rates is submitted on behalf of such Existing Holder, such Bids
will be considered valid in the ascending order of their respective rates
up to and including the amount of such excess; and (d) in any such event,
the number, if any, of Preferred Securities subject to Bids not valid under
subclause (a), (b) or (c) of this clause (ii) (i.e., Bids in excess of the
Preferred Securities held by the Existing Holder) will be treated as the
subject of a Bid by such Existing Holder as a Potential Holder of such
Preferred Securities; and
(iii) any Sell Order submitted on behalf of such Existing Holder will
be considered valid up to and including the excess of the number of
Preferred Securities held by such Existing Holder over the number of
Preferred Securities subject to valid Hold Orders by such Existing Holder
referred to in clause (i) and valid Bids by such Existing Holder referred
to in clause (ii), except that if more than one Sell Order is submitted on
behalf of such Existing Holder and the Preferred Securities subject to such
Sell Orders is greater than such excess, the Preferred Securities subject
to such Sell Orders will be reduced pro rata so that such Sell Orders will
cover exactly the number of Preferred Securities equal to such excess.
As used herein, an "Existing Holder" means a person who has signed and
delivered a Purchaser's Letter (at the request of their Broker-Dealer) and is
listed as the beneficial owner of the Preferred Securities in the records of the
Auction Agent or such beneficial owner's Broker-Dealer, who may act as the agent
of the Auction Agent for the limited purpose of maintaining such information.
POTENTIAL HOLDERS
Prior to the Submission Deadline for each Auction, each Broker-Dealer will
contact prospective purchasers of the Preferred Securities (each such
prospective purchaser who shall have executed and delivered a Purchaser's Letter
(if required) or who shall have submitted a Bid being referred to herein as a
"Potential Holder") by telephone or otherwise to notify such Potential Holders
as to: (i) whether the next Distribution Period is a Short-Term Distribution
Period or a Long-Term Distribution Period and the length thereof; (ii)
additional Distribution Payment Dates, if any, with respect to a Short-Term
Distribution Period of more than 90 days; (iii) the initial Distribution Payment
Date with respect to a Long-Term Distribution Period; and
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(iv) the Maximum Applicable Rate then in effect; and to determine whether such
Potential Holders desire to submit Bids. When used with respect to a Potential
Holder and any Auction, "Bid" means an Order indicating the number of Preferred
Securities that such Potential Holder offers to purchase if the Applicable Rate
for the Preferred Securities for the next Distribution Period is not less than
the rate per annum specified in such Bid.
A Bid submitted by a Potential Holder will constitute an irrevocable offer
to purchase the Preferred Securities subject to such Bid if the rate specified
in the Bid is less than or equal to the Applicable Rate determined in the
related Auction. An Existing Holder who submits a Bid in excess of the number of
Preferred Securities then held by such Existing Holder will be treated as a
Potential Holder to the extent of such excess. Any Bid submitted by a Potential
Holder specifying a rate higher than the Maximum Applicable Rate will be
rejected.
If more than one Bid is submitted on behalf of any Potential Holder, each
Bid submitted will be deemed a separate Bid with the rate and number of
Preferred Securities specified therein.
EXTENSION PERIOD
The Company has the right under the Subordinated Note Indenture to defer
payments of interest on the Series C Junior Subordinated Notes by extending the
interest payment period from time to time on the Series C Junior Subordinated
Notes which, if exercised, would defer Distributions on the Preferred Securities
during any Extension Period.
During this Extension Period, (i) Distributions will continue to accrue on
the Preferred Securities, (ii) Auctions will be discontinued, (iii) regardless
of any notice by the Administrative Trustees to the contrary, each subsequent
Distribution Period during such Extension Period will be a 28-day Short-Term
Distribution Period and (iv) the Distribution Rate for each such Distribution
Period will be the Maximum Applicable Rate (which will be reset at the end of
each 28-day Short-Term Distribution Period during the Extension Period).
Upon not less than five Business Days, nor more than 20 days written notice
to the Auction Agent and the securities depository prior to the last day of the
final Distribution Period of any Extension Period, the Administrative Trustees
will select a Long-Term Distribution Period or a Short-Term Distribution Period
as the next Distribution Period; provided that if the Distribution Period
existing prior to such Extension Period was a Final Distribution Period or a
Long-Term Distribution Period that would still be in effect but for such
Extension Period, the next Distribution Period shall be the remaining term of
such Final Distribution Period or Long-Term Distribution Period.
Prior to the end of the final Distribution Period of any Extension Period,
an Auction will be held to determine the Applicable Rate for the subsequent
Distribution Period. Each such Auction will be held (i) in the case of a
Short-Term Distribution Period, on the Business Day immediately preceding the
last day of the final Distribution Period of such Extension Period and (ii) in
the case of a Long-Term Distribution Period, on the third Business Day preceding
the last day of the final Distribution Period of such Extension Period.
DETERMINATION OF DISTRIBUTION RATE IN AN AUCTION
No earlier than the Submission Deadline on each Auction Date, the Auction
Agent will assemble all Orders submitted or deemed submitted to it by any
Broker-Dealer (each Hold Order, Bid or Sell Order as submitted or deemed
submitted by any Broker-Dealer being referred to herein as a "Submitted Hold
Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as
a "Submitted Order") and will determine the excess, if any, of the total number
of Preferred Securities over the Preferred Securities subject to Submitted Hold
Orders (such excess called the "Available Preferred Securities"). If all of the
Preferred Securities are subject to Submitted Hold Orders, there will be no
Available Preferred Securities and the
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Applicable Rate for the next Distribution Period will be the Minimum Applicable
Rate (as defined below) on such Auction Date which shall be determined by the
Administrative Trustees and disclosed to the Auction Agent by 12:30 p.m., New
York City time, on the Auction Date.
If there are Available Preferred Securities with respect to any Auction,
the Auction Agent will determine whether Sufficient Clearing Bids have been made
in such Auction. "Sufficient Clearing Bids" will have been made if the number of
Preferred Securities that are the subject of Submitted Bids by Potential Holders
(including Existing Holders who have submitted Bids to purchase additional
Preferred Securities and are thus Potential Holders with respect to such
Preferred Securities), specifying rates not higher than the Maximum Applicable
Rate which shall be determined by the Company and disclosed to the Auction Agent
by 12:30 p.m., New York City time on the Auction Date, equals or exceeds the
number of Preferred Securities that are the subject of Submitted Sell Orders
(including the number of Preferred Securities subject to Submitted Bids by
Existing Holders specifying rates higher than the Maximum Applicable Rate).
If Sufficient Clearing Bids have been made with respect to any Auction, the
Auction Agent will determine the lowest rate specified in the Submitted Bids of
Existing Holders and Potential Holders (the "Winning Bid Rate") that would
result in Existing Holders continuing to hold (pursuant to Submitted Bids) and
Potential Holders (including Existing Holders who have placed Bids to purchase
additional Preferred Securities) purchasing, at such rate, an aggregate number
of Preferred Securities at least equal to the number of Available Preferred
Securities. If Sufficient Clearing Bids have been made, the Applicable Rate for
the next succeeding Distribution Period will be the Winning Bid Rate.
If Sufficient Clearing Bids have not been made in an Auction (other than
because all of the Preferred Securities are the subject of Submitted Hold
Orders) and no Trust Agreement Event of Default exists, the Applicable Rate for
the next succeeding Distribution Period will be equal to the Maximum Applicable
Rate on the date of such Auction, and the related Distribution Period will be a
28-day Short-Term Distribution Period regardless of whether the Administrative
Trustees have selected a Long-Term Distribution Period or a Short-Term
Distribution Period of any other length prior to such Auction. In such event,
Existing Holders that have placed Sell Orders for Preferred Securities will not
be able to sell all, and may not be able to sell any, Preferred Securities in
such Auction. See "The Auction -- Acceptance and Rejection of Orders and
Allocation of Preferred Securities."
There can be no assurance that Sufficient Clearing Bids will be made in any
particular Auction, and neither the Company nor any of its affiliates nor the
Auction Agent nor any Broker-Dealer is obligated to take any action to ensure
that Sufficient Clearing Bids will be made in any Auction. If Sufficient
Clearing Bids are not made in any Auction, Existing Holders that have submitted
Sell Orders will not be able to sell in the Auction all, and may not be able to
sell in the Auction any, Preferred Securities subject to those Orders. In the
absence of successful Auctions, there is no assurance that a secondary market
for the Preferred Securities will develop or that any trading that does develop
will be at prices equal or close to an amount equal to the liquidation
preference of the Preferred Securities. In addition, the Auctions require the
active participation of a Broker-Dealer. While the Auction Agent has initially
entered into a non-exclusive agreement with each of Goldman Sachs and Lehman
Brothers to act as Broker-Dealers and, under certain circumstances, may enter
into similar agreements with one or more other broker-dealers, the liquidity of
the market and the efficient functioning of the Auctions could be reduced to the
extent that Goldman Sachs or Lehman Brothers resigns or ceases to participate
actively in the Auctions and no additional Broker-Dealers are appointed or, if
appointed, resign or cease to participate actively in the Auctions.
The "Maximum Applicable Rate" on any date means, except as provided in the
next paragraph, (i) with respect to an Auction relating to a Short-Term
Distribution Period of less than 184 days, the percentage of the Commercial
Paper Rate and (ii) with respect to an Auction
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relating to a Short-Term Distribution Period of 184 days or more or a Long-Term
Distribution Period, the percentage of the Treasury Index Rate (as defined
herein), in each case as of the close of business on the Business Day next
preceding such date, determined as set forth below based on the Prevailing
Rating in effect at the close of business on such Business Day (such percentage,
the "Applicable Percentage"):
<TABLE>
<CAPTION>
APPLICABLE
PREVAILING RATING* PERCENTAGE
------------------ ----------
<S> <C>
"aa3"/AA- or above.......................................... 150%
"a3"/A-..................................................... 200%
"baa3"/BBB-................................................. 250%
Below "baa3"/BBB-........................................... 300%
</TABLE>
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* If two ratings do not fall in the same category set forth in this table, the
Applicable Percentage will be determined on the basis of the lower rating. For
example, a rating of "a3"/BBB+ would result in an Applicable Percentage of
250%.
If Sufficient Clearing Bids have not been made in an Auction (other than
because all of the Preferred Securities were the subject of Submitted Hold
Orders) or if an Auction has not been held on a scheduled Auction Date (other
than because a Trust Agreement Event of Default exists or an Extension Period
has been elected), the Maximum Applicable Rate with respect to the next
succeeding Auction will be the "Special Maximum Applicable Rate," which will be
the higher of (i) the Applicable Percentage of the Commercial Paper Rate for a
28-day Short-Term Distribution Period and (ii) 150% of the highest of (a) the
Treasury Bill Rate, (b) the Ten-Year Constant Maturity Rate (as defined herein)
and (c) the Thirty-Year Constant Maturity Rate (as defined herein) with respect
to such date. In the event that the Administrative Trustees determine in good
faith that for any reason:
(i) any one of the Treasury Bill Rate, the Ten-Year Constant Maturity
Rate or the Thirty-Year Constant Maturity Rate cannot be determined with
respect to any date, then the Special Maximum Applicable Rate with respect
to such date will be determined on the basis of the higher of whichever two
of such rates can be so determined;
(ii) only one of the Treasury Bill Rate, the Ten-Year Constant
Maturity Rate and the Thirty-Year Constant Maturity Rate can be determined
with respect to any date, then the Special Maximum Applicable Rate with
respect to such date will be determined on the basis of whichever such rate
can be so determined; or
(iii) none of the Treasury Bill Rate, the Ten-Year Constant Maturity
Rate and Thirty-Year Constant Maturity Rate can be determined with respect
to any date, then the Special Maximum Applicable Rate will be the rate
otherwise determined under the terms of the Preferred Securities.
The "Prevailing Rating" of the Preferred Securities will be:
(i) "aa3"/AA- or above if the Preferred Securities have a rating of
"aa3" or better by Moody's Investors Service Inc. or any successor thereto
("Moody's") and AA- or better by Standard & Poor's Ratings Group or any
successor thereto ("S&P");
(ii) if not "aa3"/AA- or above, then "a3"/A- if the Preferred
Securities have a rating of "a3" or better by Moody's and A- or better by
S&P;
(iii) if not "aa3"/AA- or above or "a3"/A-, then "baa3"/BBB- if the
Preferred Securities have a rating of "baa3" or better by Moody's and BBB-
or better by S&P; and
(iv) if not "aa3"/AA- or above, "a3"/A- or "baa3"/BBB-, then below
"baa3"/BBB.
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If, however, either Moody's or S&P or both do not make ratings on the Preferred
Securities available, the Administrative Trustees will select one or two
nationally recognized statistical rating organizations (as the term is used in
the rules and regulations of the Commission under the 1934 Act), as the case may
be, to act as a substitute rating agency or substitute rating agencies, and the
Administrative Trustees will take all reasonable action to enable such rating
agency or rating agencies to make available the equivalent rating or ratings for
the Preferred Securities. The Administrative Trustees will take all reasonable
action necessary to enable Moody's and S&P to provide a rating for the Preferred
Securities. If necessary, the Special Maximum Applicable Rate shall be
determined by the Administrative Trustees and disclosed to the Auction Agent by
12:30 p.m., New York City time, on the next succeeding Auction Date.
With respect to the Preferred Securities, the Administrative Trustees may
from to time, in accordance with the applicable provisions of the Trust
Agreement, upon delivery of written notice to the Auction Agent and the
securities depository, increase the Applicable Percentages used to calculate the
Maximum Applicable Rate as follows: the 150% to up to 175%, the 200% to up to
225% and the 250% to up to 275%, with no change to the 300%. The Trust Agreement
also provides that at the option of the Administrative Trustees and in their
sole discretion, the 150% referred to in the preceding paragraph may be
increased. The Administrative Trustees have no obligation to designate a higher
Applicable Percentage.
The "Minimum Applicable Rate" with respect to any date means (i) with
respect to an Auction relating to a Long-Term Distribution Period or a
Short-Term Distribution Period of 184 days or more, 58% of the Treasury Index
Rate at the close of business on the Business Day next preceding the related
Auction Date and (ii) with respect to an Auction relating to a Short-Term
Distribution Period of less than 184 days, 58% of the Commercial Paper Rate at
the close of business on the Business Day next preceding the related Auction
Date.
"Commercial Paper Rate," on any date, means in the case of any Short-Term
Distribution Period of (a) fewer than 45 days, the interest equivalent of the
30-day rate, (b) 45 days or more but fewer than 70 days, the interest equivalent
of the 60-day rate, (c) 70 days or more but fewer than 85 days, the arithmetic
average of the interest equivalent of the 60-day and 90-day rates, (d) 85 days
or more but fewer than 120 days, the interest equivalent of the 90-day rate, (e)
120 days or more but fewer than 148 days, the arithmetic average of the interest
equivalent of the 90-day and 180-day rates, or (f) 148 days or more but fewer
than 184 days, the interest equivalent of the 180-day rate, in each case, on
commercial paper placed on behalf of issuers whose corporate bonds are rated AA
by S&P or Aa by Moody's, or the equivalent of such rating by another rating
agency, as made available on a discount basis or otherwise by the Federal
Reserve Bank of New York for the Business Day immediately preceding such date.
In the event that the Federal Reserve Bank of New York does not make available
the needed rate or rates, then such rate will be the arithmetic average of the
interest equivalent of the rate or average of rates, in each case, on commercial
paper placed on behalf of such issuers, as quoted on a discount basis or
otherwise by Goldman Sachs or, in lieu thereof, their respective affiliates or
successors that are engaged in buying or selling commercial paper ("Commercial
Paper Dealers"), to the Auction Agent as of the close of business on the
Business Day immediately preceding such date. In the event that the Federal
Reserve Bank of New York does not make available a required rate and if any
Commercial Paper Dealer does not quote a rate required to determine the
Commercial Paper Rate, the Commercial Paper Rate will be determined on the basis
of the quotation or quotations furnished by the remaining Commercial Paper
Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Administrative Trustees to
provide such rate or rates not being supplied by any Commercial Paper Dealer or
Commercial Paper Dealers, as the case may be, or, if the Administrative Trustees
do not select any such Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial
Paper Dealers. For purposes of this definition, "interest equivalent" means the
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equivalent yield on a 360-day basis of a discount basis security to an interest
bearing security. "Substitute Commercial Paper Dealers" will mean any substitute
recognized dealers in commercial paper selected by the Administrative Trustees.
"Calendar Period" with respect to any date means a period of fourteen
consecutive calendar days ending ten calendar days prior to such date.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System.
"Special Securities" means securities that can, at the option of the
holder, be surrendered at face value in payment of any federal estate tax or
that provide tax benefits to the holder and are priced to reflect such tax
benefits or that were originally issued at a deep or substantial discount.
"Ten-Year Average Yield" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of ten years).
"Ten-Year Constant Maturity Rate," on any date, means the arithmetic
average of the two most recent weekly per annum Ten-Year Average Yields (or the
one weekly per annum Ten-Year Average Yield, if only one such yield is published
during the Calendar Period with respect to such date), as published weekly by
the Federal Reserve Board during the Calendar Period with respect to such date.
In the event that the Federal Reserve Board does not publish such a weekly per
annum Ten-Year Average Yield during such Calendar Period, then the Ten-Year
Constant Maturity Rate with respect to such date shall be the arithmetic average
of the two most recent weekly per annum Ten-Year Average Yields (or the one
weekly per annum Ten-Year Average Yield, if only one such yield is published
during such Calendar Period), as published weekly during such Calendar Period by
any Federal Reserve Bank or by any U.S. Government department or agency selected
by the Administrative Trustees. In the event that a per annum Ten-Year Average
Yield is not published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency during such Calendar Period,
then the Ten-Year Constant Maturity Rate with respect to such date will be the
arithmetic average of the two most recent weekly per annum average yields to
maturity (or the one weekly per annum average yield to maturity, if only one
such yield is published during such Calendar Period) for all of the actively
traded marketable U.S. Treasury fixed interest rate securities (other than
Special Securities) then having maturities of not less than eight nor more than
12 years, as published during such Calendar Period by the Federal Reserve Board
or, if the Federal Reserve Board does not publish such yields, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Administrative Trustees. In the event that the Administrative Trustees determine
in good faith that for any reason the Administrative Trustees cannot determine
the Ten-Year Constant Maturity Rate with respect to such date as provided above
in this paragraph, then the Ten-Year Constant Maturity Rate with respect to such
date will be the arithmetic average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period for each of the issues
of actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity date not less than eight
nor more than 12 years from the date of each such quotation, as quoted daily for
each Business Day in New York City (or less frequently if daily quotations are
not generally available) to the Administrative Trustees by U.S. Government
Securities Dealers.
"Thirty-Year Average Yield" shall mean the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of 30 years).
"Thirty-Year Constant Maturity Rate" shall mean, on any date, the
arithmetic average of the two most recent weekly per annum Thirty-Year Average
Yields (or the one weekly per annum Thirty-Year Average Yield, if only one such
yield shall be published during the relevant Calendar Period), as published or
reported weekly by the Federal Reserve Board during the Calendar Period with
respect to such date. In the event that the Federal Reserve Board does not
publish
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such a weekly per annum Thirty-Year Average Yield during such Calendar Period,
then the Thirty-Year Constant Maturity Rate with respect to such date shall be
the arithmetic average of the two most recent weekly per annum Thirty-Year
Average Yields (or the one weekly per annum Thirty-Year Average Yield, if only
one such yield shall be published weekly during such Calendar Period), as
published weekly during such Calendar Period by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the Administrative
Trustees. In the event that a per annum Thirty-Year Average Yield shall not be
published by the Federal Reserve Board or by any Federal Reserve Bank or by any
U.S. Government department or agency during such Calendar Period, then the
Thirty-Year Constant Maturity Rate with respect to such date will be the
arithmetic average of the two most recent weekly per annum average yields to
maturity (or the one weekly per annum average yield to maturity, if only one
such yield shall be published during such Calendar Period) for all of the
actively traded marketable U.S. Treasury fixed interest rate securities (other
than Special Securities) then having maturities of not less than 28 nor more
than 30 years, as published during such Calendar Period by the Federal Reserve
Board or, if the Federal Reserve Board shall not publish such yields, by any
Federal Reserve Bank or by any U.S. Government department or agency selected by
the Administrative Trustees. In the event that the Administrative Trustees
determine in good faith that for any reason the Administrative Trustees cannot
determine the Thirty-Year Constant Maturity Rate with respect to such date as
provided above in this paragraph, then the Thirty-Year Constant Maturity Rate
with respect to such date will be the arithmetic average of the per annum
average yields to maturity based upon the closing bids during such Calendar
Period for each of the issues of actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) with a final maturity
date not less than 28 nor more than 30 years from the date of each such
quotation, as quoted daily for each Business Day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Administrative Trustees by U.S. Government Securities Dealers.
"Treasury Bill Rate," on any date, means the interest equivalent of the
arithmetic average of the two most recent weekly per annum market discount rates
(or the one weekly per annum market discount rate, if only one such rate is
published during the Calendar Period with respect to such date) for three-month
U.S. Treasury bills, as published weekly by the Federal Reserve Board during the
Calendar Period with respect to such date. In the event that the Federal Reserve
Board does not publish such a weekly per annum market discount rate during such
Calendar Period, then the Treasury Bill Rate for each date will be the
arithmetic average of the two most recent weekly per annum market discount rates
(or the one weekly per annum market discount rate, if only one such rate is
published during such Calendar Period) for three-month U.S. Treasury bills, as
published weekly during such Calendar Period by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the Administrative
Trustees. In the event that a per annum market discount rate for three-month
U.S. Treasury bills is not published by the Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government department or agency during such
Calendar Period, then the Treasury Bill Rate with respect to such date will be
the arithmetic average of the two most recent weekly per annum market discount
rates (or the one weekly per annum market discount rate, if only one such rate
is published during such Calendar Period) for all of the U.S. Treasury bills
then having maturities of not less than 80 nor more than 100 days, as published
during such Calendar Period by the Federal Reserve Board or, if the Federal
Reserve Board shall not publish such rates, by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the Administrative
Trustees. In the event that the Administrative Trustees determine in good faith
that for any reason no such U.S. Treasury bill rates are published as provided
above during such Calendar Period, then the Treasury Bill Rate for such date
will be the arithmetic average of the per annum market discount rates based upon
the closing bids during such Calendar Period for each of the issues of
marketable non-interest bearing U.S. Treasury securities with a maturity of not
less than 80 nor more than 100 days from the date of each such quotation, as
quoted daily for each Business Day in New York City (or less frequently if daily
quotations are not generally
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available) to the Administrative Trustees by U.S. Government Securities Dealers.
In the event that the Administrative Trustees determine in good faith that for
any reason the Administrative Trustees cannot determine the Treasury Bill Rate
for any date as provided above in this paragraph, the Treasury Bill Rate for
such date will be the arithmetic average of the per annum market discount rates
based upon the closing bids during such Calendar Period for each of the issues
of marketable interest-bearing U.S. Treasury securities with a maturity of not
less than 80 nor more than 100 days from the date of each such quotation, as
quoted daily for each Business Day in New York City (or less frequently if daily
quotations shall not be generally available) to the Administrative Trustees by
U.S. Government Securities Dealers. For purposes of this definition, "interest
equivalent" means the equivalent yield on a 360-day basis of a discount basis
security to an interest bearing security.
The Treasury Bill Rate, the Ten-Year Constant Maturity Rate and the
Thirty-Year Constant Maturity Rate will each be rounded to the nearest one
one-hundredth of a percentage point. In November 1995, the weekly per annum
market discount rate for three-month U.S. Treasury bills, the Ten-Year Average
Yield and the Thirty-Year Average Yield were published weekly by the Federal
Reserve Board in "Federal Reserve Statistical Release H.15(519) -- Selected
Interest Rates."
"Treasury Index Rate," on any date, means the interest equivalent of the
rate for direct obligations of the United States having a maturity that is equal
to, or, if not equal to, next shorter than, the length of such Distribution
Period, as published weekly by the Federal Reserve Board in "Federal Reserve
Statistical Release H.15(519) -- Selected Interest Rates" or any successor
publication, within five Business Days preceding such date. If such statistical
release is not published or is otherwise not available or does not contain such
information, the Treasury Index Rate will be the arithmetic mean of the
secondary market bid rates as of approximately 3:30 p.m., New York City time, on
the Business Day immediately preceding such date, of U.S. Government Securities
Dealers furnished to the Auction Agent for the issue of direct obligations of
the United States, in an aggregate principal amount of at least $1 million with
a remaining maturity equal to, or next shorter than, the length of such
Distribution Period, as the case may be. If any U.S. Government Securities
Dealer does not quote a rate required to determine the Treasury Index Rate, such
rate shall be determined on the basis of the quotation or quotations furnished
by the remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers (if any) and any substitute U.S. Government Securities Dealer or Dealers
(each a "Substitute U.S. Government Securities Dealer") selected by the
Administrative Trustees to provide such rate or rates not being supplied by any
U.S. Government Securities Dealer or U.S. Government Securities Dealers, as the
case may be, or, if the Administrative Trustees do not select any such
Substitute U.S. Government Securities Dealer or Substitute U.S. Government
Securities Dealers, by the remaining U.S. Government Securities Dealer or U.S.
Government Securities Dealers; provided that, in the event that the
Administrative Trustees are unable to cause such quotations to be furnished to
the Auction Agent by such sources, the Administrative Trustees may cause the
Treasury Index Rate to be furnished to the Auction Agent by such alternative
source or sources as the Administrative Trustees in good faith deem to be
reliable. For purposes of this definition, "interest equivalent" means the
equivalent yield on a 360-day basis of a discount basis security to an interest
bearing security.
"U.S. Government Securities Dealers" means at least three recognized
dealers in direct obligations of the United States, selected by the
Administrative Trustees.
ACCEPTANCE AND REJECTION OF ORDERS AND ALLOCATION OF PREFERRED SECURITIES
With respect to each Auction, based on the determinations made as described
under "The Auction -- Determination of Distribution Rate" and subject to the
discretion of the Auction Agent to round off the number of Preferred Securities
being sold or purchased as described below, Submitted Bids and Submitted Sell
Orders will be accepted or rejected by the Auction Agent such
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that the Existing Holders and Potential Holders of the Preferred Securities will
sell, continue to hold and/or purchase the Preferred Securities as described
below and in such order of priority. Existing Holders that placed or were deemed
to have placed Hold Orders in such Auction will continue to hold Preferred
Securities subject to such Hold Orders, subject to the rounding procedures
described herein.
If Sufficient Clearing Bids in any Auction have been made:
(i) each Existing Holder that placed a Submitted Bid specifying a rate
higher than the Winning Bid Rate or a Submitted Sell Order will sell the
number of Preferred Securities subject to such Submitted Bid or Submitted
Sell Order;
(ii) each Existing Holder that placed a Submitted Bid specifying a
rate lower than the Winning Bid Rate will continue to hold the number of
the Preferred Securities subject to such Submitted Bid;
(iii) each Potential Holder that placed a Submitted Bid specifying a
rate lower than the Winning Bid Rate will purchase the number of Preferred
Securities subject to such Submitted Bid;
(iv) each Existing Holder that placed a Submitted Bid specifying a
rate equal to the Winning Bid Rate will continue to hold the number of
Preferred Securities subject to such Submitted Bid, unless the number of
Preferred Securities subject to all such Submitted Bids placed by Existing
Holders is greater than the excess of the number of Preferred Securities
over the number of Preferred Securities accounted for in clauses (ii)_ and
(iii) above, in which event each Existing Holder with such a Submitted Bid
will sell a number of Preferred Securities determined on a pro rata basis
based on the number of Preferred Securities subject to all such Submitted
Bids by such Existing Holders; and
(v) each Potential Holder that placed a Submitted Bid specifying a
rate equal to the Winning Bid Rate will purchase any Preferred Securities
not accounted for in clause (ii), (iii) or (iv) above on a pro rata basis
based on the number of outstanding Preferred Securities subject to all such
Submitted Bids by such Potential Holders.
Subject to the provisions described in the following two paragraphs, if
Sufficient Clearing Bids have not been made in any Auction (other than because
all of the Preferred Securities are the subject of Submitted Hold Orders):
(i) each Existing Holder that placed a Submitted Bid specifying a rate
equal to or lower than the Maximum Applicable Rate will continue to hold
the number of outstanding Preferred Securities subject to such Submitted
Bid;
(ii) each Potential Holder that placed a Submitted Bid specifying a
rate equal to or lower than the Maximum Applicable Rate will purchase the
number of Preferred Securities subject to such Submitted Bid; and
(iii) each Existing Holder that placed a Submitted Sell Order
(including a Submitted Bid specifying a rate in excess of the Maximum
Applicable Rate) will sell a number of Preferred Securities, determined on
a pro rata basis, such that the aggregate number of Preferred Securities
sold by all such Existing Holders is equal to the number of Preferred
Securities to be purchased pursuant to (ii) above.
Notwithstanding the foregoing, if Sufficient Clearing Bids have not been
made (other than because all of the Preferred Securities are the subject of
Submitted Hold Orders) in an Auction held for the purpose of determining the
Distribution Rate for a Long-Term Distribution Period, (i) each Existing Holder
will continue to hold its Preferred Securities after such Auction irrespective
of any Orders made by such Existing Holders or by Potential Holders, (ii) the
next-succeeding Distribution Period will be, notwithstanding any prior notice by
the Administrative
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Trustees, a 28-day Short-Term Distribution Period and (iii) the Distribution
Rate for such Short-Term Distribution Period will be the Maximum Applicable Rate
as of such Auction Date.
If, in any Auction, as a result of the Auction Procedures described above,
any Existing Holder would be entitled or required to sell, or any Potential
Holder would be entitled or required to purchase, a fraction of a Preferred
Security on any Auction Date, the Auction Agent will, in such manner as it may
determine (in its sole discretion), round up or down the number of the Preferred
Securities being sold or purchased by any Existing Holder or Potential Holder on
such Auction Date so that the number of the Preferred Securities sold or
purchased by each Existing Holder or Potential Holder will be whole Preferred
Securities, even if such allocation results in one or more of such Potential
Holders not purchasing the Preferred Securities on such Auction Date or one or
more Existing Holders selling all the Preferred Securities previously held by
them.
NOTIFICATION OF RESULTS
The Auction Agent Agreement provides that on the Auction Date for each
Auction the Auction Agent will advise each Broker-Dealer with respect to any Bid
or Sell Order submitted on behalf of a Bidder whether any such Order was
accepted or rejected in whole or in part and the Distribution Rate for the next
Distribution Period by telephone by approximately 3:00 p.m., New York City time,
on such Auction Date.
The Broker-Dealer Agreements will provide that if any Broker-Dealer
submitted a Bid or Sell Order on behalf of a Bidder in any Auction, such
Broker-Dealer will (i) advise such Bidder as soon as practicable whether such
Bid or Sell Order was accepted or rejected, (ii) advise each such Bidder that
will hold the Preferred Securities following such Auction of the duration of and
the Distribution Rate for the next Distribution Period and (iii) advise each
such Bidder purchasing or selling shares to give instructions to such
Broker-Dealer (or its Agent Member) to pay the purchase price (in same-day
funds) against delivery of such Preferred Securities by book entry ("Delivery")
or to effect Delivery of such Preferred Securities against payment therefor, as
may be appropriate. If any Broker-Dealer submitted a Hold Order on behalf of an
Existing Holder in any Auction, such Broker-Dealer will also advise such
Existing Holder of the duration of and the Distribution Rate for the next
Distribution Period. The Auction Agent will record each transfer of the
Preferred Securities on the registry of Existing Holders to be maintained by the
Registrar and Transfer Agent. See "The Auction -- Auction Agent Agreement."
Pursuant to the Auction Agent Agreement, based on the results of each
Auction, the Auction Agent will determine the aggregate number of Preferred
Securities to be purchased and the aggregate number of Preferred Securities to
be sold by Potential Holders and Existing Holders on whose behalf any
Broker-Dealer placed Orders.
The Broker-Dealer Agreements will provide that if any Existing Holder
selling Preferred Securities in any Auction fails to instruct its Agent Member
to effect Delivery of the Preferred Securities, a Broker-Dealer may Deliver to a
person who was to have purchased Preferred Securities in such Auction a number
of Preferred Securities, that is less than the number of Preferred Securities
that otherwise was to be purchased by such person. In that event, the number of
Preferred Securities to be so Delivered will be determined by such
Broker-Dealer. Neither the Company, the Trust nor the Auction Agent will have
any responsibility or liability with respect to the failure of a Potential
Holder, an Existing Holder or any Broker-Dealer or Agent Member to effect
Delivery of the Preferred Securities or to pay for the Preferred Securities
purchased or sold pursuant to an Auction or otherwise.
SETTLEMENT PROCEDURES
In accordance with the securities depository's normal procedures, the
transactions described above will normally be executed through the securities
depository and the accounts of the respective Agent Members at the securities
depository will be debited and credited and Preferred
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Securities Delivered by book-entry as necessary to effect the purchases and
sales of Preferred Securities as determined in each Auction. The transactions
with respect to each Auction will normally be executed (i) on the Business Day
next following an Auction held at the end of any Short-Term Distribution Period
or (ii) on the third Business Day next following an Auction held at the end of
any Long-Term Distribution Period. Purchasers will make payment through their
Agent Members in same-day funds settled through the securities depository
against Delivery through their Agent Members; the securities depository will
make payment to the Existing Holders in accordance with its normal procedures,
which now provide for payment for purchases and sales in same-day funds.
The Settlement Procedures expected to be followed in connection with
Auctions are set forth in detail in Annex B hereto. The Auction Agent is
authorized in the Auction Agent Agreement to alter the Settlement Procedures in
order to accommodate the settlement of Auctions, including in the case of the
appointment of additional Broker-Dealers, if any.
The Company will be entitled to receive, from time to time, from the
Auction Agent the interest (if any) earned on any monies deposited with the
Auction Agent by Bidders who have submitted successful Bids at any of the
Auctions, and neither the holders of such Preferred Securities nor the Bidders
shall have any claim to such interest. Any funds deposited with the Auction
Agent by Bidders who have submitted successful Bids in any Auction that remain
unclaimed at the end of one year from such scheduled settlement date with
respect to such Auction will upon demand be paid to the Company, after which any
party claiming such funds will be entitled to look only to the Trust for payment
thereof.
THE BROKER-DEALERS
Subject to certain exceptions, Goldman Sachs and Lehman Brothers will
initially be the Broker-Dealers. Under the Broker-Dealer Agreements, after each
Auction the Auction Agent will pay a service charge to each Broker-Dealer (from
funds made available by the Company) in such amount as the Administrative
Trustees and each Broker-Dealer may agree.
The Broker-Dealer Agreements will provide that a Broker-Dealer may place
Orders in Auctions for its own account unless and until the Administrative
Trustees notify such Broker-Dealer that it may no longer do so; such
Broker-Dealer may continue after such notification to place Hold Orders and Sell
Orders for its own account. If any Broker-Dealer submits an Order for its own
account in any Auction, it will be considered an Existing Holder or a Potential
Holder, as the case may be, with respect to such Order. If any Broker-Dealer
submits an Order for its own account in any Auction, it may have an advantage
over other Bidders or prospective purchasers by reason of its knowledge of
Orders placed through it in such Auction. In the Broker-Dealer Agreements, the
Broker-Dealers will agree to handle customer Orders in accordance with their
duties under applicable securities statutes and rules. The Broker-Dealer
Agreements will provide that a Broker-Dealer will be under no obligation to
contact Existing Holders or Potential Holders with respect to an Auction if such
Broker-Dealer, in its sole judgment, believes that to do so may be unlawful or
would expose it to liability. The Auction Agent may, from time to time, request
any Broker-Dealer to provide a list of its customers that are Existing Holders
and their respective holdings, which information (as well as any other
information received as to the identity of Bidders in any Auction) the Auction
Agent shall agree in the Auction Agent Agreement to keep confidential, except
that it may provide such information to the Administrative Trustees upon request
for the Administrative Trustees' confidential use and except to the extent that
the Auction Agent is advised by its counsel that failure to disclose such
information would be unlawful.
The Broker-Dealer Agreements will provide that if any Potential Holder on
whose behalf any Broker-Dealer has submitted in an Auction an Order that was
accepted in whole or in part fails to deliver funds with respect to such
Auction, such Broker-Dealer will promptly deliver such funds to the party
entitled to receive such funds. The delivery of funds by such Broker-Dealer for
the
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purchase of Preferred Securities by a Potential Holder will not relieve such
Potential Holder of any liability to such Broker-Dealer for the payment of such
funds.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal income
tax consequences of the ownership and disposition of the Preferred Securities
and constitutes the opinion of Balch & Bingham LLP, counsel to the Company and
the Trust, insofar as it relates to matters of law and legal conclusions. 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, (iii) an estate the
income of which is subject to United States federal income taxation regardless
of its source or (iv) a trust if (a) a court within the United States is able to
exercise primary supervision over the administration of the trust and (b) one or
more U.S. persons have the authority to control all substantial decisions of the
trust. 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 Series C Junior Subordinated Notes and,
consequently, will be required to include in income the Holder's pro rata share
of the entire income from the Series C 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 OID,
if any, must be taken into account under the accrual method of accounting even
if the Holder otherwise would use the cash receipts and disbursements method.
PAYMENTS OF INTEREST
Except as set forth below, stated interest on a Series C Junior
Subordinated Note will generally be taxable to a Holder as ordinary income at
the time it is paid or accrued in accordance with the Holder's own method of
accounting.
ORIGINAL ISSUE DISCOUNT
Under applicable income tax regulations, the Company believes that the
Series C Junior Subordinated Notes will not be treated as issued with OID. It
should be noted that these regulations have not yet been addressed in any
rulings or other interpretations by the Internal
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<PAGE>
Revenue Service (the "IRS"). Accordingly, it is possible that the IRS could take
a position contrary to the interpretations described herein.
The terms of the Series C Junior Subordinated Notes permit the Company to
defer the payment of interest on the Series C Junior Subordinated Notes at any
time and from time to time by extending the interest payment period for up to
five years with respect to each Extension Period; provided, however, that no
Extension Period may extend beyond the stated maturity date of the Series C
Junior Subordinated Notes. Should the Company exercise this option to defer
payments of interest, the Series C Junior Subordinated Notes would at that time
be treated as issued with OID and all the stated interest payments on the Series
C Junior Subordinated Notes would thereafter be treated as OID for so long as
they remained outstanding. As a result, all Holders would, in effect, be
required to accrue interest income even if such Holders are on a cash method of
accounting and notwithstanding that the Company will not make any interest
payments during such period on the Series C Junior Subordinated Notes. The
accrual of OID on the Series C Junior Subordinated Notes would be determined by
treating the Series C Junior Subordinated Notes as if they had a fixed interest
rate equal to the variable rate in effect on the date of such deemed reissuance
and an issue price equal to the adjusted issue price on that date. The amount of
OID in each accrual period would be calculated on an economic accrual basis
initially using that fixed interest rate and then adjusting the result to
reflect the actual accrual of interest on the Series C Junior Subordinated Notes
during that period.
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. If the Holder disposes of a Preferred
Security prior to the occurrence of an Extension Period, any portion of the
amount received that is attributable to accrued interest will be treated as
interest income to the Holder and will not be treated as part of the amount
realized for purposes of determining gain or loss on the disposition of the
Preferred Security. Any recognized gain or loss will be capital gain or loss 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. If however the Series C Junior Subordinated Notes were
determined not to qualify as "variable rate debt instruments" under the Income
Tax Regulations, they would be treated as "contingent payment debt instruments"
with the result that any recognized gain upon disposition of Preferred
Securities would be treated as ordinary income to the Holder rather than as
capital gain. Any loss recognized would be ordinary loss to the extent of the
Holder's ordinary income previously taken into account. 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 Series C 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 adjusted tax basis in his pro rata share
of the related Series C Junior Subordinated Notes between the portion of the
Series C Junior Subordinated Notes redeemed and retained by the Holder in order
to determine gain or loss.
RECEIPT OF SERIES C JUNIOR SUBORDINATED NOTES UPON LIQUIDATION OF THE TRUST
As described under "Description of the Preferred Securities -- Special
Event Redemption; Distribution of Series C Junior Subordinated Notes," Series C
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 Series C Junior Subordinated Notes equal
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<PAGE>
to the Holder's aggregate tax basis in its Preferred Securities. A Holder's
holding period with respect to the Series C Junior Subordinated Notes so
received in liquidation of the Trust would include the period for which the
Preferred Securities were held by such Holder.
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 Series C 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.
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<PAGE>
UNDERWRITING
The Company, the Trust and the underwriters named below (the
"Underwriters") have entered into an underwriting agreement (the "Underwriting
Agreement") with respect to the Preferred Securities. Subject to certain
conditions, the Underwriters have severally agreed to purchase the number of
Preferred Securities indicated in the following table. The Underwriters are
committed to take and pay for all the Preferred Securities if any are taken.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
NAME SECURITIES
---- ----------
<S> <C>
Goldman, Sachs & Co.........................................
Lehman Brothers Inc.........................................
----------
Total............................................. 1,000
==========
</TABLE>
Because the Trust will invest the proceeds from the sale of the Preferred
Securities in the Series C Junior Subordinated Notes issued by the Company, the
Underwriting Agreement provides that the Company will pay an underwriting
commission of $ per Preferred Security (or $ for all Preferred
Securities) to the Underwriters, as compensation; provided that, for sales of
five or more Preferred Securities to a single purchaser, the commission will be
$ per Preferred Security.
The Underwriters propose to offer the Preferred Securities to the public
initially at the initial public offering price set forth on the cover page of
this Prospectus Supplement. Any Preferred Securities sold by the Underwriters to
securities dealers may be sold at a discount of up to $
per Preferred Security from the initial public offering price. Any of those
securities dealers may resell the Preferred Securities they purchase from the
Underwriters to certain other brokers and dealers at a discount of up to $
per Preferred Security from the initial public offering price. If all the
Preferred Securities are not sold at the initial public offering price, the
Underwriters may change the offering price and other selling terms.
The Company and the Trust have agreed with the Underwriters, during the
period of 15 days from the date of the Underwriting Agreement, not to sell,
offer to sell, grant any option for the sale of, or otherwise dispose of any
preferred securities, any security convertible into or exchangeable into or
exercisable for preferred securities or junior subordinated notes or any debt
securities substantially similar to the Series C Junior Subordinated Notes or
equity securities substantially similar to the Preferred Securities (except for
the Series C Junior Subordinated Notes and the Preferred Securities issued
pursuant to the Underwriting Agreement), without the prior written consent of
the Underwriters.
The Preferred Securities are a new issue of securities with no established
trading market. The Underwriters have advised the Company and the Trust that
they intend to make a market in the Preferred Securities but are not obligated
to do so and may discontinue market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the
Preferred Securities.
In connection with the offering, the Underwriters may purchase and sell the
Preferred Securities in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the Underwriters of a greater
amount of Preferred Securities than they are required to purchase in the
offering. Stabilizing transactions consist of certain bids or purchases made for
the purpose of preventing or retarding a decline in the market price of the
Preferred Securities while the offering is in progress.
The Underwriters also may impose a penalty bid. This may occur when a
particular Underwriter repays a portion of the underwriting commissions received
by it because the
S-47
<PAGE>
Underwriters have repurchased Preferred Securities sold by or for the account of
that Underwriter in stabilizing or short covering transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Preferred Securities. As a result, the price of
the Preferred Securities may be higher than the price that would otherwise
prevail in the open market. If these activities are commenced, they may be
discontinued at any time. These transactions may be effected in the over-the-
counter market or otherwise.
The Company and the Trust have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Company's expenses associated with the offer and sale of the Preferred
Securities are estimated to be $ .
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 OPINIONS
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, P.A., Wilmington, Delaware, special Delaware counsel
to the Company and the Trust. The validity of the Series C Junior Subordinated
Notes, the Guarantee and certain matters relating thereto will be passed upon on
behalf of the Company by Balch & Bingham LLP, Birmingham, Alabama, and by
Troutman Sanders LLP, Atlanta, Georgia. Balch & Bingham LLP will also pass upon
certain matters relating to United States federal income tax considerations.
Certain legal matters will be passed upon for the Underwriters by Dewey
Ballantine LLP, New York, New York.
S-48
<PAGE>
ANNEX A
PURCHASER'S LETTER
TO BE SUBMITTED TO YOUR BROKER-DEALER
PURCHASER'S LETTER RELATING TO
RATE SETTINGS THROUGH AUCTIONS
FOR CAPITAL AUCTION PREFERRED SECURITIES
ISSUED BY
ALABAMA POWER CAPITAL TRUST III
To: Alabama Power Company
Alabama Power Capital Trust III
Auction Agent
A Broker-Dealer
An Agent Member
Other Persons
1. This letter is designed to apply to the Capital Auction Preferred
Securities (the "Preferred Securities"), of Alabama Power Capital Trust III (the
"Trust") that is described in the Prospectus Supplement dated February , 1999
and the accompanying Prospectus (collectively, the "Prospectus") and the related
auctions ("Auctions") through which the distribution rate thereon is determined.
This letter shall be for the benefit of the Trust and of any Auction Agent,
Broker-Dealer, Agent Member Securities Depository or other interested person in
connection with any Preferred Securities and related Auctions (it being
understood that such persons may be required to execute specified agreements and
nothing herein shall alter such requirements). Capitalized terms used but not
defined in this letter have the meanings ascribed to them in the Prospectus.
2. We may from time to time offer to purchase, purchase, offer to sell
and/or sell Preferred Securities as described in the Prospectus. We agree that
this letter shall apply to all such purchases, sales and offers to all Preferred
Securities owned by us. We understand that the distribution rate on the
Preferred Securities may be based from time to time on the results of Auctions
as set forth in the Prospectus.
3. With respect to each Auction, we agree that any Bid or Sell Order placed
by us shall constitute an irrevocable offer by us to purchase or sell the
Preferred Securities subject to such Bid or Sell Order, or such lesser number of
Preferred Securities as we shall be required to sell or purchase as a result of
such Auction at a price of $50,000 per Preferred Security, all as set forth in
the Prospectus, and that if we fail to place a Bid or Sell Order with respect to
any Preferred Securities owned by us with any Broker-Dealer on any Auction Date,
or any Broker-Dealer fails to submit such Bid or Sell Order to the Auction Agent
concerned, we shall be deemed to have placed a Hold Order with respect to such
Preferred Securities as described in the Prospectus. We authorize any
Broker-Dealer that submits a Bid or Sell Order as our agent in Auctions to
execute contracts for the purchase or sale of Preferred Securities covered by
such Bid or Sell Order. We recognize that the payment by any Broker-Dealer of
Preferred Securities purchased on our behalf shall not relieve us of any
liability to such Broker-Dealer for payment for such Preferred Securities.
4. We agree that dispositions of Preferred Securities can be made only in
the denominations set forth in the Prospectus and we will sell, transfer or
otherwise dispose of any Preferred Securities held by us from time to time only
pursuant to a Bid or Sell Order placed in an Auction, to or through any
Broker-Dealer or to the Company, or to a person who may be required to sign and
deliver, or cause to be delivered on its behalf to the Company and Trust a
letter substantially
A-1
<PAGE>
in the form of this Purchaser's Letter, provided that in the case of all
transfers other than those made pursuant to Auctions we or our Broker-Dealer
shall advise the Auction Agent of such transfer.
5. We agree that, except as described in the Prospectus, ownership of the
Preferred Securities shall be represented by a global certificate registered in
the name of the securities depository or its nominee, we will not be entitled to
receive any certificate representing the Preferred Securities and our ownership
of any Preferred Securities will be maintained in book-entry form by the
securities depository for the account of our Agent Member, which in turn will
maintain records of our beneficial ownership. We authorize and instruct our
Agent Member to disclose to the Auction Agent such information concerning our
beneficial ownership of Preferred Securities as such Auction Agent shall
request.
6. We acknowledge that any Broker-Dealer may purchase Preferred Securities
and submit orders in Auctions for its own account and that, because all Orders
must be submitted through a Broker-Dealer, the Broker-Dealers may have knowledge
of all orders placed in any such Auction. We further acknowledge that the
Company and its subsidiaries and affiliates may submit Orders in any Auction,
subject to applicable law, and that the submission of such Orders may affect the
distribution rate applicable to the Preferred Securities.
7. We understand and agree that in making decisions as to whether to
purchase or sell Preferred Securities, in Auctions or otherwise, we must rely on
our own examination of the Company and the Trust and the terms of the Preferred
Securities, and that neither the Company or any of its affiliates nor any
Broker-Dealer, by participating in Auctions, shall be deemed to make any
recommendation regarding the merits of any investment in the Preferred
Securities or the suitability of an investment in the Preferred Securities by
us, and that neither the Auction Agent nor any Broker-Dealer has any obligation
to supply to us any information concerning the Company or the Preferred
Securities.
8. This letter is not a commitment by us to purchase any Preferred
Securities.
9. This letter supersedes as of its date any prior-dated version of this
Purchaser's Letter, and any recipient of this letter may rely upon it until such
recipient has received a signed writing amending and revoking this letter.
10. The descriptions of the Preferred Securities, the Auction Procedures
and the Settlement Procedures set forth in the Prospectus are incorporated by
reference herein and, in case of any conflict between this letter and any such
description, such description shall control.
11. Any xerographic or other copy of this letter shall be deemed of equal
effect as a signed original.
12. Our Agent Member of the securities depository is
--------------------.
13. Our employee or representative authorized to place orders with any
Broker-Dealer for the purposes set forth in the Prospectus in Auctions currently
is , telephone number ( )
- --------------- --------------- ---------------.
14. Our taxpayer identification number is
--------------------.
15. We represent and agree as follows:
A. If we are purchasing shares of Preferred Securities upon the
initial issuance of such Preferred Securities, we acknowledge that none of
the Trust, the Company, Goldman, Sachs & Co., Lehman Brothers Inc. or any
persons representing the Trust, the Company, Goldman, Sachs & Co. or Lehman
Brothers Inc. has made any representation to us with respect to the Trust,
the Company or the offering or sale of any Preferred Securities, other than
the information contained in the Prospectus (including the documents
incorporated by reference
A-2
<PAGE>
therein and the Annexes thereto), which has been delivered to us and upon
which we are relying in making our investment decision with respect to
Preferred Securities.
B. We acknowledge that prior to purchasing any Preferred Securities we
will have received a Prospectus with respect thereto and acknowledge that
we will have had access to such financial and other information and have
been afforded the opportunity to ask such questions of representatives of
the Company and receive answers thereto, as we deem necessary in connection
with our decision to purchase the Preferred Securities.
C. We recognize that the Company and the Broker-Dealers will rely upon
the truth and accuracy of the foregoing investment representations and
agreements, and we agree that each of our purchases of Preferred Securities
now or in the future shall be deemed to constitute our concurrence in all
of the foregoing that shall be binding on us.
16. So long as we hold Preferred Securities or intend to participate in the
Auctions of Preferred Securities, we agree to execute and delivery, if required,
further copies of this letter or any superseding version no less frequently than
annually after the initial delivery hereof, if required.
Dated:
------------------------------------------
Mailing Address of
Purchaser:
--------------------------------------
By:
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
A-3
<PAGE>
ANNEX B
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures is expected to be followed
in connection with the settlement of each Auction and will be incorporated by
reference in each Auction Agent Agreement and each Broker-Dealer Agreement.
Capitalized terms used but not otherwise defined herein will have the meanings
specified in the Prospectus. Nothing contained in these Settlement Procedures
constitutes a representation by the Trust that in each Auction each party
referred to herein will actually perform the procedures described herein to be
performed by such party. The Auction Agent is authorized in the Auction Agent
Agreement to alter the Settlement Procedures in order to accommodate the
settlement of Auctions, including in the case of the appointment of additional
Broker-Dealers, if any.
1. NOTIFICATION TO THE BROKER-DEALERS BY AUCTION AGENT
For each Auction, on the related Auction Date, the Auction Agent will
notify by telephone or telecopy each Broker-Dealer of the following information
with respect to the Preferred Securities:
a. the Distribution Rate fixed for the next succeeding Distribution
Period and the Distribution Payment Date or Distribution Payment Dates
therefor;
b. whether Sufficient Clearing Bids existed for the determination of
the Winning Bid Rate;
c. if such Broker-Dealer submitted a Bid or a Sell Order on behalf of
an Existing Holder, the number of Preferred Securities, if any, to be sold
by such Existing Holder;
d. if such Broker-Dealer submitted a Bid on behalf of a Potential
Holder, whether such Bid was accepted or rejected and the number of
Preferred Securities, if any, of the Preferred Securities to be purchased
by such Potential Holder; and
e. the Auction Date of the next succeeding Auction, if any.
2. NOTIFICATION OF EXISTING AND POTENTIAL HOLDERS BY THE BROKER-DEALERS
For each Auction, on the related Auction Date, each Broker-Dealer shall to
the extent the Broker-Dealer has been so advised by the Auction Agent:
a. as soon as practicable, advise each Existing Holder and Potential
Holder on whose behalf such Broker-Dealer submitted a Bid or Sell Order
whether such Bid or Sell Order was accepted or rejected;
b. instruct each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, to instruct such
Potential Holder's Agent Member to pay in same-day funds to such
Broker-Dealer (or its Agent Member) through the securities depository the
amount necessary to purchase the number of Preferred Securities to be
purchased pursuant to such Bid against receipt of such Preferred
Securities, and advise such Potential Holder of the Distribution Rate for
the next succeeding Distribution Period;
c. instruct each Existing Holder on whose behalf such Broker-Dealer
submitted a Sell Order that was accepted, in whole or in part, to instruct
such Existing Holder's Agent Member to Deliver to such Broker-Dealer (or
its Agent Member) through the securities depository the number of Preferred
Securities to be sold pursuant to such Order against payment therefor and
advise any such Existing Holder that will continue to hold Preferred
Securities at the Distribution Rate for the next succeeding Distribution
Period;
B-1
<PAGE>
d. advise each Existing Holder on whose behalf such Broker-Dealer
submitted a Hold Order of the Distribution Rate for the next succeeding
Distribution Period;
e. advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order of the Auction Date for the next succeeding Auction; and
f. advise each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction Date
of the next succeeding Auction.
3. ALLOCATION OF FUNDS AND PREFERRED SECURITIES BY THE BROKER-DEALERS
If any Existing Holder selling Preferred Securities in an Auction fails to
instruct its Agent Member to Deliver such Preferred Securities by book entry,
any Broker-Dealer may Deliver to a person who was to have purchased Preferred
Securities in such Auction by book entry a number of whole Preferred Securities
that is less than the number of Preferred Securities that otherwise was to be
purchased by such person. In such event, the number of Preferred Securities to
be so Delivered will be determined by such Broker-Dealer. Delivery of such
lesser number of Preferred Securities will constitute good Delivery. Neither the
Company, the Trust nor the Auction Agent will have any responsibility or
liability with respect to the failure of a Potential Holder, Existing Holder or
a Broker-Dealer or Agent Member to Deliver Preferred Securities or to pay for
Preferred Securities purchased or sold pursuant to an Auction or otherwise.
On the basis of the information provided to it pursuant to Section 1 above,
each Broker-Dealer will, in such manner and at such time or times as in its sole
discretion it may determine, allocate any funds received by it pursuant to
Section 2(b) above and any Preferred Securities received by it pursuant to
Sections 2(c) among the Potential Holders, if any, on whose behalf such
Broker-Dealer submitted Bids that were accepted and the Existing Holders, if
any, on whose behalf such Broker-Dealer submitted Sell Orders that were
accepted.
4. PAYMENT OF FUNDS AND DELIVERY OF PREFERRED SECURITIES
For each Auction, on the related Auction Date:
a. each Potential Holder and Existing Holder will instruct its Agent
Member as provided in Section 2(b) or 2(c) above, as the case may be;
b. if any Broker-Dealer is not an Agent Member of the securities
depository it will instruct its Agent Member to (i) pay through the
securities depository to the Agent Member of an Existing Holder Delivering
Preferred Securities to such Broker-Dealer pursuant to Section 2(c) above
the amount necessary to purchase such Preferred Securities against receipt
of such Preferred Securities; and
c. if any Broker-Dealer is not an Agent Member of the securities
depository it will instruct its Agent Member to (i) pay through the
securities depository to such Broker-Dealer (or Agent Member) the amount
necessary to purchase the Preferred Securities to be purchased pursuant to
Section 2(b) above against receipt of Preferred Securities and (ii) Deliver
such Preferred Securities through the securities depository to the Agent
Member of such purchaser against payment therefor.
B-2
<PAGE>
5. EXECUTION OF TRANSACTIONS THROUGH SECURITIES DEPOSITORY
On (x) the Business Day next following each Auction held at the end of a
Short-Term Distribution Period, or (y) the third Business Day following each
Auction held at the end of a Long-Term Distribution Period:
a. each Agent Member referred to in Section 4(a) above will instruct
the securities depository to execute the transaction described in Section
2(b) or 2(c) above, and the securities depository will execute each such
transaction;
b. each Broker-Dealer or its Agent Member will instruct the securities
depository to execute the transactions described in Section 4(b) above, and
the securities depository will execute such transactions; and
c. each Broker-Dealer or its Agent Member will instruct the securities
depository to execute the transactions described in Section 4(c) above, and
the securities depository will execute such transactions.
B-3
<PAGE>
PROSPECTUS
ALABAMA POWER COMPANY
FIRST MORTGAGE BONDS
CLASS A PREFERRED STOCK
CUMULATIVE, PAR VALUE $1 PER SHARE
SENIOR NOTES
JUNIOR SUBORDINATED NOTES
ALABAMA POWER CAPITAL TRUST III
ALABAMA POWER CAPITAL TRUST IV
ALABAMA POWER CAPITAL TRUST V
TRUST PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
ALABAMA POWER COMPANY
A SUBSIDIARY OF THE SOUTHERN COMPANY
We will provide the specific terms of these securities in supplements to this
prospectus. You should read this prospectus and the applicable prospectus
supplement carefully before you invest.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus is dated December 4, 1998
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement filed with the
Securities and Exchange Commission (the "Commission") using a "shelf"
registration process under the Securities Act of 1933, as amended (the "1933
Act"). Under the shelf process, Alabama Power Company (the "Company") may sell,
in one or more transactions,
- first mortgage bonds (the "new Bonds")
- class A preferred stock (the "new Stock")
- senior notes (the "Senior Notes")
- junior subordinated notes (the "Junior Subordinated Notes")
and Alabama Power Capital Trust III, Alabama Power Capital Trust IV and Alabama
Power Capital Trust V (individually, a "Trust" and collectively, the "Trusts")
may sell,
- trust preferred securities (the "Preferred Securities")
in one or more offerings up to a total dollar amount of $1,392,000,000. This
prospectus provides a general description of those securities. Each time we sell
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering ("Prospectus Supplement"). The
Prospectus Supplement may also add, update or change information contained in
this prospectus. You should read this prospectus and the applicable prospectus
supplement together with additional information under the heading "Available
Information."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports and other information with the Commission. Such reports and other
information can be inspected and copied at the public reference 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. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants including the Company that file electronically at
http://www.sec.gov. In addition, reports and other material concerning the
Company can be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, on which Exchange certain of the Company's
securities are listed.
No separate financial statements of any Trust are included herein. The
Company considers that such statements would not be material to holders of the
Preferred Securities because each Trust has no independent operations and exists
for the sole purpose of investing the proceeds of the sale of its Trust
Securities in Junior Subordinated Notes (each as herein defined).
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, 1997;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998; and
2
<PAGE>
(c) the Company's Current Reports on Form 8-K dated February 11, 1998,
February 20, 1998, April 17, 1998, August 5, 1998, August 10, 1998,
August 11, 1998, September 8, 1998, September 16, 1998, October 7,
1998, October 28, 1998 and November 12, 1998.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated herein by reference and made a part of this Prospectus from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN THE
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE). SUCH REQUESTS SHOULD BE DIRECTED TO WILLIAM B. HUTCHINS, III,
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER, ALABAMA POWER
COMPANY, 600 NORTH 18TH STREET, BIRMINGHAM, ALABAMA 35291, TELEPHONE: (205)
257-2905.
3
<PAGE>
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, 1997... 1,275,327
Generating Capacity at December
31, 1997 (kilowatts)............. 10,641,263
Sources of Generation during 1997
(kilowatt-hours)............... Coal (72%), Nuclear (19%), Hydro (8%), Oil
and Gas (1%)
Sources of Generation Estimated
for 1998 (kilowatt-hours)........ Coal (74%), Nuclear (18%), Hydro (7%), Oil
and Gas (1%)
ALABAMA POWER COMPANY
The Company is a corporation organized under the laws of the State of
Alabama on November 10, 1927, by the consolidation of the predecessor Alabama
Power Company, Gulf Electric Company and Houston Power Company. The predecessor
Alabama Power Company had a continuous existence since its incorporation in
1906. The principal executive offices of the Company are located at 600 North
18th Street, Birmingham, Alabama 35291, and the telephone number is (205)
257-1000.
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 the reserves in its generating plants. It also
sells, and cooperates with dealers in promoting the sale of, electric
appliances.
The Company and one of its affiliates, Georgia Power Company ("GEORGIA"),
each own 50% of the common stock of Southern Electric Generating Company
("SEGCO"). SEGCO owns generating units with an aggregate capacity of 1,019,680
kilowatts at the Ernest C. Gaston Steam Plant ("Plant Gaston") on the Coosa
River near Wilsonville, Alabama. The Company and GEORGIA are each entitled to
one-half of the capacity and energy of these units. The Company acts as SEGCO's
agent in the operation of SEGCO's units and furnishes coal to SEGCO as fuel for
its units. SEGCO also owns three 230,000 volt transmission lines extending from
Plant Gaston to the Georgia state line.
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<PAGE>
THE TRUSTS
Each Trust is a statutory business trust created under Delaware law
pursuant to the filing of a certificate of trust with the Delaware Secretary of
State on November 27, 1996, with respect to Alabama Power Capital Trust III and
Alabama Power Capital Trust IV, and November 18, 1997, with respect to Alabama
Power Capital Trust V. Each Trust's business is defined in a trust agreement,
executed by the Company, as Depositor, and the Delaware Trustee thereunder. This
trust agreement of each Trust will be amended and restated in its entirety
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part (the "Trust Agreement"). Each Trust Agreement
will be qualified as an indenture under the Trust Indenture Act of 1939, as
amended (the "1939 Act"). The Company will own all the common securities (the
"Common Securities" and, together with the Preferred Securities, the "Trust
Securities"). The Trust Securities represent undivided beneficial interests in
the assets of the respective Trusts. Each Trust exists for the exclusive
purposes of (i) issuing its Trust Securities representing undivided beneficial
interests in the assets of such Trust, (ii) investing the gross proceeds of its
Trust Securities in a related series of Junior Subordinated Notes, and (iii)
engaging in only those other activities necessary, appropriate, convenient or
incidental thereto. The payment of periodic cash distributions on the Preferred
Securities of each Trust and payments on liquidation and redemption with respect
to the Preferred Securities of each Trust, in each case to the extent each Trust
has funds legally and immediately available therefor, will be guaranteed by the
Company (individually, a "Guarantee" and collectively, the "Guarantees"). See
"Description of Guarantees."
Each Trust's business and affairs will be conducted by its trustees, which
shall be appointed by the Company as the holder of the Common Securities: two
employees of the Company as Administrative Trustees; The Chase Manhattan Bank as
Property Trustee; and Chase Manhattan Bank Delaware as Delaware Trustee. The
Property Trustee of each Trust will act as the indenture trustee with respect to
such Trust for purposes of compliance with the provisions of the 1939 Act.
The principal place of business of each Trust shall be c/o the Company, 600
North 18th Street, Birmingham, Alabama 35291, telephone (205) 257-2905, Attn:
Treasurer.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of each Trust for further information concerning such Trust.
ACCOUNTING TREATMENT OF TRUSTS
For financial reporting purposes, the Trusts will be treated as
subsidiaries of the Company and, accordingly, the accounts of the Trusts will be
included in the consolidated financial statements of the Company. The Preferred
Securities will be presented as a separate line item in the consolidated balance
sheet of the Company, and appropriate disclosures concerning the Preferred
Securities, the Guarantees and the Junior Subordinated Notes will be included in
the notes to the consolidated financial statements. For financial reporting
purposes, the Company will record distributions payable on the Preferred
Securities as an expense.
5
<PAGE>
CERTAIN RATIOS
The following table sets forth the Ratios of Earnings to Fixed Charges and
Earnings to Fixed Charges Plus Preferred Dividend Requirements (Pre-Income Tax
Basis) for the periods indicated.
<TABLE>
<CAPTION>
TWELVE
MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(1)............... 3.45 3.75 3.45 3.57 3.31 2.99
Ratio of Earnings to Fixed Charges Plus
Preferred Dividend Requirements
(Pre-Income Tax Basis)(2)......................... 2.90 3.16 2.96 3.05 3.06 2.85
</TABLE>
- ---------------
(1) 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.
(2) In computing this ratio, "Preferred Dividend Requirements" represent the
before-tax earnings necessary to pay such dividends, computed at the
effective tax rates for the applicable periods.
USE OF PROCEEDS
Each Trust will invest the proceeds received from the sale of its Preferred
Securities in Junior Subordinated Notes. Except as may be otherwise described in
an applicable Prospectus Supplement, the net proceeds received by the Company
from such investment and any proceeds received from the sale of its new Bonds,
new Stock, Senior Notes or other sales of its Junior Subordinated Notes will be
used in connection with its ongoing construction program, to pay scheduled
maturities and/or refundings of its securities, to repay short-term indebtedness
to the extent outstanding and for other general corporate purposes.
DESCRIPTION OF THE NEW BONDS
Set forth below is a description of the general terms of the Company's new
Bonds. The following description does not purport to be complete and is subject
to, and is qualified by reference to, the Indenture, dated as of January 1,
1942, between the Company and The Chase Manhattan Bank, as trustee (the "First
Mortgage Bond Trustee"), as to be supplemented by a supplemental indenture (the
"Supplemental Indenture") thereto establishing the new Bonds of each series (the
Indenture, as so supplemented, is hereinafter referred to as the "First Mortgage
Bond Indenture"), the forms of which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part. The terms of such new Bonds
will include those stated in the First Mortgage Bond Indenture and those made a
part of the First Mortgage Bond Indenture by reference to the 1939 Act. Certain
capitalized terms used herein are defined in the First Mortgage Bond Indenture.
The new Bonds will mature on the date shown in their title as set forth in
the Prospectus Supplement.
The new Bonds in definitive form will be issued only as registered bonds
without coupons in denominations of $1,000 or authorized multiples thereof or in
such other denominations as set forth in the Prospectus Supplement. New Bonds
will be exchangeable for a like aggregate principal amount of new Bonds of other
authorized denominations, and are transferable, at the principal corporate trust
office of the First Mortgage Bond Trustee in New York City, or at such other
office or agency of the Company as the Company may from time to time designate,
without payment of any charge other than for any tax or taxes or other
governmental charge.
Any proposed listing of the new Bonds on a securities exchange will be
described in the Prospectus Supplement.
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<PAGE>
Except as otherwise may be indicated in the Prospectus Supplement, there
are no provisions of the First Mortgage Bond Indenture which are specifically
intended to afford holders of the new Bonds protection in the event of a highly
leveraged transaction involving the Company.
Interest Rate Provisions: The Prospectus Supplement will set forth the
interest rate provisions of the new Bonds, including payment dates, the record
dates and the rate or rates, or the method of determining the rate or rates
(which may involve periodic interest rate settings through remarketing or
auction procedures or pursuant to one or more formulae, as described in the
Prospectus Supplement).
Redemption Provisions: The redemption provisions applicable to the new
Bonds will be described in the Prospectus Supplement.
Priority and Security: The new Bonds will rank equally as to security with
the bonds of other series presently outstanding under the First Mortgage Bond
Indenture, which is a direct first lien on substantially all of the Company's
fixed property and franchises, used or useful in its public utility business,
subject only to excepted encumbrances, as defined in the First Mortgage Bond
Indenture (Section 1.02).
The First Mortgage Bond Indenture permits, within certain limitations
specified in Section 7.05, the acquisition of property subject to prior liens.
Under certain conditions specified in Section 7.14, additional indebtedness
secured by such prior liens may be issued to the extent of 60% of the cost to
the Company or the fair value at date of acquisition, whichever is less, of the
net property additions made by the Company to the property subject to such prior
lien.
Improvement Fund Requirement: Pursuant to the Supplemental Indenture and
similar provisions of the supplemental indentures creating other series of bonds
currently outstanding under the First Mortgage Bond Indenture (other than eight
series of bonds aggregating $315,250,000 in principal amount issued and
outstanding as of September 30, 1998 as collateral security for certain
obligations), the annual improvement fund requirement applicable to the new
Bonds and the bonds of each such other series, which must be satisfied on or
before June 1 in each year, is equal to 1% of the principal amount of bonds
authenticated of each such series prior to January 1 of that year (less bonds of
such series retired directly or indirectly as a result of the release of
property). The improvement fund requirements may be satisfied in cash or in
principal amount of bonds authenticated under the First Mortgage Bond Indenture
or to the extent of 60% of the cost or fair value, whichever is less, of
unfunded net property additions. Any cash so deposited is to be used by the
First Mortgage Bond Trustee for the redemption at their then special redemption
prices or other retirement of bonds of such series as may be designated by the
Company (subject to such limitation, if any, as to the new Bonds as set forth in
the Prospectus Supplement and except as to limitations which have been or may be
established in the supplemental indentures creating other series of bonds) or
may be withdrawn by the Company against the deposit of bonds or to the extent of
60% of unfunded net property additions.
Replacement Requirement: By Section 4 of the Supplemental Indenture dated
as of October 1, 1981, the Company is required to certify to the First Mortgage
Bond Trustee unfunded net property additions or to deposit with the First
Mortgage Bond Trustee cash or bonds in an amount equal to the amount by which
annual expenditures for renewals and replacements are less than 2.25% of the
average annual amount of depreciable mortgaged property or such revised
percentage as shall be authorized or approved by the Commission, or any
successor commission, under the Public Utility Holding Company Act of 1935, as
amended. Any available replacement credit may be carried forward and deposited
cash or bonds may be withdrawn, used or applied in accordance with the
provisions of said section.
Any limitation on the right of the Company to redeem new Bonds through the
operation of the replacement provisions of the First Mortgage Bond Indenture
will be described in the Prospectus Supplement.
The First Mortgage Bond Indenture (Section 7.16) provides for an
examination of the mortgaged property by an independent engineer at least once
every five years. The Company covenants to make good any maintenance deficiency
shown by the certificate of such engineer and to record retirements as called
for thereby.
7
<PAGE>
Issuance of Additional Bonds: Additional bonds may be issued under the
First Mortgage Bond Indenture (a) under Article IV to the extent of 60% of the
cost or fair value at date of acquisition, whichever is less, of unfunded net
property additions, as defined in the First Mortgage Bond Indenture (Sections
1.08 through 1.11, as amended), or (b) under Article V against the retirement of
other bonds theretofore outstanding under the First Mortgage Bond Indenture, or
(c) under Article VI against the deposit of cash equal to the principal amount
of bonds to be issued. Such additional bonds, however, may be issued, except in
certain cases when issued under Article V, only if, for a period of twelve
consecutive calendar months within the fifteen preceding calendar months, the
net earnings of the Company, as defined in the First Mortgage Bond Indenture
(Section 1.03, as amended), shall have been at least twice the interest
requirements for one year on all bonds outstanding, including the additional
bonds applied for and all outstanding prior lien bonds and other indebtedness of
the character described in the First Mortgage Bond Indenture. Such net earnings
are computed, in effect, after making certain deductions including (i) all
operating expenses other than income and excess profits taxes and (ii) the
amount, if any, by which the aggregate charges to expense or income to provide
for depreciation are less than 2.25% of the average amount of depreciable
mortgaged property. Under this provision, no amount is included in interest
requirements on account of $99,400,000 principal amount of first mortgage bonds
(out of a total of $315,250,000 principal amount) issued and outstanding as of
September 30, 1998, as collateral for certain obligations for which such bonds
are pledged as security. No interest is payable on any such bonds unless and
until default occurs on such obligations.
Cash deposited as the basis for the issuance of bonds may be applied to the
retirement of bonds or be withdrawn against the deposit of bonds or be withdrawn
to the extent of 60% of the cost or fair value, whichever is less, of unfunded
net property additions (Article VI).
Release and Substitution of Property: The First Mortgage Bond Indenture
(Article X) provides that, subject to various limitations, property may be
released from the lien thereof when sold or exchanged, upon the basis of cash
deposited with the First Mortgage Bond Trustee, bonds or purchase money
obligations delivered to the First Mortgage Bond Trustee, prior lien bonds
delivered to the First Mortgage Bond Trustee or reduced or assumed, property
additions acquired in exchange for the property released, or unfunded net
property additions certified to the First Mortgage Bond Trustee.
The First Mortgage Bond Indenture (Section 10.05) permits the cash proceeds
of released property and other funds to be withdrawn either upon a showing that
unfunded net property additions exist or against the deposit of bonds and also
permits such proceeds and other funds to be applied to the retirement of bonds.
Restrictions on Common Stock Dividends: There are various restrictions on
Common Stock dividends in the First Mortgage Bond Indenture (which are to remain
in effect so long as certain series of bonds are outstanding). Any restrictions
on dividends and distributions on Common Stock in the Supplemental Indenture
will be set forth in the Prospectus Supplement.
Amendments to the First Mortgage Bond Indenture: By Section 6(g) of the
Supplemental Indenture dated as of October 1, 1981, the First Mortgage Bond
Indenture may be modified with the consent of the holders of not less than a
majority in principal amount of the bonds at the time outstanding which would be
affected by the action proposed to be taken. However, the bondholders shall have
no power (i) to extend the fixed maturity of any bonds, or reduce the rate or
extend the time of payment of interest thereon, or reduce the principal amount
thereof, without the express consent of the holder of each bond which would be
so affected, or (ii) to reduce the aforesaid percentage of bonds, the holders of
which are required to consent to any such modification, without the consent of
the holders of all bonds outstanding, or (iii) to permit the creation by the
Company of any mortgage or pledge or lien in the nature thereof, not otherwise
permitted under the First Mortgage Bond Indenture, ranking prior to or equal
with the lien of the First Mortgage Bond Indenture on any of the mortgaged and
pledged property, or (iv) to deprive the holder of any bond outstanding under
the First Mortgage Bond Indenture of the lien thereof on any of the mortgaged
and pledged property. The First Mortgage Bond Trustee shall not be obligated to
enter into a supplemental indenture which would affect its own rights, duties or
immunities under the First Mortgage Bond Indenture or otherwise.
8
<PAGE>
Regarding the First Mortgage Bond Trustee: The Chase Manhattan Bank, New
York, New York is First Mortgage Bond Trustee under the First Mortgage Bond
Indenture. Such bank is a depositary of the Company. The Company and its
affiliates borrow from such bank from time to time.
Enforcement Provisions: The First Mortgage Bond Indenture (Section 11.05)
provides that, upon the occurrence of certain events of default, the First
Mortgage Bond Trustee or the holders of not less than 20% in principal amount of
outstanding bonds may declare the principal of all outstanding bonds immediately
due and payable, but that, upon the curing of any such default, the holders of a
majority in principal amount of outstanding bonds may waive such default and its
consequences.
The holders of a majority in principal amount of outstanding bonds may
direct the time, method and place of conducting any proceeding for the
enforcement of the First Mortgage Bond Indenture (Sections 11.12 and 11.01). No
holder of any bond has any right to institute any proceedings to enforce the
First Mortgage Bond Indenture or any remedy thereunder, unless such holder shall
previously have given to the First Mortgage Bond Trustee written notice of a
default, and unless such holder or holders shall have tendered to the First
Mortgage Bond Trustee indemnity against costs, expenses and liabilities, and
unless the holders of not less than 20% in principal amount of outstanding bonds
shall have tendered such indemnity and requested the First Mortgage Bond Trustee
to take action and the First Mortgage Bond Trustee shall have failed to take
action within 60 days (Section 11.14).
Defaults: By Section 11.01 of the First Mortgage Bond Indenture, the
following events are defined as "defaults": failure to pay principal; failure
for 60 days to pay interest; failure for 90 days to pay any sinking or other
purchase fund installment; certain events in bankruptcy, insolvency or
reorganization; and failure for 90 days after notice to perform other covenants.
By Section 9.03 of the First Mortgage Bond Indenture, a failure by the Company
to deposit or direct the application of money for the redemption of bonds called
for redemption also constitutes a default.
Evidence as to Compliance with Conditions and Covenants: The First
Mortgage Bond Indenture requires the Company to furnish to the First Mortgage
Bond Trustee, among other things, a certificate of officers and an opinion of
counsel as evidence of compliance with conditions precedent provided for
therein; a certificate of an engineer (who, in certain instances, must be an
independent engineer) with respect to the fair value of property certified or
released; and a certificate of an accountant (who, in certain instances, must be
an independent public accountant) as to compliance with the earnings,
improvement fund and replacement requirements. Various certificates and other
documents are required to be filed periodically or upon the happening of certain
events; however, no general periodic evidence is required by the First Mortgage
Bond Indenture to be furnished as to the absence of default or as to compliance
with the terms of the First Mortgage Bond Indenture in general.
DESCRIPTION OF THE NEW STOCK
Set forth below is a description of the general terms of the new Stock.
The statements herein concerning the new Stock are an outline and do not
purport to be complete. Such statements make use of defined terms and are
qualified in their entirety by express reference to the cited provisions of the
charter of the Company, as amended (the "charter"), a copy of which is filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
The general provisions which apply to the preferred stock of the Company of all
classes, which are now or may hereafter be authorized or created, are set forth
in the charter.
General: The new Stock is to be established by resolutions of the Board of
Directors of the Company (the "Resolutions"), a copy of which is an exhibit to
the registration statement (or incorporated by reference therein) to which
reference is hereby made. The Resolutions shall include a provision fixing the
stated capital of the new Stock.
In addition to the new Class A Preferred Stock, at September 30, 1998,
there were outstanding 13,520,000 shares of Class A Preferred Stock with a
stated capital of $25 per share, 500,000 shares of Class A
9
<PAGE>
Preferred Stock with a stated capital of $100 per share and 200 shares of Class
A Preferred Stock with a stated capital of $100,000 per share. Additionally, at
September 30, 1998, the Company had outstanding 475,115 shares of Preferred
Stock which have a par value of $100 per share. The Class A Preferred Stock
ranks on a parity as to dividends and assets with the outstanding Preferred
Stock and has the same rights and preferences as the outstanding Preferred
Stock. On all matters submitted to a vote of the holders of the Preferred Stock
and the Class A Preferred Stock (other than a change in the rights and
preferences of only one, but not the other, such kind of stock), both kinds of
stock vote together as a single class, and each share of Preferred Stock and
Class A Preferred Stock shall have the relative voting rights described in
"Voting Rights" herein.
The new Stock will not be subject to further calls or to assessment by the
Company.
Any proposed listing of the new Stock on a securities exchange will be
described in the Prospectus Supplement.
Transfer Agent and Registrar: The new Stock will be transferable at the
office of Southern Company Services, Inc., 270 Peachtree Street, N.W., Atlanta,
Georgia 30303, which will also serve as the Registrar.
Dividend Rights: The holders of the Preferred Stock and Class A Preferred
Stock of each class are entitled to receive cumulative dividends, payable when
and as declared by the Board of Directors, at the rates determined for the
respective classes, before any dividends may be declared or paid on the Common
Stock. Dividends on the Preferred Stock and Class A Preferred Stock must have
been or be contemporaneously declared and set apart for payment, or paid, on the
Preferred Stock and Class A Preferred Stock of all classes for all dividend
periods terminating on the same or an earlier date (Charter -- A. Preferred
Stock -- 2. General Provisions -- a and b).
The Prospectus Supplement will set forth the dividend rate provisions of
the new Stock, including the payment dates and the rate or rates, or the method
of determining the rate or rates (which may involve periodic dividend rate
settings through remarketing or auction procedures or pursuant to one or more
formulae, as described in the Prospectus Supplement). Dividends payable on the
new Stock will be cumulative from the date of original issue.
Redemption Provisions: The redemption provisions applicable to the new
Stock will be described in the Prospectus Supplement.
The charter provides that the Company shall not redeem, purchase or
otherwise acquire any shares of Preferred Stock or Class A Preferred Stock if,
at the time of such redemption, purchase or other acquisition, dividends payable
on the Preferred Stock or Class A Preferred Stock of any class shall be in
default in whole or in part unless, prior to or concurrently with such
redemption, purchase or other acquisition, all such defaults shall be cured or
unless such action has been ordered, approved or permitted under the Public
Utility Holding Company Act of 1935 by the SEC or any successor commission or
regulatory authority of the United States of America (Charter -- A. Preferred
Stock -- 2. General Provisions -- d).
Voting Rights: Except as otherwise provided by law or in the charter, the
right to vote is vested in the holders of the Common Stock; provided, however,
that, if and so long as four quarterly dividends payable on the Preferred Stock
or Class A Preferred Stock of any class shall be in default, the holders of the
Preferred Stock and Class A Preferred Stock of all classes shall have the
exclusive right, voting separately and as a single class, to elect the smallest
number of directors which shall constitute a majority of the then authorized
number of directors and, on all other matters, the right to vote together with
the holders of the Common Stock. In each instance in which the holders of the
Preferred Stock and the Class A Preferred Stock are entitled to vote separately
and as a single class or to vote together with the holders of the Common Stock,
the relative voting power of the various classes of stock shall be computed as
hereinafter provided. Stockholders are entitled to cumulative voting at
elections of directors (Charter -- C. Voting Powers).
The affirmative vote of at least two-thirds of the total voting power of
the outstanding shares of Preferred Stock and Class A Preferred Stock will be
required for --
(a) the authorization or creation of any kind of stock preferred as to
dividends or assets over the Preferred Stock or Class A Preferred Stock or
the issue (such issuance to be within twelve months after
10
<PAGE>
such vote) of any shares of any kind of stock preferred as to dividends or
assets over the Preferred Stock or Class A Preferred Stock or any security
convertible into such kind of stock or a change in any of the rights and
preferences of the then outstanding Preferred Stock or Class A Preferred
Stock in any manner so as to affect adversely the holders thereof;
provided, however, that, if any such change would adversely affect the
holders of only one, but not the other, such kind of stock, only the vote
of the holders of at least two-thirds of the total voting power of the
outstanding shares of the kind so affected will be required; or
(b) the issue, sale or other disposition of any shares of Preferred
Stock if the total number of shares thereof to be outstanding would exceed
300,000, or the issue, sale or other disposition of any shares of Class A
Preferred Stock, or the issue, sale or other disposition of any senior or
equally ranking stock, or the reissue, sale or other disposition of any
shares of Preferred Stock or Class A Preferred Stock or senior or equally
ranking stock which have been redeemed, purchased or otherwise acquired by
the Company, unless, in any such case, (i) net income available for
dividends for a period of twelve consecutive calendar months within the 15
preceding calendar months is at least equal to two times the annual
dividend requirements on all outstanding shares of Preferred Stock and
Class A Preferred Stock and on senior or equally ranking stock to be
outstanding; (ii) gross income available for interest for a period of
twelve consecutive calendar months within the 15 preceding calendar months
is at least equal to one and one-half times the aggregate of annual
interest requirements and annual dividend requirements on all outstanding
shares of Preferred Stock and Class A Preferred Stock and on senior or
equally ranking stock to be outstanding; and (iii) the aggregate of common
stock capital and surplus is not less than the aggregate amount payable
upon involuntary liquidation on all shares of Preferred Stock and Class A
Preferred Stock and on senior or equally ranking stock to be outstanding
(Charter -- A. Preferred Stock -- 2. General Provisions -- e.).
The charter provides that relative voting power of each share of Preferred
Stock and Class A Preferred Stock shall be in the same proportion to all the
outstanding shares of Preferred Stock and Class A Preferred Stock as the ratio
of (i) the stated capital of such share to (ii) the aggregate stated capital of
all then outstanding shares of Preferred Stock and Class A Preferred Stock.
Thus, a share of Class A Preferred Stock having a stated capital of $25 per
share will have one-fourth the voting power of a share of Preferred Stock or
Class A Preferred Stock having a stated capital of $100 per share. In voting by
holders of Preferred Stock and Class A Preferred Stock together with the holders
of the Common Stock, each share of Common Stock will have one vote, each share
of Preferred Stock will have one vote and each share of Class A Preferred Stock
having a stated capital of other than $100 per share will have that number of
votes which is proportionate to such one vote as determined above in this
paragraph (Charter -- C. Voting Powers).
Liquidation Rights: Upon voluntary or involuntary liquidation, the holders
of the Preferred Stock and Class A Preferred Stock of each class, without
preference between classes, will be entitled to receive the amounts specified to
be payable on the shares of such class (which, in the case of the new Stock, is
an amount equal to the stated capital per share on involuntary liquidation, or
an amount equal to the then current regular redemption price per share on
voluntary liquidation, plus accrued dividends in each case) before any
distribution of assets may be made to the holders of the Common Stock. Available
assets, if insufficient to pay such amounts to the holders of the Preferred
Stock and Class A Preferred Stock, are to be distributed pro rata to the
payment, first, of the amount per share payable in the event of involuntary
liquidation, second, of accrued dividends, and third, of any premium
(Charter -- A. Preferred Stock -- 2. General Provisions -- c.).
Sinking Fund: The terms and conditions of a sinking fund or purchase fund,
if any, for the benefit of the holders of the new Stock will be set forth in the
Prospectus Supplement.
Other Rights: The holders of the new Stock do not have any preemptive or
conversion rights unless otherwise indicated in the Prospectus Supplement.
DESCRIPTION OF THE SENIOR NOTES
Set forth below is a description of the general terms of the Senior Notes.
The following description does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the Senior Note Indenture, dated
as of December 1, 1997, between the Company and The Chase Manhattan Bank, as
trustee
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(the "Senior Note Indenture Trustee"), as to be supplemented by a supplemental
indenture thereto establishing the Senior Notes of each series (the Senior Note
Indenture, as so supplemented, is hereinafter referred to as the "Senior Note
Indenture"), the forms of which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part. The terms of the Senior Notes
will include those stated in the Senior Note Indenture and those made a part of
the Senior Note Indenture by reference to the 1939 Act. Certain capitalized
terms used herein are defined in the Senior Note Indenture.
GENERAL
The Senior Notes will be issued as unsecured senior debt securities under
the Senior Note Indenture and will rank pari passu with all other unsecured and
unsubordinated debt of the Company. The Senior Notes will be effectively
subordinated to all secured debt of the Company, including its first mortgage
bonds, aggregating approximately $1,920,000,000 outstanding at September 30,
1998. The Senior Note Indenture does not limit the aggregate principal amount of
Senior Notes that may be issued thereunder and provides that Senior Notes may be
issued from time to time in one or more series pursuant to an indenture
supplemental to the Senior Note Indenture.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Senior Notes being offered
thereby: (i) the title of such Senior Notes; (ii) any limit on the aggregate
principal amount of such Senior Notes; (iii) the date or dates on which the
principal of such Senior Notes is payable; (iv) the rate or rates at which such
Senior Notes shall bear interest, if any, or any method by which such rate or
rates will be determined, the date or dates from which such interest will
accrue, the interest payment dates on which such interest shall be payable, and
the regular record date for the interest payable on any interest payment date;
(v) the place or places where the principal of (and premium, if any) and
interest, if any, on such Senior Notes shall be payable; (vi) the period or
periods within which, the price or prices at which and the terms and conditions
on which such Senior Notes may be redeemed, in whole or in part, at the option
of the Company; (vii) the obligation, if any, of the Company to redeem or
purchase such Senior Notes; (viii) the denominations in which such Senior Notes
shall be issuable; (ix) if other than the principal amount thereof, the portion
of the principal amount of such Senior Notes which shall be payable upon
declaration of acceleration of the maturity thereof; (x) any deletions from,
modifications of or additions to the Events of Default or covenants of the
Company as provided in the Senior Note Indenture pertaining to such Senior
Notes; (xi) whether such Senior Notes shall be issued in whole or in part in the
form of a Global Security; and (xii) any other terms of such Senior Notes.
The Senior Note Indenture does not contain provisions that afford holders
of Senior Notes protection in the event of a highly leveraged transaction
involving the Company.
EVENTS OF DEFAULT
The Senior Note Indenture provides that any one or more of the following
described events with respect to the Senior Notes of any series, which has
occurred and is continuing, constitutes an "Event of Default" with respect to
the Senior Notes of such series:
(a) failure for 10 days to pay interest on the Senior Notes of such
series, when due on an Interest Payment Date other than at maturity or upon
earlier redemption; or
(b) failure to pay principal or premium, if any, or interest on the
Senior Notes of such series when due at maturity or upon earlier
redemption; or
(c) failure for three Business Days to deposit any sinking fund
payment when due by the terms of a Senior Note of such series; or
(d) failure to observe or perform any other covenant or warranty of
the Company in the Senior Note Indenture (other than a covenant or warranty
which has expressly been included therein solely for the benefit of one or
more series of Senior Notes other than such series) for 90 days after
written notice to the Company from the Senior Note Indenture Trustee or the
holders of at least 25% in principal amount of the outstanding Senior Notes
of such series; or
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(e) certain events of bankruptcy, insolvency, or reorganization of the
Company.
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Senior Note Indenture Trustee with respect to the Senior Notes of such series.
If a Senior Note Indenture Event of Default occurs and is continuing with
respect to the Senior Notes of any series, then the Senior Note Indenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of the Senior Notes of such series may declare the principal amount
thereof due and payable immediately by notice in writing to the Company (and to
the Senior Note Indenture Trustee if given by the holders), and upon any such
declaration such principal amount shall become immediately due and payable. At
any time after such a declaration of acceleration with respect to the Senior
Notes of any series has been made and before a judgment or decree for payment of
the money due has been obtained as provided in Article Five of the Senior Note
Indenture, the holders of not less than a majority in aggregate outstanding
principal amount of the Senior Notes of such series may rescind and annul such
declaration and its consequences if the default has been cured or waived and the
Company has paid or deposited with the Senior Note Indenture Trustee a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration and all sums paid or advanced by the Senior Note
Indenture Trustee, including reasonable compensation and expenses of the Senior
Note Indenture Trustee.
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series may, on behalf of the holders of all
the Senior Notes of such series, waive any past default with respect to such
series, except (i) a default in the payment of principal or interest or (ii) a
default in respect of a covenant or provision which under Article Nine of the
Senior Note Indenture cannot be modified or amended thereunder without the
consent of the holder of each outstanding Senior Note of such series affected
thereby.
REGISTRATION AND TRANSFER
The Company shall not be required to (i) issue, register the transfer of or
exchange Senior Notes of any series during a period of 15 days immediately
preceding the date notice is given identifying the Senior Notes of such series
called for redemption, or (ii) register the transfer of or exchange any Senior
Notes so selected for redemption, in whole or in part, except the unredeemed
portion of any Senior Note being redeemed in part.
PAYMENT AND PAYING AGENT
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Senior Notes will be made only against surrender to the
Paying Agent of such Senior Notes. Principal of and interest on Senior Notes
will be payable, subject to any applicable laws and regulations, at the office
of such Paying Agent or Paying Agents as the Company may designate from time to
time, except that, at the option of the Company, payment of any interest may be
made by wire transfer or by check mailed to the address of the person entitled
thereto as such address shall appear in the Security Register with respect to
the Senior Notes. Payment of interest on Senior Notes on any interest payment
date will be made to the person in whose name the Senior Notes (or predecessor
security) are registered at the close of business on the Record Date for such
interest payment (the fifteenth calendar day before such interest payment date).
Unless otherwise indicated in an applicable Prospectus Supplement, the
Senior Indenture Trustee will act as Paying Agent with respect to the Senior
Notes. The Company may at any time designate additional Paying Agents or rescind
the designation of any Paying Agents or approve a change in the office through
which any Paying Agent acts.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or interest on the Senior Notes of any series which remain
unclaimed at the end of two years after such principal or interest shall have
become due and payable will be repaid to the Company, and the holder of such
Senior Notes will thereafter look only to the Company for payment thereof.
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MODIFICATION
The Senior Note Indenture contains provisions permitting the Company and
the Senior Indenture Trustee, with the consent of the holders of not less than a
majority in principal amount of the outstanding Senior Notes of each series
affected thereby, to modify the Senior Note Indenture or the rights of the
holders of the Senior Note of such series; provided, that no such modification
may, without the consent of the holder of each outstanding Senior Note affected
thereby, (i) change the stated maturity of the principal of, or any installment
of principal of or interest on, any Senior Note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the method of calculating the rate of interest
thereon, or impair the right to institute suit for the enforcement of any such
payment on or after the stated maturity thereof (or, in the case of redemption,
on or after the redemption date), or (ii) reduce the percentage of principal
amount of the outstanding Senior Notes of any series, the consent of whose
holders is required for any such supplemental indenture, or the consent of whose
holders is required for any waiver (of compliance with certain provisions of the
Senior Note Indenture or certain defaults thereunder and their consequences)
provided for in the Senior Note Indenture, or (iii) modify any of the provisions
of the Senior Note Indenture relating to supplemental indentures, waiver of past
defaults, or waiver of certain covenants, except to increase any such percentage
or to provide that certain other provisions of the Senior Note Indenture cannot
be modified or waived without the consent of the holder of each outstanding
Senior Note affected thereby.
In addition, the Company and the Senior Note Indenture Trustee may execute,
without the consent of any holders of Senior Notes, any supplemental indenture
for certain other usual purposes, including the creation of any new series of
senior notes.
CONSOLIDATION, MERGER AND SALE
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such other corporation or person
expressly assumes, by supplemental indenture executed and delivered to the
Senior Note Indenture Trustee, the payment of the principal of (and premium, if
any) and interest on all the Senior Notes and the performance of every covenant
of the Senior Note Indenture on the part of the Company to be performed or
observed; (2) immediately after giving effect to such transactions, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have happened and be continuing; and (3) the Company
has delivered to the Senior Note Indenture Trustee an officers' certificate and
an opinion of counsel, each stating that such transaction complies with the
provisions of the Senior Note Indenture governing consolidation, merger,
conveyance, transfer or lease and that all conditions precedent thereto have
been complied with.
INFORMATION CONCERNING THE SENIOR NOTE INDENTURE TRUSTEE
The Senior Note Indenture Trustee, prior to an Event of Default with
respect to Senior Notes of any series, undertakes to perform, with respect to
Senior Notes of such series, only such duties as are specifically set forth in
the Senior Note Indenture and, in case an Event of Default with respect to
Senior Notes of any series has occurred and is continuing, shall exercise, with
respect to Senior Notes of such series, the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
such provision, the Senior Note Indenture Trustee is under no obligation to
exercise any of the powers vested in it by the Senior Note Indenture at the
request of any holder of Senior Notes of any series, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Senior Note Indenture Trustee is not required to expend
or risk its own funds or otherwise incur any financial liability in the
performance of its duties if the Senior Note Indenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
The Chase Manhattan Bank, the Senior Note Indenture Trustee, also serves as
First Mortgage Bond Trustee, as Subordinated Note Indenture Trustee, as Property
Trustee and as Guarantee Trustee. The Company and certain of its affiliates
maintain deposit accounts and banking relationships with The Chase
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Manhattan Bank. The Chase Manhattan Bank also serves as trustee under other
indentures pursuant to which securities of the Company and affiliates of the
Company are outstanding.
GOVERNING LAW
The Senior Note Indenture and the Senior Notes will be governed by, and
construed in accordance with, the internal laws of the State of New York.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Senior Note Indenture to a direct or indirect wholly-owned
subsidiary of the Company; provided, that, in the event of any such assignment,
the Company will remain primarily liable for all such obligations. Subject to
the foregoing, the Senior Note Indenture will be binding upon and inure to the
benefit of the parties thereto and their respective successors and assigns.
DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES
Set forth below is a description of the general terms of the Junior
Subordinated Notes. The following description does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Subordinated Note Indenture, dated as of January 1, 1997, between the Company
and The Chase Manhattan Bank, as trustee (the "Subordinated Note Indenture
Trustee"), as to be supplemented by a supplemental indenture thereto
establishing the Junior Subordinated Notes of each series (the Subordinated Note
Indenture, as so supplemented, is hereinafter referred to as the "Subordinated
Note Indenture"), the forms of which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part. The terms of the Junior
Subordinated Notes will include those stated in the Subordinated Note Indenture
and those made a part of the Subordinated Note Indenture by reference to the
1939 Act. Certain capitalized terms used herein are defined in the Subordinated
Note Indenture.
GENERAL
The Junior Subordinated Notes will be issued as unsecured junior
subordinated debt securities under the Subordinated Note Indenture. The
Subordinated Note Indenture does not limit the aggregate principal amount of
Junior Subordinated Notes that may be issued thereunder and provides that Junior
Subordinated Notes may be issued from time to time in one or more series
pursuant to an indenture supplemental to the Subordinated Note Indenture.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Junior Subordinated Notes
being offered thereby: (i) the title of such Junior Subordinated Notes; (ii) any
limit on the aggregate principal amount of such Junior Subordinated Notes; (iii)
the date or dates on which the principal of such Junior Subordinated Notes is
payable; (iv) the rate or rates at which such Junior Subordinated Notes shall
bear interest, if any, or any method by which such rate or rates will be
determined, the date or dates from which such interest will accrue, the interest
payment dates on which such interest shall be payable, and the regular record
date for the interest payable on any interest payment date; (v) the place or
places where the principal of (and premium, if any) and interest, if any, on
such Junior Subordinated Notes shall be payable; (vi) the period or periods
within which, the price or prices at which and the terms and conditions on which
such Junior Subordinated Notes may be redeemed, in whole or in part, at the
option of the Company; (vii) the obligation, if any, of the Company to redeem or
purchase such Junior Subordinated Notes; (viii) the denominations in which such
Junior Subordinated Notes shall be issuable; (ix) if other than the principal
amount thereof, the portion of the principal amount of such Junior Subordinated
Notes which shall be payable upon declaration of acceleration of the maturity
thereof; (x) any deletions from, modifications of or additions to the Events of
Default or covenants of the Company as provided in the Subordinated Note
Indenture pertaining to such Junior Subordinated Notes; (xi) whether such Junior
Subordinated Notes shall be issued in whole or in part in the form of a Global
Security; (xii) the right, if any, of the Company to extend the interest payment
periods of such Junior Subordinated Notes; and (xiii) any
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other terms of such Junior Subordinated Notes. The terms of each series of
Junior Subordinated Notes issued to a Trust will correspond to those of the
related Preferred Securities of such Trust as described in the Prospectus
Supplement relating to such Preferred Securities.
The Subordinated Note Indenture does not contain provisions that afford
holders of Junior Subordinated Notes protection in the event of a highly
leveraged transaction involving the Company.
SUBORDINATION
The Junior Subordinated Notes are subordinated and junior in right of
payment to all Senior Indebtedness (as defined below) of the Company. No payment
of principal of (including redemption payments, if any), or premium, if any, or
interest on (including Additional Interest (as defined 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 otherwise ceasing to exist, or (b) the
maturity of any Senior Indebtedness has been accelerated because of a default,
or (c) notice has been given of the exercise of an option to require repayment,
mandatory payment or prepayment or otherwise. Upon any payment or distribution
of assets of the Company to creditors upon any liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of creditors, marshalling
of assets or liabilities, or any bankruptcy, insolvency or similar proceedings
of the Company, the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due or to become due on or in respect of all
Senior Indebtedness before the holders of the Junior Subordinated Notes are
entitled to receive or retain any payment or distribution. Subject to the prior
payment of all Senior Indebtedness, the rights of the holders of the Junior
Subordinated Notes will be subrogated to the rights of the holders of Senior
Indebtedness to receive payments and distributions applicable to such Senior
Indebtedness until all amounts owing on the Junior Subordinated Notes are paid
in full.
The term "Senior Indebtedness" means, with respect to the Company, (i) any
payment due in respect of indebtedness of the Company, whether outstanding at
the date of execution of the Subordinated Note Indenture or thereafter incurred,
created or assumed, (a) in respect of money borrowed (including any financial
derivative, hedging or futures contract or similar instrument) and (b) evidenced
by securities, debentures, bonds, notes or other similar instruments issued by
the Company that, by their terms, are senior or senior subordinated debt
securities including, without limitation, all obligations under its indentures
with various trustees; (ii) all capital lease obligations; (iii) all obligations
issued or assumed as the deferred purchase price of property, all conditional
sale obligations and all obligations of the Company under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business and long-term purchase obligations); (iv) all obligations for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction; (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise; and (vi)
all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of the Company
(whether or not such obligation is assumed by the Company), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Junior Subordinated Notes and (2) any unsecured indebtedness between or among
the Company or its affiliates. Such Senior Indebtedness shall continue to be
Senior Indebtedness and be entitled to the benefits of the subordination
provisions contained in the Subordinated Note Indenture irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
The Subordinated Note Indenture does not limit the aggregate amount of
Senior Indebtedness that may be issued by the Company. As of September 30, 1998,
Senior Indebtedness of the Company aggregated approximately $3,093,000,000.
ADDITIONAL INTEREST
"Additional Interest" is defined in the Subordinated Note Indenture as (i)
such additional amounts as may be required so that the net amounts received and
retained by a holder of Junior Subordinated Notes (if the holder is a Trust)
after paying taxes, duties, assessments or governmental charges of whatever
nature
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(other than withholding taxes) imposed by the United States or any other taxing
authority will not be less than the amounts the holder would have received had
no such taxes, duties, assessments, or other governmental charges been imposed;
and (ii) any interest due and not paid on an interest payment date, together
with interest thereon from such interest payment date to the date of payment,
compounded quarterly, on each interest payment date.
CERTAIN COVENANTS
The Company covenants in the Subordinated Note Indenture, for the benefit
of the holders of each series of Junior Subordinated Notes, that, (i) if at such
time the Company shall have given notice of its election to extend an interest
payment period for such series of Junior Subordinated Notes and such extension
shall be continuing, (ii) if at such time the Company shall be in default with
respect to its payment or other obligations under the Guarantee with respect to
the Trust Securities, if any, related to such series of Junior Subordinated
Notes, or (iii) if at such time an Event of Default thereunder with respect to
such series of Junior Subordinated Notes shall have occurred and be continuing,
(a) the Company shall not declare or pay any dividend or make any distributions
with respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock, and (b) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees other than the Guarantees)
issued by the Company which rank pari passu with or junior to the Junior
Subordinated Notes. None of the foregoing, however, shall restrict (i) any of
the actions described in the preceding sentence resulting from any
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock, or (ii) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged.
The Subordinated Note Indenture further provides that, for so long as the
Trust Securities of any Trust remain outstanding, the Company covenants (i) to
directly or indirectly maintain 100% ownership of the Common Securities of such
Trust; provided, however, that any permitted successor of the Company under the
Subordinated Note Indenture may succeed to the Company's ownership of such
Common Securities, and (ii) to use its reasonable efforts to cause such Trust
(a) to remain a statutory business trust, except in connection with the
distribution of Junior Subordinated Notes to the holders of Trust Securities in
liquidation of such Trust, the redemption of all of the Trust Securities of such
Trust, or certain mergers, consolidations or amalgamations, each as permitted by
the related Trust Agreement, and (b) to otherwise continue to be classified as a
grantor trust for United States federal income tax purposes.
EVENTS OF DEFAULT
The Subordinated Note Indenture provides that any one or more of the
following described events with respect to the Junior Subordinated Notes of any
series, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Junior Subordinated Notes of such series:
(a) failure for 10 days to pay interest on the Junior Subordinated
Notes of such series, including any Additional Interest (as defined in
clause (ii) of the definition thereof in the Subordinated Note Indenture)
in respect thereof, when due on an Interest Payment Date other than at
maturity or upon earlier redemption; provided, however, that a valid
extension of the interest payment period by the Company shall not
constitute a default in the payment of interest for this purpose; or
(b) failure for 10 days to pay Additional Interest (as defined in
clause (i) of the definition thereof in the Subordinated Note Indenture);
or
(c) failure to pay principal or premium, if any, or interest,
including Additional Interest (as defined in clause (ii) of the definition
thereof in the Subordinated Note Indenture), on the Junior Subordinated
Notes of such series when due at maturity or upon earlier redemption; or
(d) failure for three Business Days to deposit any sinking fund
payment when due by the terms of a Junior Subordinated Note of such series;
or
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(e) failure to observe or perform any other covenant or warranty of
the Company in the Subordinated Note Indenture (other than a covenant or
warranty which has expressly been included therein solely for the benefit
of one or more series of Junior Subordinated Notes other than such series)
for 90 days after written notice to the Company from the Subordinated Note
Indenture Trustee or the holders of at least 25% in principal amount of the
outstanding Junior Subordinated Notes of such series; or
(f) certain events of bankruptcy, insolvency, or reorganization of the
Company.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Subordinated Note Indenture Trustee with respect to the Junior
Subordinated Notes of such series. If a Subordinated Note Indenture Event of
Default occurs and is continuing with respect to the Junior Subordinated Notes
of any series, then the Subordinated Note Indenture Trustee or the holders of
not less than 25% in aggregate outstanding principal amount of the Junior
Subordinated Notes of such series may declare the principal amount thereof due
and payable immediately by notice in writing to the Company (and to the
Subordinated Note Indenture Trustee if given by the holders), and upon any such
declaration such principal amount shall become immediately due and payable. At
any time after such a declaration of acceleration with respect to the Junior
Subordinated Notes of any series has been made and before a judgment or decree
for payment of the money due has been obtained as provided in Article Five of
the Subordinated Note Indenture, the holders of not less than a majority in
aggregate outstanding principal amount of the Junior Subordinated Notes of such
series may rescind and annul such declaration and its consequences if the
default has been cured or waived and the Company has paid or deposited with the
Subordinated Note Indenture Trustee a sum sufficient to pay all matured
installments of interest (including any Additional Interest) and principal due
otherwise than by acceleration and all sums paid or advanced by the Subordinated
Note Indenture Trustee, including reasonable compensation and expenses of the
Subordinated Note Indenture Trustee.
A holder of Preferred Securities may institute a legal proceeding directly
against the Company, without first instituting a legal proceeding against the
Property Trustee or any other person or entity, for enforcement of payment to
such holder of principal of or interest on the Junior Subordinated Notes of the
related series having a principal amount equal to the aggregate stated
liquidation amount of the Preferred Securities of such holder on or after the
due dates specified in the Junior Subordinated Notes of such series.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series may, on behalf of the
holders of all the Junior Subordinated Notes of such series, waive any past
default with respect to such series, except (i) a default in the payment of
principal or interest or (ii) a default in respect of a covenant or provision
which under Article Nine of the Subordinated Note Indenture cannot be modified
or amended thereunder without the consent of the holder of each outstanding
Junior Subordinated Note of such series affected thereby.
REGISTRATION AND TRANSFER
The Company shall not be required to (i) issue, register the transfer of or
exchange Junior Subordinated Notes of any series during a period of 15 days
immediately preceding the date notice is given identifying the Junior
Subordinated Notes of such series called for redemption, or (ii) register the
transfer of or exchange any Junior Subordinated Notes so selected for
redemption, in whole or in part, except the unredeemed portion of any Junior
Subordinated Note being redeemed in part.
PAYMENT AND PAYING AGENT
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Junior Subordinated Notes will be made only against
surrender to the Paying Agent of such Junior Subordinated Notes. Principal of
and interest on Junior Subordinated Notes will be payable, subject to any
applicable laws and regulations, at the office of such Paying Agent or Paying
Agents as the Company may designate from time to time, except that, at the
option of the Company, payment of any interest may be made by wire transfer or
by
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check mailed to the address of the person entitled thereto as such address shall
appear in the Security Register with respect to the Junior Subordinated Notes.
Payment of interest on Junior Subordinated Notes on any interest payment date
will be made to the person in whose name the Junior Subordinated Notes (or
predecessor security) are registered at the close of business on the Record Date
for such interest payment (the fifteenth calendar day before such interest
payment date).
Unless otherwise indicated in an applicable Prospectus Supplement, the
Subordinated Note Indenture Trustee will act as Paying Agent with respect to the
Junior Subordinated Notes. The Company may at any time designate additional
Paying Agents or rescind the designation of any Paying Agents or approve a
change in the office through which any Paying Agent acts.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or interest on the Junior Subordinated Notes of any series which
remain unclaimed at the end of two years after such principal or interest shall
have become due and payable will be repaid to the Company, and the holder of
such Junior Subordinated Notes will thereafter look only to the Company for
payment thereof.
MODIFICATION
The Subordinated Note Indenture contains provisions permitting the Company
and the Subordinated Note Indenture Trustee, with the consent of the holders of
not less than a majority in principal amount of the outstanding Junior
Subordinated Notes of each series affected thereby, to modify the Subordinated
Note Indenture or the rights of the holders of the Junior Subordinated Note of
such series; provided, that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Note affected thereby, (i) change
the stated maturity of the principal of, or any installment of principal of or
interest on, any Junior Subordinated Note, or reduce the principal amount
thereof or the rate of interest (including Additional Interest) thereon or any
premium payable upon the redemption thereof, or change the method of calculating
the rate of interest thereon, or impair the right to institute suit for the
enforcement of any such payment on or after the stated maturity thereof (or, in
the case of redemption, on or after the redemption date), or (ii) reduce the
percentage of principal amount of the outstanding Junior Subordinated Notes of
any series, the consent of whose holders is required for any such supplemental
indenture, or the consent of whose holders is required for any waiver (of
compliance with certain provisions of the Subordinated Note Indenture or certain
defaults thereunder and their consequences) provided for in the Subordinated
Note Indenture, or (iii) modify any of the provisions of the Subordinated Note
Indenture relating to supplemental indentures, waiver of past defaults, or
waiver of certain covenants, except to increase any such percentage or to
provide that certain other provisions of the Subordinated Note Indenture cannot
be modified or waived without the consent of the holder of each outstanding
Junior Subordinated Note affected thereby, or (iv) modify the provisions of the
Subordinated Note Indenture with respect to the subordination of the Junior
Subordinated Notes in a manner adverse to such holder.
In addition, the Company and the Subordinated Note Indenture Trustee may
execute, without the consent of any holders of Junior Subordinated Notes, any
supplemental indenture for certain other usual purposes, including the creation
of any new series of junior subordinated notes.
CONSOLIDATION, MERGER AND SALE
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such other corporation or person
expressly assumes, by supplemental indenture executed and delivered to the
Subordinated Note Indenture Trustee, the payment of the principal of (and
premium, if any) and interest (including Additional Interest) on all the Junior
Subordinated Notes and the performance of every covenant of the Subordinated
Note Indenture on the part of the Company to be performed or observed; (2)
immediately after giving effect to such transactions, no Event of Default, and
no event which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing; and (3) the Company has
delivered to the Subordinated Note Indenture Trustee an officers' certificate
and an opinion of counsel, each stating that such transaction complies with the
provisions of the Subordinated Note
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<PAGE>
Indenture governing consolidation, merger, conveyance, transfer or lease and
that all conditions precedent thereto have been complied with.
INFORMATION CONCERNING THE SUBORDINATED NOTE INDENTURE TRUSTEE
The Subordinated Note Indenture Trustee, prior to an Event of Default with
respect to Junior Subordinated Notes of any series, undertakes to perform, with
respect to Junior Subordinated Notes of such series, only such duties as are
specifically set forth in the Subordinated Note Indenture and, in case an Event
of Default with respect to Junior Subordinated Notes of any series has occurred
and is continuing, shall exercise, with respect to Junior Subordinated Notes of
such series, the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provision, the
Subordinated Note Indenture Trustee is under no obligation to exercise any of
the powers vested in it by the Subordinated Note Indenture at the request of any
holder of Junior Subordinated Notes of any series, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Subordinated Note Indenture Trustee is not required to
expend or risk its own funds or otherwise incur any financial liability in the
performance of its duties if the Subordinated Note Indenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
The Chase Manhattan Bank, the Subordinated Note Indenture Trustee, also
serves as First Mortgage Bond Trustee, as Senior Note Indenture Trustee, as
Property Trustee and as Guarantee Trustee. The Company and certain of its
affiliates maintain deposit accounts and banking relationships with The Chase
Manhattan Bank. The Chase Manhattan Bank also serves as trustee under other
indentures pursuant to which securities of the Company and affiliates of the
Company are outstanding.
GOVERNING LAW
The Subordinated Note Indenture and the Junior Subordinated Notes will be
governed by, and construed in accordance with, the internal laws of the State of
New York.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Subordinated Note Indenture to a direct or indirect
wholly-owned subsidiary of the Company; provided, that, in the event of any such
assignment, the Company will remain primarily liable for all such obligations.
Subject to the foregoing, the Subordinated Note Indenture will be binding upon
and inure to the benefit of the parties thereto and their respective successors
and assigns.
DESCRIPTION OF THE PREFERRED SECURITIES
Each Trust may issue only one series of Preferred Securities having terms
described in the Prospectus Supplement relating thereto. The Trust Agreement of
each Trust will authorize the Administrative Trustees, on behalf of the Trust,
to issue the Preferred Securities of such Trust. The Preferred Securities of
each Trust will have such terms, including distributions, redemption, voting,
liquidation rights and such other preferred, deferral or other special rights or
such restrictions as shall be set forth in the Trust Agreement of such Trust.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a Trust for specific terms, including (i) the distinctive
designation of such Preferred Securities; (ii) the number of Preferred
Securities issued by such Trust; (iii) the distribution rate (or method of
determining such rate) for Preferred Securities of such Trust and the date or
dates on which such distributions shall be payable; (iv) whether distributions
on such Preferred Securities shall be cumulative and, in the case of Preferred
Securities having cumulative distribution rights, the date or dates, or method
of determining the date or dates, from which distributions on such Preferred
Securities shall be cumulative; (v) the amount or amounts that shall be paid out
of the assets of such Trust to the holders of the Preferred Securities of such
Trust upon voluntary or involuntary dissolution, winding-up or termination of
such Trust; (vi) the obligation, if any, of such Trust to purchase or redeem
such Preferred Securities and the price or prices at which, the period or
periods within which, and the terms and conditions upon which such Preferred
Securities shall be purchased or redeemed, in whole or in part, pursuant to such
obligation; (vii) the voting rights, if any, of such Preferred Securities in
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addition to those required by law, including the number of votes per Preferred
Security and any requirement for the approval by the holders of Preferred
Securities as a condition to specified action or amendments to the Trust
Agreement of such Trust; (viii) the rights, if any, to defer distributions on
the Preferred Securities by extending the interest payment period on the related
Junior Subordinated Notes; and (ix) any other relative rights, preferences,
privileges, limitations or restrictions of such Preferred Securities not
inconsistent with the Trust Agreement of such Trust or applicable law. All
Preferred Securities offered hereby will be guaranteed by the Company to the
extent set forth under "Description of the Guarantees." Any material United
States federal income tax considerations applicable to an offering of Preferred
Securities will be described in the Prospectus Supplement relating thereto.
DESCRIPTION OF THE GUARANTEES
Set forth below is a summary of information concerning the Guarantees that
will be executed and delivered by the Company for the benefit of the holders of
Preferred Securities of the respective Trusts from time to time. Each Guarantee
will be qualified as an indenture under the 1939 Act. The Chase Manhattan Bank
will act as indenture trustee under each Guarantee (the "Guarantee Trustee") for
purposes of the 1939 Act. The terms of the respective Guarantees will be those
set forth therein and those made part thereof by the 1939 Act. The following
summary does not purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to, the Guarantees,
the form of which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, and the 1939 Act. Each Guarantee will be held by
the Guarantee Trustee for the benefit of holders of the Preferred Securities to
which it relates.
GENERAL
Pursuant to each Guarantee, the Company will irrevocably and
unconditionally agree, to the extent set forth therein, to pay in full, to the
holders of the related Preferred Securities, the Guarantee Payments (as defined
herein), to the extent not paid by, or on behalf of, the related Trust,
regardless of any defense, right of set-off or counterclaim that the Company may
have or assert against any person. The following payments or distributions with
respect to the Preferred Securities of any Trust to the extent not paid or made
by, or on behalf of, such Trust will be subject to the Guarantee related thereto
(without duplication): (i) any accrued and unpaid distributions required to be
paid on the Preferred Securities of such Trust but if and only if and to the
extent that such Trust has funds legally and immediately available therefor,
(ii) the redemption price, including all accrued and unpaid distributions to the
date of redemption (the "Redemption Price"), with respect to any Preferred
Securities called for redemption by such Trust, but if and only to the extent
such Trust has funds legally and immediately available therefor, and (iii) upon
a dissolution, winding-up or termination of such Trust (other than in connection
with the distribution of Junior Subordinated Notes to the holders of Trust
Securities of such Trust or the redemption of all of the Preferred Securities of
such Trust), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Preferred Securities of such Trust to
the date of payment, to the extent such Trust has funds legally and immediately
available therefor, and (b) the amount of assets of such Trust remaining
available for distribution to holders of Preferred Securities of such Trust in
liquidation of such Trust (the "Guarantee Payments"). The Company's obligation
to make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Company to the holders of the related Preferred Securities or by
causing the related Trust to pay such amounts to such holders.
Each Guarantee will be a guarantee of the Guarantee Payments with respect
to the related Preferred Securities from the time of issuance of such Preferred
Securities, but will not apply to the payment of distributions and other
payments on such Preferred Securities when the related Trust does not have
sufficient funds legally and immediately available to make such distributions or
other payments. IF THE COMPANY DOES NOT MAKE INTEREST PAYMENTS ON THE JUNIOR
SUBORDINATED NOTES HELD BY THE PROPERTY TRUSTEE UNDER ANY TRUST, SUCH TRUST WILL
NOT MAKE DISTRIBUTIONS ON ITS PREFERRED SECURITIES.
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<PAGE>
SUBORDINATION
The Company's obligations under each Guarantee to make the Guarantee
Payments will constitute an unsecured obligation of the Company and will rank
(i) subordinate and junior in right of payment to all other liabilities of the
Company, including the Junior Subordinated Notes, except those obligations or
liabilities made pari passu or subordinate by their terms, (ii) pari passu with
the most senior preferred or preference stock now or hereafter issued by the
Company and with any guarantee now or hereafter entered into by the Company in
respect of any preferred or preference securities of any affiliate of the
Company, and (iii) senior to all common stock of the Company. The terms of the
Preferred Securities will provide that each holder of Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of the
Guarantee related thereto. The Company has outstanding preferred stock that
ranks pari passu to the Guarantees and common stock that ranks junior to the
Guarantees. See "Selected Information -- Selected Financial Information."
Each Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the guarantor to enforce its rights under the guarantee without first
instituting a legal proceeding against any other person or entity).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially and adversely
affect the rights of holders of the related Preferred Securities (in which case
no consent will be required), each Guarantee may be amended only with the prior
approval of the holders of not less than 66 2/3% in liquidation amount of such
outstanding Preferred Securities. The manner of obtaining any such approval of
holders of the Preferred Securities will be as set forth in an accompanying
Prospectus Supplement. All guarantees and agreements contained in each Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the holders of the related
Preferred Securities then outstanding.
TERMINATION
Each Guarantee will terminate and be of no further force and effect as to
the related Preferred Securities upon full payment of the Redemption Price of
all such Preferred Securities, upon distribution of Junior Subordinated Notes to
the holders of such Preferred Securities, or upon full payment of the amounts
payable upon liquidation of the related Trust. Each Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
holder of the related Preferred Securities must restore payment of any sums paid
with respect to such Preferred Securities or under such Guarantee.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure by the
Company to perform any of its payment obligations thereunder. The holders of a
majority in liquidation amount of the Preferred Securities to which any
Guarantee relates have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such Guarantee. Any holder of the
related Preferred Securities may institute a legal proceeding directly against
the Company to enforce its rights under such Guarantee without first instituting
a legal proceeding against the Guarantee Trustee or any other person or entity.
The holders of a majority in liquidation amount of Preferred Securities of any
series may, by vote, on behalf of the holders of all the Preferred Securities of
such series, waive any past event of default and its consequences.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of any event of default with
respect to any Guarantee and after the curing or waiving of all events of
default with respect to such Guarantee, undertakes to perform only such duties
as are specifically set forth in such Guarantee and, in case an event of default
has occurred, shall exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs.
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Subject to such provisions, the Guarantee Trustee is under no obligation to
exercise any of the powers vested in it by any Guarantee at the request of any
holder of the related Preferred Securities, unless offered reasonable indemnity
against the costs, expenses and liabilities which might be incurred thereby.
The Chase Manhattan Bank, the Guarantee Trustee, also serves as Property
Trustee, as First Mortgage Bond Trustee, as Senior Note Indenture Trustee and as
Subordinated Note Indenture Trustee. The Company and certain of its affiliates
maintain deposit accounts and banking relationships with The Chase Manhattan
Bank. The Chase Manhattan Bank serves as trustee under other indentures pursuant
to which securities of the Company and affiliates of the Company are
outstanding.
GOVERNING LAW
Each Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
THE AGREEMENTS AS TO EXPENSES AND LIABILITIES
Pursuant to an Agreement as to Expenses and Liabilities to be entered into
by the Company under each Trust Agreement, the Company will irrevocably and
unconditionally guarantee to each person or entity to whom each Trust becomes
indebted or liable the full payment of any indebtedness, expenses or liabilities
of such Trust, other than obligations of such Trust to pay to the holders of the
related Preferred Securities or other similar interests in such Trust the
amounts due such holders pursuant to the terms of such Preferred Securities or
such other similar interests, as the case may be.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED NOTES AND THE GUARANTEES
As long as payments of interest and other payments are made when due on
each series of Junior Subordinated Notes issued to a Trust, such payments will
be sufficient to cover distributions and payments due on the related Trust
Securities of such Trust primarily because (i) the aggregate principal amount of
each series of Junior Subordinated Notes will be equal to the sum of the
aggregate stated liquidation amount of the related Trust Securities; (ii) the
interest rate and interest and other payment dates on each series of Junior
Subordinated Notes will match the distribution rate and distribution and other
payment dates for the related Preferred Securities; (iii) the Company shall pay
for all costs and expenses of each Trust pursuant to the Agreements as to
Expenses and Liabilities; and (iv) each Trust Agreement provides that the
Securities Trustees thereunder shall not cause or permit the Trust to, among
other things, engage in any activity that is not consistent with the purposes of
the Trust.
Payments of distributions (to the extent funds therefor are legally and
immediately available) and other payments due on the Preferred Securities (to
the extent funds therefor are legally and immediately available) will be
guaranteed by the Company as and to the extent set forth under "Description of
the Guarantees." If the Company does not make interest payments on any series of
Junior Subordinated Notes, it is not expected that the related Trust will have
sufficient funds to pay distributions on its Preferred Securities. Each
Guarantee is a guarantee from the time of its issuance, but does not apply to
any payment of distributions unless and until the related Trust has sufficient
funds legally and immediately available for the payment of such distributions.
If the Company fails to make interest or other payments on any series of
Junior Subordinated Notes when due (taking into account any extension period as
described in the applicable Prospectus Supplement), the Trust Agreement provides
a mechanism whereby the holders of the related Preferred Securities may appoint
a substitute Property Trustee. Such holders may also direct the Property Trustee
to enforce its rights under the Junior Subordinated Notes of such series,
including proceeding directly against the Company to enforce such Junior
Subordinated Notes. If the Property Trustee fails to enforce its rights under
any series of Junior Subordinated Notes, to the fullest extent permitted by
applicable law, any holder of related Preferred Securities may institute a legal
proceeding directly against the Company to enforce the Property Trustee's
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<PAGE>
rights under such series of Junior Subordinated Notes without first instituting
any legal proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, a holder of Preferred Securities may institute a
legal proceeding directly against the Company, without first instituting a legal
proceeding against the Property Trustee or any other person or entity, for
enforcement of payment to such holder of principal of or interest on Junior
Subordinated Notes of the related series having a principal amount equal to the
aggregate stated liquidation amount of the Preferred Securities of such holder
on or after the due dates specified in the Junior Subordinated Notes of such
series.
If the Company fails to make payments under any Guarantee, such Guarantee
provides a mechanism whereby the holders of the Preferred Securities to which
such Guarantee relates may direct the Guarantee Trustee to enforce its rights
thereunder. In addition, any holder of Preferred Securities may institute a
legal proceeding directly against the Company to enforce the Guarantee Trustee's
rights under the related Guarantee without first instituting a legal proceeding
against the Guarantee Trustee or any other person or entity.
Each Guarantee, the Subordinated Note Indenture, the Junior Subordinated
Notes of the related series, the related Trust Agreement and the related
Agreement as to Expenses and Liabilities, as described above, constitute a full
and unconditional guarantee by the Company of the payments due on the related
series of Preferred Securities.
Upon any voluntary or involuntary dissolution, winding-up or termination of
any Trust, unless Junior Subordinated Notes of the related series are
distributed in connection therewith, the holders of Preferred Securities of such
Trust will be entitled to receive, out of assets legally available for
distribution to holders, a liquidation distribution in cash as described in the
applicable Prospectus Supplement. Upon any voluntary or involuntary liquidation
or bankruptcy of the Company, the Property Trustee, as holder of the related
series of Junior Subordinated Notes, would be a subordinated creditor of the
Company, subordinated in right of payment to all Senior Indebtedness, but
entitled to receive payment in full of principal and interest, before any
stockholders of the Company receive payments or distributions. Because the
Company is guarantor under each Guarantee and has agreed to pay for all costs,
expenses and liabilities of each Trust (other than the Trust's obligations to
holders of the Preferred Securities) pursuant to the related Agreement as to
Expenses and Liabilities, the positions of a holder of Preferred Securities and
a holder of Junior Subordinated Notes of the related series relative to other
creditors and to stockholders of the Company in the event of liquidation or
bankruptcy of the Company would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Subordinated Note Indenture.
However, in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Junior Subordinated Notes
provide that no payments may be made in respect of the Junior Subordinated Notes
until such Senior Indebtedness has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on the
Junior Subordinated Notes of any series would constitute an Event of Default
under the Subordinated Note Indenture with respect to the Junior Subordinated
Notes of such series except that failure to make interest payments on the Junior
Subordinated Notes of such series will not be an Event of Default during an
extension period as described in the applicable Prospectus Supplement.
PLAN OF DISTRIBUTION
The Company may sell the new Bonds, new Stock, Senior Notes and the Junior
Subordinated Notes and the Trusts may sell the Preferred Securities in one or
more of the following ways from time to time: (i) to underwriters for resale to
the public or to institutional investors; (ii) directly to institutional
investors; or (iii) through agents to the public or to institutional investors.
The Prospectus Supplement with respect to each series of new Bonds, new Stock,
Senior Notes, Junior Subordinated Notes or Preferred Securities will set forth
the terms of the offering of such new Bonds, new Stock, Senior Notes, Junior
Subordinated Notes or Preferred Securities, including the name or names of any
underwriters or agents, the purchase price of such new Bonds, new Stock, Senior
Notes, Junior Subordinated Notes or Preferred Securities and the proceeds to the
Company or the applicable Trust from such sale, any underwriting discounts or
agency fees and other items
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<PAGE>
constituting underwriters' or agents' compensation, any initial public offering
price, any discounts or concessions allowed or reallowed or paid to dealers and
any securities exchange on which such new Bonds, new Stock, Senior Notes, Junior
Subordinated Notes or Preferred Securities may be listed.
If underwriters participate in the sale, such new Bonds, new Stock, Senior
Notes, Junior Subordinated Notes or Preferred Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale.
Unless otherwise set forth in the Prospectus Supplement, the obligations of
the underwriters to purchase any series of new Bonds, new Stock, Senior Notes,
Junior Subordinated Notes or Preferred Securities will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all of
such series of Senior Notes, Junior Subordinated Notes or Preferred Securities,
if any are purchased.
Underwriters and agents may be entitled under agreements entered into with
the Company and/or the applicable Trust to indemnification against certain civil
liabilities, including liabilities under the 1933 Act. Underwriters and agents
may engage in transactions with, or perform services for, the Company in the
ordinary course of business.
Each series of new Bonds, new Stock, Senior Notes, Junior Subordinated
Notes or Preferred Securities will be a new issue of securities and will have no
established trading market. Any underwriters to whom new Bonds, new Stock,
Senior Notes, Junior Subordinated Notes or Preferred Securities are sold for
public offering and sale may make a market in such new Bonds, new Stock, Senior
Notes, Junior Subordinated Notes or Preferred Securities, but such underwriters
will not be obligated to do so and may discontinue any market making at any time
without notice. The new Bonds, new Stock, Senior Notes, Junior Subordinated
Notes or Preferred Securities may or may not be listed on a national securities
exchange.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Company and the Trusts by
Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel
to the Company and the Trusts. The validity of the new Bonds, new Stock, Senior
Notes, Junior Subordinated Notes, Guarantees and certain matters relating
thereto will be passed upon on behalf of the Company by Balch & Bingham LLP,
Birmingham, Alabama, and by Troutman Sanders LLP, Atlanta, Georgia. Certain
legal matters will be passed upon for the underwriters by Dewey Ballantine LLP,
New York, New York.
EXPERTS
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, 1997,
incorporated by reference in this Prospectus, have been 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, 1998 and 1997, and June 30, 1998 and 1997, included in the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998
and June 30, 1998 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 1933 Act 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.
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<PAGE>
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, 1997, relating to
titles to property of the Company under "Item 2 -- Properties -- Titles to
Property", and relating to the Company under "Item 1 -- Business -- Regulation",
"Item 1 -- Business -- Rate Matters" and "Item 1 -- Business -- Competition",
have been reviewed by Balch & Bingham LLP, general counsel for the Company, and
such statements are made upon the authority of such firm as experts.
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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the Preferred Securities offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
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TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary Information -- Q&A................ S-2
Risk Factors.............................. S-6
Alabama Power Capital Trust III........... S-9
Capitalization............................ S-10
Use of Proceeds........................... S-10
Recent Results of Operations.............. S-10
Recent Developments....................... S-11
Description of the Preferred Securities... S-11
Description of the Series C Junior
Subordinated Notes...................... S-26
The Auction............................... S-28
The Broker-Dealers........................ S-43
Certain Federal Income Tax
Considerations.......................... S-44
Underwriting.............................. S-47
Legal Opinions............................ S-48
Prospectus
About this Prospectus..................... 2
Available Information..................... 2
Incorporation of Certain Documents by
Reference............................... 2
Selected Information...................... 4
Alabama Power Company..................... 4
The Trusts................................ 5
Accounting Treatment of Trusts............ 5
Certain Ratios............................ 6
Use of Proceeds........................... 6
Description of the New Bonds.............. 6
Description of the New Stock.............. 9
Description of the Senior Notes........... 11
Description of the Junior Subordinated
Notes................................... 15
Description of the Preferred Securities... 20
Description of the Guarantees............. 21
Relationship Among the Preferred
Securities, the Junior Subordinated
Notes and the Guarantees................ 23
Plan of Distribution...................... 24
Legal Matters............................. 25
Experts................................... 25
</TABLE>
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1,000 Preferred Securities
ALABAMA POWER
CAPITAL TRUST III
Capital Auction Preferred
Securities (CAPS)
(Liquidation Amount $50,000 per
Preferred Security)
Fully and unconditionally guaranteed,
as described herein
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(Alabama Power Logo)
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
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