<PAGE> 1
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934
Check the appropriate box:
[X] Preliminary information statement
[ ] Confidential, for use of the Commission only
(as permitted by Rule 14c-5(d)(2))
[ ] Definitive information statement
Georgia Power Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
GEORGIA POWER COMPANY
ATLANTA, GEORGIA
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD ON DECEMBER 10, 1997
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders of
Georgia Power Company will be held at the Company's offices, 333 Piedmont
Avenue, N.E., Atlanta, Georgia, on December 10, 1997 at 3:45 p.m., Eastern time,
to consider and act on the following proposal, as more fully described in the
attached Information Statement:
PROPOSAL: To remove from the Company's charter (i)
Subparagraph 14.A.3.f.(2) of Paragraph III, a provision restricting the
amount of securities representing unsecured indebtedness issuable by
the Company, (ii) Subparagraph 14.A.3.f.(1) of Paragraph III, a
provision which requires the vote of the holders of at least a majority
of the total voting power of the Company's outstanding preferred stock
to approve the sale of all or substantially all of the Company's
property and mergers or consolidations that have not been approved
under the Public Utility Holding Company Act of 1935, as amended, and
(iii) Subparagraph 14.A.3.b. (except the first paragraph therein) of
Paragraph III, a provision restricting the ability of the Company to
pay dividends on its common stock in the event that its common equity
capitalization falls below certain levels;
and for the purpose of transacting any and all business in connection with the
foregoing and any other business that may properly come before said meeting or
any adjournment or adjournments thereof.
Only shareholders of record at the close of business on November 7,
1997, with respect to Class A Preferred Stock, and November 6, 1997, with
respect to $100 Preferred Stock, will be entitled to notice of and to vote at
said meeting or any adjournment or adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Judy M. Anderson
Vice President and Corporate Secretary
Atlanta, Georgia
November __, 1997
<PAGE> 3
GEORGIA POWER COMPANY
ATLANTA, GEORGIA
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 10, 1997
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
This Information Statement is furnished by the Board of Directors of
Georgia Power Company (the "Company") to the holders (the "Preferred
Shareholders") of the $1.925 Series of the Company's outstanding Class A
Preferred Stock, with stated value of $25 (the "$1.925 Series"), in connection
with a the Special Meeting of Shareholders of the Company to be held at the
Company's offices, 333 Piedmont Avenue, N.E., Atlanta, Georgia, on December 10,
1997 at 3:45 p.m., Eastern time, or any adjournment or postponement of such
meeting (the "Special Meeting"). The $1.925 Series will be redeemed by the
Company on December 2, 1997.
This Information Statement is first being mailed on or about November
__, 1997. The record date with respect to the $1.925 Series is November 7, 1997.
The principal executive offices of the Company are located at 333
Piedmont Avenue, N.E., Atlanta, Georgia 30308. The telephone number is (404)
526-6526.
PROPOSED AMENDMENT
BUSINESS TO COME BEFORE THE SPECIAL MEETING
The following Proposed Amendment (the "Proposed Amendment") to the
Company's charter (the "Charter") is the only item of business expected to be
presented at the Special Meeting:
To remove in their entirety (i) Subparagraph 14.A.3.f.(2) of Paragraph
III of the Charter, a provision restricting the amount of securities
representing unsecured indebtedness issuable by the Company, (ii) Subparagraph
14.A.3.f.(1) of Paragraph III of the Charter, a provision which requires the
vote of the holders of at least a majority of the total voting power of the
Company's outstanding preferred stock to approve the sale of all or
substantially all of the Company's property and mergers or consolidations that
have not been approved under the Public Utiloity Holding Company Act of 1935, as
amended, and (iii) Subparagraph 14.A.3.b. (except the first paragraph therein)
of Paragraph III of the Charter, a provision restricting the ability of the
Company to pay dividends on its common stock in the event that its common equity
capitalization falls below certain levels.
THE FOLLOWING STATEMENTS ARE SUMMARIES OF THE SUBSTANCE OR GENERAL
EFFECT OF PROVISIONS OF THE CHARTER, AND ARE QUALIFIED IN THEIR ENTIRETY BY THE
CHARTER AND SUBPARAGRAPHS 14.A.3.B., 14.A.3.F.(1) AND 14.A.3.F.(2) OF PARAGRAPH
III THEREIN (AS DESCRIBED BELOW). SEE APPENDIX A HERETO FOR THE TEXT OF THE
PROVISIONS TO BE DELETED.
EXPLANATION OF THE PROPOSED AMENDMENT
Subparagraph 14.A.3.f.(2) of Paragraph III of the Charter currently
provides that, so long as any shares of the Company's preferred stock are
outstanding, without the affirmative vote of the holders of at least a majority
of the total voting power of its outstanding shares of preferred stock, the
Company shall not issue or assume any
<PAGE> 4
securities representing unsecured debt (other than for the purpose of refunding
or renewing outstanding unsecured securities issued by the Company resulting in
equal or longer maturities or redeeming or otherwise retiring all outstanding
shares of its preferred stock or of any senior or equally ranking stock) if,
immediately after such issue or assumption, (a) the total outstanding principal
amount of all securities representing unsecured debt of the Company would exceed
20% of the aggregate of all existing secured debt of the Company and the capital
stock, premiums thereon and surplus of the Company as stated on the Company's
books; or (b) the total outstanding principal amount of all securities
representing unsecured debt of the Company of maturities of less than ten years
would exceed 10% of such aggregate (the "Debt Limitation Provision").
Subparagraph 14.A.3.f.(1) of Paragraph III of the Charter currently
provides that, so long as any shares of the Company's preferred stock are
outstanding, without the affirmative vote of the holders of at least a majority
of the total voting power of its outstanding shares of preferred stock, the
Company shall not dispose of all or substantially all of its property or merge
or consolidate, unless such action has been approved by the Commission under the
Holding Company Act (the "Merger Provision").
Subparagraph 14.A.3.b. (except the first paragraph therein) of
Paragraph III of the Charter currently provides that, so long as any shares of
the Company's preferred stock are outstanding, the Company's dividends on its
common stock are limited to 50% of net income available for such stock during a
period of 12 months if, calculated on a corporate basis, the ratio of its common
stock equity to total capitalization, including surplus, adjusted to reflect the
payment of the proposed dividend, is below 20%, and to 75% of such net income if
such ratio is 20% or more but less than 25% (the "Common Stock Dividend
Provision").
The Proposed Amendment, if adopted, would eliminate from the Charter in
their entirety the Debt Limitation Provision, the Merger Provision and the
Common Stock Dividend Provision (collectively, the "Restriction Provisions"),
each as set forth in full in Appendix A hereto.
REASONS FOR THE PROPOSED AMENDMENT
The electric utility industry has become, and will continue to be,
increasingly competitive as the result of various factors, including regulatory
and technological developments. Various federal and state regulatory initiatives
designed to promote wholesale and retail competition include, among other
things, proposals that would allow customers to choose their electricity
provider. As these competitive initiatives materialize, the structure of the
utility industry could radically change. The Company believes that maintaining
and improving its position as a low-cost producer and having the flexibility to
respond to developments in the industry will be crucial to its success in the
new competitive marketplace.
The Company believes that adoption of the Proposed Amendment is
important to creating the necessary flexibility to respond to any industry
developments.
The restrictions that would be eliminated by the Proposed Amendment
generally do not burden the industry's new competitors (power marketers,
independent power producers, exempt wholesale generators and owners of
cogeneration facilities), nor even other public utility companies. These
restrictions stem from the fact that the Company and its affiliates are subject
to regulation under the Holding Company Act. Such restrictions were initially
imposed as a result of the Commission's 1956 Statement of Policy Regarding
Preferred Stock Subject to the Public Utility Holding Company Act of 1935. The
Commission recently has noted that the Statement of Policy is out of date and
has not kept pace with the rapidly changing securities markets. Furthermore, the
Commission stated that the marketplace should more appropriately determine the
terms and conditions applicable to securities issuances.
Management considers that elimination of the Debt Limitation Provision
is crucial to the Company's financial flexibility and its ability to effect
future capital cost reductions. The deletion of this provision from the Charter
will allow the Company to utilize more fully various unsecured debt alternatives
and thus improve its ability to take full advantage of changing conditions in
the capital markets. The additional flexibility will, for example, permit the
Company to issue long-term debt when, because of mortgage coverage restrictions
or other reasons, it
-2-
<PAGE> 5
may be unattractive or not possible to issue any additional first mortgage
bonds. In addition, elimination of the Debt Limitation Provision will afford the
Company greater flexibility in the issuance of short-term debt to meet seasonal
cash requirements with what is usually the least expensive form of capital.
The Company believes that the Merger Provision is an unnecessary
restriction on the ability of the Company to consider strategic responses to the
increasingly competitive utility industry. For instance, the Merger Provision
provides that, unless approved under the Holding Company Act, the sale or lease
of certain of the Company's properties would require Preferred Shareholder
approval in addition to any statutory requirement under state law. Such an
additional burden could hinder the Company's ability to conduct its business
operations in this changing utility environment. Furthermore, the elimination of
the Merger Provision will not affect voting rights of stockholders under
applicable state law.
Similarly, the Common Stock Dividend Restriction unnecessarily impedes
the financial flexibility of the Company and The Southern Company ("Southern").
The Common Stock Dividend Restriction prevents the Company from paying dividends
on its common stock unless the Company maintains a certain equity
capitalization. This restriction (a vestige of the 1956 Statement of Policy) is
in addition to (i) the statutory requirements on the Company's ability to pay
dividends on its common stock that arise under state law and (ii) other
provisions of the Company's Charter, which provide that the Company may not pay
dividends unless it is current in the payment of dividends on its preferred
stock. Due to continued applicability of these restrictions, the Company views
the Common Stock Dividend Restriction as an unduly burdensome and unnecessary
provision which could restrict the ability of the Company and Southern to
participate in today's capital markets.
CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
If the Proposed Amendment becomes effective, preferred shareholders
will no longer be entitled to the benefits of the Charter provision limiting the
amount of unsecured debt the Company may issue, which will have been deleted by
the Proposed Amendment. As discussed above, such provision places restrictions
on the Company's ability to issue or assume unsecured indebtedness. Although the
Company's debt instruments may contain certain restrictions on the Company's
ability to issue or assume debt, any such restrictions may be waived and the
increased flexibility afforded the Company by the deletion of the Debt
Limitation Provision may permit the Company to take certain actions that may
increase the credit risks with respect to the Company, adversely affecting the
market price and credit rating of the shares of preferred stock, or otherwise be
materially adverse to the interests of the preferred shareholders. In addition,
to the extent that the Company elects to issue additional unsecured debt,
including trust preferred securities, the preferred shareholders' relative
position in the Company's capital structure could be perceived to decline, which
in turn could adversely affect the market price and credit rating of the shares
of preferred stock.
The Proposed Amendment, if it becomes effective, would delete the
Merger Provision and, therefore, may permit the Company to engage in certain
transactions not subject to approval by the Commission under the Holding Company
Act that would otherwise have required the consent of preferred stockholders. In
addition, elimination of the Common Stock Dividend Provision may permit the
Company to pay common stock dividends in amounts that would otherwise have been
prohibited. Any such transaction or payment may have a material adverse effect
on the holders of the Company's preferred stock. As described under "Reasons for
the Proposed Amendment," however, adoption of the Proposed Amendment will not
affect voting rights of stockholders or restrictions on the Company's ability to
pay common stock dividends under applicable state law
VOTING SHARES
With respect to Class A Preferred Stock, November 7, 1997 and with
respect to $100 Preferred Stock, November 6, 1997 (collectively, the "Record
Date") have been fixed as the respective record dates for the determination of
shareholders entitled to notice of and to vote at the Special Meeting.
A separate Proxy Statement is being mailed to the holders of the
Adjustable Rate (First 1993) Series and the Adjustable Rate (Second 1993) Series
of the Company's outstanding Class A preferred stock, with stated values
-3-
<PAGE> 6
of $25, and the $6.48 Series and the $6.60 Series of the Company's outstanding
preferred stock, with stated values of $100. A separate Offer to Purchase and
Proxy Statement (the "Offer") is being mailed to the holders of the $4.60
Series, the $4.60 (1962) Series, the $4.60 (1963 Series), the $4.60 (1964)
Series, the $4.72 Series, the $4.92 Series, the $4.96 Series, the $5.00 Series
and the $5.64 Series of the Company's preferred stock, with stated values of
$100, pursuant to which Southern is making a tender offer (the "Offer") for such
each series and the Company is soliciting proxies in connection with the
Proposed Amendment. Holders of each series of the Company's outstanding
preferred stock except the $1.925 Series will receive a special cash payment for
each share voted in favor of the Proposed Amendment.
The Company's Charter authorizes the issuance of 15,000,000 shares of
common stock, without nominal or par value, of which 7,761,500 shares are
outstanding. All of such shares are owned by Southern.
The Company's Charter also authorizes the issuance of 5,000,000 shares
of $100 preferred stock and 50,000,000 shares of Class A $25 preferred stock,
both without nominal or par value, of which 1,177,864 and 8,156,500 shares,
respectively, are outstanding on the Record Date. Such shares are publicly held
and are divided into eleven separate classes of preferred stock and three
separate classes of Class A preferred stock. Such classes constitute individual
series of preferred stock and Class A preferred stock, respectively, and vary
from each other with respect to dividend rates, redemption prices and amounts
payable on liquidation. All outstanding shares of the Company's preferred stock
are entitled to vote on the Proposed Amendment as a single class, each share of
preferred stock with a stated value of $100 being counted as one, and each share
of Class A preferred stock with a stated value of $25 being counted as
one-quarter.
Pursuant to Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), a beneficial owner of a security is any person who
directly or indirectly has or shares voting or investment power over such
security. No person or group is known by management of the Company to be the
beneficial owner of more than 5% of shares of the Company's preferred stock as
of October 30, 1997, other than Salomon Brothers Inc, Seven World Trade Center,
New York, New York 10048, which owns 2,789,623 shares of the Company's Class A
Preferred Stock, representing 21.679% of the Company's preferred stock.
Officers and directors of the Company as a group owned, as of October
30, 1997, less than 1% of the total number of shares of the Company's preferred
stock and of the common stock of Southern.
VOTING REQUIREMENTS AND PROCEDURES
Adoption of the Proposed Amendment requires the affirmative vote of the
holders of (i) at least two-thirds of the shares of the capital stock of the
Company then outstanding and entitled to vote (i.e., the common stock) and (ii)
at least two-thirds of the total voting power of shares of the Company's
preferred stock outstanding (counting shares as described above). Abstentions
and broker non-votes will have the effect of votes against the Proposed
Amendment. SOUTHERN, THE OWNER OF ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
OF THE COMPANY, HAS ADVISED THE COMPANY THAT IT INTENDS TO VOTE ALL OF THE
OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY IN FAVOR OF THE PROPOSED
AMENDMENT.
YOU ARE NOT BEING ASKED FOR A PROXY BY THE COMPANY AND YOU ARE
REQUESTED NOT TO SEND ONE. YOU MAY VOTE YOUR SHARES, IF YOU SO WISH, BY
ATTENDING THE SPECIAL MEETING IN PERSON.
Votes at the Special Meeting will be tabulated preliminarily by the
Bank of New York, as Depositary for shares tendered pursuant to the Offer, and
Corporate Investor Communications, Inc., the Information Agent. Inspectors of
Election, duly appointed by the presiding officer of the Special Meeting, will
definitively count and tabulate the votes and determine and announce the results
at the Special Meeting. The Company has no established procedure for
confidential voting. There are no rights of appraisal in connection with the
Proposed Amendment.
-4-
<PAGE> 7
FINANCIAL AND OTHER INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports and other information
with the Commission. Such reports and other information may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company. Reports, proxy materials and other
information about the Company are also available at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
The financial statements of the Company and related information
included in its Annual Report on Form 10-K for the year ended December 31, 1996,
its Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997 and
June 30, 1997 and its Current Reports on Form 8-K dated January 9, 1997,
February 12, 1997 and June 5, 1997, each as filed with the Commission, are
hereby incorporated by reference. All documents subsequently filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Information Statement and prior to the date of the Special
Meeting (or any adjournment thereof) shall be deemed to be incorporated by
reference in this Information Statement and to be a part hereof 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 Information Statement to the extent that a
statement contained herein or in any other subsequently filed document which is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Information
Statement.
The Company will provide without charge to each person to whom a copy
of this Information Statement has been delivered, on the written or oral request
of any such person, a copy of any or all of its documents described above which
have been incorporated by reference in this Information Statement, other than
exhibits to such documents. Such requests should be directed to Judy M.
Anderson, Vice President and Corporate Secretary, Georgia Power Company, 333
Piedmont Avenue, N.E., Atlanta, Georgia 30308, telephone: (404) 526-6526. The
information relating to the Company contained in this Information Statement does
not purport to be comprehensive and should be read together with the information
contained in the documents incorporated by reference.
INDEPENDENT PUBLIC ACCOUNTANTS
No representative of Arthur Andersen LLP, the Company's independent
public accountants, is expected to be present at the Special Meeting unless
prior to the day of the Special Meeting the Vice President and Corporate
Secretary of the Company has received written notice from a Preferred
Shareholder addressed to Judy M. Anderson, Vice President and Corporate
Secretary, 333 Piedmont Avenue, N.E., Atlanta, Georgia 30308 that such Preferred
Shareholder will attend the Special Meeting and wishes to ask questions of a
representative of Arthur Andersen LLP.
-5-
<PAGE> 8
OTHER MATTERS
The Board of Directors knows of no matter other than the foregoing to
come before the Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Judy M. Anderson
Vice President and Corporate Secretary
Atlanta, Georgia
November __, 1997
-6-
<PAGE> 9
APPENDIX A
PROVISIONS OF THE CHARTER TO BE DELETED BY THE PROPOSED AMENDMENT
Unless otherwise defined, capitalized terms used herein are used as
defined in the Charter.
The Debt Limitation Provision
Subparagraph 14.A.3.f.(2) of Paragraph III of the Charter states:
"Notwithstanding any of the provisions of subparagraph 5 of
this paragraph III or of paragraph V or VI hereof, so long as any
shares of the Preferred Stock or Class A Preferred Stock are
outstanding, the Consolidated Corporation shall not, without the
affirmative vote in favor thereof of the holders of at least a majority
of the total number of shares of Preferred Stock and Class A Preferred
Stock at the time outstanding (each share of Preferred Stock being
counted as one and each share of Class A Preferred Stock being counted
as one-quarter),
(2)(a) issue or assume any unsecured notes,
debentures or other securities representing unsecured debt
(other than for the purpose of refunding or renewing
outstanding unsecured securities issued or assumed by the
Consolidated Corporation resulting in equal or longer
maturities or redeeming or otherwise retiring all outstanding
shares of the Preferred Stock and Class A Preferred Stock or
of any kind of stock over which the Preferred Stock and Class
A Preferred Stock do not have preference as to the payment of
dividends and as to assets) if immediately after such issue or
assumption (i) the total outstanding principal amount of all
unsecured notes, debentures or other securities representing
unsecured debt of the Consolidated Corporation will thereby
exceed 20% of the aggregate of all existing secured debt of
the Consolidated Corporation and the capital stock, premiums
thereon and surplus of the Consolidated Corporation, as stated
on its books, or (ii) the total outstanding principal amount
of all unsecured notes, debentures or other securities
representing unsecured debt of the Consolidated Corporation of
maturities of less than ten years would exceed 10% of such
aggregate;
(b) for the purpose of sub-paragraph (a) above, the
payment due upon the maturity of unsecured debt having an
original single maturity in excess of ten years or the payment
due upon the final maturity of any unsecured serial debt which
had original maturities in excess of ten years shall not be
regarded as unsecured debt of a maturity of less than ten
years until such payment shall be required to be made within
three years."
The Merger Provision
Subparagraph 14.A.3.f.(1) of Paragraph III of the Charter states:
"Notwithstanding any of the provisions of subparagraph 5 of
this paragraph III or of paragraph V or VI hereof, so long as any
shares of the Preferred Stock or Class A Preferred Stock are
outstanding, the Consolidated Corporation shall not, without the
affirmative vote in favor thereof of the holders of at least a majority
of the total number of shares of Preferred Stock and Class A Preferred
Stock at the time outstanding (each share of Preferred Stock being
counted as one and each share of Class A Preferred Stock being counted
as one-quarter),
(1) sell, lease or exchange all or substantially all of its
property or merge or consolidate with or into any other corporation or
corporations, unless such sale, lease, exchange, merger or
consolidation, or the issuance and assumption of all securities to be
issued or assumed in connection therewith, shall have been ordered,
approved or permitted by the Securities and Exchange Commission, or by
any successor commission thereto, under the Public Utility Holding
Company Act of 1935. Nothing in this paragraph
<PAGE> 10
contained shall authorize any such sale, lease, exchange, merger or
consolidation by the vote of the holders of a less number of shares of
the Preferred Stock or Class A Preferred Stock, or of any other class
of stock, or of all classes of stock, than is required for any such
sale, lease, exchange, merger or consolidation by the laws of the State
of Georgia at the time applicable thereto."
The Common Stock Dividend Provision
The relevant provision of Subparagraph 14.A.3.b. of Paragraph
III of the Charter states:
"So long as any shares of the Preferred Stock or Class A
Preferred Stock are outstanding, the payment of dividends on the Common
Stock (other than dividends payable in Common Stock) and the making of
any distribution of assets to holders of Common Stock by purchase of
shares or otherwise (each of such actions being herein embraced within
the term "payment of common stock dividends") shall be subject to the
following limitations:
(a) If and so long as the ratio of the aggregate of
the par value of, or stated capital represented by, the
outstanding shares of Common Stock (including premiums on the
Common Stock but excluding premiums on the Preferred Stock and
the Class A Preferred Stock) and of the surplus of the
Consolidated Corporation to the total capitalization and
surplus of the Consolidated Corporation at the end of a period
of twelve consecutive calendar months within the fourteen
calendar months immediately preceding the calendar month in
which the proposed payment of Common Stock dividends is to be
made (such period being hereinafter referred to as the "base
period"), adjusted to reflect the proposed payment of Common
Stock dividends (such ratio being hereinafter referred to as
the "capitalization ratio"), is less than 20%, the payment of
Common Stock dividends, including the proposed payment, during
the twelve calendar months period ending with and including
the calendar month in which the proposed payment is to be made
shall not exceed 50% of the net income of the Consolidated
Corporation available for the payment of dividends on the
Common Stock during the base period;
(b) If and so long as the capitalization ratio is 20%
or more but less than 25%, the payment of Common Stock
dividends, including the proposed payment, during the twelve
calendar months period ending with and including the calendar
month in which the proposed payment is to be made shall not
exceed 75% of the net income of the Consolidated Corporation
available for the payment of dividends on the Common Stock
during the base period;
(c) Except to the extent permitted under paragraphs
(a) and (b) above, the Consolidated Corporation shall not make
any payment of Common Stock dividends which would reduce the
capitalization ratio to less than 25%.
For the purpose of the foregoing provisions, the following
terms shall have the following meanings:
(1) The term "net income of the Consolidated
Corporation available for the payment of dividends on the
Common Stock" shall mean for any period the balance remaining
after deducting from the total gross revenues of the
Consolidated Corporation from all sources during such period
the following:
(i) all operating expenses and taxes,
including charges to income for general taxes and for
federal and state taxes measured by income, for
retirement or depreciation reserve and for
amortization or other disposition of amounts, if any,
classified as amounts in excess of original cost of
utility plant; (ii) all interest charges and other
income deductions, including charges to income for
amortization of debt discount, premium and expense
and Preferred Stock and Class A Preferred Stock
premium and expense; (iii) all dividends paid or set
aside for payment to the holders of Preferred Stock
and Class A Preferred Stock and of all other kinds of
stock over which the Preferred Stock and Class
<PAGE> 11
A Preferred Stock do not have preference as to the
payment of dividends which are applicable to such
period; and (iv) the amount, if any, by which the
charges to income or earned surplus since December
31, 1961 to the end of the base period as provision
for depreciation shall have been less than the sum of
the amounts equal to the product of the applicable
percentage (as defined below) and the mathematical
average of the amounts of depreciable property (as
defined in Section 4 of the Supplemental Indenture
dated as of November 1, 1962) at the opening of
business on the first day and at the close of
business on the last day of each calendar year (and,
proportionately, of each period of months which is
less than a calendar year) subsequent to December 31,
1961 and prior to the end of the base period, up to
but not exceeding that part of the applicable
deficiency, if any, arising during the base period.
The term "applicable percentage" shall mean 3.0% or
such other percentage as shall be authorized or
approved under the Public Utility Holding Company Act
of 1935 by the Securities and Exchange Commission or
any successor commission or regulatory authority of
the United States of America.
(2) The term "total capitalization" shall mean the
aggregate of the principal amount of all outstanding
indebtedness of the Consolidated Corporation maturing more
than twelve months after the date of issue thereof, plus the
par value of, or stated capital represented by, the
outstanding shares of all classes of stock of the Consolidated
Corporation, including any premiums on capital stock.
(3) The term "surplus" shall include capital surplus,
earned surplus and any other surplus of the Consolidated
Corporation, adjusted to eliminate (i) the amount, if any, by
which the aggregate of the charges to income or earned surplus
since December 31, 1961 to the end of the base period as
provision for depreciation shall have been less than the sum
of the amounts equal to the product of the applicable
percentage (as defined below) and the mathematical average of
the amounts of depreciable property (as defined in Section 4
of the Supplemental Indenture dated as of November 1, 1962) at
the opening of business on the first day and at the close of
business on the last day of each calendar year (and,
proportionately, of each period of months which is less than a
calendar year) subsequent to December 31, 1961 and prior to
the end of the base period, (ii) any amounts which may then be
classified by the Consolidated Corporation on its books as
amounts in excess of the original cost of utility plant and
which are not provided for by reserve and any items set forth
on the asset side of the balance sheet of the Consolidated
Corporation as a result of accounting convention, such as
unamortized debt discount, premium and expense and Preferred
Stock and Class A Preferred Stock premium and expense, unless
any such amount or item, as the case may be, is being
amortized or is being provided for by a reserve, and (iii) the
excess, if any, of the aggregate amount payable in event of
involuntary liquidation of the Consolidated Corporation upon
all outstanding shares of all classes of Preferred Stock and
Class A Preferred Stock over the sum of (a) the aggregate of
the par value of, or stated capital represented by, such
shares and (b) any premiums thereon. The term "applicable
percentage" shall mean 3.0% or such other percentage as shall
be authorized or approved under the Public Utility Holding
Company Act of 1935 by the Securities and Exchange Commission
or any successor commission or regulatory authority of the
United States of America."
