Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-43895
333-43895-01
333-43895-02
333-43895-03
PROSPECTUS SUPPLEMENT
(To Prospectus Dated January 15, 1998)
8,000,000 Preferred Securities
Georgia Power Capital Trust IV
6.85% Trust Preferred Securities
(Liquidation Amount $25 per Preferred Security)
Fully and unconditionally guaranteed, as described herein, by
(Georgia Power Logo)
A BRIEF DESCRIPTION OF THE 6.85% TRUST PREFERRED SECURITIES CAN BE FOUND
UNDER "SUMMARY INFORMATION -- Q&A" IN THIS PROSPECTUS SUPPLEMENT.
------------------------
APPLICATION HAS BEEN MADE TO LIST THE PREFERRED SECURITIES ON THE NEW YORK
STOCK EXCHANGE. IF APPROVED, GEORGIA POWER COMPANY EXPECTS TRADING OF THE
PREFERRED SECURITIES TO BEGIN WITHIN 30 DAYS AFTER THEY ARE FIRST ISSUED.
------------------------
INVESTING IN THE PREFERRED SECURITIES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-6.
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND
PUBLIC COMMISSIONS PROCEEDS TO TRUST
-------- ------------- -----------------
<S> <C> <C> <C>
Per Preferred Security......................... $25 See below $25
Total.......................................... $200,000,000 See below $200,000,000
</TABLE>
------------------------
Georgia Power Capital Trust IV will not pay any underwriting commissions.
Georgia Power Company will pay underwriting commissions of $.7875 per Preferred
Security ($.50 per Preferred Security sold to certain institutions). Any
accumulated distributions from the date of original issuance of the Preferred
Securities should be added to the Price to Public.
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this Prospectus
Supplement or the accompanying Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The Underwriters expect to deliver the Preferred Securities to purchasers
on or about February 25, 1999.
---------------------------
MORGAN STANLEY DEAN WITTER
A.G. EDWARDS & SONS, INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES
SALOMON SMITH BARNEY
February 17, 1999
<PAGE>
You should rely only on the information contained or incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus. Georgia
Power Company and the underwriters have not authorized any other person to
provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. Georgia Power Company and
the underwriters are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this Prospectus Supplement and the accompanying
Prospectus is accurate as of the date on the front of the documents only.
Georgia Power Company's business, financial condition, results of operations and
prospects may have changed since that date.
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Summary Information -- Q&A.................................. S-3
Risk Factors................................................ S-6
Georgia Power Capital Trust IV.............................. S-8
Capitalization.............................................. S-9
Use of Proceeds............................................. S-10
Recent Results of Operations; Recent Developments........... S-10
Accounting Treatment........................................ S-11
Description of the Preferred Securities..................... S-11
Description of the Series D Junior Subordinated Notes....... S-21
Relationship Among the Preferred Securities, the Series D
Junior Subordinated Notes and the Guarantee............... S-22
Certain Federal Income Tax Considerations................... S-24
Underwriting................................................ S-27
Experts..................................................... S-28
Legal Opinions.............................................. S-29
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
Selected Information........................................ 3
Georgia Power Company....................................... 4
The Trusts.................................................. 5
Accounting Treatment........................................ 5
Use of Proceeds............................................. 5
Recent Results of Operations................................ 5
Description of the Senior Notes............................. 6
Description of the Junior Subordinated Notes................ 9
Description of the Preferred Securities..................... 15
Description of the Guarantees............................... 15
Relationship Among the Preferred Securities, the Junior
Subordinated Notes and the Guarantees..................... 17
Plan of Distribution........................................ 19
Legal Matters............................................... 19
Experts..................................................... 20
</TABLE>
S-2
<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 6.85% Trust Preferred Securities (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 Georgia Power Capital Trust IV (the "Trust"). Each Preferred Security
will entitle the holder to receive quarterly cash distributions as described in
this Prospectus Supplement. The Trust is offering 8,000,000 Preferred Securities
at a price of $25 for each Preferred Security.
WHO IS THE TRUST?
The Trust is a Delaware business trust. Its principal place of business is
c/o Georgia Power Company, 241 Ralph McGill Boulevard, N.E., Atlanta, Georgia
30308-3374, and its telephone number is (404) 506-6526.
The Trust will sell its Preferred Securities to the public and its common
securities (the "Common Securities") to Georgia Power Company (the "Company").
The Trust will use the proceeds from these sales to buy a series of 6.85% junior
subordinated deferrable interest notes due March 31, 2029 (the "Series D Junior
Subordinated Notes") from the Company with the same financial terms as the
Preferred Securities. The Company will guarantee payments made on the Preferred
Securities as described herein.
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 D 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
Georgia on June 26, 1930. The Company has its principal office at 241 Ralph
McGill Boulevard, N.E., Atlanta, Georgia 30308-3374, telephone (404) 506-6526.
The Company is a wholly owned subsidiary of The Southern Company ("Southern").
The Company is a regulated public utility engaged in the generation,
transmission, distribution and sale of electric energy within an approximately
57,200 square mile service area comprising most of the State of Georgia.
WHEN WILL YOU RECEIVE QUARTERLY DISTRIBUTIONS?
If you purchase the Preferred Securities, you are entitled to receive
cumulative cash distributions at an annual rate of 6.85% (the "Securities Rate")
of the liquidation amount of $25 per Preferred Security. Distributions will
accumulate from the date the Trust issues the Preferred Securities (the "Issue
Date") and
S-3
<PAGE>
will be paid quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year (each, a "Distribution Date"), beginning March 31,
1999.
WHEN CAN PAYMENT OF YOUR DISTRIBUTIONS BE DEFERRED?
The Company can, on one or more occasions, defer interest payments on the
Series D Junior Subordinated Notes for up to 20 consecutive quarterly periods. A
deferral of interest payments cannot extend, however, beyond the maturity date
of the Series D Junior Subordinated Notes (which is March 31, 2029).
If the Company defers interest payments on the Series D Junior Subordinated
Notes, the Trust will also defer distributions on the Preferred Securities.
During this deferral period, distributions will continue to accrue on the
Preferred Securities at an annual rate of 6.85% of the liquidation amount of $25
per Preferred Security. Also, the deferred distributions will themselves accrue
interest at an annual rate of 6.85% (to the extent permitted by law). Once the
Company makes all interest payments on the Series D Junior Subordinated Notes,
with accrued interest, it can again defer interest payments on the Series D
Junior Subordinated Notes.
During any period in which the Company defers interest payments on the
Series D 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 D Junior Subordinated Notes.
If the Company defers payments of interest on the Series D 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 D Junior
Subordinated Notes are paid at maturity on March 31, 2029. In addition, if the
Company redeems any Series D 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 D Junior
Subordinated Notes redeemed.
The Company can redeem some or all of the Series D Junior Subordinated
Notes before their maturity at 100% of their principal amount on one or more
occasions any time on or after February 25, 2004. The Company also has the
option to redeem the Series D 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 D 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 D Junior Subordinated
Notes;
- its obligations under the Guarantee; and
S-4
<PAGE>
- its obligations under the Trust Agreement and an Agreement as to Expenses
and Liabilities between the Company and the Trust (the "Agreement as to
Expenses and Liabilities").
The Company's obligations under the Series D Junior Subordinated Notes are
subordinate and junior in right of payment to all of its Senior Indebtedness (as
defined under "Description of the Junior Subordinated Notes -- Subordination" in
the accompanying Prospectus), which aggregated approximately $3,238,000,000 at
September 30, 1998.
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.
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 D 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 D Junior Subordinated Notes to holders of the Preferred Securities and
the Common Securities on a pro rata basis. If the Series D Junior Subordinated
Notes are distributed, the Company will use its best efforts to list the Series
D Junior Subordinated Notes on the New York Stock Exchange ("NYSE")(or any other
exchange on which the Preferred Securities are then listed) in place of the
Preferred Securities. For a discussion of the Company's ability to distribute
the Series D Junior Subordinated Notes, see "Description of the Preferred
Securities -- Special Event Redemption; Distribution of Series D Junior
Subordinated Notes" and "-- Liquidation Distribution Upon Dissolution."
WILL THE PREFERRED SECURITIES BE LISTED ON A STOCK EXCHANGE?
Application has been made to list the Preferred Securities on the NYSE. If
approved, trading of the Preferred Securities is expected to begin within 30
days after they are first issued.
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 The
Depository Trust Company ("DTC") 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 DTC on or about February
25, 1999.
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 D JUNIOR
SUBORDINATED NOTES ARE SUBORDINATED.
The Company's obligations under the Series D Junior Subordinated Notes will
rank junior in priority of payment to all of the Company's Senior Indebtedness.
This means that the Company cannot make any payments on the Series D 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. At September 30, 1998, Senior Indebtedness of the Company
aggregated approximately $3,238,000,000.
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 D 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 D 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 D Junior Subordinated Notes when due.
If the Company defaults on its obligations to pay principal or interest on
the Series D 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 D Junior Subordinated Notes.
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 D Junior Subordinated Notes for up to 20 consecutive quarterly periods.
If the Company defers interest payments on the Series D Junior Subordinated
Notes, the Trust will defer distributions on the Preferred Securities during
S-6
<PAGE>
any deferral period. However, distributions would still accumulate and such
deferred distributions would themselves accrue interest at the annual rate of
6.85% per annum (to the extent permitted by law).
If the Company defers payments of interest on the Series D 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 D 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 D 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 D 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 D Junior
Subordinated Notes may mean that the market price for the Preferred Securities
(which represent an undivided beneficial interest in the Series D 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 D 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 $25
per security plus any accrued and unpaid distributions. See "Description of the
Preferred Securities -- Special Event Redemption; Distribution of Series D
Junior Subordinated Notes."
PREFERRED SECURITIES MAY BE REDEEMED AT THE OPTION OF THE COMPANY.
At the option of the Company, the Series D Junior Subordinated Notes may be
redeemed, in whole, at any time, or in part, from time to time, on or after
February 25, 2004 at a redemption price equal to the principal amount to be
redeemed plus any accrued and unpaid interest to the redemption date. See
"Description of the Series D Junior Subordinated Notes -- 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 D Junior Subordinated Notes. If the
Series D 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 D Junior Subordinated
Notes to be redeemed. See "Description of the Preferred
Securities -- Redemption."
THERE CAN BE NO ASSURANCE AS TO THE MARKET PRICES FOR THE PREFERRED SECURITIES
OR THE SERIES D JUNIOR SUBORDINATED NOTES.
There can be no assurance as to the market prices for the Preferred
Securities or the Series D 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 or in the secondary market, or the
Series D 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 D 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 D
Junior Subordinated Notes) may be more volatile than the market prices of other
securities that are not subject to such optional deferrals.
S-7
<PAGE>
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 D 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 D 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 D 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 D 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 Redemption; Distribution of Series D Junior Subordinated Notes." The
Company cannot predict the other circumstances under which this right would be
exercised.
Although the Company will use its best efforts to list the Series D Junior
Subordinated Notes on the NYSE (or any other exchange on which the Preferred
Securities are then listed) if they are distributed, we cannot assure you that
the Series D Junior Subordinated Notes will be approved for listing or that a
trading market will exist for those securities.
YOU HAVE LIMITED VOTING RIGHTS.
You will have limited 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."
GEORGIA POWER CAPITAL TRUST IV
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
May 27, 1997. The Trust's business is defined in a trust agreement, executed by
the Company, as Depositor, and the Delaware Trustee thereunder. This trust
agreement will be amended and restated in its entirety on the Issue Date
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus Supplement and the accompanying Prospectus form a part
(the "Trust Agreement"). The Trust Agreement has been 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 D Junior
Subordinated Notes, and (iii) engaging in only those other activities necessary,
appropriate, convenient or incidental thereto. The Trust has a term of
approximately 33 years, but may terminate earlier as provided in the Trust
Agreement.
Upon issuance of the Preferred Securities, the purchasers thereof will own
all of the Preferred Securities. The Company will acquire all of the Common
Securities, which will have an aggregate liquidation amount equal to
approximately 3% of the total capital of the Trust. The Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the Preferred
Securities, except that upon the occurrence and continuance of a 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 Administrative
Trustees. The Chase Manhattan Bank will serve as Property Trustee and will hold
legal title to the Series D 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,
S-8
<PAGE>
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 D 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 D 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 D 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.
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, 241 Ralph
McGill Boulevard, N.E., Atlanta, Georgia 30308-3374, telephone (404) 506-6526,
Attn: Corporate Secretary.
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
--------------------------
(UNAUDITED)
ACTUAL AS ADJUSTED(1)
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(MILLIONS, EXCEPT
PERCENTAGES)
<S> <C> <C> <C>
Common Stock Equity......................................... $4,121 $3,851 51.4%
Cumulative Preferred Stock.................................. 52 15 0.2
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiaries Substantially All of Whose
Assets are Junior Subordinated Debentures or Notes(2)..... 689 889 11.9
Senior Notes................................................ 145 495 6.6
Other Long-Term Debt........................................ 2,789 2,247 29.9
------ ------ -----
Total, excluding amounts due within one year of $360
million............................................... $7,796 $7,497 100.0%
====== ====== =====
</TABLE>
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(1) Reflects (i) the capital distribution to Southern recorded in December 1998
of $270,000,000; (ii) the redemption in December 1998 of $70,000,000
principal amount of First Mortgage Bonds, 7.75% Series due April 1, 2023,
$117,790,000 principal amount of First Mortgage Bonds, 7.95% Series due
February 1, 2023 and $150,000,000 principal amount of First Mortgage Bonds,
6.875% Series due September 1, 2002; (iii) the redemption in January 1999 of
$11,995,000 principal amount of First Mortgage Bonds, 7.625% Series due
March 1, 2023; (iv) the redemption in December 1998 of issues of preferred
stock in an amount aggregating $1,171,500; (v) the redemption in January
1999 of issues of preferred stock in an amount aggregating $35,656,100; (vi)
the proposed redemption in March 1999 of $120,000,000 principal amount of
First Mortgage Bonds, 7.55% Series due August 1, 2023 and $72,005,000
principal amount of
S-9
<PAGE>
First Mortgage Bonds, 7.625% Series due March 1, 2023; (vii) the issuance in
November 1998 of $200,000,000 aggregate principal amount of Series B 6.60%
Senior Notes due December 31, 2038; (viii) the issuance in December 1998 of
$150,000,000 principal amount of Series C 5.50% Senior Notes due December 1,
2005; and (ix) the proposed issuance of the Preferred Securities offered
hereby.
(2) Substantially all of the assets of the respective Trusts are Junior
Subordinated Debentures or Notes of the Company, and upon redemption of such
debt, the related Preferred Securities will be mandatorily redeemable.
USE OF PROCEEDS
The Trust will invest the proceeds received from the sale of the Preferred
Securities in the Series D Junior Subordinated Notes. The net proceeds received
by the Company from such investment will be applied by the Company to redeem in
March 1999 the $120,000,000 outstanding principal amount of its First Mortgage
Bonds, 7.55% Series due August 1, 2023 and the $72,005,000 outstanding principal
amount of its First Mortgage Bonds, 7.625% Series due March 1, 2023 and to repay
a portion of its outstanding short-term indebtedness, which aggregated
approximately $252,000,000 as of February 17, 1999.
RECENT RESULTS OF OPERATIONS; RECENT DEVELOPMENTS
For the year ended December 31, 1998, the unaudited amounts for "Operating
Revenues," "Income Before Interest Charges" and "Net Income After Dividends on
Preferred Stock" were $4,738,000,000, $847,000,000 and $570,000,000,
respectively. In the opinion of the management of the Company, the above
unaudited amounts for the year ended December 31, 1998 reflect all adjustments
(which, except for a charge to earnings of $21,000,000 (after taxes) associated
with the write-down of the Rocky Mountain pumped storage hydroelectric plant, as
discussed in the second following paragraph, were only normal recurring
adjustments) necessary to present fairly the results 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 4.49 and 4.34, respectively. 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, 1997 were 4.66 and 4.19, respectively.
On February 17, 1999, the board of directors of the Company approved
revisions to its capital budget resulting from management's annual review
process. The Company now estimates that construction expenditures for the years
1999 through 2001 will total approximately $755,000,000, $734,000,000 and
$829,000,000, respectively. These estimates reflect 600 megawatts of combustion
turbine generation now planned for service in 2000 and 360 megawatts of combined
cycle generation planned for service in 2003, as well as additional expenditures
for transmission and distribution improvements and environmental compliance.
Reference is made to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 under "Item 1 -- Business -- Construction Programs"
for a discussion of the Company's continuous construction program.
On December 18, 1998, the Georgia Public Service Commission (the "GPSC")
approved a new three-year rate order for the Company. Under the terms of the
order, the Company's earnings will continue to be evaluated against a retail
return on common equity range of 10% to 12 1/2%. The Company's retail rates were
decreased by $262,000,000 on an annual basis effective January 1, 1999, and will
be decreased by an additional $24,000,000 effective January 1, 2000. The order
further provides for $85,000,000 in each year, plus up to $50,000,000 of any
earnings in excess of the 12 1/2% return during the second and third years, to
be applied to accelerated amortization or depreciation of assets. Two-thirds of
any additional earnings in excess of the 12 1/2% return in any year will be
applied to additional rate reductions, with the remaining one-third being
retained by the Company. During the term of the order, the Company will not file
for a general base rate increase unless its projected retail return on common
equity falls below 10%. The Company will be required to file a general rate case
on July 1, 2001, in response to which the GPSC would be expected to determine
whether the rate order should be continued, modified or discontinued. Further
under the order, the Company voluntarily dismissed its appeal of the GPSC's
prior order that the Company be allowed approximately $108,000,000 of
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its $142,000,000 investment in the Rocky Mountain pumped storage hydroelectric
plant as of December 31, 1998 (see note (N) to the condensed financial
statements included in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, incorporated by reference herein). As a
result, in December 1998, the Company recorded a charge to earnings of
$21,000,000, after taxes, associated with the write-down of the Rocky Mountain
plant.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust 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 Guarantee and the Series D 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.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement has been 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 Delaware Business Trust Act and 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 pari passu, 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 D 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 holder of Preferred
Securities is to direct the Property Trustee to enforce its rights under the
Series D 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 D 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 D
Junior Subordinated Notes. The above mechanisms and obligations, together with
the Company's obligations under the Agreement
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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
Distributions on the Preferred Securities will be fixed at the Securities
Rate and will accrue from the Issue Date and, except in the event of an
Extension Period (as defined below), will be payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year commencing March
31, 1999. In the event that any date on which distributions are to be made on
the Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date. A "Business
Day" shall mean any day other than a Saturday or Sunday, a day on which banks in
New York City are authorized or obligated by law or executive order to remain
closed or a day on which the principal corporate trust office of the Property
Trustee or the Indenture Trustee is closed for business.
Distributions payable on any Distribution Date will be payable to the
holders of record on the Record Date for such Distribution Date, which is the
close of business on the fifteenth calendar day preceding such Distribution
Date. Subject to any applicable laws and regulations and the provisions of the
Trust Agreement, each such payment will be made as described under
"-- Book-Entry Only Issuance -- The Depository Trust Company" below. The amount
of distributions payable for any period will be computed on the basis of a
360-day year of twelve 30-day months.
The Company has the right under the Subordinated Note Indenture to defer
payments of interest on the Series D Junior Subordinated Notes by extending the
interest payment period from time to time on the Series D Junior Subordinated
Notes (each, an "Extension Period") which, if exercised, would defer quarterly
distributions on the Preferred Securities during any such extended interest
payment period. Deferred installments of interest on the Series D Junior
Subordinated Notes will bear interest, compounded quarterly, at a rate per annum
equal to the Securities Rate (to the extent permitted by law). If distributions
are deferred, the deferred distributions and accrued interest thereon shall be
paid, if funds are legally available therefor, to holders of record of the
Preferred Securities as they appear on the books and records of the Trust on the
Record Date next following the termination of such Extension Period. See
"Description of the Series D Junior Subordinated Notes -- Interest" and
"-- Option to Extend Interest Payment Period."
Distributions on the Preferred Securities must be paid on the Distribution
Dates to the extent that the Trust has funds legally and immediately available
for the payment of such distributions. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received under the Series D Junior Subordinated Notes. See "Description
of the Series D Junior Subordinated Notes."
REDEMPTION
The Preferred Securities are subject to mandatory redemption upon repayment
of the Series D Junior Subordinated Notes at maturity or their earlier
redemption. The Series D Junior Subordinated Notes will mature on March 31, 2029
and may be redeemed, in whole or in part, at the option of the Company, at any
time on or after February 25, 2004 or at any time in whole upon the occurrence
of a Special Event (as defined below). Upon the repayment of the Series D Junior
Subordinated Notes, whether at maturity or upon redemption, the proceeds from
such repayment or payment shall simultaneously be applied to redeem a like
amount of Trust Securities upon not less than 30 nor more than 60 days' notice,
at the Redemption Price (as defined below). See "Description of the Series D
Junior Subordinated Notes -- Optional Redemption." If a partial redemption of
the Series D Junior Subordinated Notes would result in the delisting of the
Preferred Securities, the Company may only redeem the Series D Junior
Subordinated Notes in whole. In the event that fewer than all of the outstanding
Trust Securities are to be redeemed, the Preferred Securities to be redeemed
will be selected as described under "-- Book-Entry Only Issuance -- The
Depository Trust Company" below. If the Preferred Securities are no longer in
book-entry only form, the Preferred Securities to be redeemed will
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be selected by such method as the Property Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $25 or integral multiples thereof) of the aggregate liquidation amount
of Preferred Securities of a denomination larger than $25; provided, however,
that before undertaking the redemption of the Preferred Securities on other than
a pro rata basis, the Property Trustee shall have received an opinion of counsel
that the status of the Trust as a grantor trust for federal income tax purposes
would not be adversely affected.
The Redemption Price for each Preferred Security shall equal the stated
liquidation amount of $25 plus accrued and unpaid distributions thereon to the
date of payment.
SPECIAL EVENT REDEMPTION; DISTRIBUTION OF SERIES D JUNIOR SUBORDINATED NOTES
Upon the occurrence of a Special Event at any time, the Company will have
the option to redeem the Series D 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 D Junior Subordinated Notes, (ii) interest payable on the Series D 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 D 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."
If Series D Junior Subordinated Notes are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to have the Series D
Junior Subordinated Notes listed on the NYSE or on such other exchange as the
Preferred Securities are then listed. After the date for any distribution of
Series D Junior Subordinated Notes upon termination of the Trust, (i) the
Preferred Securities and the Guarantee will no longer be deemed to be
outstanding, (ii) the depositary or its nominee, as the record holder of the
Preferred Securities, will receive a registered global certificate or
certificates representing the Series D Junior Subordinated Notes to be delivered
upon such distribution and (iii) any certificates representing Preferred
Securities and the Guarantee not held by the depositary or its nominee will be
deemed to represent Series D Junior Subordinated Notes having an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the Securities Rate of, and accrued and unpaid
interest equal to
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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 D 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 D 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 D 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.
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
(as defined below) 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 then applicable rate, from such
redemption date originally established by the Trust for such Preferred
Securities to the date such Redemption Price is actually paid. See "-- Events of
Default" below, "Relationship Among the Preferred Securities, the Series D
Junior Subordinated Notes and the Guarantee" below 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 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.
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DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the NYSE, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Securities and
Exchange 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
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DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred
Security will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. Such laws may impair the ability to
transfer beneficial interests in a global Preferred Security.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates will be printed
and delivered to the holders of record. Additionally, the Company may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary) with respect to the Preferred Securities. In that event,
certificates for the Preferred Securities will be printed and delivered to the
holders of record.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company and the Trust believe to be
reliable, but the Company and the Trust take no responsibility for the accuracy
thereof. The Trust has no responsibility for the performance by DTC or its
Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Trust shall terminate on December 31,
2029, 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 D Junior Subordinated Notes to the holders of the Trust Securities in
liquidation of the Trust (see "-- Special Event Redemption; Distribution of
Series D Junior Subordinated Notes" above); or (iii) the payment at maturity or
redemption of all of the Series D 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 D
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 $25 per Trust Security plus accrued and unpaid
distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then subject to the next succeeding 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
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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
(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
(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.
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 D Junior
Subordinated Notes. If the Property Trustee fails to enforce its rights under
the Series D 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 D 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 D Junior Subordinated Notes.
See "Relationship Among the Preferred Securities, the Series D Junior
Subordinated Notes and the Guarantee" herein 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 upon dissolution of the Trust as described above.
See "-- Liquidation Distribution Upon Dissolution."
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VOTING RIGHTS
Except as provided below and under "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 D 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 D 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
D 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 D Junior Subordinated Notes, where such consent shall be required, or to
any other action, as the holder of the Series D 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 D 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 D 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.
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 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
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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 (A) expressly assumes all of the obligations of the
Trust with respect to the Trust Securities or (B) 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 Series D 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,
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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 Dates. If the Preferred Securities are not held by DTC, such
payments shall be made by check mailed to the address of the holder entitled
thereto as such address shall appear on the Securities Register (as such term is
defined in the Trust Agreement). The Paying Agent shall initially be the
Property Trustee. The Paying Agent shall be permitted to resign as Paying Agent
upon 30 days' written notice to the Administrative Trustees and the Company. In
such event, the Administrative Trustees shall appoint a successor to act as
Paying Agent.
REGISTRAR AND TRANSFER AGENT
It is anticipated that the Property Trustee, or one of its affiliates, will
act as registrar and transfer agent (the "Securities Registrar") for the
Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment in respect of any tax or
other governmental charges which may be imposed in relation to it.
The Securities Registrar will not be required to register or cause to be
registered any transfer of Preferred Securities after they have been called for
redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a Trust Agreement Event of
Default with respect to the Trust Securities, undertakes to perform only such
duties as are specifically set forth in the Trust Agreement and, after default,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provisions, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Trust Agreement at the request of any holder of Preferred Securities, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby.
The Chase Manhattan Bank, the Property Trustee, also serves as 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.
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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 D 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 D JUNIOR SUBORDINATED NOTES
Set forth below is a description of the specific terms of the Series D
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 D Junior Subordinated Notes will be issued as a series of Junior
Subordinated Notes under the Subordinated Note Indenture. The Series D Junior
Subordinated Notes will be limited in aggregate principal amount to
$206,185,575, such amount being the approximate aggregate liquidation amount of
the Trust Securities.
The entire principal amount of the Series D Junior Subordinated Notes will
mature and become due and payable, together with any accrued and unpaid interest
thereon, including Additional Interest (see "Description of the Junior
Subordinated Notes -- Additional Interest" in the accompanying Prospectus), if
any, on March 31, 2029. The Series D Junior Subordinated Notes are not subject
to any sinking fund provision.
The terms of the Series D 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 D Junior Subordinated
Notes, in whole or in part, without premium, from time to time, on or after
February 25, 2004, 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 D Junior Subordinated Notes," upon not
less than 30 nor more than 60 days' notice, at a Redemption Price equal to 100%
of the principal amount to be redeemed plus any accrued and unpaid interest,
including Additional Interest, if any, to the redemption date. If a partial
redemption of the Series D Junior Subordinated Notes would result in the
delisting of the Preferred Securities, the Company may only redeem the Series D
Junior Subordinated Notes in whole.
INTEREST
Each Series D Junior Subordinated Note shall bear interest at the
Securities Rate from the Issue Date, payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year commencing March 31, 1999 to
the person in whose name such Series D Junior Subordinated Note is registered at
the close of business on the fifteenth calendar day prior to such payment date.
The amount of interest payable will be computed on the basis of a 360-day year
of twelve 30-day months. In the event that any date on which interest is payable
on the Series D Junior Subordinated Notes is not a Business Day, then payment of
the interest payable on such date will be made on the next succeeding day which
is a Business Day (and without
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any interest or other payment in respect of any such delay), except that, if
such Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date.
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 D Junior Subordinated Notes by
extending the interest payment period for up to 20 consecutive quarters, but not
beyond the stated maturity date. At the end of an Extension Period, the Company
shall pay all interest then accrued and unpaid (together with interest thereon
at the Securities Rate compounded quarterly, to the extent permitted by law) and
all Additional Interest; provided, that if the Company shall have given notice
of its election to select an Extension Period, (a) the Company shall not declare
or pay any dividend or 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 pari passu with or junior to the
Series D Junior Subordinated Notes. Prior to the termination of any Extension
Period, the Company may further defer payments of interest by extending the
interest payment period, provided that such Extension Period, together with all
such previous and further extensions thereof, may not exceed 20 consecutive
quarters. Upon the termination of any Extension Period and the payment of all
amounts then due, the Company may select a new Extension Period, subject to the
above requirements. The Company has no present intention of exercising its
rights to defer payments of interest by extending the interest payment period on
the Series D Junior Subordinated Notes. See "Certain Federal Income Tax
Considerations -- Original Issue Discount."
The Company shall give the holder or holders of the Series D 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 the NYSE or
other applicable self-regulatory organization of the record date or the date
such distributions are payable.
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 D 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 D 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."
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SERIES D JUNIOR SUBORDINATED NOTES AND THE GUARANTEE
As long as payments of interest and other payments are made when due on the
Series D Junior Subordinated Notes, such payments will be sufficient to cover
distributions and payments due on the Trust Securities primarily because (i) the
aggregate principal amount of Series D Junior Subordinated Notes will be equal
to the sum of the aggregate stated liquidation amount of the Trust Securities;
(ii) the interest rate and interest and other payment dates on the Series D
Junior Subordinated Notes will match the distribution rate and distribution and
other payment dates for the Preferred Securities; (iii) the Company shall pay
for all costs and expenses of the Trust pursuant to the Agreement as to Expenses
and Liabilities; and (iv) the Trust Agreement provides that the Securities
Trustees shall not cause or permit the Trust to, among other things, engage in
any activity that is not consistent with the purposes of the Trust.
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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) are guaranteed
by the Company as and to the extent set forth under "Description of the
Guarantees" in the accompanying Prospectus. If the Company does not make
interest payments on the Series D Junior Subordinated Notes, it is not expected
that the Trust will have sufficient funds to pay distributions on the Preferred
Securities. The Guarantee is a guarantee from the time of its issuance, but does
not apply to any payment of distributions unless and until the Trust has
sufficient funds legally and immediately available for the payment of such
distributions.
If the Company fails to make interest or other payments on the Series D
Junior Subordinated Notes when due (taking into account any Extension Period),
the Trust Agreement provides a mechanism whereby the holders of the Preferred
Securities may appoint a substitute Property Trustee. Such holders may also
direct the Property Trustee to enforce its rights under the Series D Junior
Subordinated Notes, including proceeding directly against the Company to enforce
the Series D Junior Subordinated Notes. If the Property Trustee fails to enforce
its rights under the Series D Junior Subordinated Notes, to the fullest extent
permitted by applicable law, any holder of Preferred Securities may institute a
legal proceeding directly against the Company to enforce the Property Trustee's
rights under the Series D 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 the Series
D 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 D Junior Subordinated Notes.
If the Company fails to make payments under the Guarantee, the Guarantee
provides a mechanism whereby the holders of the Preferred Securities may direct
the Guarantee Trustee to enforce its rights thereunder. 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 Guarantee without
first instituting a legal proceeding against the Guarantee Trustee or any other
person or entity.
The Guarantee, the Subordinated Note Indenture, the Series D Junior
Subordinated Notes, the Trust Agreement and the Agreement as to Expenses and
Liabilities, as described above, constitute a full and unconditional guarantee
by the Company of the payments due on the Preferred Securities.
Upon any voluntary or involuntary dissolution, winding-up or termination of
the Trust, unless the Series D Junior Subordinated Notes are distributed in
connection therewith, the holders of Preferred Securities will be entitled to
receive, out of assets legally available for distribution to holders, the
Liquidation Distribution in cash. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Dissolution." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the Series D Junior Subordinated Notes, would be a subordinated
creditor of the Company, subordinated in right of payment to all Senior
Indebtedness, but entitled to receive payment in full of principal and interest,
before any stockholders of the Company receive payments or distributions.
Because the Company is guarantor under the Guarantee and has agreed to pay for
all costs, expenses and liabilities of the Trust (other than the Trust's
obligations to holders of the Preferred Securities) pursuant to the Agreement as
to Expenses and Liabilities, the positions of a holder of Preferred Securities
and a holder of Series D Junior Subordinated Notes relative to other creditors
and to stockholders of the Company in the event of liquidation or bankruptcy of
the Company would be substantially the same.
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 Series D Junior Subordinated
Notes provide that no payments may be made in respect of the Series D 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 Series D Junior Subordinated Notes would constitute an Event of
Default under the Subordinated Note Indenture except that failure to make
interest payments on the Series D Junior
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Subordinated Notes will not be an Event of Default during an Extension Period;
provided, however, that any Extension Period may not exceed 20 consecutive
quarters or extend beyond the stated maturity of the Series D Junior
Subordinated Notes.
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 Troutman Sanders 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 below). 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 D 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 D 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 D 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 D 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 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 D Junior Subordinated Notes permit the Company to
defer the payment of interest on the Series D Junior Subordinated Notes at any
time and from time to time by extending the interest payment period for up to 20
consecutive quarters with respect to each Extension Period; provided,
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however, that no Extension Period may extend beyond the stated maturity date of
the Series D Junior Subordinated Notes. Should the Company exercise this option
to defer payments of interest, the Series D Junior Subordinated Notes would at
that time be treated as issued with OID and all the stated interest payments on
the Series D 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. Consequently, in the event that the payment of interest is deferred,
a Holder could be required to include OID in income on an economic accrual
basis, notwithstanding that the Company will not make any interest payments
during such period on the Series D Junior Subordinated Notes.
MARKET DISCOUNT
A purchaser of a Preferred Security at a discount from the liquidation
amount at maturity of such purchaser's pro rata share of the Series D Junior
Subordinated Notes acquires such Preferred Security with "market discount."
However, market discount with respect to a Preferred Security will be considered
to be zero if it is de minimis. Market discount will be de minimis with respect
to a Preferred Security if it is less than the product of (i) 0.25% of the
adjusted issue price of the purchaser's pro rata share of the Series D Junior
Subordinated Notes multiplied by (ii) the number of complete years to maturity
of such Series D Junior Subordinated Notes after the date of purchase. The
purchaser of a Preferred Security with more than a de minimis amount of market
discount generally will be required to treat any gain on the sale, exchange,
redemption or other disposition of all or part of the Preferred Securities (or
related Series D Junior Subordinated Notes) as ordinary income to the extent of
accrued (but not previously taxed) market discount. Market discount generally
will accrue ratably during the period from the date of purchase of such
Preferred Security to the maturity date of the Series D Junior Subordinated
Notes, unless the Holder irrevocably elects to accrue such market discount on
the basis of a constant interest rate.
A Holder who has acquired a Preferred Security at a market discount
generally will be required to defer any deductions of interest expense
attributable to any indebtedness incurred or continued to purchase or carry the
Preferred Security, to the extent such interest expense exceeds the related
interest income. Any such deferred interest expense generally will be allowable
as a deduction not later than the year in which the related market discount
income is recognized. As an alternative to the inclusion of market discount in
income upon disposition of all or a portion of a Preferred Security or the
related Series D Junior Subordinated Notes (including redemptions thereof), a
Holder may make an election (which may not be revoked without the Internal
Revenue Service's consent) to include market discount in income as it accrues on
all market discount instruments acquired by the Holder during or after the
taxable year for which the election is made. In that case, the preceding
deferral rule for interest expense will not apply.
In lieu of the foregoing treatment of market discount and interest expense,
a Holder may elect to treat any market discount (including a de minimis amount)
as OID and accrue such discount on a constant-yield basis in the same manner as
the Holder accrues OID.
SALE OF PREFERRED SECURITIES
Upon the sale, retirement (including redemption) or other taxable
disposition of all or part of a Preferred Security, a Holder thereof will
recognize gain or loss equal to the difference between the amount realized on
such sale, retirement or other disposition and such Holder's adjusted tax basis
in the Preferred Security or part thereof. 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,
except to the extent of any accrued market discount (see "Market Discount"
above), and such capital gain or loss will be long-term if the holding period
for the Preferred Security is more than one year at the time of sale, retirement
or other disposition. A Holder's adjusted tax basis in a Preferred Security
acquired by purchase will equal the cost of such Preferred Security to the
Holder, increased by the amount of any related accrued OID and market discount
included in taxable income by the Holder and reduced by any prior payments on
the Series D
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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 D Junior
Subordinated Notes between the portion of the Series D Junior Subordinated Notes
redeemed and retained by the Holder in order to determine gain or loss.
RECEIPT OF SERIES D JUNIOR SUBORDINATED NOTES UPON LIQUIDATION OF THE TRUST
As described under "Description of the Preferred Securities -- Special
Event Redemption; Distribution of Series D Junior Subordinated Notes," Series D
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 D Junior Subordinated Notes equal
to the Holder's aggregate tax basis in its Preferred Securities. A Holder's
holding period with respect to the Series D 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 D 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
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to the Underwriters
named below, and the Underwriters, for whom Morgan Stanley & Co. Incorporated,
A.G. Edwards & Sons, Inc., Goldman, Sachs & Co., Lehman Brothers Inc.,
PaineWebber Incorporated, Prudential Securities Incorporated and Salomon Smith
Barney Inc. are acting as representatives (the "Representatives"), have
severally agreed to purchase the number of Preferred Securities set forth
opposite their respective names below. In the Underwriting Agreement, the
Underwriters have agreed, subject to the terms and conditions set forth therein,
to purchase all of the Preferred Securities offered hereby if any of the
Preferred Securities are purchased.
<TABLE>
<CAPTION>
NUMBER OF
NAME PREFERRED SECURITIES
---- --------------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... 958,000
A.G. Edwards & Sons, Inc.................................... 952,000
Goldman, Sachs & Co......................................... 952,000
Lehman Brothers Inc......................................... 952,000
PaineWebber Incorporated.................................... 952,000
Prudential Securities Incorporated.......................... 952,000
Salomon Smith Barney Inc.................................... 952,000
ABN Amro Incorporated....................................... 70,000
Chase Securities Inc........................................ 70,000
CIBC Oppenheimer Corp....................................... 70,000
Credit Suisse First Boston Corporation...................... 70,000
First Chicago Capital Markets, Inc.......................... 70,000
First Union Capital Markets Corp............................ 70,000
J.P. Morgan Securities Inc.................................. 70,000
The Robinson-Humphrey Company, LLC.......................... 70,000
SG Cowen Securities Corporation............................. 70,000
Robert W. Baird & Co. Incorporated.......................... 35,000
Blaylock & Partners, L.P.................................... 35,000
J.C. Bradford & Co.......................................... 35,000
Dain Rauscher Wessels....................................... 35,000
Doley Securities, Inc....................................... 35,000
Fidelity Capital Markets
A division of National Financial Services Corporation..... 35,000
J.J.B. Hilliard, W.L. Lyons, Inc............................ 35,000
Interstate/Johnson Lane Corporation......................... 35,000
Legg Mason Wood Walker, Incorporated........................ 35,000
Morgan Keegan & Company, Inc................................ 35,000
OLDE Discount Corporation................................... 35,000
Pershing/Division of Donaldson, Lufkin & Jenrette........... 35,000
Piper Jaffray Inc........................................... 35,000
Raymond James & Associates, Inc............................. 35,000
Roney Capital Markets
A division of First Chicago Capital Markets, Inc.......... 35,000
Charles Schwab & Co., Inc................................... 35,000
Muriel Siebert & Co., Inc................................... 35,000
Southwest Securities, Inc................................... 35,000
Utendahl Capital Partners, L.P.............................. 35,000
The Williams Capital Group, L.P............................. 35,000
---------
Total............................................. 8,000,000
=========
</TABLE>
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<PAGE>
The Underwriters have advised the Company and the Trust that they propose
to offer the Preferred Securities in part directly to the public at the price to
the public, as set forth on the cover page of this Prospectus Supplement, and in
part to certain securities dealers at such price less a concession not in excess
of $.50 per Preferred Security. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $.45 per Preferred Security to certain
other dealers. After the Preferred Securities are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the Underwriters.
The Preferred Securities are expected to be approved for listing on the
NYSE, subject to official notice of issuance. Trading of the Preferred
Securities on the NYSE is expected to commence within a 30-day period after the
initial delivery of the Preferred Securities. The Representatives have advised
the Company and the Trust that they intend to make a market in the Preferred
Securities prior to the commencement of trading on the NYSE. The Representatives
will have no obligation to make a market in the Preferred Securities, however,
and may cease market making activities, if commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the NYSE, the Underwriters will undertake to sell lots of 100 or
more Preferred Securities to a minimum of 400 beneficial holders.
In order to facilitate the offering of the Preferred Securities, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Preferred Securities. Specifically, the Underwriters may
over-allot in connection with this offering, creating short positions in the
securities for their own account. In addition, to cover over-allotments or to
stabilize the price of the Preferred Securities, the Underwriters may bid for,
and purchase, Preferred Securities in the open market. Finally, the Underwriters
may reclaim selling concessions allowed to an underwriter or dealer for
distributing Preferred Securities in this offering, if the Underwriters
repurchase previously distributed Preferred Securities in transactions that
cover syndicate short positions, in stabilization transactions or otherwise. Any
of these activities may stabilize or maintain the market price of the Preferred
Securities above independent market levels. The Underwriters are not required to
engage in these activities, and may end any of these activities at any time.
The Company and the Trust have agreed, 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 the Series D Junior Subordinated Notes or any debt securities
substantially similar to the Series D Junior Subordinated Notes or equity
securities substantially similar to the Preferred Securities (except for the
Series D Junior Subordinated Notes and the Preferred Securities issued pursuant
to the Underwriting Agreement), without the prior written consent of the
Representatives.
The Company estimates that its expenses in connection with this offering,
excluding underwriting discounts and commissions, will be approximately
$295,000.
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 "1933 Act"). The Underwriters have agreed to reimburse the Company
for certain of its expenses.
Certain of the Underwriters and their affiliates engage in transactions
with, and, from time to time, have performed services for, the Company and its
affiliates in the ordinary course of business, including an affiliate of Chase
Securities Inc. that serves as Property Trustee, Indenture Trustee and Guarantee
Trustee.
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 herein, 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, June 30, 1998 and 1997 and September 30, 1998 and 1997,
included in the
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Company's Quarterly Reports on From 10-Q for the quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998, respectively, and incorporated by
reference herein, Arthur Andersen LLP has applied limited procedures in
accordance with professional standards for review of such information. However,
their separate reports thereon state that they did not audit and they do not
express an opinion on such interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures employed. In addition, the
accountants are not subject to the liability provisions of Section 11 of the
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.
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 Troutman Sanders LLP, general counsel for the Company, and
such statements are made upon the authority of such firm as experts.
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 D Junior Subordinated
Notes, the Guarantee and certain matters relating thereto will be passed upon on
behalf of the Company by Troutman Sanders LLP, Atlanta, Georgia. Troutman
Sanders 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.
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