AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1997
REGISTRATION NOS. 333-28187
333-28187-01
333-28187-02
-------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
THE SOUTHERN COMPANY
SOUTHERN COMPANY CAPITAL FUNDING, INC.
SOUTHERN COMPANY CAPITAL TRUST III
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 58-0690070
DELAWARE APPLIED FOR
DELAWARE APPLIED FOR
(I.R.S. EMPLOYER IDENTIFICATION
(STATE OR OTHER JURISDICTION OF NUMBER)
INCORPORATION OR ORGANIZATION)
-------------
270 PEACHTREE STREET, N.W.
ATLANTA, GEORGIA 30303
(770) 393-0650
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
EACH REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
TOMMY CHISHOLM, SECRETARY
THE SOUTHERN COMPANY
270 PEACHTREE STREET, N.W.
ATLANTA, GEORGIA 30303
(770) 393-0650
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE OF EACH REGISTRANT)
-------------
PLEASE SEND COPIES OF ALL CORRESPONDENCE TO:
W.L. WESTBROOK JOHN D. MCLANAHAN
FINANCIAL VICE PRESIDENT TROUTMAN SANDERS LLP
THE SOUTHERN COMPANY 600 PEACHTREE STREET, N.E., SUITE 5200
270 PEACHTREE STREET, N.W. ATLANTA, GEORGIA 30308
ATLANTA, GEORGIA 30303 (404) 885-3000
(770) 393-0650
-------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
-------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE(5)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred Securities,
Liquidation Amount $25
per Preferred Security, 8,000,000
of Southern Company Preferred
Capital Trust III...... Securities $25 $200,000,000 $60,607
- -----------------------------------------------------------------------------------------
Series C Junior
Subordinated Deferrable
Interest Notes of
Southern Company
Capital Funding,
Inc.(2)................
- -----------------------------------------------------------------------------------------
The Southern Company
Preferred Securities
Guarantee(2)(3)........
- -----------------------------------------------------------------------------------------
The Southern Company
Junior Subordinated
Notes Guarantee(2)(3)..
- -----------------------------------------------------------------------------------------
Total(4)................ $200,000,000 $60,607
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated for the sole purpose of computing the registration fee.
(2) Pursuant to Rule 457(n) under the Securities Act, no separate fee is
payable with respect to the Junior Subordinated Notes, the Preferred
Securities Guarantee or the Junior Subordinated Notes Guarantee.
(3) Includes the rights of holders of Preferred Securities of Southern Company
Capital Trust III under the Trust Agreement, the rights of holders of
Junior Subordinated Notes under the Indenture, the rights of the holders
of such Preferred Securities under the Preferred Securities Guarantee, the
rights of holders of the Junior Subordinated Notes under the Notes
Guarantee and certain backup undertakings as described herein.
(4) Such amount represents the liquidation amount of the Southern Company
Capital Trust III Preferred Securities being registered hereunder and the
principal amount of Junior Subordinated Notes that may be distributed to
holders of such Preferred Securities upon any liquidation of Southern
Company Capital Trust III.
(5) Previously paid.
-------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 5, 1997
8,000,000 PREFERRED SECURITIES
SOUTHERN COMPANY CAPITAL TRUST III
% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES (QUIPSSM)*
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
[LOGO OF SOUTHERN COMPANY APPEARS HERE]
----------
The % Cumulative Quarterly Income Preferred Securities (the "Preferred
Securities") offered hereby evidence preferred undivided beneficial interests,
representing 97% undivided beneficial interests in the assets of Southern
Company Capital Trust III, a statutory business trust created under the laws of
the State of Delaware (the "Trust"). Southern Company Capital Funding, Inc., a
Delaware corporation ("Capital") and an indirect, wholly-owned subsidiary of
The Southern Company, a Delaware corporation ("Southern"), will own all the
common securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities") representing the remaining 3% undivided
beneficial interests in the assets of the Trust. The Trust exists for the sole
purpose of issuing the Preferred Securities and Common Securities and investing
the proceeds thereof in an equivalent amount of Capital's Series C % junior
subordinated deferrable interest notes due , 2037 (the "Junior
Subordinated Notes"). Southern will irrevocably and unconditionally guarantee
the due and punctual payment of the Junior Subordinated Notes (the "Notes
Guarantee"). See "Description of the Notes Guarantee."
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR CERTAIN INFORMATION RELEVANT TO
AN INVESTMENT IN THE PREFERRED SECURITIES.
Application has been made to list the Preferred Securities on the New York
Stock Exchange, Inc. (the "NYSE"). If approved, trading of the Preferred
Securities on the NYSE is expected to commence within a 30-day period after the
initial delivery of the Preferred Securities. See "Underwriting."
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2)(3) TRUST(2)(3)(4)
----------------- -------------- --------------
<S> <C> <C> <C>
Per Preferred Security........ $ $ $
Total......................... $ $ $
</TABLE>
- -----
(1) Plus accrued distributions, if any, from the Issue Date.
(2) Southern, Capital and the Trust have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(3) Because the proceeds of the sale of the Preferred Securities will be
invested in Junior Subordinated Notes, Southern has agreed to pay to the
Underwriters, as compensation (the "Underwriters' Compensation") for arranging
the investment therein of such proceeds, $ per Preferred Security, except
for Preferred Securities sold to certain institutions, for which the
Underwriters' Compensation will be $ per Preferred Security. Therefore, to
the extent that Preferred Securities are sold to such institutions, the actual
amount of Underwriters' Compensation will be less than and the Proceeds to
Trust will be greater than the aggregate amounts specified above. See
"Underwriting."
(4) Expenses of the offering to be paid by Southern are estimated to be
approximately $ .
----------
The Preferred Securities are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
delivery of the Preferred Securities will be made in book-entry only form
through the facilities of The Depository Trust Company on or about June , 1997
(the "Issue Date") against payment therefor in immediately available funds.
- -----
*QUIPS is a service mark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO. LEHMAN BROTHERS
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
THE ROBINSON-HUMPHREY
COMPANY, INC.
SMITH BARNEY INC.
----------
The date of this Prospectus is June , 1997.
<PAGE>
(Continued from the previous page)
The Junior Subordinated Notes will be unsecured obligations of Capital and
will be subordinate and junior in right of payment to all Senior Indebtedness
of Capital, as described herein. See "Description of the Junior Subordinated
Notes--Subordination." The Notes Guarantee will be an unsecured obligation of
Southern and will be subordinate and junior in right of payment to all Senior
Indebtedness of Southern. See "Description of the Notes Guarantee." Holders of
the Preferred Securities are entitled to receive cumulative cash distributions
at the rate of % per annum (the "Securities Rate"), accruing from the date
of original issuance and payable, unless deferred, quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year (each, a
"Distribution Date").
The Securities Rate and the Distribution Dates for the Preferred Securities
will correspond to the interest rate and interest and other payment dates on
the Junior Subordinated Notes, which will constitute substantially all the
assets of the Trust. As a result, if principal or interest is not paid on the
Junior Subordinated Notes, no amounts will be paid on the Preferred
Securities. CAPITAL HAS THE RIGHT TO DEFER PAYMENTS OF INTEREST ON THE JUNIOR
SUBORDINATED NOTES BY EXTENDING THE INTEREST PAYMENT PERIOD ON THE JUNIOR
SUBORDINATED NOTES, AT ANY TIME AND FROM TIME TO TIME, FOR UP TO 20
CONSECUTIVE QUARTERS (EACH, AN "EXTENSION PERIOD"). If interest payments are
so deferred, distributions on the Preferred Securities also will be deferred
and neither Southern nor Capital will be permitted, subject to certain
exceptions described herein, to declare or pay any dividend or distribution on
any of its capital stock or make any guarantee payments with respect to the
foregoing, or make any payment on any debt securities issued by it which rank
pari passu with or junior to the Junior Subordinated Notes or the Notes
Guarantee. During any Extension Period, holders of Preferred Securities will
be required to include income in the form of original issue discount ("OID")
in their gross income for United States federal income tax purposes in advance
of the receipt of the cash payments attributable to such deferred interest.
See "Description of the Junior Subordinated Notes--Option to Extend Interest
Payment Period," "Risk Factors--Option to Extend Interest Payment Period" and
"Certain Federal Income Tax Considerations--Original Issue Discount" and "--
Market Discount." Deferred installments of interest on the Junior Subordinated
Notes will bear interest, compounded quarterly, at a rate per annum equal to
the Securities Rate to the extent permitted by applicable law. The payment of
such deferred interest, together with interest thereon, will be distributed to
the holders of the Preferred Securities as received at the end of any
Extension Period.
The Trust Securities are subject to mandatory redemption upon repayment of
the Junior Subordinated Notes at maturity or their earlier redemption. The
Junior Subordinated Notes are redeemable at the option of Capital (in whole or
in part), from time to time, on or after , 2002, or at any time in whole
upon the occurrence of a Tax Event or Investment Company Act Event (either, a
"Special Event"). Capital will have the right at any time to terminate the
Trust and cause the Junior Subordinated Notes to be distributed to the holders
of the Preferred Securities in liquidation of the Trust. See "Description of
the Preferred Securities--Special Event Redemption or Distribution." If the
Junior Subordinated Notes are distributed to the holders of the Preferred
Securities, Southern and Capital will use their best efforts to have the
Junior Subordinated Notes listed on the NYSE or on such other exchange as the
Preferred Securities are then listed. See "Description of the Preferred
Securities--Special Event Redemption or Distribution" and "Description of the
Junior Subordinated Notes."
The payment of distributions on the Preferred Securities is guaranteed by
Southern under the Preferred Securities Guarantee Agreement, but only to the
extent that the Trust has funds legally and immediately available therefor
(the "Preferred Securities Guarantee"). If Capital fails to make required
payments on the Junior Subordinated Notes, the Trust will not have sufficient
funds to pay such distributions, and the Preferred Securities Guarantee does
not cover the payment of distributions when the Trust does not have sufficient
funds legally available therefor. In such event, the remedy of a holder of
Preferred Securities is to enforce the Junior Subordinated Notes and the Notes
Guarantee. See "Description of the Junior Subordinated Notes" and "Description
of the Notes Guarantee." Southern's
2
<PAGE>
obligations under the Preferred Securities Guarantee are subordinate and
junior in right of payment to all of its other liabilities and will rank pari
passu (equal in priority) with the most senior preferred stock of Southern
which may be issued. See "Description of the Preferred Securities Guarantee."
Southern and Capital have, through the Preferred Securities Guarantee, the
Notes Guarantee, the Subordinated Note Indenture, the Junior Subordinated
Notes, the Trust Agreement and the Agreement as to Expenses and Liabilities,
fully and unconditionally guaranteed, subject to certain subordination
provisions, all the Trust's obligations with respect to the Preferred
Securities.
In the event of the redemption of the Junior Subordinated Notes or the
voluntary or involuntary dissolution, winding-up or termination of the Trust,
the holders of the Preferred Securities will be entitled to receive, for each
Preferred Security, a liquidation amount of $25 plus accrued and unpaid
distributions thereon (including interest thereon) to the date of payment (the
"Redemption Price"), unless in connection with such dissolution, winding-up or
termination, the Junior Subordinated Notes are distributed to the holders of
the Preferred Securities. See "Description of the Preferred Securities--
Liquidation Distribution Upon Dissolution."
The Preferred Securities initially will be represented by a global
certificate or certificates registered in the name of The Depository Trust
Company ("DTC") or its nominee. Beneficial interests in such Preferred
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by Participants (as defined herein) in DTC. Except
as described herein, Preferred Securities in certificated form will not be
issued in exchange for the global certificates. See "Description of the
Preferred Securities--Book-Entry Only Issuance--The Depository Trust Company."
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
3
<PAGE>
AVAILABLE INFORMATION
Southern, Capital and the Trust have filed with the Securities and Exchange
Commission (the "Commission") a combined registration statement on Form S-3
(the "Registration Statement," which term encompasses any amendments thereof
and exhibits thereto) under the Securities Act of 1933, as amended (the "1933
Act"). As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made.
Southern is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Commission.
Such reports, proxy statements and other information may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices at 7 World Trade Center, 13th Floor, Suite 1300, New York,
New York 10048 and Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material may also be obtained at
prescribed rates by writing to the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants including Southern that file electronically
at http://www.sec.gov. In addition, reports and other material concerning
Southern may be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005, on which Exchange the common stock of
Southern is listed.
No separate financial statements of Capital or the Trust have been included
herein. Southern, Capital and the Trust do not consider that such financial
statements would be material to holders of the Preferred Securities because
each of Capital and the Trust is a special purpose entity, has no operating
history or independent operations and is not engaged in and does not propose
to engage in any activity other than, in the case of Capital, obtaining
financing for Southern and direct and indirect subsidiaries of Southern other
than the operating affiliates (as defined herein) and, in the case of the
Trust, holding as trust assets the Junior Subordinated Notes, issuing the
Trust Securities and engaging in other activities as are necessary, advisable
or incidental thereto. See "Southern Company Capital Funding, Inc.," "Southern
Company Capital Trust III," "Description of the Preferred Securities,"
"Description of the Junior Subordinated Notes," "Description of the Notes
Guarantee," and "Description of the Preferred Securities Guarantee." In
addition, Southern does not expect that Capital or the Trust will file
reports, proxy statements and other information under the 1934 Act with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by Southern with the Commission
pursuant to the 1934 Act and are incorporated herein by reference and made a
part of this Prospectus:
(a)Southern's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b)Southern's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997; and
(c)Southern's Current Report on Form 8-K dated February 12, 1997.
All documents filed by Southern with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated herein by reference and made a part of this Prospectus from the
respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
SOUTHERN WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS
IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY
OR ALL DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN THE EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE). SUCH REQUESTS SHOULD BE DIRECTED TO TOMMY CHISHOLM, SECRETARY, THE
SOUTHERN COMPANY, 270 PEACHTREE STREET, N.W., ATLANTA, GEORGIA 30303,
TELEPHONE: (770) 393-0650.
4
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information contained elsewhere in this
Prospectus or incorporated herein by reference. Capitalized terms not otherwise
defined shall have the meanings assigned in the Glossary.
THE SOUTHERN COMPANY
Southern was incorporated under the laws of Delaware on November 9, 1945.
Southern is domesticated under the laws of Georgia and is qualified to do
business as a foreign corporation under the laws of Alabama. The principal
executive offices of Southern are located at 270 Peachtree Street, N.W.,
Atlanta, Georgia 30303, and the telephone number is (770) 393-0650.
Southern owns all the outstanding common stock of Alabama Power Company
("ALABAMA"), Georgia Power Company ("GEORGIA"), Gulf Power Company ("GULF"),
Mississippi Power Company ("MISSISSIPPI") and Savannah Electric and Power
Company ("SAVANNAH") (ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH being
collectively referred to herein as the "operating affiliates"), each of which
is an operating public utility company, and of Southern Company Services, Inc.
(the system service company). ALABAMA and GEORGIA each owns 50% of the
outstanding common stock of Southern Electric Generating Company ("SEGCO"). The
operating affiliates supply electric service in the states of Alabama, Georgia,
Florida, Mississippi and Georgia, respectively, and SEGCO owns generating units
at a large electric generating station which supplies power to ALABAMA and
GEORGIA. Southern also owns all the outstanding common stock of Southern
Energy, Inc. ("Southern Energy"), The Southern Development and Investment
Group, Inc. ("Southern Development"), Southern Nuclear Operating Company, Inc.
("Southern Nuclear") and Southern Communications Services, Inc. ("Southern
Communications"). Southern Energy designs, builds, owns and operates power
production and delivery facilities and provides a broad range of technical
services to industrial companies and utilities in the United States and a
number of international markets. Southern Development explores, develops and
markets energy management services and other business lines relating to
Southern's core business of generating and distributing energy. Southern
Nuclear provides services to the Southern electric system's nuclear plants.
Southern Communications provides digital wireless communications services to
the operating affiliates and regional non-affiliates.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
TWELVE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, APRIL 30,
-------------------------------------- 1997(1)
1992 1993 1994(1) 1995(1) 1996(1) (UNAUDITED)
------ ------ ------ ------- ------- -----------
(MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues......... $8,073 $8,489 $8,297 $9,180 $10,358 $10,576
Income Before Interest
Charges.................... $1,793 $1,827 $1,756 $1,900 $ 1,944 $ 1,951
Consolidated Net Income.... $ 953 $1,002 $ 989 $1,103 $ 1,127 $ 1,064
Earnings per Share of
Common Stock............... $ 1.51 $ 1.57 $ 1.52 $ 1.66 $ 1.68 $ 1.58
Dividends Paid per Share of
Common Stock............... $ 1.10 $ 1.14 $ 1.18 $ 1.22 $ 1.26 $ 1.27
Ratio of Earnings to Fixed
Charges (2)................ 3.23 3.41 3.63 3.75 3.68 3.42
Ratio of Earnings to Fixed
Charges Plus
Preferred Dividend
Requirements
(Pre-Income Tax Basis)
(3)....................... 2.66 2.84 3.01 3.13 3.12 2.95
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CAPITALIZATION AS OF
MARCH 31, 1997
------------------------
ACTUAL AS ADJUSTED(4)
------- ----------------
(MILLIONS, EXCEPT
PERCENTAGES)
<S> <C> <C> <C> <C>
Common Stock Equity.............................. $ 9,262 $ 9,262 43.4%
Preferred Stock of Subsidiaries.................. 833 833 3.9
Subsidiary Obligated Mandatorily Redeemable
Capital and Preferred Securities................. 1,354 1,554 7.3
Long-Term Debt................................... 9,700 9,700 45.4
------- -------- ------
Total, excluding amounts due within one year of
$583 million.................................... $21,149 $ 21,349 100.0%
======= ======== ======
</TABLE>
- --------
(1) "Income Before Interest Charges" and "Consolidated Net Income" for the
years ended December 31, 1994, 1995 and 1996 and the twelve months ended
April 30, 1997 reflect charges of approximately $61,000,000, $17,000,000,
$53,000,000 and $39,000,000, respectively, after taxes relating to benefits
provided pursuant to work force reduction programs.
(2) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Income Before Interest Charges" all income taxes deducted
therefrom and the debt portion of allowance for funds used during
construction; and (ii) "Fixed Charges" consist of "Net Interest Charges"
plus the debt portion of allowance for funds used during construction.
(3) In computing this ratio, "Preferred Dividend Requirements" represent the
before-tax earnings necessary to pay such dividends, computed at the
effective tax rates for the applicable periods.
(4)Reflects the issuance of the Preferred Securities offered hereby.
6
<PAGE>
SOUTHERN COMPANY CAPITAL FUNDING, INC.
Capital was established to obtain financing for Southern and direct and
indirect subsidiaries of Southern other than the operating affiliates. Capital
does not and will not engage in business activities other than such financing.
Capital was incorporated under the laws of Delaware on January 24, 1997 and
is a wholly-owned subsidiary of SEI Holdings, Inc., which itself is a wholly-
owned subsidiary of Southern. The principal executive offices of Capital are
located at 270 Peachtree Street, N.W., Atlanta, Georgia 30303, and the
telephone number is (770) 393-0650.
[CHART OF STRUCTURE OF THE OFFERING APPEARS HERE]
7
<PAGE>
THE OFFERING
The Trust................... Southern Company Capital Trust III is a statutory
business trust created under Delaware law solely
for the purpose of holding Capital's Junior Sub-
ordinated Notes and issuing Preferred Securities
and Common Securities evidencing the entire bene-
ficial interest therein (and engaging in activi-
ties necessary, appropriate, convenient or inci-
dental thereto).
The Trustees................ Bankers Trust Company will act as property
trustee (the "Property Trustee") of the Trust.
Two employees of a subsidiary of Southern also
will act as trustees (the "Administrative Trust-
ees") of the Trust. Bankers Trust (Delaware) will
be an additional trustee (the "Delaware Trustee")
of the Trust. Bankers Trust Company also will act
as trustee (the "Indenture Trustee") under the
Subordinated Note Indenture pursuant to which the
Junior Subordinated Notes will be issued and will
act as trustee under the Preferred Securities
Guarantee (the "Guarantee Trustee").
The Property Trustee, Delaware Trustee and Admin-
istrative Trustees are sometimes referred to as
the "Securities Trustees."
Preferred Securities The Trust will offer 8,000,000 Preferred Securi-
Offered.................... ties evidencing preferred undivided beneficial
interests in the assets of the Trust. Holders of
the Preferred Securities are entitled to receive
cumulative cash distributions at the Securities
Rate, accruing from the date of original issuance
and payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each
year, commencing on June 30, 1997 (each, a "Dis-
tribution Date"). The Securities Rate and the
Distribution Dates for the Preferred Securities
will correspond to the interest rate and payment
dates on the Junior Subordinated Notes, which
will constitute substantially all the assets of
the Trust. As a result, if principal or interest
is not paid on the Junior Subordinated Notes, no
amounts will be paid on the Preferred Securities.
See "Description of the Preferred Securities"
herein.
Record Date................. The record date for each Distribution Date will
be the close of business on the 15th calendar day
prior to such Distribution Date.
Junior Subordinated Notes... The Trust will invest the proceeds from the issu-
ance of the Preferred Securities and Common Secu-
rities in an equivalent amount of Capital's Se-
ries C % junior subordinated deferrable inter-
est notes due , 2037. The Junior Subordinated
Notes will be subordinate and junior in right of
payment to all indebtedness for borrowed money
and other obligations of Capital included in the
definition of Senior Indebtedness. See "Descrip-
tion of the Junior Subordinated Notes--Subordina-
tion."
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Preferred Securities
Guarantee and Notes The payment of distributions on the Preferred Se-
Guarantee.................. curities is guaranteed by Southern under the Pre-
ferred Securities Guarantee, but only to the ex-
tent the Trust has funds legally and immediately
available to make such distributions. If Capital
does not make principal or interest payments on
the Junior Subordinated Notes, the Trust will not
have sufficient funds to make distributions on
the Preferred Securities, in which event the Pre-
ferred Securities Guarantee will not apply to
such distributions until the Trust has sufficient
funds legally available therefor. In such event,
the remedy of a holder of Preferred Securities is
to enforce the Junior Subordinated Notes and the
Notes Guarantee. The obligations of Southern un-
der the Preferred Securities Guarantee will be
subordinate and junior in right of payment to all
other liabilities of Southern and will rank pari
passu with the most senior preferred stock which
may be issued by Southern. See "Risk Factors--
Ranking of and Rights Under the Preferred Securi-
ties Guarantee."
Pursuant to the Subordinated Note Indenture,
Southern will irrevocably and unconditionally
guarantee the due and punctual payment of princi-
pal, premium, if any, and interest on the Junior
Subordinated Notes when and as the same shall be-
come due and payable, whether at maturity, upon
redemption or otherwise. The Notes Guarantee will
be junior in right of payment to all present and
future Senior Indebtedness of Southern. See "De-
scription of the Notes Guarantee."
Southern and Capital have, through the Preferred
Securities Guarantee, the Notes Guarantee, the
Subordinated Note Indenture, the Junior Subordi-
nated Notes, the Trust Agreement and the Agree-
ment as to Expenses and Liabilities, fully and
unconditionally guaranteed, subject to certain
subordination provisions, all the Trust's obliga-
tions with respect to the Preferred Securities.
Interest Deferral........... Capital has the right to defer payments of inter-
est on the Junior Subordinated Notes by extending
the interest payment period on the Junior Subor-
dinated Notes, at any time and from time to time,
for up to 20 consecutive quarters (each, an "Ex-
tension Period"). The only restrictions on Capi-
tal's ability to defer payments of interest are
that during the Extension Period neither Southern
nor Capital may, subject to certain exceptions
described herein, (i) pay dividends on or redeem
any of its capital stock or (ii) pay principal or
interest on any debt securities ranking pari
passu with or subordinate to the Junior Subordi-
nated Notes or the Notes Guarantee. There could
be multiple Extension Periods of varying lengths
throughout the term of the Junior Subordinated
Notes. See "Description of the Preferred Securi-
ties--Distributions" and "Description of the Ju-
nior Subordinated Notes--Option to Extend Inter-
est Payment Period."
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<PAGE>
If interest payments on the Junior Subordinated
Notes are deferred, distributions on the Pre-
ferred Securities will also be deferred. During
an Extension Period, holders of Preferred Securi-
ties will be required to include income in the
form of OID in their gross income for federal in-
come tax purposes in advance of the receipt of
the cash payments attributable to such deferred
interest. See "Description of the Junior Subordi-
nated Notes--Option to Extend Interest Payment
Period" and "Certain Federal Income Tax Consider-
ations--Original Issue Discount" and "--Market
Discount." Deferred interest will bear interest,
compounded quarterly, at a rate per annum equal
to the Securities Rate from the date of deferral
to the date of payment.
Redemption; Distribution.... The Preferred Securities are subject to mandatory
redemption upon repayment of the Junior Subordi-
nated Notes at maturity or their earlier redemp-
tion. The Junior Subordinated Notes are redeem-
able by Capital (in whole or in part), from time
to time on or after , 2002, or at any time in
whole upon the occurrence of a Special Event. If
a partial redemption of the Junior Subordinated
Notes would result in the delisting of the Pre-
ferred Securities, Capital may only redeem the
Junior Subordinated Notes in whole. Any partial
redemption of the Junior Subordinated Notes will
be effected by the redemption of an equivalent
amount of Trust Securities, to be allocated ap-
proximately 97% to the Preferred Securities and
3% to the Common Securities. See "Description of
the Preferred Securities--Redemption" and "--Spe-
cial Event Redemption or Distribution."
Capital will have the right at any time to termi-
nate the Trust and cause the Junior Subordinated
Notes to be distributed to the holders of the
Preferred Securities in liquidation of the Trust.
This right is optional and wholly within the dis-
cretion of Capital. Circumstances under which
Capital may determine to exercise such right
could include the occurrence of an Investment
Company Act Event or a Tax Event, adverse tax
consequences to Southern, Capital 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 "Account-
ing Treatment." See "Description of the Preferred
Securities--Special Event Redemption or Distribu-
tion."
Special Event............... A Special Event means a Tax Event or an Invest-
ment Company Act Event. A "Tax Event" means that
the Administrative Trustees, Southern and Capital
shall have received an opinion from independent
tax counsel experienced in such matters (which
may be counsel to Southern or Capital) to the ef-
fect that, as a result of (a) any amendment to,
or change (including
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<PAGE>
any announced prospective change) in, the laws
(or any regulations thereunder) of the United
States or any political subdivision or taxing au-
thority thereof or therein or (b) any amendment
to, or change in, an interpretation or applica-
tion of such laws or regulations, there is more
than an insubstantial risk that (i) the Trust
would be subject to United States federal income
tax with respect to income accrued or received on
the Junior Subordinated Notes, (ii) interest pay-
able to the Trust on the Junior Subordinated
Notes would not be deductible by a member of
Southern's consolidated tax group 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 governmen-
tal charges, which change or amendment becomes
effective on or after the Issue Date. An "Invest-
ment Company Act Event" means that the Adminis-
trative Trustees, Southern and Capital shall have
received an opinion of independent counsel (which
may be counsel to Southern or Capital) to the ef-
fect that, as a result of a change in law or reg-
ulation or a written change in interpretation or
application of law or regulation by any legisla-
tive body, court, governmental agency or regula-
tory authority after the Issue Date, there is
more than an insubstantial risk that the Trust is
or will be considered an investment company under
the Investment Company Act of 1940, as amended
(the "1940 Act").
Redemption Price............
In the event of the redemption of the Trust Secu-
rities or other termination of the Trust without
distribution of the Junior Subordinated Notes,
each Preferred Security shall be entitled to re-
ceive a liquidation amount of $25 plus accrued
and unpaid distributions thereon (including in-
terest thereon) to the date of payment.
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<PAGE>
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus and should consider
particularly the following matters:
RANKING OF AND RIGHTS UNDER THE JUNIOR SUBORDINATED NOTES AND THE NOTES
GUARANTEE
No amounts will be available to make payments on the Preferred Securities
except from payments made on the Junior Subordinated Notes. The obligations of
Capital under the Junior Subordinated Notes are subordinate and junior in
right of payment to all Senior Indebtedness of Capital whenever incurred.
Capital currently has no Senior Indebtedness outstanding. The obligations of
Southern under the Notes Guarantee will be subordinate and junior to all
present and future Senior Indebtedness of Southern. At March 31, 1997, Senior
Indebtedness of Southern aggregated approximately $794,000,000. There are no
terms in the Preferred Securities, the Junior Subordinated Notes, the
Preferred Securities Guarantee or the Notes Guarantee that limit Southern's or
Capital's ability to incur additional indebtedness, including indebtedness
that ranks senior to the Junior Subordinated Notes or the Notes Guarantee. See
"Description of the Preferred Securities Guarantee," "Description of the
Junior Subordinated Notes-- Subordination" and "Description of the Notes
Guarantee."
RANKING OF AND RIGHTS UNDER THE PREFERRED SECURITIES GUARANTEE
Southern's obligations under the Preferred Securities Guarantee are
subordinate and junior in right of payment to all liabilities of Southern and
will be pari passu with the most senior preferred stock issued by Southern. If
Capital were to default in its obligation to pay amounts payable on the Junior
Subordinated Notes, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and in such event holders of the Preferred Securities would not be
able to rely upon the Preferred Securities Guarantee for payment of such
amounts.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Capital has the right under the Subordinated Note Indenture, and at any
time, and from time to time, to defer payments of interest on the Junior
Subordinated Notes for a period of up to 20 consecutive quarters (each, an
"Extension Period"), but not beyond the stated maturity of the Junior
Subordinated Notes. Prior to the termination of any Extension Period, Capital
may further defer payments of interest, provided that such Extension Period,
together with all such previous and further extensions thereof, may not exceed
20 consecutive quarters. Upon the termination of any Extension Period and the
payment of all amounts then due, Capital may select a new Extension Period,
subject to the above requirements. There could be multiple Extension Periods
of varying lengths throughout the term of the Junior Subordinated Notes.
Deferred installments of interest on the Junior Subordinated Notes will bear
interest, compounded quarterly, at a rate per annum equal to the Securities
Rate to the extent permitted by applicable law. The payment of such deferred
interest, together with interest thereon, will be passed through to the
holders of the Preferred Securities as received at the end of any Extension
Period.
The only restrictions on Capital's ability to defer payments of interest are
that during any Extension Period neither Southern nor Capital may, subject to
certain exceptions described herein, (i) pay dividends on or redeem any of its
capital stock or (ii) pay principal or interest on any debt securities ranking
pari passu with or subordinate to the Junior Subordinated Notes or the Notes
Guarantee. See "Description of the Preferred Securities--Distributions" and
"Description of the Junior Subordinated Notes-- Option to Extend Interest
Payment Period."
Should Capital exercise its rights to defer payments of interest, each
holder of Preferred Securities will be required to include income in the form
of OID in its gross income for United States federal income tax purposes in
respect of the deferred interest allocable to its Preferred Securities. As a
result,
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<PAGE>
holders of Preferred Securities will recognize income for United States
federal income tax purposes in advance of the receipt of cash and will not
receive the cash from the Trust related to such income if such holders dispose
of their Preferred Securities prior to the record date for the date on which
distributions of such amounts are made. See "Certain Federal Income Tax
Considerations -- Original Issue Discount" and "-- Sale of Preferred
Securities." INVESTORS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES OF AN INVESTMENT IN THE PREFERRED SECURITIES.
Capital has no current intention of exercising its right to defer payments
of interest by extending the interest payment period on the Junior
Subordinated Notes. However, should Capital determine to exercise such right
in the future, the market price of the Preferred Securities is likely to be
affected. A holder that disposes of its Preferred Securities during an
Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Preferred Securities. In
addition, as a result of the existence of Capital's right to defer interest
payments, the market price of the Preferred Securities (which represent an
undivided beneficial interest in the Junior Subordinated Notes) may be more
volatile than other similar securities that do not have such rights.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If a Special Event shall occur and be continuing, Capital will have the
option to redeem the Junior Subordinated Notes in cash (with the result that
the Preferred Securities shall be redeemed). In addition, Capital will have
the right at any time to terminate the Trust and cause the Junior Subordinated
Notes to be distributed to the holders of the Preferred Securities in
liquidation of the Trust. See "Description of the Preferred Securities--
Special Event Redemption or Distribution."
There can be no assurance as to the market price for the Junior Subordinated
Notes that may be distributed in exchange for Preferred Securities if a
termination or liquidation of the Trust were to occur. Accordingly, the Junior
Subordinated Notes that the investor may receive on termination and
liquidation of the Trust may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby. See
"Description of the Junior Subordinated Notes."
POSSIBLE TAX LAW CHANGES
On February 6, 1997, the revenue portion of President Clinton's fiscal 1998
budget proposal (the "Proposal") was released. The Proposal would, among other
things, generally deny interest deductions for interest on an instrument
issued by a corporation that has a maximum term of more than 15 years and that
is not shown as indebtedness on the separate balance sheet of the issuer. If
the Proposal were to apply to the Junior Subordinated Notes, Southern would be
unable to deduct interest on the Junior Subordinated Notes. As currently
drafted, however, the Proposal would be effective generally for instruments
issued on or after the date of first Congressional committee action and, as
such, is not expected to apply to the Junior Subordinated Notes. Southern
believes that, under current law, it will be able to deduct interest on the
Junior Subordinated Notes. There can be no assurance, however, that current or
future legislative proposals or final legislation will not affect the ability
of Southern to deduct interest on the Junior Subordinated Notes. Such a change
could give rise to a Tax Event, which would permit Capital to cause a
redemption of the Preferred Securities, as described more fully under
"Description of the Preferred Securities--Special Event Redemption or
Distribution."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and, except
for the rights of holders of Preferred Securities to appoint a Substitute
Property Trustee upon the occurrence of certain events described herein, will
not be entitled to vote to appoint, remove or replace the Securities Trustees,
which voting rights are vested exclusively in the holder of the Common
Securities.
TRADING CHARACTERISTICS OF PREFERRED SECURITIES
The Preferred Securities are expected to be listed on the NYSE, subject to
official notice of issuance. The Preferred Securities are expected to trade at
a price that takes into account the value,
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<PAGE>
if any, of accrued but unpaid distributions; thus, purchasers will not pay and
sellers will not receive accrued and unpaid interest with respect to the
Preferred Securities that is not included in the trading price thereof. If a
Preferred Security is disposed of 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 a U.S. holder for tax purposes
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. If an
Extension Period occurs, interest on the Junior Subordinated Notes will be
included in the gross income of U.S. holders of Preferred Securities as it
accrues rather than when it is paid. Should an Extension Period occur, a
holder who disposes of his Preferred Securities between record dates for
payments of distributions thereon would be required to include accrued but
unpaid interest on the Junior Subordinated Notes through the date of
disposition in income as OID, and to add such amount to his adjusted tax basis
in his pro rata share of the related Junior Subordinated Notes deemed disposed
of. To the extent the selling price is less than the holder's adjusted tax
basis, a holder generally will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "Certain Federal Income Tax
Considerations--Original Issue Discount" and "--Sale of Preferred Securities."
The trading price of the Preferred Securities is likely to be sensitive to
the level of interest rates generally. If interest rates rise in general, the
trading price of the Preferred Securities may decline to reflect the
additional yield requirements of the purchasers. Conversely, a decline in
interest rates may increase the trading price of the Preferred Securities,
although any increase will be moderated by Capital's ability to call the
Junior Subordinated Notes at any time on or after , 2002 at a redemption
price equal to 100% of the principal amount to be redeemed plus accrued but
unpaid interest. In addition, because holders of Preferred Securities will be
paid only from payments on the Junior Subordinated Notes and may receive
Junior Subordinated Notes upon the termination of the Trust, prospective
purchasers of Preferred Securities are making an investment decision with
regard to the Junior Subordinated Notes and should carefully review all the
information regarding the Junior Subordinated Notes contained herein. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution," "Description of the Junior Subordinated Notes" and "Description
of the Notes Guarantee."
THE SOUTHERN COMPANY
Southern was incorporated under the laws of Delaware on November 9, 1945.
Southern is domesticated under the laws of Georgia and is qualified to do
business as a foreign corporation under the laws of Alabama. The principal
executive offices of Southern are located at 270 Peachtree Street, N.W.,
Atlanta, Georgia 30303, and the telephone number is (770) 393-0650.
Southern owns all the outstanding common stock of Alabama Power Company
("ALABAMA"), Georgia Power Company ("GEORGIA"), Gulf Power Company ("GULF"),
Mississippi Power Company ("MISSISSIPPI") and Savannah Electric and Power
Company ("SAVANNAH") (ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH being
collectively referred to herein as the "operating affiliates"), each of which
is an operating public utility company, and of Southern Company Services, Inc.
(the system service company). ALABAMA and GEORGIA each owns 50% of the
outstanding common stock of Southern Electric Generating Company ("SEGCO").
The operating affiliates supply electric service in the states of Alabama,
Georgia, Florida, Mississippi and Georgia, respectively, and SEGCO owns
generating units at a large electric generating station which supplies power
to ALABAMA and GEORGIA. Southern also owns all the outstanding common stock of
Southern Energy, Inc. ("Southern Energy"), The Southern Development and
Investment Group, Inc. ("Southern Development"), Southern Nuclear Operating
Company, Inc. ("Southern Nuclear") and Southern Communications Services, Inc.
("Southern Communications"). Southern Energy designs, builds, owns and
operates power production and delivery facilities and provides a broad range
of technical services to industrial
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<PAGE>
companies and utilities in the United States and a number of international
markets. Southern Development explores, develops and markets energy management
services and other business lines relating to Southern's core business of
generating and distributing energy. Southern Nuclear provides services to the
Southern electric system's nuclear plants. Southern Communications provides
digital wireless communications services to the operating affiliates and
regional non-affiliates.
SOUTHERN COMPANY CAPITAL FUNDING, INC.
Capital was established to obtain financing for Southern and direct and
indirect subsidiaries of Southern other than the operating affiliates. Capital
does not and will not engage in business activities other than such financing.
Capital was incorporated under the laws of Delaware on January 24, 1997 and
is a wholly-owned subsidiary of SEI Holdings, Inc., which itself is a wholly-
owned subsidiary of Southern. The principal executive offices of Capital are
located at 270 Peachtree Street, N.W., Atlanta, Georgia 30303, and the
telephone number is (770) 393-0650.
SOUTHERN COMPANY CAPITAL TRUST III
The Trust is a statutory business trust created under Delaware law pursuant
to the filing of a certificate of trust with the Delaware Secretary of State
on May 23, 1997. The Trust's business is defined in a trust agreement,
executed by Capital, as Depositor, and Bankers Trust (Delaware), as the
Delaware Trustee thereunder. This trust agreement will be amended and restated
in its entirety on the Issue Date (the "Trust Agreement"). The Trust exists
for the exclusive purposes of (i) issuing the Trust Securities representing
undivided beneficial interests in the assets of the Trust, (ii) investing the
gross proceeds of the Trust Securities in the Junior Subordinated Notes, and
(iii) engaging in only those other activities necessary, appropriate,
convenient or incidental thereto. The Trust has a term of approximately 45
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. Capital 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, 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 Capital as the holder of the Common
Securities. Two employees of a subsidiary of Southern initially will serve as
Administrative Trustees. Bankers Trust Company will serve as Property Trustee
and will hold legal title to the Junior Subordinated Notes issued by Capital
on behalf of the Trust and the holders of the Trust Securities. Bankers Trust
(Delaware) will serve as Delaware Trustee. In certain circumstances, the
holders of a majority in liquidation amount of the Preferred Securities will
be entitled to appoint a Substitute Property Trustee. See "Description of the
Preferred Securities -- Voting Rights."
The Property Trustee will hold legal title to the Junior Subordinated Notes
for the benefit of the Trust and the holders of the Trust Securities and will
have the power to exercise all rights, powers and privileges under the
Subordinated Note Indenture as the holder of the Junior Subordinated Notes.
The Property Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities.
Subject to the right of the holders of the Preferred Securities to appoint a
Substitute Property Trustee in certain instances, Capital, as the holder of
all the Common Securities, will have the right to appoint, remove or replace
all the Securities Trustees.
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<PAGE>
The Junior Subordinated Notes will constitute substantially all of the
assets of the Trust. Other assets that may constitute "Trust Property" (as
that term is defined in the Trust Agreement) include any cash on deposit in,
or owing to, the payment account as established under the Trust Agreement, as
well as any other property or assets held by the 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 Trust Indenture Act of
1939, as amended (the "1939 Act"). See "Description of the Preferred
Securities."
The Trust's office in the State of Delaware is c/o Bankers Trust (Delaware),
1001 Jefferson Street, Suite 550, Wilmington, Delaware 19801-1457. The
principal place of business of the Trust shall be c/o Southern, 270 Peachtree
Street, N.W., Atlanta, Georgia 30303, telephone (770) 393-0650, Attn:
Secretary.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of Southern and, accordingly, the accounts of the Trust will be included in
the consolidated financial statements of Southern. The Preferred Securities
will be presented as a separate line item in the consolidated balance sheet of
Southern, and appropriate disclosures concerning the Preferred Securities, the
Preferred Securities Guarantee, the Junior Subordinated Notes and the Notes
Guarantee will be included in the notes to the consolidated financial
statements. For financial reporting purposes, Southern will record
distributions payable on the Preferred Securities as an expense.
USE OF PROCEEDS
The Trust will invest all of the proceeds from the sale of the Preferred
Securities in the Junior Subordinated Notes. The proceeds from such investment
will be remitted to Southern and used by it to repay a portion of its
outstanding short-term debt which aggregated approximately $ million as of
, 1997.
RECENT RESULTS OF OPERATIONS
For the twelve months ended April 30, 1997, the unaudited amounts of
"Operating Revenues," "Income Before Interest Charges," "Consolidated Net
Income," "Earnings per Share of Common Stock" and "Dividends Paid per Share of
Common Stock" were $10,576,000,000, $1,951,000,000, $1,064,000,000, $1.58 and
$1.27, respectively. In the opinion of the management of Southern, the above
amounts for the twelve months ended April 30, 1997 reflect all adjustments
(which were only normal recurring adjustments, except as indicated in Note (1)
to the Selected Consolidated Financial Information under "Summary" above)
necessary to present fairly the results of operations for such period. The
"Ratio of Earnings to Fixed Charges" and the "Ratio of Earnings to Fixed
Charges Plus Preferred Dividend Requirements (Pre-Income Tax Basis)" for the
twelve months ended April 30, 1997 were 3.42 and 2.95, respectively.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement will be qualified as an indenture under the
1939 Act. The Property Trustee will act as the indenture trustee with respect
to the Trust, as well as the Preferred Securities 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 is a part, as well as the 1939 Act.
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<PAGE>
GENERAL
The Trust Agreement authorizes the Administrative Trustees, on behalf of the
Trust, to issue the Preferred Securities, which represent preferred undivided
beneficial interests in the assets of the Trust, and the Common Securities,
which represent common undivided beneficial interests in the assets of the
Trust. All of the Common Securities will be owned by Capital. 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 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 Southern on a subordinated basis as and to the extent
described under "Description of the Preferred Securities Guarantee." The
Preferred Securities 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 Junior Subordinated Notes. In addition, a
holder of Preferred Securities may institute a legal proceeding directly
against Capital, without first instituting a legal proceeding against the
Property Trustee or any other person or entity, for enforcement of payment to
such holder of principal of or interest on the Junior Subordinated Notes
having a principal amount equal to the aggregate stated liquidation amount of
the Preferred Securities of such holder on or after the due dates specified in
the Junior Subordinated Notes. The above mechanisms and obligations, together
with Southern's obligations under the Notes Guarantee and the Agreement as to
Expenses and Liabilities, constitute a full and unconditional guarantee by
Southern and Capital of payments due on the Preferred Securities. See "--
Voting Rights" below.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at the Securities
Rate and will accrue from the Issue Date and, except in the event of an
Extension Period, will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year. 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.
Capital has the right under the Subordinated Note Indenture to defer
payments of interest on the Junior Subordinated Notes by extending the
interest payment period from time to time on the Junior Subordinated Notes
(each, an "Extension Period") which, if exercised, would defer quarterly
distributions on the Preferred Securities during any such extended interest
payment period. Deferred
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<PAGE>
installments of interest on the Junior Subordinated Notes will bear interest,
compounded quarterly, at a rate per annum equal to the Securities Rate to the
extent permitted by applicable 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 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 Junior Subordinated Notes. See "Description of the
Junior Subordinated Notes."
REDEMPTION
The Preferred Securities are subject to mandatory redemption upon repayment
of the Junior Subordinated Notes at maturity or their earlier redemption. The
Junior Subordinated Notes will mature on , 2037 and may be redeemed, in
whole or in part, at the option of Capital, at any time on or after ,
2002 or at any time in whole upon the occurrence of a Special Event. Upon the
repayment of the Junior Subordinated Notes, whether at maturity or upon
redemption, the proceeds from such repayment or payment shall simultaneously
be applied to redeem a like amount of Trust Securities upon not less than 30
nor more than 60 days' notice, at the Redemption Price (as defined below). See
"Description of the Junior Subordinated Notes--Optional Redemption." If a
partial redemption of the Junior Subordinated Notes would result in the
delisting of the Preferred Securities, Capital may only redeem the Junior
Subordinated Notes in whole. In the event that fewer than all of the
outstanding Trust Securities are to be redeemed, the Preferred Securities to
be redeemed will be selected as described under "--Book-Entry Only Issuance--
The Depository Trust Company" below. If the Preferred Securities are no longer
in book-entry only form, the Preferred Securities to be redeemed will be
selected by such method as the Property Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $25 or integral multiples thereof) of the aggregate liquidation
amount of Preferred Securities of a denomination larger than $25; provided;
however, that before undertaking the redemption of the Preferred Securities on
other than a pro rata basis, the Property Trustee shall have received an
opinion of counsel that the status of the Trust as a grantor trust for federal
income tax purposes would not be adversely affected.
The Redemption Price for each Preferred Security shall equal the stated
liquidation amount of $25 plus accrued and unpaid distributions thereon to the
date of payment.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event at any time, Capital will have the
option to redeem the 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,
Southern and Capital shall have received an opinion of independent counsel
(which may be counsel to Southern or Capital) to the effect that, as a result
of a change in law or regulation or a written change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority after the Issue Date, there is more than an
insubstantial risk that the Trust is or will be considered an investment
company under the 1940 Act.
"Tax Event" means that the Administrative Trustees, Southern and Capital
shall have received an opinion from independent tax counsel experienced in
such matters (which may be counsel to Southern or Capital) 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
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interpretation or application of such laws or regulations, there is more than
an insubstantial risk that (i) the Trust would be subject to United States
federal income tax with respect to income accrued or received on the Junior
Subordinated Notes, (ii) interest payable to the Trust on the Junior
Subordinated Notes would not be deductible by a member of Southern's
consolidated tax group 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. See "Risk Factors--Possible Tax Law
Changes."
Capital 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
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
Capital. Circumstances under which Capital may determine to exercise such
right could include the occurrence of an Investment Company Act Event or a Tax
Event, adverse tax consequences to Southern, Capital 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 Junior Subordinated Notes are distributed to the holders of the Preferred
Securities, Southern and Capital will use their best efforts to have the
Junior Subordinated Notes listed on the NYSE or on such other exchange as the
Preferred Securities are then listed. After the date for any distribution of
Junior Subordinated Notes upon termination of the Trust, (i) the Preferred
Securities and the Preferred Securities Guarantee will no longer be deemed to
be outstanding, (ii) the depositary or its nominee, as the record holder of
the Preferred Securities, will receive a registered global certificate or
certificates representing the Junior Subordinated Notes to be delivered upon
such distribution and (iii) any certificates representing Preferred Securities
and the Preferred Securities Guarantee not held by the depositary or its
nominee will be deemed to represent Junior Subordinated Notes having an
aggregate principal amount equal to the aggregate stated liquidation amount
of, with an interest rate identical to the Securities Rate of, and accrued and
unpaid interest equal to accrued and unpaid distributions on, such Preferred
Securities, until such certificates are presented to Capital or its agent for
transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Notes that may be distributed in
exchange for the Preferred Securities if a termination and liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor
may purchase, or the Junior Subordinated Notes that the investor may receive
on termination and liquidation of the Trust, may trade at a discount to the
price that the investor paid to purchase the Preferred Securities offered
hereby.
REDEMPTION PROCEDURES
In the event that fewer than all of the Trust Securities are to be redeemed,
then the aggregate liquidation 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 applicable Redemption Price with the proceeds from the contemporaneous
redemption of the 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
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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 not in book-entry only form, the Property Trustee, subject to
the immediately preceding paragraph, shall irrevocably deposit with the Paying
Agent funds sufficient to pay the applicable Redemption Price and will give
the Paying Agent irrevocable instructions to pay the Redemption Price to the
holders thereof upon surrender of their Preferred Securities certificates. If
notice of redemption shall have been given and funds deposited as required,
then immediately prior to the close of business on the date of such deposit,
distributions will cease to accrue and all rights of holders of such Preferred
Securities so called for redemption will cease, except the right of the
holders of such Preferred Securities to receive the applicable 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 Southern pursuant to the Preferred Securities
Guarantee or the Notes 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 Junior Subordinated Notes,
the Preferred Securities Guarantee and the Notes Guarantee" and "Description
of the Preferred Securities Guarantee--Events of Default."
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), Southern, Capital or any
of their affiliates may, at any time and from time to time, purchase
outstanding Preferred Securities by tender, in the open market or by private
agreement.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as the initial securities
depositary for the Preferred Securities. The Preferred Securities will be
issued only as fully registered securities registered in the name of Cede &
Co., DTC's nominee. One or more fully registered global Preferred Securities
certificates will be issued, representing in the aggregate the total number of
Preferred Securities, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the 1934 Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the NYSE, the American
Stock Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser
of Preferred Securities ("Beneficial Owner") is in turn to be recorded
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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, Capital or Southern, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of distributions
to DTC is the responsibility of the Trust, disbursement of such payments to
Direct Participants is the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
will not be entitled to receive physical delivery of Preferred Securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Preferred Securities. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. Such laws may impair the ability to
transfer beneficial interests in a global Preferred Security.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates will be printed
and delivered to the holders of record. Additionally, Southern, Capital or the
Trust 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.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Southern, Capital and the Trust believe to
be reliable, but Southern, Capital 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,
2042, or earlier upon (i) the occurrence of a Bankruptcy Event (as defined in
the Trust Agreement) in respect of Capital, dissolution or liquidation of
Capital, or dissolution of the Trust pursuant to a judicial decree; (ii) the
delivery of written direction to the Property Trustee by Capital, as
Depositor, at any time (which direction is optional and wholly within the
discretion of Capital, as Depositor) to terminate the Trust and distribute the
Junior Subordinated Notes to the holders of the Trust Securities in
liquidation of the Trust (see "--Special Event Redemption or Distribution"
above); or (iii) the payment at maturity or redemption of all of the Junior
Subordinated Notes, and the consequent payment of the Trust Securities.
If an early termination occurs as described in clause (i) 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 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 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"); 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
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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, Southern and Capital,
unless such Trust Agreement Event of Default shall have been cured or waived.
If a Trust Agreement Event of Default occurs and is continuing, then,
pursuant to the Trust Agreement, holders of a majority in aggregate
liquidation amount of Preferred Securities have the right to direct the
exercise of any trust or power conferred upon the Property Trustee under the
Trust Agreement, including the right to direct the Property Trustee under the
Trust Agreement to exercise the remedies available to it as holder of the
Junior Subordinated Notes and the Notes Guarantee. If the Property Trustee
fails to enforce its rights under the Junior Subordinated Notes and the Notes
Guarantee, a holder of Preferred Securities may, to the fullest extent
permitted by applicable law, institute a legal proceeding directly against
Southern and Capital 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 Southern and Capital, without
first instituting a legal proceeding against the Property Trustee or any other
person or entity, for enforcement of payment to such holder of principal of or
interest on the Junior Subordinated Notes having a principal amount equal to
the aggregate stated liquidation amount of the Preferred Securities of such
holder on or after the due dates specified in the Junior Subordinated Notes.
See "Relationship Among the Preferred Securities, the Junior Subordinated
Notes, the Preferred Securities Guarantee and the Notes Guarantee" and
"Description of the Preferred Securities Guarantee--Events of Default."
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."
VOTING RIGHTS
Except as provided below and under "Description of the Preferred Securities
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Trust Agreement, the holders of the Preferred Securities will have no voting
rights.
If any proposed amendment to the Trust Agreement provides for, or the
Securities Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the 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.
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So long as any Junior Subordinated Notes are held by the Property Trustee,
the Securities Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee
(as defined herein), or executing any trust or power conferred on the
Indenture Trustee with respect to the Junior Subordinated Notes, (ii) waive
any past default which is waivable under the applicable provisions of the
Subordinated Note Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Junior Subordinated Notes shall be
due and payable, or (iv) consent to any amendment, modification or termination
of the Subordinated Note Indenture or the Junior Subordinated Notes, where
such consent shall be required, or to any other action, as the holder of the
Junior Subordinated Notes, under the Subordinated Note Indenture, without, in
each case, obtaining the prior approval of the holders of at least 66 2/3% in
liquidation 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 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
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 Southern, Capital, the Securities Trustees or any
affiliate of Southern, Capital 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
(as defined in the Trust Agreement) may at the time be located, the holder of
the Common Securities and the Property Trustee shall have power to appoint,
and upon the written request of the Property Trustee, Capital, as Depositor,
shall for such purpose join with the Property Trustee in the execution,
delivery and performance of all instruments and agreements necessary or proper
to appoint, one or more persons approved by the Property Trustee either to act
as co-property trustee, jointly with the Property Trustee, of all or any part
of such Trust Property, or to act as separate trustee of any such property, in
either case with such powers as may be provided in the instrument of
appointment, and to vest in such person or persons in such capacity, any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the Trust Agreement. If Capital, 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 Capital 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
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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 Capital, with the consent of
the Administrative Trustees and without the consent of the holders of the
Trust Securities, consolidate, amalgamate, merge with or into, or be replaced
by a trust organized as such under the laws of any state; provided, that (i)
such successor entity either (x) expressly assumes all of the obligations of
the Trust with respect to the Trust Securities or (y) substitutes for the
Preferred Securities other securities having substantially the same terms as
the Trust Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Trust Securities rank in priority with respect
to distributions and payments upon liquidation, redemption and otherwise, (ii)
Capital expressly appoints a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the Junior
Subordinated Notes, (iii) the Preferred Securities or any Successor Securities
are listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or other organization on which
the Preferred Securities are then listed, (iv) such merger, consolidation,
amalgamation or replacement does not cause the Preferred Securities (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation, amalgamation
or replacement does not adversely affect the rights, preferences and
privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect, (vi) such successor entity has a purpose
substantially identical to that of the Trust, (vii) prior to such merger,
consolidation, amalgamation or replacement, Southern 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) Southern guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Preferred
Securities Guarantee. Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100% in liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or the successor entity to be classified as
other than a grantor trust for federal income tax purposes.
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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 in global form
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
Capital. 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.
Bankers Trust Company, the Property Trustee, also serves as Indenture
Trustee and Guarantee Trustee. Southern and certain of its subsidiaries
maintain deposit accounts and banking relationships with Bankers Trust
Company. Bankers Trust Company serves as trustee under other indentures
pursuant to which securities of subsidiaries of Southern are outstanding.
GOVERNING LAW
The Trust Agreement and the Trust Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware;
provided that the immunities and standard of care of the Property Trustee
shall be governed by New York law.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to operate the Trust
so that the Trust will not be deemed to be an "investment company" required to
be registered under the 1940 Act or taxed
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as other than a grantor trust for federal income tax purposes and so that the
Junior Subordinated Notes will be treated as indebtedness of Capital for
federal income tax purposes. In this connection, the Administrative Trustees
and Capital 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 Capital 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 JUNIOR SUBORDINATED NOTES
Set forth below is a description of the terms of the Junior Subordinated
Notes. The following description does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Subordinated
Note Indenture, dated as of , 1997, among Capital, Southern and Bankers
Trust Company, as trustee (the "Indenture Trustee"), as to be supplemented by
a supplemental indenture thereto (the Subordinated Note Indenture, as so
supplemented, is hereinafter referred to as the "Subordinated Note
Indenture"), the forms of which are filed as exhibits to the Registration
Statement of which this Prospectus is a part. The Subordinated Note Indenture
will be qualified as an indenture under the 1939 Act. The terms of the Junior
Subordinated Notes will include those stated in the Subordinated Note
Indenture and those made a part of the Subordinated Note Indenture by
reference to the 1939 Act. Certain capitalized terms used herein are defined
in the Subordinated Note Indenture.
GENERAL
The Junior Subordinated Notes will be issued as a series of junior
subordinated notes under the Subordinated Note Indenture. The Junior
Subordinated Notes will be limited in aggregate principal amount to
$206,186,000, such amount being the approximate aggregate liquidation amount
of the Trust Securities.
The entire principal amount of the Junior Subordinated Notes will mature and
become due and payable, together with any accrued and unpaid interest thereon,
including Additional Interest, if any, on , 2037. The Junior Subordinated
Notes are not subject to any sinking fund provision.
The terms of the Junior Subordinated Notes correspond to those of the
Preferred Securities, as described herein.
The Subordinated Note Indenture does not contain provisions that afford
holders of Junior Subordinated Notes protection in the event of a highly
leveraged transaction involving Southern or Capital.
SUBORDINATION
The Junior Subordinated Notes are subordinated and junior in right of
payment to all Senior Indebtedness (as defined below) of Capital. No payment
of principal of (including redemption payments, if any), or premium, if any,
or interest on (including Additional Interest (as defined herein)) the Junior
Subordinated Notes may be made if (a) any Senior Indebtedness is not paid when
due and any applicable grace period with respect to such default has ended
with such default not being cured or waived or otherwise ceasing to exist, or
(b) the maturity of any Senior Indebtedness has been accelerated because of a
default, or (c) notice has been given of the exercise of an option to require
repayment, mandatory payment or prepayment or otherwise. Upon any payment or
distribution of assets of Capital to creditors upon any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of
creditors, marshalling of assets or liabilities, or any bankruptcy, insolvency
or similar proceedings of Capital, the holders of Senior Indebtedness shall be
entitled to receive payment in full of all amounts due or to become due on or
in respect of all Senior Indebtedness before the holders of
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the Junior Subordinated Notes are entitled to receive or retain any payment or
distribution. Subject to the prior payment of all Senior Indebtedness, the
rights of the holders of the Junior Subordinated Notes will be subrogated to
the rights of the holders of Senior Indebtedness to receive payments and
distributions applicable to such Senior Indebtedness until all amounts owing
on the Junior Subordinated Notes are paid in full.
The term "Senior Indebtedness" means, with respect to any person, (i) any
payment due in respect of indebtedness of such person, whether outstanding at
the date of execution of the Subordinated Note Indenture or thereafter
incurred, created or assumed, (a) in respect of money borrowed (including any
financial derivative, hedging or futures contract or similar instrument) and
(b) evidenced by securities, debentures, bonds, notes or other similar
instruments issued by such person that, by their terms, are senior or senior
subordinated debt securities; (ii) all capital lease obligations; (iii) all
obligations issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations of such person under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business and long-term purchase obligations); (iv) all
obligations for the reimbursement of any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction; (v) all
obligations of the type referred to in clauses (i) through (iv) above of other
persons the payment of which such person is responsible or liable as obligor,
guarantor or otherwise; and (vi) all obligations of the type referred to in
clauses (i) through (v) above of other persons secured by any lien on any
property or asset of such person (whether or not such obligation is assumed by
such person), except for (1) any such indebtedness that is by its terms
subordinated to or pari passu with the Junior Subordinated Notes and (2) any
unsecured indebtedness between or among such person or its affiliates. Such
Senior Indebtedness shall continue to be Senior Indebtedness and be entitled
to the benefits of the subordination provisions contained in the Subordinated
Note Indenture irrespective of any amendment, modification or waiver of any
term of such Senior Indebtedness.
The Subordinated Note Indenture does not limit the aggregate amount of
Senior Indebtedness that may be issued by Capital. Capital currently has no
Senior Indebtedness outstanding.
OPTIONAL REDEMPTION
Capital shall have the right to redeem the Junior Subordinated Notes, in
whole or in part, without premium, from time to time, on or after , 2002,
or at any time in whole upon the occurrence of a Special Event as described
under "Description of the Preferred Securities--Special Event Redemption or
Distribution," upon not less than 30 nor more than 60 days' notice, at a
Redemption Price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest, including Additional Interest, if any, to the
Redemption Date. If a partial redemption of the Junior Subordinated Notes
would result in the delisting of the Preferred Securities, Capital may only
redeem the Junior Subordinated Notes in whole.
INTEREST
Each Junior Subordinated Note shall bear interest at the Securities Rate
from the Issue Date, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year to the person in whose name such
Junior Subordinated Note is registered at the close of business on the
fifteenth calendar day prior to such payment date. The amount of interest
payable will be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on the Junior
Subordinated Notes is not a Business Day, then payment of the interest payable
on such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year,
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
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OPTION TO EXTEND INTEREST PAYMENT PERIOD
Capital shall have the right at any time, and from time to time, to defer
payments of interest on the 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, Capital shall pay all
interest then accrued and unpaid (including any Additional Interest) (together
with interest thereon at the Securities Rate compounded quarterly to the
extent permitted by applicable law); provided, that if Capital shall have
given notice of its election to select an Extension Period, subject to the
exceptions described under "--Certain Covenants" below, (a) neither Southern
nor Capital shall 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) neither Southern nor Capital shall make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by it which rank pari passu with or junior to the Junior
Subordinated Notes or the Notes Guarantee. Prior to the termination of any
Extension Period, Capital 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, Capital may select a new Extension Period,
subject to the above requirements. Capital has no present intention of
exercising its rights to defer payments of interest by extending the interest
payment period on the Junior Subordinated Notes. See "Certain Federal Income
Tax Considerations--Original Issue Discount."
Capital shall give the holder or holders of the 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 Capital or
the Trust is required to give notice to any applicable self-regulatory
organization of the record date or the date such distributions are payable.
ADDITIONAL INTEREST
"Additional Interest" is defined in the Subordinated Note Indenture as (i)
such additional amounts as may be required so that the net amounts received
and retained by a holder of Junior Subordinated Notes (if the holder is a
Trust) after paying taxes, duties, assessments or governmental charges of
whatever nature (other than withholding taxes) imposed by the United States or
any other taxing authority will not be less than the amounts the holder would
have received had no such taxes, duties, assessments, or other governmental
charges been imposed; and (ii) any interest due and not paid on an interest
payment date, together with interest thereon from such interest payment date
to the date of payment, compounded quarterly, on each interest payment date.
NOTES GUARANTEE
Pursuant to the Subordinated Note Indenture, Southern will irrevocably and
unconditionally guarantee the Junior Subordinated Notes as described under
"Description of the Notes Guarantee."
CERTAIN COVENANTS
Southern and Capital each covenants in the Subordinated Note Indenture, for
the benefit of the holders of each series of Junior Subordinated Notes, that,
(i) if at such time Capital shall have given notice of its election to extend
an interest payment period for such series of Junior Subordinated Notes and
such extension shall be continuing, (ii) if at such time Southern shall be in
default with respect to its payment or other obligations under (A) the
Preferred Securities Guarantee with respect to the Trust Securities, if any,
related to such series of Junior Subordinated Notes or (B) the Notes
Guarantee, if any, related to such series of Junior Subordinated Notes, or
(iii) if at such time an Event of Default
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thereunder with respect to such series of Junior Subordinated Notes shall have
occurred and be continuing, (a) neither Southern nor Capital shall declare or
pay any dividend or make any distributions with respect to, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock, and (b) neither Southern nor Capital shall make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by it which rank pari passu with or junior to the
Junior Subordinated Notes or the Notes Guarantee. None of the foregoing,
however, shall restrict (i) any of the actions described in the preceding
sentence resulting from any reclassification of Southern's or Capital's
capital stock or the exchange or conversion of one class or series of
Southern's or Capital's capital stock for another class or series of
Southern's or Capital's capital stock, (ii) the purchase of fractional
interests in shares of Southern's or Capital's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (iii) dividends, payments or distributions payable in
shares of capital stock, (iv) redemptions, purchases or other acquisitions of
shares of capital stock in connection with any employment contract, incentive
plan, benefit plan or other similar arrangement of Southern or any of its
subsidiaries or in connection with a dividend reinvestment or stock purchase
plan, or (v) any declaration of a dividend in connection with implementation
of any stockholders' rights plan, or the issuance of rights, stock or other
property under any such plan, or the redemption, repurchase or other
acquisition of any such rights pursuant thereto.
The Subordinated Note Indenture further provides that, for so long as the
Trust Securities of any Trust remain outstanding, Capital covenants (i) to
directly or indirectly maintain 100% ownership of the Common Securities of
such Trust; provided, however, that any permitted successor of Capital or
Southern under the Subordinated Note Indenture may succeed to the Capital's
ownership of such Common Securities, and (ii) to use its reasonable efforts to
cause such Trust (a) to remain a statutory business trust, except in
connection with the distribution of Junior Subordinated Notes to the holders
of Trust Securities in liquidation of such Trust, the redemption of all of the
Trust Securities of such Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the related Trust Agreement, and (b) to
otherwise continue to be classified as a grantor trust for United States
federal income tax purposes.
EVENTS OF DEFAULT
The Subordinated Note Indenture provides that any one or more of the
following described events with respect to the Junior Subordinated Notes of
any series, which has occurred and is continuing, constitutes an "Event of
Default" with respect to the Junior Subordinated Notes of such series:
(a) failure for 10 days to pay interest on the Junior Subordinated Notes
of such series, including any Additional Interest (as defined in clause
(ii) of the definition thereof in the Subordinated Note Indenture) in
respect thereof, when due on an Interest Payment Date other than at
maturity or upon earlier redemption; provided, however, that a valid
extension of the interest payment period by Capital shall not constitute a
default in the payment of interest for this purpose; or
(b) failure for 10 days to pay Additional Interest (as defined in clause
(i) of the definition thereof in the Subordinated Note Indenture); or
(c) failure to pay principal or premium, if any, or interest, including
Additional Interest (as defined in clause (ii) of the definition thereof in
the Subordinated Note Indenture), on the Junior Subordinated Notes of such
series when due at maturity or upon earlier redemption; or
(d) failure for three Business Days to deposit any sinking fund payment
when due by the terms of a Junior Subordinated Note of such series; or
(e) failure to observe or perform any other covenant or warranty in the
Subordinated Note Indenture (other than a covenant or warranty which has
expressly been included therein solely for the benefit of one or more
series of Junior Subordinated Notes other than such series) for 90 days
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after written notice to Southern and Capital from the Indenture Trustee or
the holders of at least 25% in principal amount of the outstanding Junior
Subordinated Notes of such series; or
(f) certain events of bankruptcy, insolvency, or reorganization of
Southern or Capital.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee with respect to the Junior Subordinated
Notes of such series. If a Subordinated Note Indenture Event of Default occurs
and is continuing with respect to the Junior Subordinated Notes of any series,
then the Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Notes of such series
may declare the principal amount thereof due and payable immediately by notice
in writing to Southern and Capital (and to the Indenture Trustee if given by
the holders), and upon any such declaration such principal amount shall become
immediately due and payable. At any time after such a declaration of
acceleration with respect to the Junior Subordinated Notes of any series has
been made and before a judgment or decree for payment of the money due has
been obtained as provided in Article Five of the Subordinated Note Indenture,
the holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of such series may rescind and annul
such declaration and its consequences if the default has been cured or waived
and Southern or Capital has paid or deposited with the Indenture Trustee a sum
sufficient to pay all matured installments of interest (including any
Additional Interest) and principal due otherwise than by acceleration and all
sums paid or advanced by the Indenture Trustee, including reasonable
compensation and expenses of the Indenture Trustee.
A holder of Preferred Securities may institute a legal proceeding directly
against Southern and Capital, without first instituting a legal proceeding
against the Property Trustee or any other person or entity, for enforcement of
payment to such holder of principal of or interest on the Junior Subordinated
Notes of the related series having a principal amount equal to the aggregate
stated liquidation amount of the Preferred Securities of such holder on or
after the due dates specified in the Junior Subordinated Notes of such series.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series may, on behalf of the
holders of all the Junior Subordinated Notes of such series, waive any past
default with respect to such series, except (i) a default in the payment of
principal or interest or (ii) a default in respect of a covenant or provision
which under Article Nine of the Subordinated Note Indenture cannot be modified
or amended thereunder without the consent of the holder of each outstanding
Junior Subordinated Note of such series affected thereby.
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 Junior Subordinated Notes are expected to be issued in the form of one or
more global certificates registered in the name of the securities depositary
or its nominee. In such event, the procedures applicable to the transfer and
payment of the Junior Subordinated Notes are expected to be substantially
similar to those described with respect to the Preferred Securities in
"Description of the Preferred Securities -- Book-Entry Only Issuance -- The
Depository Trust Company."
REGISTRATION AND TRANSFER
Capital shall not be required to (i) issue, register the transfer of or
exchange Junior Subordinated Notes of any series during a period of 15 days
immediately preceding the date notice is given identifying the Junior
Subordinated Notes of such series called for redemption, or (ii) register the
transfer of or exchange any Junior Subordinated Notes so selected for
redemption, in whole or in part, except the unredeemed portion of any Junior
Subordinated Note being redeemed in part.
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PAYMENT AND PAYING AGENT
Payment of principal of any Junior Subordinated Notes will be made only
against surrender to the Paying Agent of such Junior Subordinated Notes.
Principal of and interest on Junior Subordinated Notes will be payable,
subject to any applicable laws and regulations, at the office of such Paying
Agent or Paying Agents as Capital may designate from time to time, except
that, at the option of Capital, payment of any interest may be made by wire
transfer or by check mailed to the address of the person entitled thereto as
such address shall appear in the Security Register with respect to the Junior
Subordinated Notes. Payment of interest on Junior Subordinated Notes on any
interest payment date will be made to the person in whose name the Junior
Subordinated Notes (or predecessor security) are registered at the close of
business on the Record Date for such interest payment (the fifteenth calendar
day before such interest payment date).
The Indenture Trustee will act as Paying Agent with respect to the Junior
Subordinated Notes. Capital may at any time designate additional Paying Agents
or rescind the designation of any Paying Agents or approve a change in the
office through which any Paying Agent acts.
All moneys paid by Capital to a Paying Agent for the payment of the
principal of or interest on the Junior Subordinated Notes of any series which
remain unclaimed at the end of two years after such principal or interest
shall have become due and payable will be repaid to Capital, and the holder of
such Junior Subordinated Notes will thereafter look only to Capital for
payment thereof.
MODIFICATION
The Subordinated Note Indenture contains provisions permitting Capital,
Southern and the Indenture Trustee, with the consent of the holders of not
less than a majority in principal amount of the outstanding Junior
Subordinated Notes of each series affected thereby, to modify the Subordinated
Note Indenture or the rights of the holders of the Junior Subordinated Notes
of such series; provided, that no such modification may, without the consent
of the holder of each outstanding Junior Subordinated Note affected thereby,
(i) change the stated maturity of the principal of, or any installment of
principal of or interest on, any Junior Subordinated Note, or reduce the
principal amount thereof or the rate of interest (including Additional
Interest) thereon or any premium payable upon the redemption thereof, or
change the method of calculating the rate of interest thereon, or impair the
right to institute suit for the enforcement of any such payment on or after
the stated maturity thereof (or, in the case of redemption, on or after the
redemption date), or (ii) reduce the percentage of principal amount of the
outstanding Junior Subordinated Notes of any series, the consent of whose
holders is required for any such supplemental indenture, or the consent of
whose holders is required for any waiver (of compliance with certain
provisions of the Subordinated Note Indenture or certain defaults thereunder
and their consequences) provided for in the Subordinated Note Indenture, or
(iii) modify any of the provisions of the Subordinated Note Indenture relating
to supplemental indentures, waiver of past defaults, or waiver of certain
covenants, except to increase any such percentage or to provide that certain
other provisions of the Subordinated Note Indenture cannot be modified or
waived without the consent of the holder of each outstanding Junior
Subordinated Note affected thereby, or (iv) reduce any amount payable under,
delay or defer the required time of payment under, or impair the right to
institute suit to enforce any payment under the Notes Guarantee, or (v) modify
the provisions of the Subordinated Note Indenture with respect to the
subordination of the Junior Subordinated Notes or the Notes Guarantee in a
manner adverse to such holder.
In addition, Capital, Southern and the Indenture Trustee may execute,
without the consent of any holders of Junior Subordinated Notes, any
supplemental indenture for certain other usual purposes, including the
creation of any new series of junior subordinated notes.
CONSOLIDATION, MERGER AND SALE
Neither Southern nor Capital shall consolidate with or merge into any other
corporation or convey, transfer or lease its properties and assets
substantially as an entirety to any person, unless (1) such
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other corporation or person is a corporation organized and existing under the
laws of the United States, any state thereof or the District of Columbia and
such other corporation or person expressly assumes, by supplemental indenture
executed and delivered to the Indenture Trustee, the payment of the principal
of (and premium, if any) and interest (including Additional Interest) on all
the Junior Subordinated Notes and the performance of every covenant of the
Subordinated Note Indenture and the Notes Guarantee on the part of Southern or
Capital, as the case may be, to be performed or observed; (2) immediately
after giving effect to such transactions, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing; and (3) Southern or Capital,
as the case may be, has delivered to the Indenture Trustee an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the provisions of the Subordinated Note Indenture governing
consolidation, merger, conveyance, transfer or lease and that all conditions
precedent thereto have been complied with.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to an Event of Default with respect to Junior
Subordinated Notes of any series, undertakes to perform, with respect to
Junior Subordinated Notes of such series, only such duties as are specifically
set forth in the Subordinated Note Indenture and, in case an Event of Default
with respect to Junior Subordinated Notes of any series has occurred and is
continuing, shall exercise, with respect to Junior Subordinated Notes of such
series, the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers vested in it by
the Subordinated Note Indenture at the request of any holder of Junior
Subordinated Notes of any series, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The Indenture Trustee is not required to expend or risk its own funds
or otherwise incur any financial liability in the performance of its duties if
the Indenture Trustee reasonably believes that repayment or adequate indemnity
is not reasonably assured to it.
Bankers Trust Company, the Indenture Trustee, also serves as Property
Trustee and as Guarantee Trustee. Southern and certain of its subsidiaries
maintain deposit accounts and banking relationships with Bankers Trust
Company. Bankers Trust Company also serves as trustee under other indentures
pursuant to which securities of subsidiaries of Southern are outstanding.
GOVERNING LAW
The Subordinated Note Indenture and the Junior Subordinated Notes will be
governed by, and construed in accordance with, the internal laws of the State
of New York.
MISCELLANEOUS
Each of Southern and Capital will have the right at all times to assign any
of its rights or obligations under the Subordinated Note Indenture to a direct
or indirect wholly-owned subsidiary of Southern; provided, that, in the event
of any such assignment, Southern or Capital, as the case may be, will remain
primarily liable for all such obligations. Subject to the foregoing, the
Subordinated Note Indenture will be binding upon and inure to the benefit of
the parties thereto and their respective successors and assigns.
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DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
Set forth below is a summary of information concerning the Preferred
Securities Guarantee that will be executed and delivered by Southern for the
benefit of the holders of Preferred Securities from time to time. The
Preferred Securities Guarantee will be qualified as an indenture under the
1939 Act. Bankers Trust Company will act as indenture trustee under the
Preferred Securities Guarantee (the "Guarantee Trustee") for purposes of the
1939 Act. The terms of the Preferred Securities Guarantee will be those set
forth therein and those made part thereof by the 1939 Act. The following
summary does not purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to, the Preferred
Securities Guarantee, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the 1939
Act. The Preferred Securities Guarantee will be held by the Guarantee Trustee
for the benefit of holders of the Preferred Securities.
GENERAL
Pursuant to the Preferred Securities Guarantee, Southern will irrevocably
and unconditionally agree, to the extent set forth therein, to pay in full, to
the holders of the Preferred Securities, the Guarantee Payments (as defined
herein), to the extent not paid by, or on behalf of, the Trust, regardless of
any defense, right of set-off or counterclaim that Southern may have or assert
against any person. The following payments or distributions with respect to
the Preferred Securities to the extent not paid or made by, or on behalf of,
the Trust will be subject to the Preferred Securities Guarantee (without
duplication): (i) any accrued and unpaid distributions required to be paid on
the Preferred Securities but if and only if and to the extent that the Trust
has funds legally and immediately available therefor, (ii) the applicable
Redemption Price with respect to any Preferred Securities called for
redemption by the Trust, but if and only to the extent the Trust has funds
legally and immediately available therefor, and (iii) upon a dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Junior Subordinated Notes to the holders of Trust Securities
or the redemption of all of the Preferred Securities), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid distributions
on the Preferred Securities to the date of payment, to the extent the Trust
has funds legally and immediately available therefor, and (b) the amount of
assets of the Trust remaining available for distribution to holders of
Preferred Securities in liquidation of the Trust (the "Guarantee Payments").
Southern's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by Southern to the holders of the Preferred
Securities or by causing the Trust to pay such amounts to such holders.
The Preferred Securities Guarantee will be a guarantee of the Guarantee
Payments with respect to the Preferred Securities from the time of issuance of
the Preferred Securities, but will not apply to the payment of distributions
and other payments on the Preferred Securities when the Trust does not have
sufficient funds legally and immediately available to make such distributions
or other payments. IF CAPITAL DOES NOT MAKE INTEREST PAYMENTS ON THE JUNIOR
SUBORDINATED NOTES HELD BY THE PROPERTY TRUSTEE, THE TRUST WILL NOT MAKE
DISTRIBUTIONS ON THE PREFERRED SECURITIES.
SUBORDINATION
Southern's obligations under the Preferred Securities Guarantee to make the
Guarantee Payments will constitute an unsecured obligation of Southern and
will rank (i) subordinate and junior in right of payment to all other
liabilities of Southern, except those obligations or liabilities made pari
passu or subordinate by their terms, (ii) pari passu with the most senior
preferred or preference stock now or hereafter issued by Southern and with any
guarantee now or hereafter entered into by Southern in respect of any
preferred or preference securities of any affiliate of Southern, and (iii)
senior to all common stock of Southern. The terms of the Preferred Securities
will provide that each holder of Preferred Securities by acceptance thereof
agrees to the subordination provisions and other terms of the Preferred
Securities Guarantee.
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The Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without first instituting a legal proceeding against any other
person or entity).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially and adversely
affect the rights of holders of the Preferred Securities (in which case no
consent will be required), the Preferred Securities Guarantee may be amended
only with the prior approval of the holders of not less than 66 2/3% in
liquidation amount of the outstanding Preferred Securities. The manner of
obtaining any such approval of holders of the Preferred Securities is set
forth under "Description of the Preferred Securities--Voting Rights." All
guarantees and agreements contained in the Preferred Securities Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
Southern and shall inure to the benefit of the holders of the Preferred
Securities then outstanding.
TERMINATION
The Preferred Securities Guarantee will terminate and be of no further force
and effect as to the Preferred Securities upon full payment of the applicable
Redemption Price of all Preferred Securities, upon distribution of Junior
Subordinated Notes to the holders of such Preferred Securities, or upon full
payment of the amounts payable upon liquidation of the Trust. The Preferred
Securities Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of the Preferred Securities must
restore payment of any sums paid with respect to the Preferred Securities or
under the Preferred Securities Guarantee.
EVENTS OF DEFAULT
An event of default under the Preferred Securities Guarantee will occur upon
the failure by Southern to perform any of its payment obligations thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Preferred Securities Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Preferred Securities Guarantee.
Any holder of Preferred Securities may institute a legal proceeding directly
against Southern to enforce its rights under the Preferred Securities
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee or any other person or entity. The holders of a majority in
liquidation amount of Preferred Securities may, by vote, on behalf of the
holders of all the Preferred Securities, waive any past event of default and
its consequences.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of any event of default with
respect to the Preferred Securities Guarantee and after the curing or waiving
of all events of default with respect to the Preferred Securities Guarantee,
undertakes to perform only such duties as are specifically set forth in the
Preferred Securities Guarantee and, in case an event of default has occurred,
shall exercise the same degree of care as a prudent individual would exercise
in the conduct of his or her own affairs. Subject to such provisions, the
Guarantee Trustee is under no obligation to exercise any of the powers vested
in it by the Preferred Securities Guarantee at the request of any holder of
the Preferred Securities, unless offered reasonable indemnity against the
costs, expenses and liabilities which might be incurred thereby.
Bankers Trust Company, the Guarantee Trustee, also serves as Property
Trustee and as Indenture Trustee. Southern and certain of its subsidiaries
maintain deposit accounts and banking relationships with Bankers Trust
Company. Bankers Trust Company serves as trustee under other indentures
pursuant to which securities of subsidiaries of Southern are outstanding.
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GOVERNING LAW
The Preferred Securities Guarantee will be governed by, and construed in
accordance with, the internal laws of the State of New York.
THE AGREEMENT AS TO EXPENSES AND LIABILITIES
Pursuant to an Agreement as to Expenses and Liabilities to be entered into
by Southern under the Trust Agreement, Southern will irrevocably and
unconditionally guarantee to each person or entity to whom the Trust becomes
indebted or liable the full payment of any indebtedness, expenses or
liabilities of the Trust, other than obligations of the Trust to pay to the
holders of the Preferred Securities or other similar interests in the Trust
the amounts due such holders pursuant to the terms of the Preferred Securities
or such other similar interests, as the case may be.
DESCRIPTION OF THE NOTES GUARANTEE
Pursuant to the Subordinated Note Indenture, Southern will irrevocably and
unconditionally guarantee the due and punctual payment of principal, premium,
if any, and interest on the Junior Subordinated Notes when and as the same
shall become due and payable, whether at maturity, upon redemption or
otherwise. The Notes Guarantee will constitute an unsecured obligation of
Southern and will rank subordinate and junior to all Senior Indebtedness that
may be issued by Southern. As of March 31, 1997, Senior Indebtedness of
Southern aggregated approximately $794,000,000. Since Southern is a holding
company, the right of Southern and, hence, the right of creditors of Southern
(including the holders of the Junior Subordinated Notes) to participate in any
distribution of the assets of any subsidiary of Southern, whether upon
liquidation, reorganization or otherwise, is subject to prior claims of
creditors of each such subsidiary.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SUBORDINATED NOTES, THE PREFERRED SECURITIES GUARANTEE AND THE NOTES
GUARANTEE
As long as payments of interest and other payments are made when due on the
Junior Subordinated Notes, such payments will be sufficient to cover
distributions and payments due on the Trust Securities primarily because (i)
the aggregate principal amount of Junior Subordinated Notes will be equal to
the sum of the aggregate stated liquidation amount of the Trust Securities;
(ii) the interest rate and interest and other payment dates on the Junior
Subordinated Notes will match the distribution rate and distribution and other
payment dates for the Preferred Securities; (iii) Southern shall pay for all
costs and expenses of the Trust pursuant to the Agreement as to Expenses and
Liabilities; and (iv) the Trust Agreement provides that the Securities
Trustees shall not cause or permit the Trust to, among other things, engage in
any activity that is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are legally and
immediately available) and other payments due on the Preferred Securities (to
the extent funds therefor are legally and immediately available) are
guaranteed by Southern as and to the extent set forth under "Description of
the Preferred Securities Guarantee." If Capital does not make interest
payments on the Junior Subordinated Notes, it is not expected that the Trust
will have sufficient funds to pay distributions on the Preferred Securities.
The Preferred Securities 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 Capital fails to make interest or other payments on the Junior
Subordinated Notes when due (taking into account any Extension Period), the
Trust Agreement provides a mechanism whereby the holders of the Preferred
Securities may appoint a substitute Property Trustee. Such holders may also
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<PAGE>
direct the Property Trustee to enforce its rights under the Junior
Subordinated Notes and the Notes Guarantee, including proceeding directly
against Capital to enforce the Junior Subordinated Notes and Southern to
enforce the Notes Guarantee. If the Property Trustee fails to enforce its
rights under the Junior Subordinated Notes or the Notes Guarantee, to the
fullest extent permitted by applicable law, any holder of Preferred Securities
may institute a legal proceeding directly against Capital to enforce the
Property Trustee's rights under the Junior Subordinated Notes and against
Southern to enforce such rights under the Notes Guarantee 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 Southern and
Capital, without first instituting a legal proceeding against the Property
Trustee or any other person or entity, for enforcement of payment to such
holder of principal of or interest on the Junior Subordinated Notes having a
principal amount equal to the aggregate stated liquidation amount of the
Preferred Securities of such holder on or after the due dates specified in the
Junior Subordinated Notes.
If Southern fails to make payments under the Preferred Securities Guarantee,
the Preferred Securities 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 Southern to enforce the
Guarantee Trustee's rights under the Preferred Securities Guarantee without
first instituting a legal proceeding against the Guarantee Trustee or any
other person or entity.
The Notes Guarantee, the Preferred Securities Guarantee, the Subordinated
Note Indenture, the Junior Subordinated Notes, the Trust Agreement and the
Agreement as to Expenses and Liabilities, as described above, constitute a
full and unconditional guarantee by Southern and Capital of the payments due
on the Preferred Securities.
Upon any voluntary or involuntary dissolution, winding-up or termination of
the Trust, unless the 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 Capital, the Property Trustee, as holder of the
Junior Subordinated Notes, would be a subordinated creditor of Capital,
subordinated in right of payment to all Senior Indebtedness, but entitled to
receive payment in full of principal and interest, before any stockholders of
Capital receive payments or distributions. Because Southern is guarantor under
the Preferred Securities Guarantee and the Notes Guarantee and has agreed to
pay for all costs, expenses and liabilities of the Trust (other than the
Trust's obligations to holders of the Preferred Securities) pursuant to the
Agreement as to Expenses and Liabilities, the positions of a holder of
Preferred Securities and a holder of Junior Subordinated Notes relative to
other creditors and to stockholders of Southern in the event of liquidation or
bankruptcy of Southern would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Subordinated Note
Indenture. However, in the event of payment defaults under, or acceleration
of, Senior Indebtedness, the subordination provisions of the Junior
Subordinated Notes provide that no payments may be made in respect of the
Junior Subordinated Notes until such Senior Indebtedness has been paid in full
or any payment default thereunder has been cured or waived. Failure to make
required payments on the Junior Subordinated Notes would constitute an Event
of Default under the Subordinated Note Indenture except that failure to make
interest payments on the Junior Subordinated Notes will not be an Event of
Default during an Extension Period; provided, however, that any Extension
Period may not exceed 20 consecutive quarters or extend beyond the maturity of
the Junior Subordinated Notes.
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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 Southern,
Capital and the Trust, insofar as it relates to matters of law and legal
conclusions. This summary deals only with Preferred Securities held as capital
assets within the meaning of Section 1221 of the Internal Revenue Code of
1986, as amended to the date hereof (the "Code"), by Holders (as defined
herein). Moreover, it does not discuss all of the tax consequences that may be
relevant to a Holder in light of his particular circumstances or to Holders
subject to special rules, such as certain financial institutions, insurance
companies, dealers in securities, individual retirement and certain tax
deferred accounts, and persons who engage in a straddle or a hedge relating to
a Preferred Security. Prospective investors should consult their own tax
advisors with regard to the application of the tax considerations discussed
below to their particular situations as well as the application of any state,
local or other tax laws. This summary is based on laws, existing and proposed
regulations, and applicable judicial and administrative determinations, all of
which are subject to change at any time, and any such changes may be
retroactively applied in a manner that could adversely affect Holders. As used
herein, the term "Holder" means a beneficial owner of a Preferred Security
that for United States federal income tax purposes is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or (iii) a trust that is not a foreign trust or
an estate the income of which is subject to United States federal income
taxation regardless of its source. Thus, the following summary does not
address any tax consequences that apply specifically to nonresident aliens or
foreign entities.
TREATMENT OF THE TRUST AND PREFERRED SECURITIES FOR FEDERAL INCOME TAX
PURPOSES
The Trust will be treated as a "grantor trust" and not as an association
taxable as a corporation for federal income tax purposes. Thus, for federal
income tax purposes, each Holder will be treated as the beneficial owner of a
pro rata undivided interest in the Junior Subordinated Notes and,
consequently, will be required to include in income the Holder's pro rata
share of the entire income from the Junior Subordinated Notes. Each Holder
generally will determine its net income or loss with respect to the Trust in
accordance with its own method of accounting, although income arising from
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 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, Southern and Capital believe that
the 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 Junior Subordinated Notes permit Capital to defer the
payment of interest on the 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, however, that no
Extension Period may extend beyond the stated maturity date of the Junior
Subordinated Notes. Should Capital exercise this option to defer payments of
interest, the Junior Subordinated Notes would
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at that time be treated as reissued with OID and interest would be taxable on
an economic accrual basis. 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 Capital will not make any interest
payments during such period on the 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 Junior
Subordinated Notes acquires such Preferred Security with "market discount."
However, market discount with respect to a Preferred Security will be
considered to be zero if it is de minimis. Market discount will be de minimis
with respect to a Preferred Security if it is less than the product of (i)
0.25% of the adjusted issue price of the purchaser's pro rata share of the
Junior Subordinated Notes multiplied by (ii) the number of complete years to
maturity of such Junior Subordinated Notes after the date of purchase. The
purchaser of a Preferred Security with more than a de minimis amount of market
discount generally will be required to treat any gain on the sale, exchange,
redemption or other disposition of all or part of the Preferred Securities (or
related Junior Subordinated Notes) as ordinary income to the extent of accrued
(but not previously taxed) market discount. Market discount generally will
accrue ratably during the period from the date of purchase of such Preferred
Security to the maturity date of the Junior Subordinated Notes, unless the
Holder irrevocably elects to accrue such market discount on the basis of a
constant interest rate.
A Holder who has acquired a Preferred Security at a market discount
generally will be required to defer any deductions of interest expense
attributable to any indebtedness incurred or continued to purchase or carry
the Preferred Security, to the extent such interest expense exceeds the
related 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 Junior Subordinated Notes (including redemptions
thereof), a Holder may make an election (which may not be revoked without the
IRS'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 Junior Subordinated Notes which are not
qualified stated interest. The redemption of only part of a Preferred
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Security will require an allocation of the Holder's adjusted tax basis in his
pro rata share of the related Junior Subordinated Notes between the portion of
the Junior Subordinated Notes redeemed and retained by the Holder in order to
determine gain or loss.
RECEIPT OF JUNIOR SUBORDINATED NOTES UPON LIQUIDATION OF THE TRUST
As described under "Description of the Preferred Securities--Special Event
Redemption or Distribution," Junior Subordinated Notes may be distributed to
Holders in exchange for the Preferred Securities and in liquidation of the
Trust. Such a distribution would be treated as a non-taxable event to each
Holder and each Holder would receive an aggregate tax basis in the Holder's
Junior Subordinated Notes equal to the Holder's aggregate tax basis in its
Preferred Securities. A Holder's holding period with respect to the Junior
Subordinated Notes so received in liquidation of the Trust would include the
period for which the Preferred Securities were held by such Holder.
INFORMATION REPORTING TO HOLDERS
Income on the Preferred Securities will be reported to Holders on Form 1099,
which form should be mailed to Holders of Preferred Securities by January 31
following each calendar year.
BACKUP WITHHOLDING
A Holder may be subject to "backup withholding" under certain circumstances.
Backup withholding applies to a Holder if the Holder, among other things, (i)
fails to furnish his social security number or other taxpayer identification
number ("TIN") to the payor responsible for backup withholding (for example,
the Holder's securities broker), (ii) furnishes such payor an incorrect TIN,
(iii) fails to provide such payor with a certified statement, signed under
penalties of perjury, that the TIN provided to the payor is correct and that
the Holder is not subject to backup withholding, or (iv) fails to report
properly interest and dividends on his tax return. Backup withholding,
however, does not apply to payments made to certain exempt recipients, such as
corporations and tax-exempt organizations. The backup withholding rate is 31%
of "reportable payments," which generally will include distributions of
interest and principal payments on the Junior Subordinated Notes.
POSSIBLE TAX LAW CHANGES
On February 6, 1997, the revenue portion of President Clinton's fiscal 1998
budget proposal was released. The Proposal would, among other things,
generally deny interest deductions for interest on an instrument issued by a
corporation that has a maximum term of more than 15 years and that is not
shown as indebtedness on the separate balance sheet of the issuer. If the
Proposal were to apply to the Junior Subordinated Notes, Southern would be
unable to deduct interest on the Junior Subordinated Notes. As currently
drafted, however, the Proposal would be effective generally for instruments
issued on or after the date of first Congressional committee action and, as
such, is not expected to apply to the Junior Subordinated Notes. Southern
believes that, under current law, it will be able to deduct interest on the
Junior Subordinated Notes. There can be no assurance, however, that current or
future legislative proposals or final legislation will not affect the ability
of Southern to deduct interest on the Junior Subordinated Notes. Such a change
could give rise to a Tax Event, which would permit Capital to cause a
redemption of the Preferred Securities, as described more fully under
"Description of the Preferred Securities -- Special Event Redemption or
Distribution."
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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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 Goldman, Sachs & Co.,
Lehman Brothers Inc., J.P. Morgan Securities Inc., Morgan Stanley & Co.
Incorporated, PaineWebber Incorporated, Prudential Securities Incorporated,
The Robinson-Humphrey Company, Inc. and 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
PREFERRED
NAME SECURITIES
---- ----------
<S> <C>
Goldman, Sachs & Co. .............................................
Lehman Brothers Inc. .............................................
J.P. Morgan Securities Inc........................................
Morgan Stanley & Co. Incorporated.................................
PaineWebber Incorporated..........................................
Prudential Securities Incorporated................................
The Robinson-Humphrey Company, Inc................................
Smith Barney Inc..................................................
---------
Total......................................................... 8,000,000
=========
</TABLE>
The Underwriters have advised Southern, Capital and the Trust that they
propose to offer the Preferred Securities in part directly to the public at
the initial public offering price, as set forth on the cover page of this
Prospectus, and in part to certain securities dealers at such price less a
concession not in excess of $. per Preferred Security. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $. per
Preferred Security to certain other dealers. After the Preferred Securities
are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Underwriters.
The Preferred Securities are expected to be approved for listing on the
NYSE, subject to official notice of issuance. Trading of the Preferred
Securities on the NYSE is expected to commence within a 30-day period after
the initial delivery of the Preferred Securities. The Representatives have
advised Southern, Capital 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 connection with the offering, the Underwriters may purchase and sell the
Preferred Securities in the open market. These transactions may include over-
allotment and stabilizing transactions and purchases to cover syndicate short
positions created in connection with the offering. Stabilizing transactions
consist of certain bids or purchases for the purpose of preventing or
retarding a decline in the market price of the Preferred Securities; and
syndicate short positions involve the sale by the Underwriters of a greater
number of Preferred Securities than they are required to purchase from the
Trust in the offering. The Underwriters also may impose a penalty bid, whereby
selling concessions
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allowed to syndicate members or other broker dealers in respect of the
securities sold in the offering for their account may be reclaimed by the
syndicate if such Preferred Securities are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Preferred Securities, which may be
higher than the price that might otherwise prevail in the open market; and
these activities, if commenced, may be discontinued at any time. These
transactions may be effected on the NYSE, in the over-the-counter market or
otherwise.
Southern, Capital 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 Junior Subordinated Notes or any debt securities
substantially similar to the Junior Subordinated Notes or equity securities
substantially similar to the Preferred Securities (except for the Junior
Subordinated Notes and the Preferred Securities issued pursuant to the
Underwriting Agreement), without the prior written consent of the
Representatives.
Southern, Capital and the Trust have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the 1933 Act.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, Southern and its affiliates in the ordinary
course of business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of Capital and the Trust by Richards,
Layton & Finger, Wilmington, Delaware, special Delaware counsel to Capital and
the Trust. The validity of the Junior Subordinated Notes, the Preferred
Securities Guarantee and the Notes Guarantee and certain matters relating
thereto will be passed upon on behalf of Southern and Capital 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, New York, New York.
EXPERTS
The consolidated financial statements and schedule of Southern included in
Southern's Annual Report on Form 10-K for the year ended December 31, 1996,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
with respect thereto, and are incorporated herein in reliance upon the
authority of said firm as experts in giving said reports.
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GLOSSARY
1933 Act................. The Securities Act of 1933, as amended.
1934 Act................. The Securities Exchange Act of 1934, as amended.
1939 Act................. The Trust Indenture Act of 1939, as amended.
1940 Act................. The Investment Company Act of 1940, as amended.
Additional Interest...... Amounts payable by Capital as defined under
"Description of the Junior Subordinated Notes--
Additional Interest."
Administrative Wayne Boston and Richard A. Childs.
Trustees................
Agreement as to Expenses
and Liabilities.........
The agreement between Southern and the Trust
pursuant to which Southern has agreed to pay all
indebtedness, expenses or liabilities of the Trust,
other than the Trust's obligations to pay to the
holders of the Preferred Securities the amounts due
such holders pursuant to the terms thereof.
Capital.................. Southern Company Capital Funding, Inc.
Code..................... The Internal Revenue Code of 1986, as amended.
Common Securities........ The Trust Securities being sold to Capital.
Delaware Trustee......... Bankers Trust (Delaware).
DTC...................... The Depository Trust Company, a "clearing
corporation" that initially will hold (through its
agents) a global certificate evidencing the
Preferred Securities.
Distribution Dates....... March 31, June 30, September 30 and December 31 of
each year.
Extension Period......... Any period during which interest is not paid on the
Junior Subordinated Notes (and, consequently, on
the Preferred Securities) at the election of
Capital to the extent permitted under the terms of
the Junior Subordinated Notes.
Guarantee Payments....... Payments required to be made pursuant to the
Preferred Securities Guarantee as described in
"Description of the Preferred Securities
Guarantee--General."
Guarantee Trustee........ The trustee under the Preferred Securities
Guarantee; initially, Bankers Trust Company.
Indenture Trustee........ The trustee under the Subordinated Note Indenture;
initially, Bankers Trust Company.
Issue Date............... The date set forth on the cover page on which the
Junior Subordinated Notes and Preferred Securities
are scheduled to be issued.
Investment Company Act
Event...................
An event of the type described in "Description of
the Preferred Securities--Special Event Redemption
or Distribution."
Junior Subordinated
Notes...................
The Series C % junior subordinated deferrable
interest notes of Capital due , 2037.
Notes Guarantee..........
The guarantee by Southern of the payments by
Capital on the Junior Subordinated Notes.
43
<PAGE>
NYSE..................... New York Stock Exchange.
Preferred Securities..... The Trust Securities being offered to investors
pursuant to this Prospectus.
Preferred Securities
Guarantee...............
The guarantee by Southern of the payments by the
Trust on the Preferred Securities from time to
time.
Property Trustee......... A trustee under the Trust designated to hold the
trust property; initially Bankers Trust Company.
Record Date.............. The close of business on the 15th calendar day
prior to a Distribution Date.
Redemption Price......... The stated liquidation amount of $25 per Preferred
Security, plus accrued and unpaid distributions
thereon (and interest thereon) to the date of
payment.
Securities Rate.......... The per annum interest rate expressed as a
percentage of the stated liquidation amount of $25
per Preferred Security, and set forth on the cover
page of this Prospectus.
Securities Trustees...... The Property Trustee, Administrative Trustees and
Delaware Trustee.
Senior Indebtedness...... Indebtedness described under "Description of the
Junior Subordinated Notes--Subordination."
Southern................. The Southern Company.
Special Event............ A Tax Event or Investment Company Act Event.
Subordinated Note The indenture pursuant to which Capital's Junior
Indenture............... Subordinated Notes will be issued.
Subordinated Note
Indenture Event of
Default................. As described under "Description of the Junior
Subordinated Notes--Events of Default."
Tax Event................ An event of the type described in "Description of
the Preferred Securities--Special Event Redemption
or Distribution."
Trust.................... Southern Company Capital Trust III, a Delaware
business trust that will issue the Trust
Securities.
Trust Agreement.......... The agreement pursuant to which the Trust is
organized as it may be amended and restated from
time to time.
Trust Agreement Event of
Default.................
As described under "Description of the Preferred
Securities--Events of Default."
Trust Securities......... The Preferred Securities and the Common Securities.
44
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY SOUTHERN, CAPITAL, THE TRUST OR THE UNDERWRITERS. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF SOUTHERN, CAPITAL, OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UN-
LAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 4
Incorporation of Certain Documents by Reference........................... 4
Summary................................................................... 5
Risk Factors.............................................................. 12
The Southern Company...................................................... 14
Southern Company Capital Funding, Inc. ................................... 15
Southern Company Capital Trust III........................................ 15
Accounting Treatment...................................................... 16
Use of Proceeds........................................................... 16
Recent Results of Operations.............................................. 16
Description of the Preferred Securities................................... 16
Description of the Junior Subordinated Notes.............................. 27
Description of the Preferred Securities Guarantee......................... 34
Description of the Notes Guarantee........................................ 36
Relationship Among the Preferred Securities, the Subordinated Notes, the
Preferred Securities Guarantee and the Notes Guarantee................... 36
Certain Federal Income Tax Considerations................................. 38
Underwriting.............................................................. 41
Legal Matters............................................................. 42
Experts................................................................... 42
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8,000,000 PREFERRED SECURITIES
SOUTHERN COMPANY
CAPITAL TRUST III
% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES
(QUIPSSM)
(LIQUIDATION AMOUNT $25 PER
PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY
[LOGO OF SOUTHERN COMPANY APPEARS HERE]
-----------
PROSPECTUS
-----------
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
SMITH BARNEY INC.
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission Fee.................................$ 60,607
Fees and Expense of Trustees........................................... 16,000
Printing Expenses...................................................... 75,000
Counsel Fees........................................................... 45,000
Rating Agency Fees..................................................... 107,000
Listing Fees........................................................... 58,300
Accountant's Fees...................................................... 30,000
Miscellaneous.......................................................... 28,093
-------
Total..................................................................$420,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of Title of the Delaware Code gives a corporation power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys" fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. The same Section also
gives a corporation power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper. Also, the
Section states that, to the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in defense of
any such action, suit or proceeding, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
The By-Laws of Southern provide in substance that no present or future
director or officer of Southern shall be liable for any act, omission, step or
conduct taken or had in good faith which is required, authorized or approved
by order issued pursuant to the Public Utility Holding Company Act of 1935,
the Federal Power Act, or any state statute regulating Southern or its
subsidiaries by reason of their being public utility companies or public
utility holding companies, or any amendment to any thereof. In the event that
such provisions are found by a court not to constitute a valid defense, each
such director and officer shall be reimbursed for, or indemnified against, all
expenses and liabilities incurred by him or imposed on him in connection with,
or arising out of, any such action, suit or proceeding based on any act,
omission, step or conduct taken or had in good faith as in such By-Laws
described.
II-1
<PAGE>
The By-Laws of Southern further provide as follows:
"Each person who is or was a director or officer of the Corporation and
who was or is a party or was or is threatened to be made a party to any
threatened, pending or completed claim, action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee,
agent or trustee of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, shall be indemnified by the
Corporation as a matter of right against any and all expenses (including
attorneys' fees) actually and reasonably incurred by him and against any
and all claims, judgments, fines, penalties, liabilities and amounts paid
in settlement actually incurred by him in defense of such claim, action,
suit or proceeding, including appeals, to the full extent permitted by
applicable law. The indemnification provided by this Section shall inure to
the benefit of the heirs, executors and administrators of such person.
Expenses (including attorneys' fees) incurred by a director or officer of
the Corporation with respect to the defense of any such claim, action, suit
or proceeding may be advanced by the Corporation prior to the final
disposition of such claim, action, suit or proceeding, as authorized by the
Board of Directors in the specific case, upon receipt of an undertaking by
or on behalf of such person to repay such amount unless it shall ultimately
be determined that such person is entitled to be indemnified by the
Corporation under this Section or otherwise; provided, however, that the
advancement of such expenses shall not be deemed to be indemnification
unless and until it shall ultimately be determined that such person is
entitled to be indemnified by the Corporation."
Southern has an insurance policy covering its liabilities and expenses which
might arise in connection with its lawful indemnification of its directors and
officers for certain of their liabilities and expenses and also covering its
officers and directors against certain other liabilities and expenses.
Paragraph 10 of the Certificate of Incorporation of Capital provides as
follows:
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, or (iii) for any transaction from which the
director received an improper personal benefit.
Article VII of the By-laws of Capital provides in pertinent part:
Section 1. The corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person
acted in good faith in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe such
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his or her conduct was unlawful.
II-2
<PAGE>
Section 2. The corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that such person
is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if he or she acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of
the corporation and except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of
his or her duty to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
Section 3. To the extent that a director, officer, employee or agent of
the corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in Section 1. and 2., or in
defense of any claim, issue or matter therein, such individual shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Section 4. Any indemnification under Sections 1. and 2. (unless ordered
by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in Sections 1. and 2.
Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable,
or, even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
Section 5. Expenses incurred by an officer or director in defending a
civil or criminal action, suit or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding as
authorized by the board of directors in the specific case upon receipt of
an undertaking by or on behalf of such director or officer to repay such
amount unless it shall ultimately be determined that such individual is
entitled to be indemnified by the corporation as authorized in this
Section. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
Section 6. The indemnification provided by this Article VII shall not be
exclusive of any other rights to which those seeking indemnification may be
entitled under any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such individual's official
capacity and as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against such person and incurred by such in any such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify against such liability under
the provisions of this section.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<C> <S>
1.1 Form of Underwriting Agreement*
4.1 Form of Subordinated Note Indenture of The Southern Company and
Southern Company Capital Funding, Inc. relating to the Junior
Subordinated Notes**
4.2 Form of First Supplemental Indenture to Subordinated Note Indenture of
Southern Company Capital Funding, Inc. and The Southern Company
relating to the Junior Subordinated Notes**
4.3 Form of Certificate of Junior Subordinated Notes (included as Exhibit
A to Exhibit 4.2)**
4.4 Certificate of Trust of Southern Company Capital Trust III**
4.5 Trust Agreement of Southern Company Capital Trust III**
4.6 Form of Amended and Restated Trust Agreement of Southern Company
Capital Trust III**
4.7 Form of Preferred Security Certificate for Southern Company Capital
Trust III (included as Exhibit E to Exhibit 4.6)**
4.8 Form of Preferred Securities Guarantee of The Southern Company
relating to the Preferred Securities**
4.9 Form of Agreement as to Expenses and Liabilities (included as Exhibit
D to Exhibit 4.6)**
5.1 Opinion of Troutman Sanders LLP to The Southern Company and Southern
Company Capital Funding, Inc. as to legality of the Preferred
Securities Guarantee and the Notes Guarantee to be issued by The
Southern Company and legality of the Junior Subordinated Notes
to be issued by Southern Company Capital Funding, Inc.
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as to
legality of the Preferred Securities to be issued by Southern Company
Capital Trust III
8.1 Opinion of Troutman Sanders LLP, special tax counsel, as to certain
United States federal income tax matters
12.1 Computation of ratio of earnings to fixed charges**
12.2 Computation of ratio of earnings to fixed charges plus preferred
dividend requirements**
21.1 List of Subsidiaries of The Southern Company (Designated in Form 10-K
for the year ended December 31, 1996, File No. 1-3536, as Exhibit 21.)
23.1 Consent of Arthur Andersen LLP**
23.2 Consent of Troutman Sanders LLP (included in Exhibit 5.1)
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2)
23.4 Consent of Troutman Sanders LLP (included in Exhibit 8.1)
24.1 Power of Attorney of certain officers and directors of The Southern
Company**
24.2 Resolution of The Southern Company re: Power of Attorney**
25.1 Form T-1 Statement of Eligibility of Bankers Trust Company**
</TABLE>
- --------
* To be subsequently filed or incorporated by reference.
**Previously filed
ITEM 17. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of a Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit
II-4
<PAGE>
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
each undersigned Registrant pursuant to the foregoing provisions, or
otherwise, each Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by each undersigned Registrant of expenses incurred or paid by a
director, officer of controlling person of each Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, each Registrant will, unless in the opinion of its counsel the
matter has been settled by the controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
THE SOUTHERN COMPANY, A DELAWARE CORPORATION, CERTIFIES THAT IT HAS REASONABLE
GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3
AND HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON THE 5TH DAY OF JUNE, 1997.
The Southern Company
A. W. DAHLBERG
By: _________________________________
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
By: /s/Wayne Boston
WAYNE BOSTON
ATTORNEY-IN-FACT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
DIRECTORS AND OFFICERS OF THE SOUTHERN COMPANY IN THE CAPACITIES AND ON THE DATE
INDICATED:
SIGNATURE TITLE DATE
A. W. Dahlberg Chairman of the Board,
President, Chief
Executive Officer and
Director (Principal
Executive Officer)
W. L. Westbrook Financial Vice
President, Chief
Financial Officer and
Treasurer (Principal
Financial and
Accounting Officer)
John C. Adams
A. D. Correll
Paul J. DeNicola
Jack Edwards
H. Allen Franklin
Bruce S. Gordon
L. G. Hardman III Directors
Elmer B. Harris
William A. Parker, Jr.
William J. Rushton, Jr.
Gloria M. Shatto
Gerald J. St. Pe
Herbert Stockham
II-6
<PAGE>
SIGNATURE TITLE DATE
/S/Wayne Boston
- ------------------------------------- June 5, 1997
WAYNE BOSTON
Attorney-in-Fact
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
SOUTHERN COMPANY CAPITAL FUNDING, INC., A DELAWARE CORPORATION, CERTIFIES THAT
IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR
FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF ATLANTA, STATE OF GEORGIA, ON THE 5TH DAY OF JUNE,
1997.
Southern Company Capital Funding,
Inc.
By: /s/W. L. Westbrook
W.L. WESTBROOK
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING DIRECTOR AND
OFFICERS OF SOUTHERN COMPANY CAPITAL FUNDING, INC. IN THE CAPACITIES AND ON THE
DATE INDICATED.
SIGNATURE TITLE DATE
By: /s/W.L. Westbrook President, Chief June 5,
W.L. WESTBROOK Executive Officer and 1997
Director (Principal
Executive Officer)
Vice President and Chief June 5,
By: /s/C.O. Rawlins Financial Officer 1997
C.O. RAWLINS (Principal Financial and
Accounting Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, SOUTHERN COMPANY
CAPITAL TRUST III CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ATLANTA, STATE OF
GEORGIA, ON THE 5TH DAY OF JUNE, 1997.
Southern Company Capital Trust III
By: Southern Company Capital Funding,
Inc., Depositor
By: /s/Wayne Boston
WAYNE BOSTON
ASSISTANT SECRETARY
II-7
EXHIBIT 5.1
Troutman Sanders LLP
Atlanta, Ga.
June 5, 1997
The Southern Company
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Southern Company Capital Funding, Inc.
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Re: Registration Statement on Form S-3
Gentlemen:
We are acting as counsel to The Southern Company ("Southern") and
Southern Company Capital Funding, Inc. ("Capital") in connection with the
preparation of a Registration Statement on Form S-3, including a preliminary
prospectus, filed with the Securities and Exchange Commission (the "Commission")
on May 30, 1997 (File Nos. 333-28187, 333-28187-01 and 333-28187-02) and amended
by Amendment No. 1 filed with the Commission on June 5, 1997 (as so amended, the
"Registration Statement"), for the registration under the Securities Act of
1933, as amended (the "Act"), of (1) Junior Subordinated Notes (the "Junior
Subordinated Notes") to be issued by Capital to Southern Company Capital Trust
III (the "Trust"), (2) Cumulative Quarterly Income Preferred Securities
(liquidation amount $25 per Preferred Security) to be issued by the Trust, (3)
Southern's Preferred Securities Guarantee (as defined in the Registration
Statement) with respect to such Preferred Securities and (4) Southern's Notes
Guarantee (as defined in the Registration Statement) with respect to the Junior
Subordinated Notes. The Junior Subordinated Notes and the Notes Guarantee will
be issued pursuant to a subordinated note indenture, as supplemented, among
Southern, Capital and the trustee named therein (the "Subordinated Note
Indenture") and the Preferred Securities Guarantee will be issued pursuant to a
guarantee agreement between Southern and the trustee named therein (the
"Preferred Securities Guarantee Agreement"), in each case in the respective
forms filed as exhibits to the Registration Statement.
We are of the opinion that, upon compliance with the pertinent
provisions of the Act, the Trust Indenture Act of 1939, as amended, and the
Public Utility Holding Company Act of 1935, as amended, upon compliance with
applicable securities or blue sky laws of various jurisdictions, upon the
adoption of appropriate resolutions by the Board of Directors of Capital or a
duly authorized committee thereof, when the Subordinated Note Indenture has been
duly executed and delivered by the proper officers of Southern, Capital and the
trustee named therein, when the Preferred Securities Guarantee Agreement has
been duly executed and delivered by the proper officers of Southern and the
trustee named therein, and when the Junior Subordinated Notes, the Notes
Guarantee and the Preferred Securities Guarantee have been executed,
authenticated and delivered in accordance with the terms of the Subordinated
Note Indenture and the Preferred Securities Guarantee Agreement, as the case may
be, (i) the Notes Guarantee and the Preferred Securities Guarantee will be
valid, binding and legal obligations of Southern (subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and to general principles
of equity, whether considered in a proceeding at law or in equity) and (ii) the
Junior Subordinated Notes will be valid, binding and legal obligations of
Capital (subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally and to general principles of equity, whether considered in a
proceeding at law or in equity). In rendering the foregoing opinion, with
respect to matters of New York law, we have relied on the opinion of Dewey
Ballantine attached hereto as Annex I.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the statements with respect to our firm under the
caption "Legal Matters" in the Registration Statement. In giving the foregoing
consent, we do not hereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Commission thereunder.
Very truly yours,
/s/Troutman Sanders LLP
TROUTMAN SANDERS LLP
<PAGE>
Annex I
Dewey Ballantine
New York, New York
June 5, 1997
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308
Re: Registration Statement on Form S-3
Gentlemen:
We are acting as counsel to the Underwriters in connection with the
preparation of a Registration Statement on Form S-3, including a preliminary
prospectus, filed with the Securities and Exchange Commission (the "Commission")
on May 30, 1997 (File Nos. 333-28187, 333-28187-01 and 333-28187-02) and amended
by Amendment No. 1 filed with the Commission on June 5, 1997 (as so amended, the
"Registration Statement"), for the registration under the Securities Act of
1933, as amended (the "Act"), of (1) Junior Subordinated Notes (the "Junior
Subordinated Notes") to be issued by Southern Company Capital Funding, Inc.
("Capital") to Southern Company Capital Trust III (the "Trust"), (2) Cumulative
Quarterly Income Preferred Securities (liquidation amount $25 per Preferred
Security) to be issued by the Trust, (3) the Preferred Securities Guarantee (as
defined in the Registration Statement) of The Southern Company ("Southern") with
respect to such Preferred Securities and (4) Southern's Notes Guarantee (as
defined in the Registration Statement) with respect to the Junior Subordinated
Notes. The Junior Subordinated Notes and the Notes Guarantee will be issued
pursuant to a subordinated note indenture, as supplemented, among Southern,
Capital and the trustee named therein (the "Subordinated Note Indenture") and
the Preferred Securities Guarantee will be issued pursuant to a guarantee
agreement between Southern and the trustee named therein (the "Preferred
Securities Guarantee Agreement"), in each case in the respective forms filed as
exhibits to the Registration Statement.
We are of the opinion that, upon compliance with the pertinent
provisions of the Act, the Trust Indenture Act of 1939, as amended, and the
Public Utility Holding Company Act of 1935, as amended, upon compliance with
applicable securities or blue sky laws of various jurisdictions, upon the
adoption of appropriate resolutions by the Board of Directors of Capital or a
duly authorized committee thereof, when the Subordinated Note Indenture has been
duly executed and delivered by the proper officers of Southern, Capital and the
trustee named therein, when the Preferred Securities Guarantee Agreement has
been duly executed and delivered by the proper officers of Southern and the
trustee named therein, and when the Junior Subordinated Notes, the Notes
Guarantee and the Preferred Securities Guarantee have been executed,
authenticated and delivered in accordance with the terms of the Subordinated
Note Indenture and the Preferred Securities Guarantee Agreement, as the case may
be, (i) the Notes Guarantee and the Preferred Securities Guarantee will be
valid, binding and legal obligations of Southern (subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and to general principles
of equity, whether considered in a proceeding at law or in equity) and (ii) the
Junior Subordinated Notes will be valid, binding and legal obligations of
Capital (subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally and to general principles of equity, whether considered in a
proceeding at law or in equity).
This opinion is furnished solely for your benefit in connection with
your rendering an opinion to Southern and Capital to be filed as Exhibit 5.1 to
the Registration Statement and we hereby consent to your attaching this opinion
as an annex to such opinion. This opinion may not be relied upon by you for any
other purpose, or quoted to or relied upon by any other person, firm or entity
for any purpose, without our prior written consent.
Very truly yours,
/s/Dewey Ballantine
DEWEY BALLANTINE
Exhibit 5.2
[Letterhead of Richards, Layton and Finger]
June 5, 1997
Southern Company Capital Trust III
c/o Southern Company Capital Funding, Inc.
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Re: Southern Company Capital Trust III
Ladies and Gentlemen:
We have acted as special Delaware counsel for Southern Company Capital
Funding, Inc., a Delaware corporation (the "Company"), and Southern Company
Capital Trust III, a Delaware business trust (the "Trust"), in connection with
the matters set forth herein. At your request, this opinion is being furnished
to you.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of originals or copies of the
following:
(a) The Certificate of Trust of the Trust, dated May 23, 1997 (the
"Certificate"), as filed in the office of the Secretary of State of the
State of Delaware (the "Secretary of State") on May 23, 1997;
(b) The Trust Agreement of the Trust, dated as of May 23, 1997,
between the Company, as Depositor, and the trustee of the Trust named
therein;
(c) Amendment No. 1 to the Registration Statement (the "Registration
Statement") on Form S-3, including a preliminary prospectus (the
"Prospectus"), relating to the __% Trust Preferred Securities of the Trust
representing preferred undivided beneficial interests
<PAGE>
Southern Company Capital Trust III
June 5, 1997
Page 2
in the assets of the Trust (each, a "Preferred Security" and
collectively, the "Preferred Securities"), as proposed to be filed by the
Company, the Trust and others as set forth therein with the Securities and
Exchange Commission on or about June 5, 1997;
(d) A form of Amended and Restated Trust Agreement of the Trust, to be
entered into among the Company, as Depositor, the trustees of the Trust
named therein, and the holders, from time to time, of undivided beneficial
interests in the assets of the Trust (including Exhibits C and E thereto)
(the "Trust Agreement"), attached as an exhibit to the Registration
Statement; and
(e) A Certificate of Good Standing for the Trust, dated June 5, 1997,
obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are used
as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents other than
the documents listed in paragraphs (a) through (e) above. In particular, we have
not reviewed any document (other than the documents listed in paragraphs (a)
through (e) above) that is referred to in or incorporated by reference into the
documents reviewed by us. We have assumed that there exists no provision in any
document that we have not reviewed that is inconsistent with the opinions stated
herein. We have conducted no independent factual investigation of our own but
rather have relied solely upon the foregoing documents, the statements and
information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust Agreement
and the Certificate are in full force and effect and have not been amended, (ii)
except to the extent provided in paragraph 1 below, the due creation or due
organization or due formation, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the laws of the
jurisdiction governing its creation, organization or formation, (iii) the legal
capacity of natural persons who are parties to the documents examined by us,
(iv) that each of the parties to the documents examined by us has the power and
authority to execute and deliver, and to perform its obligations under, such
documents, (v) the due authorization, execution and delivery by all parties
thereto of all documents examined by us, (vi) the receipt by each Person to whom
a Preferred Security is to be issued by the Trust (collectively, the "Preferred
Security Holders") of a Preferred Securities Certificate for such Preferred
Security and the payment for
<PAGE>
Southern Company Capital Trust III
June 5, 1997
Page 3
the Preferred Security acquired by it, in accordance with the Trust Agreement
and the Registration Statement, and (vii) that the Preferred Securities are
issued and sold to the Preferred Security Holders in accordance with the Trust
Agreement and the Registration Statement. We have not participated in the
preparation of the Registration Statement and assume no responsibility for its
contents.
This opinion is limited to the laws of the State of Delaware (excluding the
securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal laws
and rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder which are
currently in effect.
Based upon the foregoing, and upon our examination of such questions of law
and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good standing
as a business trust under the Delaware Business Trust Act.
2. The Preferred Securities will represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of the Trust, will
be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Trust Agreement.
We consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement. In addition, we hereby
consent to the use of our name under the heading "Legal Matters" in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of Persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above, without
our prior written consent, this opinion may not be furnished or quoted to, or
relied upon by, any other Person for any purpose.
Very truly yours,
/s/Richards, Layton and Finger
EXHIBIT 8.1
Troutman Sanders LLP
Atlanta, Ga
June 5, 1997
The Southern Company
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Re: Registration Statement on Form S-3
Gentlemen:
We are acting as counsel to The Southern Company in connection with the
preparation of a Registration Statement on Form S-3, including a preliminary
prospectus, filed with the Securities and Exchange Commission (the "Commission")
on May 30, 1997 (File Nos. 333-28187, 333-28187-01 and 333-28187-02) and amended
by Amendment No. 1 filed with the Commission on June 5, 1997 (as so amended, the
"Registration Statement").
We hereby confirm our opinion that the statements as to matters of law
and legal conclusions set forth under the caption "Certain Federal Income Tax
Considerations" in the preliminary prospectus included in the Registration
Statement are correct in all material respects.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement and to the use of our name under the
heading "Certain Federal Income Tax Considerations" in the preliminary
prospectus forming part of the Registration Statement. In giving the foregoing
consent, we do not hereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Commission thereunder.
Very truly yours,
/s/Troutman Sanders LLP
TROUTMAN SANDERS LLP
