SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION OR DECLARATION
under
The Public Utility Holding Company Act of 1935
THE SOUTHERN COMPANY
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
ALABAMA POWER COMPANY GULF POWER COMPANY
600 North 18th Street 500 Bayfront Parkway
Birmingham, Alabama 35291 Pensacola, Florida 32501
GEORGIA POWER COMPANY MISSISSIPPI POWER COMPANY
333 Piedmont Avenue, N.E. 2992 West Beach
Atlanta, Georgia 30308 Gulfport, Mississippi 39501
(Name of company or companies filing this statement
and addresses of principal executive offices)
THE SOUTHERN COMPANY
(Name of top registered holding company parent of each
applicant or declarant)
Tommy Chisholm, Secretary
The Southern Company
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Art P. Beattie, Vice President, Warren E. Tate, Secretary and Treasurer
Secretary and Treasurer Gulf Power Company
Alabama Power Company 500 Bayfront Parkway
600 North 18th Street Pensacola, Florida 32501
Birmingham, Alabama 35291
Judy M. Anderson, Vice President Michael W. Southern, Vice President,
and Corporate Secretary Secretary, Treasurer and
Georgia Power Company Chief Financial Officer
333 Piedmont Avenue, N.E. Mississippi Power Company
Atlanta, Georgia 30308 2992 West Beach
Gulfport, Mississippi 39501
(Names and addresses of agents for service)
The Commission is requested to mail signed copies of all
orders, notices and communications to:
W. L. Westbrook John D. McLanahan, Esq.
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
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
The Southern Company ("SOUTHERN"), a Delaware corporation and a holding
company registered under the Public Utility Holding Company Act of 1935 (the
"1935 Act"), and Alabama Power Company ("ALABAMA"), an Alabama corporation,
Georgia Power Company ("GEORGIA"), a Georgia corporation, Gulf Power Company
("GULF"), a Maine corporation, and Mississippi Power Company ("MISSISSIPPI"), a
Mississippi corporation (ALABAMA, GEORGIA, GULF and MISSISSIPPI are sometimes
collectively referred to herein as the "Subsidiaries"), request authority (i)
for each of the Subsidiaries to solicit proxies from the holders of their
respective shares of preferred stock and common stock; (ii) for each of the
Subsidiaries to amend their respective Charters (as defined herein); (iii) for
SOUTHERN to make an offer to the holders of shares of certain series of the
Subsidiaries' outstanding preferred stock to acquire such shares for cash; and
(iv) for SOUTHERN to sell to the respective Subsidiaries any preferred stock so
acquired at SOUTHERN's purchase price plus expenses. SOUTHERN, ALABAMA, GEORGIA,
GULF and MISSISSIPPI are sometimes collectively referred to herein as the
"Applicants."
A. Introduction
1. ALABAMA Proxy Solicitation and Tender Offer
ALABAMA proposes to solicit proxies from the holders of its outstanding
shares of preferred stock and common stock (the "ALABAMA Proxy Solicitation")
for use at a special meeting of its stockholders (the "ALABAMA Special Meeting")
to consider a proposed amendment to Alabama's charter (the "ALABAMA Charter")
that would eliminate in their entirety (i) Paragraph A.2.f.(2) of Article IX of
the ALABAMA Charter, a provision restricting the amount of securities
representing unsecured indebtedness issuable by ALABAMA, (ii) Paragraph
A.2.f.(1) of Article IX of the ALABAMA Charter, a provision which requires the
vote of the holders of at least a majority of the total voting power of the
outstanding ALABAMA preferred stock to approve the sale of all or substantially
all of ALABAMA's property and mergers or consolidations that have not been
approved under the 1935 Act, (iii) Paragraph A.2.b. (except the first paragraph
therein) of Article IX of the ALABAMA Charter, a provision restricting the
ability of ALABAMA to pay dividends on its common stock in the event that its
common equity capitalization falls below certain levels and (iv) the words after
"January 31, 1942" of the first paragraph of Paragraph A.2.b. of Article IX of
the ALABAMA Charter, a provision restricting the ability of ALABAMA to pay
dividends on its common stock in the event that its retained earnings are not at
least equal to two times the annual dividends on its outstanding preferred stock
(collectively, the "ALABAMA Proposed Amendment"). If the ALABAMA Proposed
Amendment is adopted, ALABAMA proposes to make a special cash payment to each
preferred stockholder who voted his or her shares of preferred stock in favor of
the ALABAMA Proposed Amendment, provided that such shares have not been tendered
pursuant to the concurrent cash tender offer described below.
Concurrently with the ALABAMA Proxy Solicitation, SOUTHERN proposes to
make an offer (the "ALABAMA Offer") to the holders of the 4.20% Series (as
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defined herein) (the "ALABAMA Tendered Series") to acquire for cash any and all
shares of such series, at a cash purchase price which SOUTHERN anticipates will
include a market premium for such series. In addition, holders of tendered
shares purchased by SOUTHERN will receive from ALABAMA a dividend attributable
to the period ending on the date the shares are purchased by SOUTHERN. SOUTHERN
anticipates that the ALABAMA Offer will expire at 5:00 P.M. (New York City time)
on December 10, 1997, the date of the ALABAMA Special Meeting (the "ALABAMA
Expiration Date"), unless the ALABAMA Offer is extended. Holders of the ALABAMA
Tendered Series who wish to tender such shares pursuant to the ALABAMA Offer
must vote in favor of or consent to the ALABAMA Proposed Amendment. Any shares
that are tendered but not voted in favor of the ALABAMA Proposed Amendment will
be deemed withdrawn and not validly tendered. Among the other conditions of the
ALABAMA Offer is that the ALABAMA Proposed Amendment be approved and adopted at
the ALABAMA Special Meeting.
2. GEORGIA Proxy Solicitation and Tender Offer
GEORGIA proposes to solicit proxies from the holders of its outstanding
shares of preferred stock (except for shares of the $1.925 Series (as defined
herein)) and common stock (the "GEORGIA Proxy Solicitation") for use at a
special meeting of its stockholders (the "GEORGIA Special Meeting") to consider
a proposed amendment to GEORGIA's charter, as amended (the "GEORGIA Charter"),
that would eliminate in their entirety (i) Subparagraph 14.A.3.f.(2) of
Paragraph III of the GEORGIA Charter, a provision restricting the amount of
securities representing unsecured indebtedness issuable by GEORGIA, (ii)
Subparagraph 14.A.3.f.(1) of Paragraph III of the GEORGIA Charter, a provision
which requires the vote of the holders of at least a majority of the total
voting power of the outstanding GEORGIA preferred stock to approve the sale of
all or substantially all of GEORGIA's property, mergers or consolidations that
have not been approved under the 1935 Act, and (iii) Subparagraph 14.A.3.b.
(except the first paragraph therein) of Paragraph III of the GEORGIA Charter, a
provision restricting the ability of GEORGIA to pay dividends on its common
stock in the event that its common equity capitalization falls below certain
levels (collectively, the "GEORGIA Proposed Amendment"). If the GEORGIA Proposed
Amendment is adopted, GEORGIA proposes to make a special cash payment to each
preferred stockholder who voted his or her shares of preferred stock in favor of
the GEORGIA Proposed Amendment, provided that such shares have not been tendered
pursuant to the concurrent cash tender offer described below.
Concurrently with the GEORGIA Proxy Solicitation, SOUTHERN proposes to
make an offer (the "GEORGIA Offer") to the holders of the $4.60 Series, the
$4.60 1962 Series, the $4.60 1963 Series, the $4.60 1964 Series, the $4.72
Series, the $4.92 Series, the $4.96 Series, the $5.00 Series and the $5.64
Series (each as herein defined) (collectively, the "GEORGIA Tendered Series") to
acquire for cash any and all shares of each such series, at cash purchase prices
which SOUTHERN anticipates will include a market premium for each such series.
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In addition, holders of tendered shares purchased by SOUTHERN will receive from
GEORGIA a dividend attributable to the period ending on the date the shares are
purchased by SOUTHERN. SOUTHERN anticipates that the GEORGIA Offer will expire
at 5:00 P.M. (New York City time) on December 10, 1997, the date of the GEORGIA
Special Meeting (the "GEORGIA Expiration Date"), unless the GEORGIA Offer is
extended. Holders of the GEORGIA Tendered Series who wish to tender such shares
pursuant to the GEORGIA Offer must vote in favor of or consent to the GEORGIA
Proposed Amendment. Any shares that are tendered but not voted in favor of the
GEORGIA Proposed Amendment will be deemed withdrawn and not validly tendered.
Among the other conditions of the GEORGIA Offer is that the GEORGIA Proposed
Amendment be approved and adopted at the GEORGIA Special Meeting.
In addition, GEORGIA has entered into an agreement to purchase
approximately 1,365,000 shares of its AR1 1993 Series (as herein defined) from
the holder of such shares at purchase prices of up to $25.6875 per share plus
the net carrying cost of such holder and approximately 1,430,000 shares of its
AR2 1993 Series (as herein defined) from the holder of such shares at purchase
prices of up to $25.0025 per share plus the net carrying cost of such holder. It
is proposed that, subject to Commission authorization herein (which
authorization is hereby sought), GEORGIA may assign its rights under such
contract to SOUTHERN, which it is expected would then purchase such shares not
later than the time at which SOUTHERN purchases shares pursuant to the GEORGIA
Offer, and GEORGIA would purchase such shares from SOUTHERN (at the price paid
therefor by SOUTHERN) not later than the time at which GEORGIA purchases shares
sold to SOUTHERN pursuant to the GEORGIA Offer as described herein.
3. GULF Proxy Solicitation and Tender Offer
GULF proposes to solicit proxies from the holders of its outstanding
shares of preferred stock and common stock (the "GULF Proxy Solicitation") for
use at a special meeting of its stockholders (the "GULF Special Meeting") to
consider a proposed amendment to GULF's Restated Articles of Incorporation, as
amended (the "GULF Charter"), that would eliminate in their entirety (i)
Paragraph (F)(b) under "General Provisions" of the "Preferred Stock" section of
the GULF Charter, a provision restricting the amount of securities representing
unsecured indebtedness issuable by GULF, (ii) Paragraph (F)(a) under "General
Provisions" of the "Preferred Stock" section of the GULF Charter, a provision
which requires the vote of the holders of at least a majority of the total
voting power of the outstanding GULF preferred stock to approve the sale of all
or substantially all of GULF's property, mergers or consolidations that have not
been approved under the 1935 Act, and (iii) Paragraph (B) (except the first
paragraph therein) under "General Provisions" of the "Preferred Stock" section
of the GULF Charter, a provision restricting the ability of GULF to pay
dividends on its common stock in the event that its common equity capitalization
falls below certain levels (collectively, the "GULF Proposed Amendment"). If the
GULF Proposed Amendment is adopted, GULF proposes to make a special cash payment
to each preferred stockholder who voted his or her shares of preferred stock in
favor of the GULF Proposed Amendment, provided that such shares have not been
tendered pursuant to the concurrent cash tender offer described below.
Concurrently with the GULF Proxy Solicitation, SOUTHERN proposes to
make an offer (the "GULF Offer") to the holders of GULF's outstanding preferred
stock of each series (collectively, the "GULF Tendered Series") to acquire for
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cash any and all shares of each such series, at cash purchase prices which
SOUTHERN anticipates will include a market premium for shares of each series. In
addition, holders of tendered shares purchased by SOUTHERN will receive from
GULF a dividend attributable to the period ending on the date the shares are
purchased by SOUTHERN. SOUTHERN anticipates that the GULF Offer will expire at
5:00 P.M. (New York City time) on December 10, 1997, the date of the GULF
Special Meeting (the "GULF Expiration Date"), unless the GULF Offer is extended.
Holders of the GULF Tendered Series who wish to tender such shares pursuant to
the GULF Offer must vote in favor of or consent to the GULF Proposed Amendment.
Any shares that are tendered but not voted in favor of the GULF Proposed
Amendment will be deemed withdrawn and not validly tendered. Among the other
conditions of the GULF Offer is that the GULF Proposed Amendment be approved and
adopted at the GULF Special Meeting.
4. MISSISSIPPI Proxy Solicitation and Tender Offer
MISSISSIPPI proposes to solicit proxies from the holders of its
outstanding shares of preferred stock and common stock (the "MISSISSIPPI Proxy
Solicitation") for use at a special meeting of its stockholders (the
"MISSISSIPPI Special Meeting") to consider a proposed amendment to MISSISSIPPI's
Articles of Incorporation, as amended (the "MISSISSIPPI Charter"), that would
eliminate in their entirety (i) Subparagraph (F)(b) of Paragraph FOURTH under
"General Provisions" of the "Preferred Stock" section of the MISSISSIPPI
Charter, a provision restricting the amount of securities representing unsecured
indebtedness issuable by MISSISSIPPI, (ii) Subparagraph (F)(a) of Paragraph
FOURTH under "General Provisions" of the "Preferred Stock" section of the
MISSISSIPPI Charter, a provision which requires the vote of the holders of at
least a majority of the total voting power of the outstanding MISSISSIPPI
preferred stock to approve the sale of all or substantially all of MISSISSIPPI's
property, mergers or consolidations that have not been approved under the 1935
Act, and (iii) Subparagraph (B) (except the first paragraph therein) of
Paragraph FOURTH under "General Provisions" of the "Preferred Stock" section of
the MISSISSIPPI Charter, a provision restricting the ability of MISSISSIPPI to
pay dividends on its common stock in the event that its common equity
capitalization falls below certain levels (collectively, the "MISSISSIPPI
Proposed Amendment"). If the MISSISSIPPI Proposed Amendment is adopted,
MISSISSIPPI proposes to make a special cash payment to each preferred
stockholder who voted his or her shares of preferred stock in favor of the
MISSISSIPPI Proposed Amendment, provided that such shares have not been tendered
pursuant to the concurrent cash tender offer described below.
Concurrently with the MISSISSIPPI Proxy Solicitation, SOUTHERN proposes
to make an offer (the "MISSISSIPPI Offer") to the holders of the 4.40% Series,
the 4.60% MS Series and the 4.72% MS Series (each as herein defined)
(collectively, the "MISSISSIPPI Tendered Series") to acquire for cash any and
all shares of each such series, at cash purchase prices which SOUTHERN
anticipates will include a market premium for each series. In addition, holders
of tendered shares purchased by SOUTHERN will receive from MISSISSIPPI a
dividend attributable to the period ending on the date the shares are purchased
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by SOUTHERN. SOUTHERN anticipates that the MISSISSIPPI Offer will be scheduled
to expire at 5:00 P.M. (New York City time) on December 10, 1997, the date of
the MISSISSIPPI Special Meeting (the "MISSISSIPPI Expiration Date"), unless the
MISSISSIPPI Offer is extended. Holders of the MISSISSIPPI Tendered Series who
wish to tender such shares pursuant to the MISSISSIPPI Offer must vote in favor
of or consent to the MISSISSIPPI Proposed Amendment. Any shares that are
tendered but not voted in favor of the MISSISSIPPI Proposed Amendment will be
deemed withdrawn and not validly tendered. Among the other conditions of the
MISSISSIPPI Offer is that the MISSISSIPPI Proposed Amendment be approved and
adopted at the MISSISSIPPI Special Meeting.1
Applicants request that the Commission issue a public notice of the
proposed transactions and order authorizing the Proxy Solicitations
(collectively, the "Proxy Solicitation Order") on October 31, 1997, thereby both
affording the Subsidiaries sufficient time to solicit proxies in advance of the
Special Meetings and, because the Proxy Solicitations and the Offers will be
effected by means of either a combined proxy statement and issuer tender offer
statement for each Tendered Series or by a Proxy Statement for all other Series
with respect to each Subsidiary pursuant to the Securities Exchange Act of 1934
(the "Exchange Act") and applicable rules and regulations thereunder,
facilitating commencement of the Offers. Applicants further request that as soon
as practicable after the Proxy Solicitation Order, the Commission issue an order
authorizing the Proposed Amendments and Cash Payments (as defined herein)
together with SOUTHERN's proposed acquisition of any and all shares of the
Subsidiaries' preferred stock pursuant to the Offers.
B. Background
As discussed below, the purpose of the Proxy Solicitations is to
eliminate the provisions in each Subsidiary's Charter restricting the ability of
the Subsidiary (i) to pay dividends on its common stock in the event that its
common equity capitalization falls below certain levels, (ii) to incur certain
indebtedness, (iii) to sell assets, merge or consolidate without preferred
shareholder approval under certain circumstances, and (iv) in the case of
ALABAMA, the provision restricting the ability of ALABAMA to pay dividends on
its common stock in the event that its retained earnings are not at least equal
to two times the annual dividends on its outstanding preferred stock. SOUTHERN
and each Subsidiary consider these restrictions significant impediments to their
ability to adapt to an increasingly competitive market for electricity, maintain
financial flexibility and minimize their financing costs. The competitive
advantages, financing flexibility and cost benefits resulting from the
elimination of these provisions outweigh the one-time cost of the Offers and the
Proxy Solicitations. Applicants further believe that the terms of purchase for
the outstanding shares of the Subsidiaries' preferred stock pursuant to the
Offers will benefit not only tendering preferred stockholders (given the
proposed per share purchase price) but also, taking into account all related
transaction costs, SOUTHERN's investors and the Subsidiaries' utility customers
by (1) contributing to the elimination of the onerous provisions concerning
indebtedness, sales of property and consolidations and mergers and common stock
dividends (with the attendant benefits described above) and (2) resulting in the
acquisition and retirement of outstanding shares of the Subsidiaries' preferred
stock and their potential replacement with comparatively less expensive
financing alternatives.
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1 The ALABAMA Proxy Solicitation, the GEORGIA Proxy Solicitation, the GULF Proxy
Solicitation and the MISSISSIPPI Proxy Solicitation are sometimes referred to
herein individually as a "Proxy Solicitation" and collectively as the "Proxy
Solicitations"; the ALABAMA Special Meeting, the GEORGIA Special Meeting, the
GULF Special Meeting and the MISSISSIPPI Special Meeting are sometimes referred
to herein individually as a "Special Meeting" and collectively as the "Special
Meetings"; the ALABAMA Charter, the GEORGIA Charter, the GULF Charter and the
MISSISSIPPI Charter are sometimes referred to herein individually as a "Charter"
and collectively as the "Charters"; the ALABAMA Proposed Amendment, the GEORGIA
Proposed Amendment, the GULF Proposed Amendment and the MISSISSIPPI Proposed
Amendment are sometimes referred to herein individually as a "Proposed
Amendment" and collectively as the "Proposed Amendments"; the ALABAMA Offer, the
GEORGIA Offer, the GULF Offer and the MISSISSIPPI Offer are sometimes referred
to herein individually as an "Offer" and collectively as the "Offers"; the
ALABAMA Tendered Series, the GEORGIA Tendered Series, the GULF Tendered Series
and the MISSISSIPPI Tendered Series are sometimes referred to herein
individually as a "Tendered Series" and collectively as the "Tendered Series";
and the ALABAMA Expiration Date, the GEORGIA Expiration Date, the GULF
Expiration Date and the MISSISSIPPI Expiration Date are sometimes referred to
herein individually as an "Expiration Date" and collectively as the "Expiration
Dates."
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C. Proposed Transactions: Proxy Solicitation and Proposed Amendment
1. Terms of Proxy Solicitation and Proposed Amendment
a. ALABAMA
ALABAMA has outstanding 5,608,955 shares of common stock, par value $40
per share (the "ALABAMA Common Stock"), all of which are held by SOUTHERN.
ALABAMA's outstanding preferred stock consists of (i) 5,520,000 shares of Class
A cumulative preferred stock, stated capital $25 per share (collectively, the
"ALABAMA NYSE Preferred Stock"), issued in three series (each, an "ALABAMA NYSE
Series"), 2 which are traded on the New York Stock Exchange, (ii) 704,000 shares
of cumulative preferred stock, par value $100 per share (collectively, the
"ALABAMA $100 Preferred Stock"), issued in six series (each, an "ALABAMA $100
Series"), 3 which are traded over-the-counter, (iii) 200 shares of Class A
cumulative preferred stock, stated capital $100,000 per share (collectively, the
"1993 Auction Preferred Stock"), issued in one series (the "1993 Auction
Series"), which are traded over-the-counter, and (iv) 500,000 shares of Class A
cumulative preferred stock, stated capital $100 per share (collectively, the
"1988 Auction Preferred Stock" and, together with the ALABAMA NYSE Preferred
Stock, the ALABAMA $100 Preferred Stock and the 1993 Auction Preferred Stock,
the "ALABAMA Preferred Stock"), issued in one series (the "1988 Auction Series"
and, together with the ALABAMA NYSE Series, the ALABAMA $100 Series and the 1993
Auction Series, the "ALABAMA Series"), which are traded over-the-counter. The
ALABAMA Common Stock and ALABAMA Preferred Stock constitute ALABAMA's only
outstanding securities entitled to vote on the ALABAMA Proposed Amendment.
ALABAMA has outstanding no other class of equity securities.
Paragraph A.2.f.(2) of Article IX of the ALABAMA Charter currently
provides that, so long as any shares of ALABAMA's Preferred Stock are
outstanding, without the affirmative vote of the holders of at least a majority
of the total voting power of the outstanding ALABAMA Preferred Stock, ALABAMA
shall not issue or assume any securities representing unsecured debt (other than
for the purpose of refunding or renewing outstanding unsecured securities issued
by ALABAMA resulting in equal or longer maturities or redeeming or otherwise
retiring all outstanding shares of the ALABAMA Preferred Stock or of any senior
or equally ranking stock) if, immediately after such issue or assumption, the
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2 The three series of ALABAMA NYSE Preferred Stock consist of a 6.80%
series, of which 1,520,000 shares are outstanding ("6.80% Series"); a 6.40%
series, of which 2,000,000 shares are outstanding ("6.40% Series"); and an
adjustable rate series, of which 2,000,000 shares are outstanding ("AR Series").
3 The six series of ALABAMA $100 Preferred Stock consist of a 4.20% series, of
which 364,000 shares are outstanding ("4.20% Series"); a 4.52% series, of which
50,000 shares are outstanding ("4.52% Series"); a 4.60% series, of which 100,000
shares are outstanding ("4.60% AL Series"); a 4.64% series, of which 60,000
shares are outstanding ("4.64% Series"); a 4.72% series, of which 50,000 shares
are outstanding ("4.72% AL Series"); and a 4.92% series, of which 80,000 shares
are outstanding ("4.92% Series").
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total outstanding principal amount of all securities representing unsecured debt
of ALABAMA would exceed 20% of the aggregate of all existing secured debt of
ALABAMA and the capital stock, premiums thereon and surplus of ALABAMA as stated
on ALABAMA's books (the "ALABAMA Debt Limitation Provision"). The ALABAMA
Proposed Amendment would eliminate the ALABAMA Debt Limitation Provision by
deleting it in its entirety from the ALABAMA Charter.
Paragraph A.2.f.(1) of Article IX of the ALABAMA Charter currently
provides that, so long as any shares of ALABAMA Preferred Stock are outstanding,
without the affirmative vote of the holders of at least a majority of the total
voting power of the outstanding ALABAMA Preferred Stock, ALABAMA shall not
dispose of all or substantially all of its property or merge or consolidate,
unless such action has been approved by the Commission under the 1935 Act (the
"ALABAMA Merger Provision"). The ALABAMA Amendment would eliminate the ALABAMA
Merger Provision by deleting it in its entirety from the ALABAMA Charter.
Paragraph A.2.b. (except the first paragraph therein) of Article IX of
the ALABAMA Charter currently provides that, so long as any shares of ALABAMA
Preferred Stock are outstanding (except as may be approved or permitted by the
affirmative vote of the holders of at least two-thirds of the total voting power
of the outstanding ALABAMA Preferred Stock), ALABAMA's payment of dividends on
the ALABAMA Common Stock is limited to 50% of net income available for such
stock during a period of 12 months if, calculated on a corporate basis, the
ratio of ALABAMA Common Stock equity to total capitalization, including surplus,
adjusted to reflect the payment of the proposed dividend, is below 20%, and to
75% of such net income if such ratio is 20% or more but less than 25% (the
"ALABAMA Common Stock Dividend Provision"). The ALABAMA Amendment would
eliminate the ALABAMA Common Stock Dividend Provision by deleting it in its
entirety from the ALABAMA Charter.
The clause after the words "January 31, 1942" in the first paragraph of
Paragraph A.2.b. of Article IX of the ALABAMA Charter currently provides that,
so long as any shares of ALABAMA Preferred Stock are outstanding, ALABAMA shall
not pay dividends on ALABAMA Common Stock (except those paid concurrently with
the receipt of a cash capital contribution in like amount) in cases where
retained earnings are not at least equal to two times annual dividends on the
outstanding ALABAMA Preferred Stock (the "ALABAMA Retained Earnings Dividend
Provision").4 The ALABAMA Amendment would eliminate the ALABAMA Retained
Earnings Dividend Provision by deleting the above-mentioned clause of such
paragraph from the ALABAMA Charter.
If the ALABAMA Proposed Amendment is adopted, ALABAMA proposes to make
a special cash payment equal to 1.00% of the par value or stated capital, as
applicable, per share of the ALABAMA Preferred Stock (except that the special
cash payment shall equal 0.25% of the stated capital per share for the 1988
Auction Series and the 1993 Auction Series) (each, an "ALABAMA Cash Payment")
for each share of ALABAMA Preferred Stock (each, an "ALABAMA Share") properly
voted at the ALABAMA Special Meeting (in person by ballot or by proxy) in favor
of the ALABAMA Proposed Amendment, provided that such ALABAMA Shares are not
tendered pursuant to the ALABAMA Offer. ALABAMA will disburse ALABAMA Cash
Payments out of its general funds, promptly after adoption of the ALABAMA
Proposed Amendment.
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4 The ALABAMA Debt Limitation Provision, the ALABAMA Merger Provision, the
ALABAMA Common Stock Dividend Provision and the ALABAMA Retained Earnings
Dividend Provision are sometimes referred to herein collectively as the
"ALABAMA Restriction Provisions."
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b. GEORGIA
GEORGIA has outstanding 7,761,500 shares of common stock, no par value
(the "GEORGIA Common Stock"), all of which are held by SOUTHERN. GEORGIA's
outstanding preferred stock consists of (i) 8,156,500 shares of Class A
cumulative preferred stock, stated value $25 per share (collectively, the
"GEORGIA NYSE Preferred Stock"), issued in three series (each, a "GEORGIA NYSE
Series"), 5 which are traded on the New York Stock Exchange and (ii) 1,177,864
shares of cumulative preferred stock, stated value $100 per share (collectively,
the "GEORGIA OTC Preferred Stock" and, together with the GEORGIA NYSE Preferred
Stock, the "GEORGIA Preferred Stock"), issued in eleven series (each, a "GEORGIA
OTC Series" and, together with the GEORGIA NYSE Series, "GEORGIA Series"), 6
which are traded over-the-counter. The GEORGIA Common Stock and GEORGIA
Preferred Stock constitute GEORGIA's only outstanding securities entitled to
vote on the GEORGIA Proposed Amendment. GEORGIA has outstanding no other class
of equity securities.
Subparagraph 14.A.3.f.(2) of Paragraph III of the GEORGIA Charter
currently provides that, so long as any shares of GEORGIA Preferred Stock are
outstanding, without the affirmative vote of the holders of at least a majority
of the total voting power of the outstanding GEORGIA Preferred Stock, GEORGIA
shall not issue or assume any securities representing unsecured debt (other than
for the purpose of refunding or renewing outstanding unsecured securities issued
by GEORGIA resulting in equal or longer maturities or redeeming or otherwise
retiring all outstanding shares of the GEORGIA Preferred Stock or of any senior
or equally ranking stock) if, immediately after such issue or assumption, (a)
the total outstanding principal amount of all securities representing unsecured
debt of GEORGIA would exceed 20% of the aggregate of all existing secured debt
of GEORGIA and the capital stock, premiums thereon and surplus of GEORGIA as
stated on GEORGIA's books; or (b) the total outstanding principal amount of all
securities representing unsecured debt of GEORGIA of maturities of less than ten
years7 would exceed 10% of such aggregate (the "GEORGIA Debt Limitation
Provision"). The GEORGIA Proposed Amendment would eliminate the GEORGIA Debt
Limitation Provision by deleting it in its entirety from the GEORGIA Charter.
_________________
5 The three series of GEORGIA NYSE Preferred Stock consist of a $1.925 series,
of which 1,156,500 shares are outstanding ("$1.925 Series"); an adjustable rate
(first 1993) series, of which 3,000,000 shares are outstanding ("AR1 1993
Series"); and an adjustable rate (second 1993) series, of which 4,000,000 shares
are outstanding ("AR2 1993 Series").
6 The eleven series of GEORGIA OTC Preferred Stock consist of a $4.60 series, of
which 433,774 shares are outstanding ("$4.60 Series"); a $4.60 1962 series, of
which 70,000 shares are outstanding ("$4.60 1962 Series"); a $4.60 1963 series,
of which 70,000 shares are outstanding ("$4.60 1963 Series"); a $4.60 1964
series, of which 50,000 shares are outstanding ("$4.60 1964 Series"); a $4.72
series, of which 60,000 shares are outstanding ("$4.72 Series"); a $4.92 series,
of which 100,000 shares are outstanding ("$4.92 Series"); a $4.96 series, of
which 70,000 shares are outstanding ("$4.96 Series"); a $5.00 series, of which
14,090 shares are outstanding ("$5.00 Series"); a $5.64 series, of which 90,000
shares are outstanding ("$5.64 Series"); a $6.48 series, of which 120,000 shares
are outstanding ("$6.48 Series"); and a $6.60 series, of which 100,000 shares
are outstanding ("$6.60 Series").
7 For the purpose of this provision, the payment due upon the maturity of
unsecured debt having an original single maturity in excess of ten years or the
payment due upon the final maturity of any unsecured serial debt which had
original maturities in excess of ten years shall not be regarded as unsecured
debt of a maturity less than ten years until such payment shall be required to
be made within three years.
8
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Subparagraph 14.A.3.f.(1) of Paragraph III of the GEORGIA Charter
currently provides that, so long as any shares of GEORGIA Preferred Stock are
outstanding, without the affirmative vote of the holders of at least a majority
of the total voting power of the outstanding GEORGIA Preferred Stock, GEORGIA
shall not dispose of all or substantially all of its property or merge or
consolidate, unless such action has been approved by the Commission under the
1935 Act (the "GEORGIA Merger Provision"). The GEORGIA Amendment would eliminate
the GEORGIA Merger Provision by deleting it in its entirety from the GEORGIA
Charter.
Subparagraph 14.A.3.b. (except the first paragraph therein) of
Paragraph III of the GEORGIA Charter currently provides that, so long as any
shares of GEORGIA Preferred Stock are outstanding, GEORGIA's payment of
dividends on the GEORGIA Common Stock is limited to 50% of net income available
for such stock during a period of 12 months if, calculated on a corporate basis,
the ratio of GEORGIA Common Stock equity to total capitalization, including
surplus, adjusted to reflect the payment of the proposed dividend, is below 20%,
and to 75% of such net income if such ratio is 20% or more but less than 25%
(the "GEORGIA Common Stock Dividend Provision"). 8 The GEORGIA Amendment would
eliminate the GEORGIA Common Stock Dividend Provision by deleting it in its
entirety from the GEORGIA Charter.
If the GEORGIA Proposed Amendment is adopted, GEORGIA proposes to make
a special cash payment equal to 1.00% of the stated value per share of the
GEORGIA Preferred Stock (each, a "GEORGIA Cash Payment") for each share of
GEORGIA Preferred Stock (except for shares of the $1.925 Series because GEORGIA
is not soliciting proxies from the holders of outstanding shares of such Series)
(each, a "GEORGIA Share") properly voted at the GEORGIA Special Meeting (in
person by ballot or by proxy) in favor of the GEORGIA Proposed Amendment,
provided that such GEORGIA Shares are not tendered pursuant to the GEORGIA
Offer. GEORGIA will disburse GEORGIA Cash Payments out of its general funds,
promptly after adoption of the GEORGIA Proposed Amendment.
c. GULF
GULF has outstanding 992,717 shares of common stock, no par value (the
"GULF Common Stock"), all of which are held by SOUTHERN. GULF's outstanding
preferred stock consists of (i) 151,026 shares of preferred stock, par value
$100 per share (collectively, the "GULF $100 Preferred Stock"), issued in three
series (each, a "GULF $100 Series"), 9 which are traded over-the-counter and
(ii) 1,400,000 shares of Class A cumulative preferred stock, par value $10 per
______________
8 The GEORGIA Debt Limitation Provision, the GEORGIA Merger Provision and the
GEORGIA Common Stock Dividend Provision are sometimes referred to herein
collectively as the "GEORGIA Restriction Provisions."
9 The three series of GULF $100 Preferred Stock consist of a 4.64% series, of
which 51,026 shares are outstanding ("4.64% Series"); a 5.16% series, of which
50,000 shares are outstanding ("5.16% Series"); and a 5.44% series, of which
50,000 shares are outstanding ("5.44% Series").
9
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share, stated capital $25 per share (collectively, the "GULF $10 Preferred
Stock" and, together with the GULF $100 Preferred Stock, the "GULF Preferred
Stock"), issued in two series (each, a "GULF $10 Series" and, together with the
GULF $100 Series, "GULF Series"), 10 which are traded over-the-counter. The GULF
Common Stock and GULF Preferred Stock constitute GULF's only outstanding
securities entitled to vote on the GULF Proposed Amendment. GULF has outstanding
no other class of equity securities.
Paragraph (F)(b) under the "General Provisions" of the "Preferred
Stock" section of the GULF Charter currently provides that, so long as any
shares of GULF Preferred Stock are outstanding, without the affirmative vote of
the holders of at least a majority of the total voting power of the outstanding
GULF Preferred Stock, GULF shall not issue or assume any securities representing
unsecured debt (other than for the purpose of refunding or renewing outstanding
unsecured securities issued by GULF resulting in equal or longer maturities or
redeeming or otherwise retiring all outstanding shares of the GULF Preferred
Stock or of any senior or equally ranking stock) if, immediately after such
issue or assumption, (a) the total outstanding principal amount of all
securities representing unsecured debt of GULF would exceed 20% of the aggregate
of all existing secured debt of GULF and the capital stock, premiums thereon and
surplus of GULF as stated on GULF's books; or (b) the total outstanding
principal amount of all securities representing unsecured debt of GULF of
maturities of less than ten years11 would exceed 10% of such aggregate (the
"GULF Debt Limitation Provision"). The GULF Proposed Amendment would eliminate
the GULF Debt Limitation Provision by deleting it in its entirety from the GULF
Charter.
Paragraph (F)(a) under "General Provisions" of the "Preferred Stock"
section of the GULF Charter currently provides that, so long as any shares of
GULF Preferred Stock are outstanding, without the affirmative vote of the
holders of at least a majority of the total voting power of the outstanding GULF
Preferred Stock, GULF shall not dispose of all or substantially all of its
property or merge or consolidate, unless such action has been approved by the
Commission under the 1935 Act (the "GULF Merger Provision"). The GULF Amendment
would eliminate the GULF Merger Provision by deleting it in its entirety from
the GULF Charter.
Paragraph (B) (except the first paragraph therein) under the "General
Provisions" of the "Preferred Stock" section of the GULF Charter currently
provides that, so long as any shares of GULF Preferred Stock are outstanding,
GULF's payment of dividends on the GULF Common Stock are limited to 50% of net
income available for such stock during a period of 12 months if, calculated on a
corporate basis, the ratio of GULF Common Stock equity to total capitalization,
including surplus, adjusted to reflect the payment of the proposed dividend, is
below 20%, and to 75% of such net income if such ratio is 20% or more but less
_______________
10 The two series of GULF $10 Preferred Stock consist of a 6.72% series, of
which 800,000 shares are outstanding ("6.72% Series"); and an adjustable rate
(1993) series, of which 600,000 shares are outstanding ("AR 1993 Series").
11 For the purpose of this provision, the payment due upon the maturity of
unsecured debt having an original single maturity in excess of ten years or the
payment due upon the final maturity of any unsecured serial debt which had
original maturities in excess of ten years shall not be regarded as unsecured
debt of a maturity less than ten years until such payment shall be required to
be made within three years.
10
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than 25% (the "GULF Common Stock Dividend Provision"). 12 The GULF Amendment
would eliminate the GULF Common Stock Dividend Provision by deleting it in its
entirety from the GULF Charter.
If the GULF Proposed Amendment is adopted, GULF proposes to make a
special cash payment equal to 1.00% of the stated capital, in the case of the
GULF $10 Preferred Stock, or par value, in the case of the GULF $100 Preferred
Stock, per share of the GULF Preferred Stock (each, a "GULF Cash Payment") for
each share of GULF Preferred Stock (each, a "GULF Share") properly voted at the
GULF Special Meeting (in person by ballot or by proxy) in favor of the GULF
Proposed Amendment, provided that such GULF Shares are not tendered pursuant to
the GULF Offer. GULF will disburse GULF Cash Payments out of its general funds,
promptly after adoption of the GULF Proposed Amendment.
d. MISSISSIPPI
MISSISSIPPI has outstanding 1,121,000 shares of common stock, without
par value (the "MISSISSIPPI Common Stock"), all of which are held by SOUTHERN.
MISSISSIPPI's outstanding preferred stock consists of (i) 936,160 shares of
depositary preferred shares, each representing one-fourth a share of cumulative
preferred stock, par value $100 per share (collectively, the "MISSISSIPPI NYSE
Preferred Stock"), issued in two series (each, a "MISSISSIPPI NYSE Series"), 13
which are traded on the New York Stock Exchange, and (ii) 160,099 shares of
cumulative preferred stock, par value $100 per share (collectively, the
"MISSISSIPPI OTC Preferred Stock" and, together with the MISSISSIPPI NYSE
Preferred Stock, the "MISSISSIPPI Preferred Stock"), issued in four series
(each, a "MISSISSIPPI OTC Series" and, together with the MISSISSIPPI NYSE
Series, the "MISSISSIPPI Series"), 14 which are traded over-the-counter. The
MISSISSIPPI Common Stock and MISSISSIPPI Preferred Stock constitute
MISSISSIPPI's only outstanding securities entitled to vote on the MISSISSIPPI
Proposed Amendment. MISSISSIPPI has outstanding no other class of equity
securities.
Subparagraph (F)(b) of Paragraph FOURTH under "General Provisions" of
the "Preferred Stock" section of the MISSISSIPPI Charter currently provides
that, so long as any shares of MISSISSIPPI Preferred Stock are outstanding,
without the affirmative vote of the holders of at least a majority of the
outstanding MISSISSIPPI Preferred Stock, MISSISSIPPI shall not issue or assume
any securities representing unsecured debt (other than for the purpose of
refunding or renewing outstanding unsecured securities issued by MISSISSIPPI
resulting in equal or longer maturities or redeeming or otherwise retiring all
outstanding shares of the MISSISSIPPI Preferred Stock or of any senior or
equally ranking stock) if, immediately after such issue or assumption, (a) the
total outstanding principal amount of all securities representing unsecured debt
of MISSISSIPPI would exceed 20% of the aggregate of all existing secured debt of
MISSISSIPPI and the capital stock, premiums thereon and surplus of MISSISSIPPI
____________
12 The GULF Debt Limitation Provision, the GULF Merger Provision and the GULF
Common Stock Dividend Provision are sometimes referred to herein collectively as
the "GULF Restriction Provisions."
13 The two series of MISSISSIPPI NYSE Preferred Stock consist of a 6.32% series,
of which 600,000 shares are outstanding ("6.32% Series"); and a 6.65% series, of
which 336,160 shares are outstanding ("6.65% Series").
14 The four series of MISSISSIPPI OTC Preferred Stock consist of a 4.40% series,
of which 40,000 shares are outstanding ("4.40% Series"); a 4.60% series, of
which 20,099 shares are outstanding ("4.60% MS Series"); a 4.72% series, of
which 50,000 shares are outstanding ("4.72% MS Series"); and a 7.00% series, of
which 50,000 shares are outstanding ("7.00% Series").
11
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as stated on MISSISSIPPI's books; or (b) the total outstanding principal amount
of all securities representing unsecured debt of MISSISSIPPI of maturities of
less than ten years15 would exceed 10% of such aggregate (the "MISSISSIPPI Debt
Limitation Provision"). The MISSISSIPPI Proposed Amendment would eliminate the
MISSISSIPPI Debt Limitation Provision by deleting it in its entirety from the
MISSISSIPPI Charter.
Subparagraph (F)(a) of Paragraph FOURTH under the "General Provisions"
of the "Preferred Stock" section of the MISSISSIPPI Charter currently provides
that, so long as any shares of MISSISSIPPI Preferred Stock are outstanding,
without the affirmative vote of the holders of at least a majority of the
outstanding MISSISSIPPI Preferred Stock, MISSISSIPPI shall not dispose of all or
substantially all of its property or merge or consolidate, unless such action
has been approved by the Commission under the 1935 Act (the "MISSISSIPPI Merger
Provision"). The MISSISSIPPI Amendment would eliminate the MISSISSIPPI Merger
Provision by deleting it in its entirety from the MISSISSIPPI Charter.
Subparagraph (B) (except the first paragraph therein) of Paragraph
FOURTH under "General Provisions" of the "Preferred Stock" section of the
MISSISSIPPI Charter currently provides that, so long as any shares of
MISSISSIPPI Preferred Stock are outstanding, MISSISSIPPI's payment of dividends
on the MISSISSIPPI Common Stock are limited to 50% of net income available for
such stock during a period of 12 months if, calculated on a corporate basis, the
ratio of MISSISSIPPI Common Stock equity to total capitalization, including
surplus, adjusted to reflect the payment of the proposed dividend, is below 20%,
and to 75% of such net income if such ratio is 20% or more but less than 25%
(the "MISSISSIPPI Common Stock Dividend Provision"). 16 The MISSISSIPPI
Amendment would eliminate the MISSISSIPPI Common Stock Dividend Provision by
deleting it in its entirety from the MISSISSIPPI Charter.
If the MISSISSIPPI Proposed Amendment is adopted, MISSISSIPPI proposes
to make a special cash payment equal to 1.00% of the par value per share of the
MISSISSIPPI Preferred Stock (each, a "MISSISSIPPI Cash Payment") for each share
of MISSISSIPPI Preferred Stock (each, a "MISSISSIPPI Share") properly voted at
the MISSISSIPPI Special Meeting (in person by ballot or by proxy) in favor of
the MISSISSIPPI Proposed Amendment, provided that such MISSISSIPPI Shares are
___________
15 For the purpose of this provision, the payment due upon the maturity of
unsecured debt having an original single maturity in excess of ten years or the
payment due upon the final maturity of any unsecured serial debt which had
original maturities in excess of ten years shall not be regarded as unsecured
debt of a maturity less than ten years until such payment shall be required to
be made within three years.
16 The MISSISSIPPI Debt Limitation Provision, the MISSISSIPPI Merger Provision
and the MISSISSIPPI Common Stock Dividend Provision are sometimes referred to
herein collectively as the "MISSISSIPPI Restriction Provisions. The ALABAMA
Restriction Provisions, the GEORGIA Restriction Provisions, the GULF Restriction
Provisions and the MISSISSIPPI Restriction Provisions are sometimes referred to
herein collectively as the "Restriction Provisions."
12
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not tendered pursuant to the MISSISSIPPI Offer. MISSISSIPPI will disburse
MISSISSIPPI Cash Payments out of its general funds, promptly after adoption of
the MISSISSIPPI Proposed Amendment.17
e. Miscellaneous
Adoption of an amendment to the Charters, including the Proposed
Amendments, requires the affirmative vote at a Subsidiary's Special Meeting (in
person by ballot or by proxy) of the holders of not less than (1) two-thirds of
the voting power of the outstanding Preferred Stock of all Series, voting
together as one class, and (2) in the case of GEORGIA, two-thirds of its Common
Stock and in the case of ALABAMA, GULF and MISSISSIPPI, a majority of its Common
Stock. SOUTHERN will vote its shares of ALABAMA Common Stock, GEORGIA Common
Stock, GULF Common Stock and MISSISSIPPI Common Stock, respectively, in favor of
the Proposed Amendments. Abstentions and broker non-votes in respect of the
Proposed Amendments will have the effect of votes against the Proposed
Amendments.
Votes at the Special Meetings will be tabulated preliminarily by The
Bank of New York and Corporate Investor Communications, Inc. Inspectors of
election, duly appointed by the presiding officer at the Special Meetings, will
definitively count and tabulate the votes and determine and announce the results
at the meeting.
The Subsidiaries have engaged Corporate Investor Communications, Inc.
to act as information agent in connection with the Proxy Solicitations for fees
and expenses estimated not to exceed approximately $70,000.
2. Benefits of Proposed Amendments
Reference is made to Exhibits B-1, B-2, B-3 and B-4 (draft Offer to
Purchase and Proxy Statement) with respect to the Tendered Series and to
Exhibits B-5, B-6 and B-7 (draft Proxy Statement) with respect to the
Non-Tendered Series18 (as defined below) for detailed information with respect
to the benefits of the Proposed Amendments.
D. Proposed Transactions: Offer
1. Terms of Offer
Concurrently with the commencement of the Proxy Solicitations, subject
to the terms and conditions stated in the Offers to Purchase and Proxy
Statements and the Letters of Transmittal and Proxy (see Exhibits B-1, B-2, B-3,
B-4 and B-9 through B-12) (collectively, "Offer Documents"), SOUTHERN proposes
to make the Offers, pursuant to which it will offer to acquire from the holders
of the Preferred Stock of certain Series any and all Shares of such Series at
the following cash purchase prices:
_____________
17 The ALABAMA Cash Payment, the GEORGIA Cash Payment, the GULF Cash Payment and
the MISSISSIPPI Cash Payment are sometimes referred to herein individually as a
"Cash Payment" and collectively as the "Cash Payments" and the ALABAMA Shares,
the GEORGIA Shares, the GULF Shares and the MISSISSIPPI Shares are sometimes
referred to herein individually and collectively as the "Shares."
18 The ALABAMA Series that are not ALABAMA Tendered Series are sometimes
referred to herein collectively as the "ALABAMA Non-Tendered Series." The
GEORGIA Series that are not GEORGIA Tendered Series are sometimes referred to
herein collectively as the "GEORGIA Non-Tendered Series." The MISSISSIPPI Series
that are not MISSISSIPPI Tendered Series are sometimes referred to herein
collectively as the "MISSISSIPPI Non-Tendered Series." The ALABAMA Non-Tendered
Series, the GEORGIA Non-Tendered Series and the MISSISSIPPI Non-Tendered Series
are sometimes referred to herein individually as a "Non-Tendered Series" and
collectively as the "Non-Tendered Series."
13
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(i) ALABAMA - $__ per share, in the case of the 4.20% Series
("ALABAMA Purchase Price") .
(ii) GEORGIA - $___ per share, in the case of the $4.60
Series; $___ per share, in the case of the $4.60 1962 Series; $__ per
share, in the case of the $4.60 1963 Series; $__ per share, in the case
of the $4.60 1964 Series; $___ per share, in the case of the $4.72
Series; $___ per share, in the case of the $4.92 Series; $__ per share,
in the case of the $4.96 Series; $__ per share, in the case of the
$5.00 Series; and $___ per share, in the case of the $5.64 Series
(each, a "GEORGIA Purchase Price").
(iii) GULF - $__ per share, in the case of the 4.64% Series;
$___ per share, in the case of the 5.16% Series; $___ per share, in the
case of the 5.44% Series; $___ per share, in the case of the 6.72%
Series; and $__ per share, in the case of the AR 1993 Series (each, a
"GULF Purchase Price").
(iv) MISSISSIPPI - $__ per share, in the case of the 4.40%
Series; $__ per share, in the case of the 4.60% MS Series; and $__ per
share, in the case of the 4.72% MS Series (each, a "MISSISSIPPI
Purchase Price").19
In addition to the purchase price paid by SOUTHERN, holders of tendered shares
purchased by SOUTHERN will receive from the applicable Subsidiary a dividend
attributable to the period ending on the date the shares are purchased by
SOUTHERN. SOUTHERN anticipates that the Offer for each Tendered Series of
Preferred Stock will be scheduled to expire at 5:00 P.M. (New York City time) on
the date of the Special Meetings (i.e., December 10, 1997). As noted below, the
Expiration Date may be extended under certain circumstances.
The Offers consist of separate offers for each Tendered Series, which
consist of the one ALABAMA Tendered Series, the nine GEORGIA Tendered Series,
the five GULF Tendered Series and the three MISSISSIPPI Tendered Series, with
the offer for any one Series being independent of the offer for any other
Series. The applicable Purchase Price and the other terms and conditions of the
Offers apply equally to all holders of the respective Tendered Series. The
Offers are not conditioned upon any minimum number of Shares of the applicable
Series being tendered, but are conditioned, among other things, on tendering
Preferred Shareholders voting in favor of the Proposed Amendments and the
Proposed Amendments being adopted at the respective Special Meetings.
_________________
19 The ALABAMA Purchase Price, the GEORGIA Purchase Price, the GULF Purchase
Price and the MISSISSIPPI Purchase Price are sometimes referred to herein
individually as a "Purchase Price" and collectively as the "Purchase Prices."
14
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To tender shares in accordance with the terms of the Offer Documents,
the tendering Preferred Stockholder must either (1) send to The Bank of New
York, in its capacity as depositary for the Offers ("Depositary"), a properly
completed and duly executed Letter of Transmittal and Proxy for that Series,
together with any required signature guarantees and any other documents required
by the Letter of Transmittal and Proxy, and either (a) certificates for the
Shares to be tendered must be received by the Depositary at one of its addresses
specified in the Offer Documents, or (b) such Shares must be delivered pursuant
to the procedures for book-entry transfer described in the Offer Documents (and
a confirmation of such delivery must be received by the Depositary), in each
case by the Expiration Date; or (2) comply with a guaranteed delivery procedure
specified in the Offer Documents.20 Tenders of Shares made pursuant to an Offer
may be withdrawn at any time prior to the Expiration Date. Thereafter, such
tenders are irrevocable, subject to certain exceptions identified in the Offer
Documents.
SOUTHERN's obligation to proceed with the Offers and to accept for
payment and to pay for any Shares tendered is made in accordance with Rule 51
under the 1935 Act and is subject to various conditions enumerated in the Offer
Documents, including, among other conditions, that tendering Preferred
Shareholders vote in favor of the Proposed Amendments, that the Proposed
Amendments be adopted at the Special Meetings and that the Commission issue an
order under the 1935 Act authorizing the proposed transactions.
At any time or from time to time, SOUTHERN may extend the Expiration
Date applicable to any Series by giving notice of such extension to the
Depositary, without extending the Expiration Date for any other Series. During
any such extension, all Shares of the applicable Series previously tendered will
remain subject to the Offer, and may be withdrawn at any time prior to the
Expiration Date as extended.
Conversely, SOUTHERN may elect in its sole discretion to terminate one
or more Offers prior to the scheduled Expiration Date and not accept for payment
and pay for any Shares tendered, subject to applicable provisions of Rule 13e-4
under the Exchange Act requiring SOUTHERN either to pay the consideration
offered or to return the Shares tendered promptly after the termination or
withdrawal of an Offer, upon the occurrence of any of the conditions to closing
enumerated in the Offer Documents, by giving notice of such termination to the
Depositary and making a public announcement thereof.
Subject to compliance with applicable law, SOUTHERN further reserves
the right in the Offer Documents, in its sole discretion, to amend one or more
Offers in any respect by making a public announcement thereof. If SOUTHERN
materially changes the terms of an Offer or the information concerning an Offer,
or if SOUTHERN waives a material condition of an Offer (such as the condition
that the Proposed Amendment be adopted at the Special Meeting), SOUTHERN will
________________
20 Preferred Stockholders will not be under any obligation to tender Shares
pursuant to the Offer; the Offer will not constitute a notice of redemption of
any Series pursuant to the Charter. Nor will the Offer operate to waive any
option the Subsidiaries have to redeem Shares.
15
<PAGE>
extend the Expiration Date to the extent required by the applicable provisions
of Rule 13e-4 under the Exchange Act. Those provisions require that the minimum
period during which an issuer tender offer must remain open following material
changes in the terms of the offer or information concerning the offer (other
than a change in price or change in percentage of securities sought) will depend
on the facts and circumstances, including the relative materiality of such terms
or information. If an Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including, the
date that SOUTHERN notifies Preferred Stockholders that it will (a) decrease the
number of Shares of any Series of Preferred being sought, (b) increase or
decrease the consideration being offered in the Offer to holders of any Series
of Preferred or (c) increase or decrease the soliciting dealers' fees, the
Expiration Date will be extended until the expiration of such period of ten
business days.
Shares validly tendered to the Depositary pursuant to an Offer and not
withdrawn in accordance with the procedures set forth in the Offer Documents
will be held by SOUTHERN until the Expiration Date (or returned in the event the
Offer is terminated). Subject to the terms and conditions of an Offer, as
promptly as practicable after the Expiration Date, SOUTHERN will accept for
payment (and thereby purchase) and pay for Shares validly tendered and not
withdrawn. SOUTHERN will pay for Shares that it has purchased pursuant to the
Offer by depositing the applicable Purchase Price with the Depositary, which
will act as agent for the tendering Preferred Stockholders for the purpose of
receiving payment from SOUTHERN and transmitting payment to tendering Preferred
Stockholders. SOUTHERN will pay all stock transfer taxes, if any, payable on
account of its acquisition of Shares pursuant to an Offer, except in certain
circumstances where special payment or delivery procedures are utilized in
conformance with the applicable Letters of Transmittal and Proxy.
With respect to Shares validly tendered and accepted for payment by
SOUTHERN, each tendering Preferred Stockholder will be entitled to receive as
consideration from SOUTHERN only the applicable Purchase Price (which SOUTHERN
anticipates will reflect a premium over the current market price at the
commencement of the Offers). In addition to the purchase price paid by SOUTHERN,
holders of tendered shares purchased by SOUTHERN will receive from the
applicable Subsidiary a dividend attributable to the period ending on the date
the shares are purchased by SOUTHERN. Any such holder will not be entitled to
receive with respect to such tendered Shares additional consideration in the
form of a Cash Payment. As stated above in Item 1.C, the latter payment is
payable by a Subsidiary solely in respect of Shares voted by Preferred
Stockholders at such Subsidiary's Special Meeting in favor of the Proposed
Amendment, provided that (a) such Shares have not been tendered pursuant to an
Offer and (b) the Proposed Amendment is adopted at the Subsidiary's Special
Meeting. Preferred Stockholders who wish to tender their Shares pursuant to an
Offer must vote in favor of or consent to the Proposed Amendment. The Offer is
conditioned upon, among other things, the Proposed Amendment being adopted at
the Special Meeting.
16
<PAGE>
As noted immediately above, subject to the terms and conditions of an
Offer, Shares validly tendered and not withdrawn will be accepted for payment
and paid for by SOUTHERN as promptly as practicable after the Expiration Date.
If a Proposed Amendment is not adopted at the Special Meeting, SOUTHERN
may elect, but is not obligated, to waive such condition, subject to applicable
law.21 In that case, as promptly as practicable after SOUTHERN's waiver thereof
and purchase of any Shares validly tendered pursuant to the Offers, the affected
Subsidiary anticipates that it may either adjourn the Special Meeting or call
another special meeting of its common and preferred stockholders and solicit
proxies therefrom for the same purpose as in the instant proceeding, i.e., to
secure the requisite affirmative vote of stockholders in favor of the Proposed
Amendments. At such meeting, SOUTHERN would vote any Shares acquired by it
pursuant to the Offer or otherwise22 (as well as all of its shares of Common
Stock) in favor of the Proposed Amendments. If the proposed amendment is adopted
at such meeting, and in any event within one year from the Expiration Date
(including any potential extension thereof pursuant to the Offer), SOUTHERN will
promptly after such meeting or at the expiration of such one-year period, as
applicable, sell the Shares to the Subsidiary at the Purchase Price plus
expenses paid therefor pursuant to the Offer, and the Subsidiary will thereupon
retire and cancel such Shares.
Merrill Lynch, Pierce, Fenner & Smith Incorporated will act as dealer
manager (the "Dealer Manager") for SOUTHERN in connection with the Offers.
SOUTHERN has agreed to pay to the Dealer Manager a fee of an amount equal to
0.50% of the par value per Share of Shares of a Tendered Series which are
tendered, accepted for payment and paid for pursuant to the Offers or (if not
tendered pursuant to the Offers) voted in favor of the Proposed Amendment (if
such Proposed Amendment is approved and adopted); provided, however, with
respect to GEORGIA's nine Tendered Series, SOUTHERN has agreed to pay the Dealer
Manager a fee of an amount equal to 0.50% of the stated value per Share of such
Shares which are tendered or voted as described above; provided, further, with
respect to GULF's AR 1993 Series and 6.72% Series, SOUTHERN has agreed to pay
the Dealer Manager a fee of an amount equal to 0.50% of the stated capital per
Share of such Shares which are tendered or voted as described above.
In addition, SOUTHERN has agreed to pay a solicitation fee of an amount
equal to 1.50% of the par value (or (x) stated value with respect to GEORGIA's
nine Tendered Series and (y) stated capital with respect to GULF's AR 1993
Series and 6.72% Series) per Share of Shares of a Tendered Series that are
tendered, accepted for payment and paid for pursuant to the Offers; provided,
however, that with respect to transactions for beneficial owners whose ownership
equals or exceeds 2,500 Shares of a Tendered Series, SOUTHERN has agreed to pay
a solicitation fee of an amount equal to 1.00% of the par value (or (x) stated
value with respect to GEORGIA's nine Tendered Series and (y) stated capital with
__________________
21 In this regard, as noted above, if SOUTHERN waives a material condition of an
Offer (such as the condition that a Proposed Amendment be adopted at the Special
Meeting), SOUTHERN will extend the Expiration Date to the extent required by the
applicable provisions of Rule 13e-4 under the Exchange Act.
22 Following the Expiration Date and the consummation of the purchase of Shares
pursuant to an Offer, SOUTHERN may determine to purchase additional Shares on
the open market, in privately negotiated transactions, through one or more
tender offers or otherwise. SOUTHERN will not undertake any such transactions
without receipt of any required Commission authorizations under the 1935 Act in
one or more separate proceedings. Likewise, in the event such a further special
meeting is necessary, the affected Subsidiary would not undertake any associated
proxy solicitation and proposed Charter amendment prior to receipt of any
required Commission authorizations under the 1935 Act in a separate proceeding.
17
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respect to GULF's AR 1993 Series and 6.72% Series) per Share for such Shares of
a Tendered Series. SOUTHERN and/or ALABAMA, GULF and MISSISSIPPI have each
agreed to pay a separate fee of an amount equal to 0.50% of the par value (or
stated capital with respect to GULF's AR 1993 Series and 6.72% Series) per Share
for Shares of the respective Tendered Series that are not tendered pursuant to
the respective Offers but which are voted in favor of such Subsidiary's Proposed
Amendment (if such Proposed Amendment is approved and adopted); provided,
however, that with respect to transactions for beneficial owners whose ownership
equals or exceeds 2,500 Shares of a Tendered Series, SOUTHERN and/or ALABAMA,
GULF or MISSISSIPPI, as applicable, will pay a separate fee of an amount equal
to 0.25% of the par value (or stated capital with respect to GULF's AR 1993
Series and 6.72% Series) per Share for Shares of the respective Tendered Series
that are not tendered pursuant to the respective Offers but which are voted in
favor of such Subsidiary's Proposed Amendment (if such Proposed Amendment is
approved and adopted). With respect to fees payable pursuant to this paragraph
involving transactions for beneficial owners whose ownership is less than 2,500
Shares of a Tendered Series, any fee payable thereunder shall be paid in full to
the Dealer Manager unless a Soliciting Dealer (as defined in the applicable
Offer to Purchase and Proxy Statement) is designated, in which case such fee
shall be paid in full to such designated Soliciting Dealer (which designated
Soliciting Dealer may be the Dealer Manager). With respect to fees payable
pursuant to this paragraph involving transactions for beneficial owners whose
ownership equals or exceeds 2,500 Shares of a Tendered Series, any fee payable
hereunder shall be paid in full to the Dealer Manager unless a Soliciting Dealer
is designated, in which case, 80% of such fee shall be paid to the Dealer
Manager and 20% of such fee shall be paid to the designated Soliciting Dealer
(which designated Soliciting Dealer may be the Dealer Manager).
In connection with the Proxy Solicitation, SOUTHERN and/or ALABAMA,
GEORGIA and MISSISSIPPI each have agreed to pay the Dealer Manager a fee of an
amount equal to 0.50% of the par value, stated value or stated capital per
Share, as the case may be, of Shares of such Subsidiary's Non-Tendered Series
which are voted in favor of the Proposed Amendment pursuant to such Subsidiary's
Proxy Solicitation (if such Subsidiary's Proposed Amendment is approved and
adopted).
With respect to the Shares of the ALABAMA Non-Tendered Series described
below which are voted in favor of ALABAMA's Proposed Amendment if the ALABAMA
Proposed Amendment is approved and adopted, ALABAMA has agreed to pay a consent
fee of an amount equal to (i) 0.50% of the stated capital per share of its AR
Series (but only with respect to transactions for beneficial owners whose
ownership is less than 2,500 Shares) and (ii) 0.50% of the stated capital or par
value, as applicable, per Share of its 4.52% Series, 4.60% Series, 4.64% Series,
4.72% Series, 4.92% Series, 6.40% Series and 6.80% Series; provided, that with
respect to transactions for beneficial owners whose ownership equals or exceeds
2,500 Shares of such Shares named in clause (ii), ALABAMA has agreed to pay a
consent fee of an amount equal to 0.25% of the stated capital or par value, as
applicable, per Share of such Shares.
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With respect to the Shares of the GEORGIA Non-Tendered Series described
below which are voted in favor of GEORGIA's Proposed Amendment if the GEORGIA
Proposed Amendment is approved and adopted, GEORGIA has agreed to pay a consent
fee of an amount equal to (i) 0.50% of the stated value per Share of its AR1
1993 Series and AR2 1993 Series (but only with respect to transactions for
beneficial owners whose ownership is less than 2,500 Shares) and (ii) 0.50% of
the stated value per Share of its $6.48 Series and $6.60 Series, provided, that
with respect to transactions for beneficial owners whose ownership equals or
exceeds 2,500 Shares of such Shares named in clause (ii), GEORGIA has agreed to
pay a consent fee of an amount equal to 0.25% of the stated value per Share of
such Shares.
With respect to Shares of the MISSISSIPPI Non-Tendered Series which are
voted in favor of MISSISSIPPI's Proposed Amendment if the MISSISSIPPI Proposed
Amendment is approved and adopted, MISSISSIPPI has agreed to pay a consent fee
of an amount equal to 0.50% of the par value per Share of such Shares, provided,
that with respect to transactions for beneficial owners whose ownership equals
or exceeds 2,500 Shares of such Shares, MISSISSIPPI has agreed to pay a consent
fee of an amount equal to 0.25% of the par value per Share of such Shares.
With respect to fees payable pursuant to the preceding three paragraphs
involving transactions for beneficial owners whose ownership is less than 2,500
Shares, any fee payable hereunder shall be paid in full to the Dealer Manager
unless a Soliciting Dealer is designated, in which case such fee shall be paid
in full to such designated Soliciting Dealer (which designated Soliciting Dealer
may be the Dealer Manager). With respect to fees payable pursuant to the
preceding three paragraphs involving transactions for beneficial owners whose
ownership equals or exceeds 2,500 Shares, any fee payable hereunder shall be
paid in full to the Dealer Manager unless a Soliciting Dealer is designated, in
which case, 80% of such fee shall be paid to the Dealer Manager and 20% of such
fee shall be paid to the designated Soliciting Dealer (which designated
Soliciting Dealer may be the Dealer Manager).
As set forth in Item 2, SOUTHERN proposes to pay the Depositary a fee
estimated at approximately $60,000.
2. Benefits of Offer; Utilization of SOUTHERN rather than the
Subsidiaries as Offeror
The proposed acquisition by SOUTHERN of Shares pursuant to the Offers
will benefit SOUTHERN System utility customers, shareholders and Preferred
Stockholders. The Offers allow Preferred Stockholders who may not favor the
Proposed Amendments an option to sell their Preferred Stock at a price that
SOUTHERN anticipates will be a premium to the market price and without the usual
transaction costs associated with a sale. SOUTHERN System utility customers and
SOUTHERN shareholders will benefit from, among other things, the Subsidiaries
lowering their cost of capital through the anticipated reduction in the
aggregate amount payable of Preferred Stock dividends and, to the extent
Preferred Stock is replaced with debt, realizing benefits from the tax
deductibility of interest since preferred stock dividends are not deductible for
tax purposes. Moreover, the Proposed Amendments will (among other benefits)
permit the Subsidiaries to redeem and replace a portion of their high-coupon
debt with lower cost short-term debt, resulting in additional cost savings.
19
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More specifically, assuming only a 50% overall success rate for the
Offers, the estimated cash savings to the Subsidiaries thereafter amount to
between $____ million each year (based on purchased shares being refinanced
entirely with short-term debt at prevailing rates on the date hereof) and $____
million each year (based on purchased Shares being refinanced entirely by
long-term tax-deductible preferred securities), after taxes and excluding
expenses incurred in connection with the Offers and the Proxy Solicitations. On
a cumulative net present value savings basis, assuming (x) a 50% overall success
rate for the Offers (and that 25% of all Preferred Stockholders do not tender
their Shares pursuant to the Offer but do vote in favor of the Proposed
Amendments at the Special Meeting), (y) refinancing of Shares acquired and paid
for pursuant to the Offers with a combination of long-term tax deductible hybrid
securities and short-term debt at prevailing rates at the date hereof, and (z) a
discount rate equal to the new securities after-tax weighted average cost of
capital, the proposed transactions are anticipated to yield total after-tax,
present value cash savings of about $____ million over approximately the
original remaining lives of the Series of Preferred, net of cash expenditures
incurred in the Offers and Proxy Solicitations (i.e., Cash Payments, the
applicable Purchase Prices paid for validly tendered and accepted Shares, and
the other fees and expenses listed in Item 2). A success rate for the Offers
higher than the 50% rate assumed above has the potential to generate even
further cash savings.
Given the significant benefits that will accrue from the Proposed
Amendments, Applicants are committed to using their best efforts to secure that
result. A principal aim of the proposed transactions is to accomplish that
objective in a cost-effective manner. However, there can be no assurance of
success.
In that regard, as stated above in Item 1.D.1, in the event any one or
more Proposed Amendments are not adopted at the Special Meeting, SOUTHERN may
elect, subject to applicable law, to waive the Offer condition that such
Proposed Amendment be adopted at the Special Meeting. In that case, as promptly
as practicable after SOUTHERN's waiver thereof and purchase of Shares validly
tendered pursuant to the Offer, the relevant Subsidiary anticipates that it will
either adjourn the Special Meeting or may call another special meeting of its
common and preferred stockholders and solicit proxies for the same purpose to
secure the requisite vote of both classes of stockholders to amend the Charters
to eliminate the Restriction Provisions. At that meeting, SOUTHERN would vote
any Shares previously acquired by it pursuant to the Offer or otherwise
(together with shares held by it of Common Stock) in favor of such proposed
amendment to the Charters, thereby maximizing its prospects for adoption in that
event. By contrast, if a Subsidiary, rather than SOUTHERN, had acquired its
Shares pursuant to the Offer, upon acquisition thereof by such Subsidiary any
such Shares would be deemed treasury shares under applicable state law and, as
such, the Subsidiary would be precluded from voting those Shares under any
circumstance.
20
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E. Purchase of Shares from SOUTHERN by the Subsidiaries
As noted above, subject to the terms and conditions of an Offer, Shares
validly tendered and not withdrawn will be accepted for payment and paid for by
SOUTHERN as promptly as practicable after the Expiration Date. If a Proposed
Amendment is adopted at a Subsidiary's Special Meeting, promptly after
consummation of the Offer the Subsidiary will purchase the Shares sold to
SOUTHERN pursuant to the Offer at the relevant Purchase Price plus expenses
incurred in the Offer, and the Subsidiary will thereupon retire and cancel such
Shares.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
Other than the Cash Payments and the applicable Purchase Prices
described in Item 1, the fees, commissions and expenses (each, a "fee") to be
incurred, directly or indirectly, by the Applicants or any associate company
thereof in connection with the proposed transactions, assuming the tender and
acceptance of 100% of the Shares, are estimated as follows:
SEC filing fees $ _________
Southern Company Services fees 150,000
Outside counsel fees
Information Agent fees 70,000
Dealer Manager fees 3,303,000
Depositary fees 60,000
Broker/dealer fees 3,625,000
Printing
Mailing
Miscellaneous fees ________
TOTAL $
ITEM 3. APPLICABLE STATUTORY PROVISIONS
Section 12(e) of the 1935 Act and Rules 62 and 65 thereunder are
applicable to the Proxy Solicitations. Section 12(e) of the 1935 Act and Rule 65
thereunder are and Section 6(a)(2) may be deemed applicable to Cash Payments.
Section 6(a)(2) of the 1935 Act is applicable to the Proposed Amendments.
Sections 9(a) and 10 of the 1935 Act and Rule 51 thereunder are applicable to
the acquisition by SOUTHERN of Shares pursuant to the Offers; SOUTHERN hereby
represents that the conditions of Rule 51 will be satisfied in respect of the
acquisition by SOUTHERN of Shares pursuant to the Offers. Sections 12(c) and
12(d) of the 1935 Act and Rules 43 and 44 thereunder are applicable to the sale
to the Subsidiaries of the Shares acquired by SOUTHERN pursuant to the Offers.
Rule 54 under the 1935 Act is also applicable to the proposed transactions. To
the extent that the Commission's "Statement of Policy Regarding Preferred Stock
Subject to the Public Utility Holding Company Act of 1935"23 may be applicable
to the Proposed Amendments, the Applicants hereby request that an exception for
such Statement of Policy be granted.
____________________
23 Rel. No. 35-13106 (February 16, 1956) (the "Statement of Policy").
21
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Rule 54 Analysis: The proposed transaction is also subject to Rule 54,
which provides that, in determining whether to approve an application which does
not relate to any "exempt wholesale generator" ("EWG") or "foreign utility
company" ("FUCO"), the Commission shall not consider the effect of the
capitalization or earnings of any such EWG or FUCO which is a subsidiary of a
registered holding company if the requirements of Rule 53(a), (b) and (c) are
satisfied.
SOUTHERN currently meets all of the conditions of Rule 53(a), except
for clause (1). At September 30, 1997, SOUTHERN "aggregate investment," as
defined in Rule 53(a)(1), in EWGs and FUCOs was approximately $2.675 billion, or
about 71.07% of Southern's "consolidated retained earnings," also as defined in
Rule 53(a)(1), for the four quarters ended June 30, 1997 ($3,764 million). With
respect to Rule 53(a)(1), however, the Commission has determined that Southern's
financing of investments in EWGs and FUCOs in an amount greater than the amount
that would otherwise be allowed by Rule 53(a)(1) would not have either of the
adverse effects set forth in Rule 53(c). See The Southern Company, Holding
Company Act Release No. 16501, dated April 1, 1996 (the "Rule 53(c) Order"); and
Holding Company Act Release No. 26646, dated January 15, 1997 (order denying
request for reconsideration and motion to stay).
In addition, SOUTHERN has complied and will continue to comply with the
record-keeping requirements of Rule 53(a)(2), the limitation under Rule 53(a)(3)
on the use of Operating Company personnel to render services to EWGs and FUCOs,
and the requirements of Rule 53(a)(4) concerning the submission of copies of
certain filings under the Act to retail rate regulatory commissions. Further,
none of the circumstances described in Rule 53(b) has occurred.
Moreover, even if the effect of the capitalization and earnings of EWGs
and FUCOs in which SOUTHERN has an ownership interest upon the SOUTHERN holding
company system were considered, there is no basis for the Commission to withhold
or deny approval for the proposal made in this Application-Declaration. The
action requested in the instant filing would not, by itself, or even considered
in conjunction with the effect of the capitalization and earnings of SOUTHERN's
EWGs and FUCOs, have a material adverse effect on the financial integrity of the
SOUTHERN system, or an adverse impact on SOUTHERN's public-utility subsidiaries,
their customers, or the ability of State commissions to protect such
public-utility customers.
The Rule 53(c) Order was predicated, in part, upon an assessment of
SOUTHERN's overall financial condition which took into account, among other
factors, SOUTHERN's consolidated capitalization ratio and the recent growth
trend in SOUTHERN's retained earnings. As of December 31, 1995, the most recent
fiscal year preceding the Rule 53(c) Order, SOUTHERN's consolidated
capitalization consisted of 49.3% equity (including mandatorily redeemable
preferred securities) and 50.7% debt (including $1.68 billion of long-term,
non-recourse debt and short-term debt related to EWGs and FUCOs). As of year-end
1996, that ratio was 52.9% equity and 47.1% debt (including $1.74 billion of
long-term, non-recourse debt and short-term debt related to EWGs and FUCOs); and
as of June 30, 1997, the comparable ratio was 50.1% equity and 49.9% debt
(including $3.82 billion of long-term, non-recourse debt and short-term debt
22
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related to EWGs and FUCOs). On a pro forma basis, taking into consideration,
among other things, the transactions contemplated hereby such ratios are 49.4%
and 50.6%, respectively, for equity and debt. The common equity component of
SOUTHERN's pro forma consolidated capitalization represents 38.5% of total
capitalization at June 30, 1997. Thus, since the date of the Rule 53(c) Order,
there has been no material change in SOUTHERN's consolidated capitalization
ratio, which remains within acceptable ranges and limits of rating agencies as
evident by the continued "A" corporate credit rating of SOUTHERN. Specifically,
in January 1997 Standard & Poor's assigned SOUTHERN its corporate credit rating
of "A" which was consistent with the implied corporate rating previously held by
SOUTHERN. This implied rating had been in effect since May 1995. Therefore,
since the April 1996 issue of the Rule 53(c) Order, the SOUTHERN consolidated
credit rating has remained at "A" thereby demonstrating SOUTHERN's continued
strong financial integrity. In addition, the underlying ratings of the
affiliated operating companies, which have a strong influence on the SOUTHERN
corporate rating, are all "A+". As a point of reference, the consolidated pro
forma percentage of debt in the total capital structure of the SOUTHERN domestic
operating utility companies is 43.5%, which is solidly below the median total
debt ratio of the Standard & Poor's "A" rated vertically integrated utilities.24
SOUTHERN's consolidated retained earnings grew on average approximately
8.8% per year from 1991 through 1995. In 1996, consolidated retained earnings
increased $280,365,000, or slightly more than 8%. The small reduction in the
rate of earnings growth was primarily attributable to reduced domestic utility
sales due to mild weather conditions throughout most of 1996 in the southeastern
United States. Earnings attributable to SOUTHERN's investments in EWGs and FUCOs
continued to contribute modestly to consolidated retained earnings.
Accordingly, since the date of the Rule 53(c) Order, the capitalization
and earnings attributable to SOUTHERN's investments in EWGs and FUCOs has not
had any adverse impact on SOUTHERN's financial integrity.
Reference is made to Exhibit H filed herewith which reflects
capitalization at June 30, 1997 and the Statement of Income for the twelve
months ended June 30, 1997 for SOUTHERN and subsidiaries consolidated.
ITEM 4. REGULATORY APPROVAL
Other than the jurisdiction of the Commission under the 1935 Act and
the Exchange Act, no state or federal regulatory agency has jurisdiction over
the proposed transactions.
Except for exemptions from the requirements of Rule 13e-3 and
Regulation 14A available to the Applicants, Applicants will comply fully with
all requirements of the Exchange Act and the rules and regulations thereunder
applicable to the Proxy Solicitations and the Offer, and acknowledge that any
Commission authorization granted under the 1935 Act is conditioned upon such
compliance.
__________________
24 Currently, capitalization ratios, including short-term debt, for "A" rated
vertically integrated electric utilities have a median total debt to total
capital ratio of 45% as noted by Standard & Poor's in May 1997 for companies
rated both publicly and confidentially. Prior to issuing this rating standard,
the Standard & Poor's total debt to total capital benchmark for an "A" rated
vertically integrated investor-owned-utility having an average business position
was 47%.
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ITEM 5. PROCEDURE
As stated in Item 1, the Special Meetings are scheduled to take place
on or about December 10, 1997. The Subsidiaries need to secure a two-thirds
affirmative vote of their respective Preferred Stockholders to secure passage of
the Proposed Amendments.
In order to afford the Subsidiaries sufficient time in advance of the
Special Meetings to solicit proxies and to maximize the prospect for adoption of
the Proposed Amendments at the Special Meetings, Applicants request that the
Commission issue and publish not later than October 31, 1997 the requisite
notice under Rule 23 with respect to the filing of this Application-Declaration,
together with an order under Section 12(e) and Rule 62 permitting the
Subsidiaries to solicit proxies pursuant to the Proxy Solicitations. As
explained in Item 1, concurrently with the commencement of the Proxy
Solicitations, SOUTHERN intends to commence the Offers using a combined issuer
tender offer statement/proxy statement under the Exchange Act.
Applicants further request that the Proxy Solicitation Order specify a
date not later than November 24, 1997 as the date after which the Commission may
issue an order granting and permitting to become effective the other
transactions for which authorization is sought herein, namely, the Proposed
Amendments and Cash Payments together with SOUTHERN's acquisition of Shares
pursuant to the Offers. Applicants request that the Commission issue this second
order as soon as practicable after such date.
Applicants waive any recommended decision by a hearing officer of or by
any other responsible officer of the Commission and waive the 30-day waiting
period between the issuance of the Commission's order and the date it is to
become effective, since it is desired that the Commission's order, when issued,
becomes effective forthwith. Applicants consent to the Staff of the Division of
Investment Management assisting in the preparation of the Commission's decision
and/or orders in this matter, unless the Staff opposes the matters covered by
this Application or Declaration.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits:
A-1 Charter of ALABAMA and amendments thereto through October 14,
1994. (Designated in Registration Nos. 2-59634 as Exhibit
2(b), 2-60209 as Exhibit 2(c), 2-60484 as Exhibit 2(b),
2-70838 as Exhibit 4(a)-2, 2-85987 as Exhibit 4(a)-2, 33-25539
as Exhibit 4(a)-2, 33-43917 as Exhibit 4(a)-2, in Form 8-K
dated February 5, 1992, File No. 1-3164, as Exhibit 4(b)-3, in
Form 8-K dated July 8, 1992, File No. 1-3164, as Exhibit
4(b)-3, in Form 8-K dated October 27, 1993, File No. 1-3164,
as Exhibit 4(a) and 4(b), in Form 8-K dated November 16, 1993,
File No. 1-3164, as Exhibit 4(a) and in Certificate of
Notification, File No. 70-8191, as Exhibit A.)
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A-2 By-laws of ALABAMA as amended effective July 23, 1993, and as
presently in effect. (Designated in Form U-1, File No.
70-8191, as Exhibit A-2.)
A-3 Charter of GEORGIA and amendments thereto through October 25,
1993. (Designated in Registration Nos. 2-63392 as Exhibit
2(a)-2, 2-78913 as Exhibits 4(a)-(2) and 4(a)-(3), 2-93039 as
Exhibit 4(a)-(2), 2-96810 as Exhibit 4(a)-2, 33-141 as Exhibit
4(a)-(2), 33-1359 as Exhibit 4(a)(2), 33-5405 as Exhibit
4(b)(2), 33-14367 as Exhibits 4(b)-(2) and 4(b)-(3), 33-22504
as Exhibits 4(b)-(2), 4(b)-(3) and 4(b)-(4), in GEORGIA's Form
10-K for the year ended December 31, 1991, File No. 1-6468, as
Exhibits 4(a)(2) and Exhibit 4(a)(3), in Registration No.
33-48895 as Exhibits 4(b)-(2) and 4(b)-(3), in Form 8-K dated
December 10, 1992, File No. 1-6468 as Exhibit 4(b), in Form
8-K dated June 17, 1993, File No. 1-6468, as Exhibit 4(b) and
in Form 8-K dated October 20, 1993, File No. 1-6468, as
Exhibit 4(b).)
A-4 By-laws of GEORGIA as amended effective July 18, 1990, and as
presently in effect. (Designated in GEORGIA's Form 10-K for
the year ended December 31, 1990, File No. 1-6468, as Exhibit
3.)
A-5 Restated Articles of Incorporation of GULF and amendments
thereto through November 8, 1993. (Designated in Registration
No. 33-43739 as Exhibit 4(b)-1, in Form 8-K dated January 15,
1992, File No. 0-2429, as Exhibit 1(b), in Form 8-K dated
August 18, 1992, File No. 0-2429, as Exhibit 4(b)-2, in Form
8-K dated September 22, 1993, File No. 0-2429, as Exhibit 4
and in Form 8-K dated November 3, 1993, File No. 0-2429, as
Exhibit 4.)
A-6 By-laws of GULF as amended effective July 26, 1996, and as
presently in effect. (Designated in Form U-1, File No.
70-8949, as Exhibit A-2(c).)
A-7 Articles of incorporation of MISSISSIPPI, articles of merger
of Mississippi Power Company (a Maine corporation) into
MISSISSIPPI and articles of amendment to the articles of
incorporation of MISSISSIPPI through August 19, 1993.
(Designated in Registration No. 2-71540 as Exhibit 4(a)-1, in
Form U5S for 1987, File No. 30-222-2, as Exhibit B-10, in
Registration No. 33-49320 as Exhibit 4(b)-(1), in Form 8-K
dated August 5, 1992, File No. 0-6849, as Exhibits 4(b)-2 and
4(b)-3, in Form 8-K dated August 4, 1993, File No. 0-6849, as
Exhibit 4(b)-3 and in Form 8-K dated August 18, 1993, File No.
0-6849, as Exhibit 4(b)-3.)
A-8 By-laws of MISSISSIPPI as amended effective April 2, 1996, and
as presently in effect. (Designated in Form U5S for 1995, File
No. 30-222-2, as Exhibit B-10.)
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B-1 Offer to Purchase and Proxy Statement for ALABAMA Tendered
Series (to be filed by amendment).
B-2 Offer to Purchase and Proxy Statement for GEORGIA Tendered
Series (to be filed by amendment).
B-3 Offer to Purchase and Proxy Statement for GULF Tendered Series
(to be filed by amendment).
B-4 Offer to Purchase and Proxy Statement for MISSISSIPPI Tendered
Series (to be filed by amendment).
B-5 Proxy Statement for ALABAMA Non-Tendered Series (to be filed
by amendment).
B-6 Proxy Statement for GEORGIA Non-Tendered Series (to be filed
by amendment).
B-7 Proxy Statement for MISSISSIPPI Non-Tendered Series (to be
filed by amendment).
B-8 Notice of Special Meeting (attached as part of Exhibit B-1
(ALABAMA Tendered Series), Exhibit B-2 (GEORGIA Tendered
Series ), B-3 (GULF Tendered Series), B-4 (MISSISSIPPI
Tendered Series), Exhibit B-5 (ALABAMA Non-Tendered Series),
Exhibit B-6 (GEORGIA Non-Tendered Series ) and B-7
(MISSISSIPPI Non-Tendered Series) (to be filed by amendment).
B-9 Form of Letter of Transmittal and Proxy for ALABAMA Tendered
Series (to be filed by amendment).
B-10 Form of Letter of Transmittal and Proxy for GULF Tendered
Series (to be filed by amendment).
B-11 Form of Letter of Transmittal and Proxy for GEORGIA Tendered
Series (to be filed by amendment).
B-12 Form of Letter of Transmittal and Proxy for MISSISSIPPI
Tendered Series (to be filed by amendment).
B-13 Form of Notice of Guaranteed Delivery and Proxy for ALABAMA
Tendered Series (to be filed by amendment).
B-14 Form of Notice of Guaranteed Delivery and Proxy for GEORGIA
Tendered Series (to be filed by amendment).
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B-15 Form of Notice of Guaranteed Delivery and Proxy for GULF
Tendered Series (to be filed by amendment).
B-16 Form of Notice of Guaranteed Delivery and Proxy for
MISSISSIPPI Tendered Series (to be filed by amendment).
B-17 Form of Proxy for ALABAMA Non-Tendered Series (to be filed by
amendment).
B-18 Form of Proxy for GEORGIA Non-Tendered Series (to be filed by
amendment).
B-19 Form of Proxy for MISSISSIPPI Non-Tendered Series (to be filed
by amendment).
F Preliminary opinion of counsel (to be filed by amendment).
G Form of notice and order permitting proxy solicitation.
H Capitalization and Income Statement for SOUTHERN and
Subsidiary Companies after giving effect to certain
transactions.
Exhibits heretofore filed with the Securities and Exchange
Commission and designated as set forth above are hereby incorporated herein by
reference and made a part hereof with the same effect as if filed herewith.
(b) Financial Statements:
Balance sheet of each Subsidiary at June 30, 1997. (Designated
in each Subsidiary's Form 10-Q for the quarter ended June 30,
1997, File Nos. 1-3164, 1-6468, 0-2429 and 0-6849.)
Statements of income and cash flows of each Subsidiary for the
twelve months ended June 30, 1997. (Designated in each
Subsidiary's Form 10-Q for the quarter ended June 30, 1997,
File Nos. 1-3164, 1-6468, 0-2429 and 0-6849.)
Consolidated balance sheet of The Southern Company and its
subsidiaries at June 30, 1997. (Designated in the Southern
Company's Form 10-Q for the quarter ended June 30, 1997, File
No. 1-3536.)
Consolidated statements of income and cash flows for The
Southern Company and its subsidiaries for the twelve months
ended June 30, 1997. (Designated in The Southern Company's
Form 10-Q for the quarter ended June 30, 1997, File No.
1-3536.)
Since June 30, 1997, there have been no material adverse changes, not
in the ordinary course of business, in the financial condition of the
Subsidiaries or of The Southern Company and its subsidiaries consolidated from
that set forth in or contemplated by the foregoing financial statements.
27
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ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
A. In light of the nature of the proposed transactions as described in
Item 1, the Commission's action in this matter will not constitute any major
federal action significantly affecting the quality of the human environment.
B. No other federal agency has prepared or is preparing an
environmental impact statement with respect to the proposed transactions.
28
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SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned companies have duly caused this statement to be signed
on their behalf by the undersigned thereunto duly authorized.
Date: October 31, 1997
THE SOUTHERN COMPANY
By /s/Tommy Chisholm
Tommy Chisholm
Secretary
ALABAMA POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
GEORGIA POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
GULF POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
MISSISSIPPI POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
29
Exhibit G
The Southern Company, Alabama Power Company, Georgia Power Company,
Gulf Power Company and Mississippi Power Company
Notice of Proposal to Amend Charters and Acquire Preferred Shares
pursuant to Cash Tender Offer; Order Authorizing Proxy Solicitation
The Southern Company ("SOUTHERN"), a registered holding company, and
certain of its utility subsidiaries, Alabama Power Company, an Alabama
corporation ("ALABAMA"), Georgia Power Company, a Georgia corporation
("GEORGIA"), Gulf Power Company, a Maine corporation ("GULF"), and Mississippi
Power Company, a Mississippi corporation ("MISSISSIPPI") (ALABAMA, GEORGIA, GULF
and MISSISSIPPI sometimes hereinafter collectively, the "Subsidiaries"), have
filed an application-declaration under Sections 6(a), 9(a), 10, 12(c), 12(d) and
12(e) of the Public Utility Holding Company Act of 1935, as amended (the "1935
Act"), and Rules 43, 44, 51, 54, 62 and 65 thereunder.
ALABAMA has outstanding 5,608,955 shares of common stock, par value $40
per share (the "ALABAMA Common Stock"), all of which are held by SOUTHERN.
ALABAMA's outstanding preferred stock consists of (i) 5,520,000 shares of Class
A cumulative preferred stock, stated capital $25 per share (collectively, the
"ALABAMA NYSE Preferred Stock"), issued in three series (each, an "ALABAMA NYSE
Series"), which are traded on the New York Stock Exchange, (ii) 704,000 shares
of cumulative preferred stock, par value $100 per share (collectively, the
"ALABAMA $100 Preferred Stock"), issued in six series (each, an "ALABAMA $100
Series"), which are traded over-the-counter, (iii) 200 shares of Class A
cumulative preferred stock, stated capital $100,000 per share (collectively, the
"ALABAMA 1993 Auction Preferred Stock"), issued in one series (the "1993 Auction
Series"), which are traded over-the-counter, and (iv) 500,000 shares of Class A
cumulative preferred stock, stated capital $100 (collectively, the "ALABAMA 1988
Auction Preferred Stock" and, together with the ALABAMA NYSE Preferred Stock,
ALABAMA $100 Preferred Stock and ALABAMA 1993 Auction Preferred Stock, the
"ALABAMA Preferred Stock"), issued in one series (the "1988 Auction Series" and,
together with the ALABAMA NYSE Series, ALABAMA $100 Series, 1988 Auction Series
and 1993 Auction Series, the "ALABAMA Series"), which are traded
over-the-counter. The three series of ALABAMA NYSE Preferred Stock consist of a
6.80% series, of which 1,520,000 shares are outstanding ("6.80% Series"); a
6.40% series, of which 2,000,000 shares are outstanding ("6.40% Series"); and an
adjustable rate series, of which 2,000,000 shares are outstanding ("AR Series").
The six series of ALABAMA $100 Preferred Stock consist of a 4.20% series, of
which 364,000 shares are outstanding ("4.20% Series"); a 4.52% series, of which
50,000 shares are outstanding ("4.52% Series"); a 4.60% series, of which 100,000
shares are outstanding ("4.60% Series"); a 4.64% series, of which 60,000 shares
are outstanding ("4.64% Series"); a 4.72% series, of which 50,000 shares are
outstanding ("4.72% Series"); and a 4.92% series, of which 80,000 shares are
outstanding ("4.92% Series"). ALABAMA has outstanding no other class of equity
securities.
1
<PAGE>
Paragraph A.2.f.(2) of Article IX of ALABAMA's Charter (the "ALABAMA
Charter") currently provides that, so long as any shares of ALABAMA's Preferred
Stock are outstanding, without the affirmative vote of the holders of at least a
majority of the total voting power of the outstanding ALABAMA Preferred Stock,
ALABAMA shall not issue or assume any securities representing unsecured debt
(other than for the purpose of refunding or renewing outstanding unsecured
securities issued by ALABAMA resulting in equal or longer maturities or
redeeming or otherwise retiring all outstanding shares of the ALABAMA Preferred
Stock or of any senior or equally ranking stock) if, immediately after such
issue or assumption, the total outstanding principal amount of all securities
representing unsecured debt of ALABAMA would exceed 20% of the aggregate of all
existing secured debt of ALABAMA and the capital stock, premiums thereon and
surplus of ALABAMA as stated on ALABAMA's books (the "ALABAMA Debt Limitation
Provision").
Paragraph A.2.f.(1) of Article IX of the ALABAMA Charter currently
provides that, so long as any shares of ALABAMA Preferred Stock are outstanding,
without the affirmative vote of the holders of at least a majority of the total
voting power of the outstanding ALABAMA Preferred Stock, ALABAMA shall not
dispose of all or substantially all of its property or merge or consolidate,
unless such action has been approved by the Securities and Exchange Commission
(the "Commission") under the 1935 Act (the "ALABAMA Merger Provision").
Paragraph A.2.b. (except the first paragraph therein) of Article IX of
the ALABAMA Charter currently provides that, so long as any shares of ALABAMA
Preferred Stock are outstanding (except as may be approved or permitted by the
affirmative vote of the holders of at least two-thirds of the total voting power
of the outstanding ALABAMA Preferred Stock), ALABAMA's payment of dividends on
the ALABAMA Common Stock is limited to 50% of net income available for such
stock during a period of 12 months if, calculated on a corporate basis, the
ratio of ALABAMA Common Stock equity to total capitalization, including surplus,
adjusted to reflect the payment of the proposed dividend, is below 20%, and to
75% of such net income if such ratio is 20% or more but less than 25% (the
"ALABAMA Common Stock Dividend Provision").
The clause after the words "January 31, 1942" in the first paragraph of
Paragraph A.2.b. of Article IX of the ALABAMA Charter currently provides that,
so long as any shares of ALABAMA Preferred Stock are outstanding, ALABAMA shall
not pay dividends on ALABAMA Common Stock (except those paid concurrently with
the receipt of a cash capital contribution in like amount) in cases where
retained earnings are not at least equal to two times annual dividends on the
outstanding ALABAMA Preferred Stock (the "ALABAMA Retained Earnings Dividend
Provision" and, together with the ALABAMA Debt Limitation Provision, the ALABAMA
Merger Provision and the ALABAMA Common Stock Dividend Provision, the "ALABAMA
Restriction Provisions").
GEORGIA has outstanding 7,761,500 shares of common stock, no par value
(the "GEORGIA Common Stock"), all of which are held by SOUTHERN. GEORGIA's
outstanding preferred stock consists of (i) 8,156,500 shares of Class A
cumulative preferred stock, stated value $25 per share (collectively, the
2
<PAGE>
"GEORGIA NYSE Preferred Stock"), issued in three series (each, a "GEORGIA NYSE
Series"), which are traded on the New York Stock Exchange and (ii) 1,177,864
shares of cumulative preferred stock, stated value $100 per share (collectively,
the "GEORGIA OTC Preferred Stock" and, together with the GEORGIA NYSE Preferred
Stock, the "GEORGIA Preferred Stock"), issued in eleven series (each, a "GEORGIA
OTC Series" and, together with the GEORGIA NYSE Series, "GEORGIA Series"), which
are traded over-the-counter. The three series of GEORGIA NYSE Preferred Stock
consist of a $1.925 series, of which 1,156,500 shares are outstanding ("$1.925
Series"); an adjustable rate (first 1993) series, of which 3,000,000 shares are
outstanding ("AR1 1993 Series"); and an adjustable rate (second 1993) series, of
which 4,000,000 shares are outstanding ("AR2 1993 Series"). The eleven series of
GEORGIA OTC Preferred Stock consist of a $4.60 series, of which 433,774 shares
are outstanding ("$4.60 Series"); a $4.60 1962 series, of which 70,000 shares
are outstanding ("$4.60 1962 Series"); a $4.60 1963 series, of which 70,000
shares are outstanding ("$4.60 1963 Series"); a $4.60 1964 series, of which
50,000 shares are outstanding ("$4.60 1964 Series"); a $4.72 series, of which
60,000 shares are outstanding ("$4.72 Series"); a $4.92 series, of which 100,000
shares are outstanding ("$4.92 Series"); a $4.96 series, of which 70,000 shares
are outstanding ("$4.96 Series"); a $5.00 series, of which 14,090 shares are
outstanding ("$5.00 Series"); a $5.64 series, of which 90,000 shares are
outstanding ("$5.64 Series"); a $6.48 series, of which 120,000 shares are
outstanding ("$6.48 Series"); and a $6.60 series, of which 100,000 shares are
outstanding ("$6.60 Series"). GEORGIA has outstanding no other class of equity
securities.
Subparagraph 14.A.3.f.(2) of Paragraph III of GEORGIA's charter, as
amended (the "GEORGIA Charter"), currently provides that, so long as any shares
of GEORGIA Preferred Stock are outstanding, without the affirmative vote of the
holders of at least a majority of the total voting power of the outstanding
GEORGIA Preferred Stock, GEORGIA shall not issue or assume any securities
representing unsecured debt (other than for the purpose of refunding or renewing
outstanding unsecured securities issued by GEORGIA resulting in equal or longer
maturities or redeeming or otherwise retiring all outstanding shares of the
GEORGIA Preferred Stock or of any senior or equally ranking stock) if,
immediately after such issue or assumption, (a) the total outstanding principal
amount of all securities representing unsecured debt of GEORGIA would exceed 20%
of the aggregate of all existing secured debt of GEORGIA and the capital stock,
premiums thereon and surplus of GEORGIA as stated on GEORGIA's books; or (b) the
total outstanding principal amount of all securities representing unsecured debt
of GEORGIA of maturities of less than ten years1 would exceed 10% of such
aggregate (the "GEORGIA Debt Limitation Provision").
Subparagraph 14.A.3.f.(1) of Paragraph III of the GEORGIA Charter
currently provides that, so long as any shares of GEORGIA Preferred Stock are
outstanding, without the affirmative vote of the holders of at least a majority
of the total voting power of the outstanding GEORGIA Preferred Stock, GEORGIA
shall not dispose of all or substantially all of its property or merge or
consolidate, unless such action has been approved by the Commission under the
1935 Act (the "GEORGIA Merger Provision").
_________________
1 For the purpose of this provision, the payment due upon the maturity of
unsecured debt having an original single maturity in excess of ten years or the
payment due upon the final maturity of any unsecured serial debt which had
original maturities in excess of ten years shall not be regarded as unsecured
debt of a maturity less than ten years until such payment shall be required to
be made within three years.
3
<PAGE>
Subparagraph 14.A.3.b. (except the first paragraph therein) of
Paragraph III of the GEORGIA Charter currently provides that, so long as any
shares of GEORGIA Preferred Stock are outstanding, GEORGIA's payment of
dividends on the GEORGIA Common Stock is limited to 50% of net income available
for such stock during a period of 12 months if, calculated on a corporate basis,
the ratio of GEORGIA Common Stock equity to total capitalization, including
surplus, adjusted to reflect the payment of the proposed dividend, is below 20%,
and to 75% of such net income if such ratio is 20% or more but less than 25%
(the "GEORGIA Common Stock Dividend Provision" and, together with the GEORGIA
Debt Limitation Provision and the GEORGIA Merger Provision, the "GEORGIA
Restriction Provisions").
GULF has outstanding 992,717 shares of common stock, no par value (the
"GULF Common Stock"), all of which are held by SOUTHERN. GULF's outstanding
preferred stock consists of (i) 151,026 shares of preferred stock, par value
$100 per share (collectively, the "GULF $100 Preferred Stock"), issued in three
series (each, a "GULF $100 Series"), which are traded over-the-counter and (ii)
1,400,000 shares of Class A preferred stock, par value $10 per share, stated
capital $25 per share (collectively, the "GULF $10 Preferred Stock" and,
together with the GULF $100 Preferred Stock, the "GULF Preferred Stock"), issued
in two series (each, a "GULF $10 Series" and, together with the GULF $100
Series, "GULF Series"), which are traded over-the-counter. The three series of
GULF $100 Preferred Stock consist of a 4.64% series, of which 51,026 shares are
outstanding ("4.64% Series"); a 5.16% series, of which 50,000 shares are
outstanding ("5.16% Series"); and a 5.44% series, of which 50,000 shares are
outstanding ("5.44% Series"). The two series of GULF $10 Preferred Stock consist
of a 6.72% series, of which 800,000 shares are outstanding ("6.72% Series"); and
an adjustable rate (1993) series, of which 600,000 shares are outstanding ("AR
1993 Series"). GULF has outstanding no other class of equity securities.
Paragraph (F)(b) under the "General Provisions" of the "Preferred
Stock" section of GULF's Restated Articles of Incorporation, as amended (the
"GULF Charter"), currently provides that, so long as any shares of GULF
Preferred Stock are outstanding, without the affirmative vote of the holders of
at least a majority of the total voting power of the outstanding GULF Preferred
Stock, GULF shall not issue or assume any securities representing unsecured debt
(other than for the purpose of refunding or renewing outstanding unsecured
securities issued by GULF resulting in equal or longer maturities or redeeming
or otherwise retiring all outstanding shares of the GULF Preferred Stock or of
any senior or equally ranking stock) if, immediately after such issue or
assumption, (a) the total outstanding principal amount of all securities
representing unsecured debt of GULF would exceed 20% of the aggregate of all
existing secured debt of GULF and the capital stock, premiums thereon and
surplus of GULF as stated on GULF's books; or (b) the total outstanding
4
<PAGE>
principal amount of all securities representing unsecured debt of GULF of
maturities of less than ten years2 would exceed 10% of such aggregate (the "GULF
Debt Limitation Provision").
Paragraph (F)(a) under "General Provisions" of the "Preferred Stock"
section of the GULF Charter currently provides that, so long as any shares of
GULF Preferred Stock are outstanding, without the affirmative vote of the
holders of at least a majority of the total voting power of the outstanding GULF
Preferred Stock, GULF shall not dispose of all or substantially all of its
property or merge or consolidate, unless such action has been approved by the
Commission under the 1935 Act (the "GULF Merger Provision").
Paragraph (B) (except the first paragraph therein) under the "General
Provisions" of the "Preferred Stock" section of the GULF Charter currently
provides that, so long as any shares of GULF Preferred Stock are outstanding,
GULF's payment of dividends on the GULF Common Stock are limited to 50% of net
income available for such stock during a period of 12 months if, calculated on a
corporate basis, the ratio of GULF Common Stock equity to total capitalization,
including surplus, adjusted to reflect the payment of the proposed dividend, is
below 20%, and to 75% of such net income if such ratio is 20% or more but less
than 25% (the "GULF Common Stock Dividend Provision" and, together with the GULF
Debt Limitation Provision and the GULF Merger Provision, the "GULF Restriction
Provisions").
MISSISSIPPI has outstanding 1,121,000 shares of common stock, without
par value (the "MISSISSIPPI Common Stock"), all of which are held by SOUTHERN.
MISSISSIPPI's outstanding preferred stock consists of (i) 936,160 shares of
depositary preferred shares, each representing one-fourth a share of preferred
stock, par value $100 per share (collectively, the "MISSISSIPPI NYSE Preferred
Stock"), issued in two series (each, a "MISSISSIPPI NYSE Series"), which are
traded on the New York Stock Exchange, and (ii) 160,099 shares of cumulative
preferred stock, par value $100 per share (collectively, the "MISSISSIPPI OTC
Preferred Stock" and, together with the MISSISSIPPI NYSE Preferred Stock, the
"MISSISSIPPI Preferred Stock"), issued in four series (each, a "MISSISSIPPI OTC
Series" and, together with the MISSISSIPPI NYSE Series, the "MISSISSIPPI
Series"), which are traded over-the-counter. The two series of MISSISSIPPI NYSE
Preferred Stock consist of a 6.32% series, of which 600,000 shares are
outstanding ("6.32% Series"); and a 6.65% series, of which 336,160 shares are
outstanding ("6.65% Series"). The four series of MISSISSIPPI OTC Preferred Stock
consist of a 4.40% series, of which 40,000 shares are outstanding ("4.40%
Series"); a 4.60% series, of which 20,099 shares are outstanding ("4.60%
Series"); a 4.72% series, of which 50,000 shares are outstanding ("4.72%
Series"); and a 7.00% series, of which 50,000 shares are outstanding ("7.00%
Series"). MISSISSIPPI has outstanding no other class of equity securities.
Subparagraph (F)(b) of Paragraph FOURTH under "General Provisions" of
the "Preferred Stock" section of MISSISSIPPI's Articles of Incorporation, as
________________
2 For the purpose of this provision, the payment due upon the maturity of
unsecured debt having an original single maturity in excess of ten years or the
payment due upon the final maturity of any unsecured serial debt which had
original maturities in excess of ten years shall not be regarded as unsecured
debt of a maturity less than ten years until such payment shall be required to
be made within three years.
5
<PAGE>
amended (the "MISSISSIPPI Charter"), currently provides that, so long as any
shares of MISSISSIPPI Preferred Stock are outstanding, without the affirmative
vote of the holders of at least a majority of the outstanding MISSISSIPPI
Preferred Stock, MISSISSIPPI shall not issue or assume any securities
representing unsecured debt (other than for the purpose of refunding or renewing
outstanding unsecured securities issued by MISSISSIPPI resulting in equal or
longer maturities or redeeming or otherwise retiring all outstanding shares of
the MISSISSIPPI Preferred Stock or of any senior or equally ranking stock) if,
immediately after such issue or assumption, (a) the total outstanding principal
amount of all securities representing unsecured debt of MISSISSIPPI would exceed
20% of the aggregate of all existing secured debt of MISSISSIPPI and the capital
stock, premiums thereon and surplus of MISSISSIPPI as stated on MISSISSIPPI's
books; or (b) the total outstanding principal amount of all securities
representing unsecured debt of MISSISSIPPI of maturities of less than ten years3
would exceed 10% of such aggregate (the "MISSISSIPPI Debt Limitation
Provision").
Subparagraph (F)(a) of Paragraph FOURTH under the "General Provisions"
of the "Preferred Stock" section of the MISSISSIPPI Charter currently provides
that, so long as any shares of MISSISSIPPI Preferred Stock are outstanding,
without the affirmative vote of the holders of at least a majority of the
outstanding MISSISSIPPI Preferred Stock, MISSISSIPPI shall not dispose of all or
substantially all of its property or merge or consolidate, unless such action
has been approved by the Commission under the 1935 Act (the "MISSISSIPPI Merger
Provision").
Subparagraph (B) (except the first paragraph therein) of Paragraph
FOURTH under "General Provisions" of the "Preferred Stock" section of the
MISSISSIPPI Charter currently provides that, so long as any shares of
MISSISSIPPI Preferred Stock are outstanding, MISSISSIPPI's payment of dividends
on the MISSISSIPPI Common Stock are limited to 50% of net income available for
such stock during a period of 12 months if, calculated on a corporate basis, the
ratio of MISSISSIPPI Common Stock equity to total capitalization, including
surplus, adjusted to reflect the payment of the proposed dividend, is below 20%,
and to 75% of such net income if such ratio is 20% or more but less than 25%
(the "MISSISSIPPI Common Stock Dividend Provision" and, together with the
MISSISSIPPI Debt Limitation Provision and the MISSISSIPPI Merger Provision, the
"MISSISSIPPI Restriction Provisions").
Each Subsidiary proposes to solicit proxies (a "Proxy Solicitation")
from the holders of its outstanding shares of Preferred Stock of each Series
(except in the case of GEORGIA for the $1.925 Series) and Common Stock for use
at a special meeting of its stockholders to be held on or about December 10,
1997 ("Special Meeting") to consider a proposed amendment to its Charter that
would eliminate the Subsidiary's Restriction Provisions (the "Proposed
Amendment"). Adoption of the Proposed Amendment requires the affirmative vote at
a Subsidiary's Special Meeting (in person by ballot or by proxy) of the holders
of at least (1) two-thirds of the voting power of the outstanding shares of the
_______________
3 For the purpose of this provision, the payment due upon the maturity of
unsecured debt having an original single maturity in excess of ten years or the
payment due upon the final maturity of any unsecured serial debt which had
original maturities in excess of ten years shall not be regarded as unsecured
debt of a maturity less than ten years until such payment shall be required to
be made within three years.
6
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Preferred Stock of all Series, voting together as one class, and (2) in the case
of GEORGIA, two-thirds of the Common Stock, and in the case of ALABAMA, GULF and
MISSISSIPPI, a majority of the Common Stock. SOUTHERN will vote its shares of
Common Stock in favor of the Proposed Amendment. The Subsidiaries have engaged
Corporate Investor Communications, Inc. to act as information agent in
connection with the Proxy Solicitations for a fee plus reimbursement of
reasonable out-of-pocket expenses.
If a Proposed Amendment is adopted, ALABAMA, GEORGIA, GULF and
MISSISSIPPI, as the case may be, propose to make a special cash payment equal to
1.00% of the par value, stated value or stated capital, as applicable, per share
of the Preferred Stock (except that the special cash payment shall equal 0.25%
of the stated capital per share for shares of the 1988 Auction Series and the
1993 Auction Series) (each, a "Special Cash Payment") for each share of
Preferred Stock (each, a "Share") properly voted at the Special Meeting (in
person by ballot or by proxy) (except for Shares of GEORGIA's $1.925 Series) in
favor of the Proposed Amendment, provided that such Shares are not tendered
pursuant to the concurrent cash tender offer described below. ALABAMA, GEORGIA,
GULF and MISSISSIPPI will disburse Special Cash Payments out of their general
funds, promptly after adoption of a Proposed Amendment.
Concurrently with the commencement of the Proxy Solicitations, subject
to the terms and conditions stated in the relevant offering documents,4 SOUTHERN
proposes to make offers (each an "Offer") to the holders of ALABAMA's Preferred
Stock of the 4.20% Series (the "ALABAMA Tendered Series"), GEORGIA's Preferred
Stock of the $4.60 Series, the $4.60 1962 Series, the $4.60 1963 Series, the
$4.60 1964 Series, the $4.72 Series, the $4.92 Series, the $4.96 Series, the
$5.00 Series and the $5.64 Series (collectively, the "GEORGIA Tendered Series"),
GULF's Preferred Stock of each Series (collectively, the "GULF Tendered Series")
and MISSISSIPPI's Preferred Stock of the 4.40% Series, the 4.60% Series and the
4.72% Series (collectively, the "MISSISSIPPI Tendered Series"), pursuant to
which SOUTHERN will offer to acquire from the holders of the ALABAMA, GEORGIA,
GULF and MISSISSIPPI Preferred Stock of each such Tendered Series any and all
Shares of that Series at the cash purchase prices to be specified in the Offer
(subject to potential increase or decrease pursuant to the terms of the Offer)
(each such purchase price, collectively, a "Purchase Price"). SOUTHERN
anticipates that the Offer for each Tendered Series of Preferred Stock will be
scheduled to expire at 5:00 P.M. (New York City time) on the date of the Special
Meeting, i.e., on or about December 10, 1997 (the "Expiration Date").
In addition, GEORGIA has entered into an agreement to purchase
approximately 1,365,000 shares of its AR1 1993 Series from the holder of such
shares at purchase prices of up to $25.6875 per share plus the net carrying cost
of such holder and approximately 1,430,000 shares of its AR2 1993 Series (as
herein defined) from the holder of such shares at purchase prices of up to
________________
4 With respect to Shares subject to both the Proxy Solicitation and the Offer,
such transactions will be effected by means of the same core document - a
combined proxy statement and issuer tender offer statement under the Securities
Exchange Act of 1934 ("Exchange Act") and applicable rules and regulations
thereunder.
7
<PAGE>
$25.0025 per share plus the net carrying cost of such holder. It is proposed
that, subject to Commission authorization herein (which authorization is hereby
sought), GEORGIA may assign its rights under such contract to SOUTHERN, which it
is expected would then purchase such shares not later than the time at which
SOUTHERN purchases shares pursuant to the GEORGIA Offer, and GEORGIA would
purchase such shares from SOUTHERN (at the price paid therefor by SOUTHERN) not
later than the time at which GEORGIA purchases shares sold to SOUTHERN pursuant
to the GEORGIA Offer as described herein.
The Offer consists of separate offers for each of the one ALABAMA
Tendered Series, the nine GEORGIA Tendered Series, the five GULF Tendered Series
and the three MISSISSIPPI Tendered Series (collectively, the "Tendered Series"),
with the offer for any one Tendered Series being independent of the offer for
any other Tendered Series. The applicable Purchase Price and the other terms and
conditions of the Offers apply equally to all Preferred Stockholders of the
respective Tendered Series. The Offers are not conditioned upon any minimum
number of Shares of the applicable Tendered Series being tendered, but are
conditioned, among other things, on the Proposed Amendments being adopted at the
respective Special Meetings. Subject to the terms of the offering documents,
SOUTHERN will purchase at the applicable Purchase Price any and all Shares of
any Tendered Series that are validly tendered and not withdrawn prior to the
Expiration Date. In addition, with respect to Shares validly tendered and
accepted for payment by Southern, each tendering Preferred Shareholder will
receive from the applicable Subsidiary a dividend attributable to the period
ending on the date the shares are purchased by SOUTHERN.
To tender Shares in accordance with the terms of the offering
documents, the tendering Preferred Stockholder must either (1) send to The Bank
of New York, in its capacity as depositary for the Offer ("Depositary"), a
properly completed and duly executed Letter of Transmittal and Proxy for that
Series (if not voting at the Special Meeting in person by ballot), together with
any required signature guarantees and any other documents required by the Letter
of Transmittal and Proxy, and either (a) certificates for the Shares to be
tendered must be received by the Depositary at one of its addresses specified in
the offering documents, or (b) such Shares must be delivered pursuant to the
procedures for book-entry transfer described in the offering documents (and a
confirmation of such delivery must be received by the Depositary), in each case
by the Expiration Date; or (2) comply with a guaranteed delivery procedure
specified in the offering documents. Tenders of Shares made pursuant to an Offer
may be withdrawn at any time prior to the Expiration Date. Thereafter, such
tenders are irrevocable, subject to certain exceptions identified in the
offering documents.
SOUTHERN's obligation to proceed with the Offers and to accept for
payment and to pay for any Shares tendered is subject to various conditions
enumerated in the offering documents, including, among other conditions, that
the Proposed Amendments be adopted at the Special Meetings and that the
Commission issue an order under the 1935 Act authorizing the proposed
transactions.
At any time or from time to time, SOUTHERN may extend the Expiration
Date applicable to any Series by giving notice of such extension to the
Depositary, without extending the Expiration Date for any other Series. During
any such extension, all Shares of the applicable Series previously tendered will
remain subject to the Offer, and may be withdrawn at any time prior to the
Expiration Date as extended.
8
<PAGE>
Conversely, SOUTHERN may elect in its sole discretion to terminate the
Offer prior to the scheduled Expiration Date and not accept for payment and pay
for any Shares tendered, subject to applicable provisions of Rule 13e-4 under
the Exchange Act requiring SOUTHERN either to pay the consideration offered or
to return the Shares tendered promptly after the termination or withdrawal of
the Offer, upon the occurrence of any of the conditions to closing enumerated in
the offering documents, by giving notice of such termination to the Depositary
and making a public announcement thereof.
Subject to compliance with applicable law, SOUTHERN further reserves
the right in the offering documents, in its sole discretion, to amend one or
more Offers in any respect by making a public announcement thereof. If SOUTHERN
materially changes the terms of an Offer or the information concerning an Offer,
or if it waives a material condition of an Offer, SOUTHERN will extend the
Expiration Date to the extent required by the applicable provisions of Rule
13e-4 under the Exchange Act. Those provisions require that the minimum period
during which an issuer tender offer must remain open following material changes
in the terms of the offer or information concerning the offer (other than a
change in price or change in percentage of securities sought) will depend on the
facts and circumstances, including the relative materiality of such terms or
information. If an Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including, the
date that SOUTHERN notifies Preferred Stockholders that it will (a) increase or
decrease the price it will pay for Shares, (b) decrease the percentage of Shares
it seeks or (c) increase or decrease soliciting dealer's fees, the Expiration
Date will be extended until the expiration of such period of ten business days.
Shares validly tendered to the Depositary pursuant to an Offer and not
withdrawn in accordance with the procedures set forth in the offering documents
will be held by SOUTHERN until the Expiration Date (or returned in the event the
Offer is terminated). Subject to the terms and conditions of the Offer, as
promptly as practicable after the Expiration Date, SOUTHERN will accept for
payment (and thereby purchase) and pay for Shares validly tendered and not
withdrawn. SOUTHERN will pay for Shares that it has purchased pursuant to the
Offer by depositing the applicable Purchase Price with the Depositary, which
will act as agent for the tendering Preferred Stockholders for the purpose of
receiving payment from SOUTHERN and transmitting payment to tendering Preferred
Stockholders. SOUTHERN will pay all stock transfer taxes, if any, payable on
account of its acquisition of Shares pursuant to the Offer, except in certain
circumstances where special payment or delivery procedures are utilized in
conformance with the applicable Letters of Transmittal and Proxy.
With respect to Shares validly tendered and accepted for payment by
SOUTHERN, each tendering Preferred Stockholder will be entitled to receive as
consideration from SOUTHERN only the applicable Purchase Price (which SOUTHERN
anticipates will reflect a premium over the current market price at the
commencement of the Offers). In addition, each such tendering Preferred
Shareholder will receive from the applicable Subsidiary a dividend attributable
to the period ending on the date the shares are purchased by SOUTHERN. Any such
holder will not be entitled to receive with respect to such tendered Shares
additional consideration in the form of a Special Cash Payment.
9
<PAGE>
As noted above, subject to the terms and conditions of the Offer,
Shares validly tendered and not withdrawn will be accepted for payment and paid
for by SOUTHERN as promptly as practicable after the Expiration Date. If a
Proposed Amendment is adopted at a Subsidiary's Special Meeting, promptly after
consummation of the Offer the Subsidiary will purchase the Shares sold to
SOUTHERN pursuant to the Offer at the relevant Purchase Price plus expenses
incurred in the Offer, and the Subsidiary will thereupon retire and cancel such
Shares.
If a Proposed Amendment is not adopted at the Special Meeting, SOUTHERN
may elect, but is not obligated, to waive such condition, subject to applicable
law. In that case, as promptly as practicable after SOUTHERN's waiver thereof
and purchase of any Shares validly tendered pursuant to the Offers, the affected
Subsidiary anticipates that it may either adjourn the Special Meeting or call
another special meeting of its common and preferred stockholders and solicit
proxies therefrom for the same purpose as in the instant proceeding, i.e., to
secure the requisite two-thirds affirmative vote of preferred stockholders to
amend the Charter to eliminate the Restriction Provisions. At that meeting,
SOUTHERN would vote any Shares acquired by it pursuant to the Offer or
otherwise5 (as well as all of its shares of Common Stock) in favor of the
proposed Charter amendment to eliminate the Restriction Provisions.6 If the
proposed amendment is adopted at that meeting, and in any event within one year
from the Expiration Date (including any potential extension thereof pursuant to
the Offer), SOUTHERN will promptly after such meeting or at the expiration of
such one-year period, as applicable, sell the Shares to the Subsidiary at the
Purchase Price plus expenses paid therefor pursuant to the Offer, and the
Subsidiary will thereupon retire and cancel such Shares.
To finance its purchase of any Shares tendered, accepted for payment
and paid for pursuant to the Offer, SOUTHERN intends to use its general funds
and/or incur short-term indebtedness in an amount sufficient to pay the Purchase
Price for all tendered Shares.
Merrill Lynch, Pierce, Fenner & Smith Incorporated will act as dealer
manager for SOUTHERN in connection with the Offers. SOUTHERN proposes to agree
to pay the dealer manager a fee for Shares tendered, accepted for payment and
paid for pursuant to the Offer and a fee for any Shares that are not tendered
__________________
5 Following the Expiration Date and the consummation of the purchase of Shares
pursuant to the Offer, SOUTHERN or one or more Subsidiaries may determine to
purchase additional Shares on the open market, in privately negotiated
transactions, through one or more tender offers or otherwise. SOUTHERN will not
undertake any such transactions without receipt of any required Commission
authorizations under the 1935 Act in one or more separate proceedings. Likewise,
in the event such a further special meeting is necessary, the Subsidiaries would
not undertake any associated proxy solicitation and proposed Charter amendment
prior to receipt of any required Commission authorizations under the 1935 Act in
a separate proceeding.
6 By contrast, if a Subsidiary, rather than SOUTHERN, had acquired Shares
pursuant to the Offer, upon acquisition thereof by such Subsidiary any such
Shares would be deemed treasury shares under Alabama, Georgia, Maine and
Mississippi law, as the case may be, and, as such, the Subsidiary would be
precluded from voting those Shares under any circumstances.
10
<PAGE>
pursuant to the Offers but which are voted in favor of the Proposed Amendment,
and to reimburse the dealer manager for certain of its reasonable out-of-pocket
expenses. In addition, SOUTHERN proposes to pay a solicitation fee for any
Shares tendered, accepted for payment and paid for pursuant to the Offer and
SOUTHERN and/or each Subsidiary proposes to pay a separate fee for any of their
respective Shares that are not tendered pursuant to the Offer but which vote in
favor of the Proposed Amendment.
The Subsidiaries state that they consider the Restriction Provisions a
significant impediment to their ability to maintain financial flexibility and
minimize their financing costs, to the detriment of their utility customers and,
indirectly, SOUTHERN's shareholders. SOUTHERN and the Subsidiaries assert that
the ongoing financing flexibility and cost benefits to be gained by the
Subsidiaries as a result of elimination of the Restriction Provisions outweigh
the one-time cost of the Special Cash Payments and the other costs of the Proxy
Solicitation. SOUTHERN and the Subsidiaries further represent that the terms of
purchase of Shares pursuant to the Offers will benefit not only tendering
Preferred Stockholders (by affording certain Preferred Stockholders who may not
favor the elimination of the Restriction Provisions an option to exit the
Preferred Stock at a premium to the market price and without the usual
transaction costs associated with a sale) but also, taking into account all
related transaction costs, SOUTHERN's shareholders and SOUTHERN System utility
customers by (1) contributing to the elimination of the Restriction Provisions
and (2) resulting in the acquisition and retirement of outstanding Shares and
their potential replacement with comparatively less expensive financing
alternatives, such as short-term debt.
As noted, the Subsidiaries propose to submit the Proposed Amendment for
consideration and action at special meetings of stockholders scheduled to take
place on or about December 10, 1997 and, in connection therewith, to solicit
proxies from the holders of their capital stock. The Subsidiaries request that
the effectiveness of the application-declaration with respect to the
solicitation of proxies for voting by their stockholders on the Proposed
Amendments be permitted to become effective forthwith, pursuant to Rule 62(d).
It appearing to the Commission that the application-declaration
regarding the proposed solicitation of proxies should be permitted to become
effective forthwith, pursuant to Rule 62(d):
IT IS ORDERED, that the application-declaration regarding the proposed
solicitation of proxies be, and it hereby is, permitted to become effective
forthwith pursuant to Rule 62 and subject to the terms and conditions prescribed
in Rule 24 under the 1935 Act.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
11
Exhibit H
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
Capitalization Ratios at June 30, 1997
<TABLE>
<CAPTION>
Consolidated Pro Forma
per 10-Q Amounts Equity Debt
---------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Capitalization (in thousands of dollars):
Common stock..........................................$3,424,341 $ - $3,424,341
Paid-in capital........................................2,190,378 - 2,190,378
Retained earnings......................................3,723,644 - 3,723,644
Preferred stock..........................................739,615 6,701 (A,D) 746,316
Capital & preferred securities.........................1,744,465 - 1,744,465
Long-term debt.........................................9,630,366 359,070 (A) $9,989,436
Preferred due within one year............................143,757 - 143,757
Long-term debt due within one year.......................591,029 - 591,029
Notes payable & commercial paper.......................1,707,887 - 1,707,887
=============== ======== =========== ===============
Total (Incl Amts Due in 1 Year)...............$23,895,482 $365,771 $11,972,901 $12,288,352
=============== ======== =========== ===============
Actual Amounts in Millions of Dollars....................$23,895 $11,966 $11,929
Actual Capitalization Ratios..............................100.0% 50.1% 49.9%
Pro Forma Amounts in Millions of Dollars.................$24,261 $11,973 $12,288
Pro Forma Capitalization Ratios...........................100.0% 49.4% 50.6%
</TABLE>
Pro Forma Consolidated Statements of Income (Unaudited)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Twelve
Months Ended
June 30, 1997 Pro Forma As Adjusted
<S> <C> <C> <C>
OPERATING REVENUES $ 10,666,636 $ - $ 10,666,636
---------------- ------------ ----------------
OPERATING EXPENSES:
Operation--
Fuel 2,189,974 - 2,189,974
Purchased power 1,533,556 - 1,533,556
Other 1,817,430 - 1,817,430
Maintenance 800,876 - 800,876
Depreciation and amortization 1,078,859 - 1,078,859
Amortization of deferred Plant Vogtle costs 144,868 - 144,868
Taxes other than income taxes 602,818 - 602,818
Income taxes 676,225 (9,315)(B) 666,910
---------------- ------------ ----------------
Total operating expenses 8,844,606 (9,315) 8,835,291
---------------- ------------ ----------------
OPERATING INCOME 1,822,030 9,315 1,831,345
OTHER INCOME:
Allowance for equity funds used during construction 4,509 - 4,509
Interest income 74,300 - 74,300
Other, net 45,608 - 45,608
Income taxes applicable to other income (19,257) - (19,257)
---------------- ------------ ----------------
INCOME BEFORE INTEREST CHARGES 1,927,190 9,315 1,936,505
---------------- ------------ ----------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt 584,062 24,147 (B) 608,209
Allowance for debt funds used during construction (16,867) - (16,867)
Interest on notes payable 97,627 - 97,627
Amortization of debt discount, premium and expense, net 28,599 - 28,599
Other interest charges 47,246 - 47,246
Minority interest in subsidiaries 40,698 - 40,698
Distributions on capital and preferred securities of subsidiary companies 64,428 - 64,428
Preferred dividends of subsidiary companies 72,663 3,520 (B,D) 76,183
---------------- ------------ ----------------
Interest charges and other, net 918,456 27,667 946,123
---------------- ------------ ----------------
CONSOLIDATED NET INCOME $ 1,008,734 $ (18,352) $ 990,382
================ ============ ================
</TABLE>
(See Notes on Following Page)
<PAGE>
NOTES
(A) To give effect to (i) the proposed issuance by Gulf Power Company of
$200,000,000 of first mortgage bonds, $200,000,000 of preferred stock and
$159,070,000 of pollution control obligations.
(B) To give effect to (i) the proposed issuance by Gulf Power Company of
$200,000,000 of first mortgage bonds at an assumed rate of 7.50%,
$200,000,000 of preferred stock at an assumed rate of 6.50%, and
$159,070,000 of pollution control obligations at an assumed rate of
5.75%.
(C) The amounts and types of the securities to be issued by Gulf Power
Company will be dependent upon, among other things, market conditions
prevailing at the time of issuance. The amounts estimated to be issued
are the maximum amounts requested in the subject application and are used
solely for the purpose of illustrating the effect upon Southern Company
consolidated capitalization and earnings. In addition, no assumptions are
made in connection with possible refundings.
(D) To give effect to the retirement of $193,299,000 of preferred stock which
ultimately could be tendered in connection with the transactions
contemplated in this Form U-1 application. Adjustments for special
federal income tax dividend deductions on certain of the issues which
could be tendered are not included in the pro forma income statement
entries.
