Filed Pursuant to Rule 424(b)(4)
Registration No. 333-64871
333-64871-01
333-64871-02
333-64871-03
333-64871-04
Prospectus Supplement to Prospectus Dated December 17, 1998
6,000,000 Preferred Securities
SOUTHERN COMPANY CAPITAL TRUST V
6.875% Cumulative Quarterly Income Preferred Securities (QUIPS(SM))
(Liquidation Amount $25 per Preferred Security)
Fully and unconditionally guaranteed, as described herein, by
(Southern Company Logo)
---------------------------
A brief description of the 6.875% Cumulative Quarterly Income Preferred
Securities (QUIPS(SM)) can be found under "Summary Information -- Q&A" in this
Prospectus Supplement.
Application has been made to list the Preferred Securities on the New York
Stock Exchange. If approved, The Southern Company expects trading of the
Preferred Securities to begin within 30 days after they are first issued.
The Southern Company urges you to carefully read the "Risk Factors" section
beginning on page S-6 for a description of specific risks associated with these
Preferred Securities, along with this Prospectus Supplement and the Prospectus,
before you make your investment decision.
---------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
<TABLE>
<CAPTION>
PER
PREFERRED SECURITY TOTAL
------------------ -----
<S> <C> <C>
Initial public offering price(1)....................... $25.00 $150,000,000
Underwriting commissions to be paid by The Southern
Company.............................................. (2) (2)
Proceeds to Southern Company Capital Trust V........... $25.00 $150,000,000
</TABLE>
- -------------------------
(1) Plus accumulated distributions, if any, from the date of original issuance,
which is expected to be December 23, 1998.
(2) Underwriting commissions of $0.7875 per Preferred Security will be paid by
The Southern Company; except that for sales of 10,000 or more Preferred
Securities to a single purchaser, the commissions will be $0.50 per
Preferred Security.
The Underwriters expect to deliver the Preferred Securities in book-entry
form only through The Depository Trust Company against payment in New York, New
York on December 23, 1998.
---------------------------
"QUIPS" is a registered service mark of Goldman, Sachs & Co.
---------------------------
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
CIBC OPPENHEIMER
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
---------------------------
Prospectus Supplement dated December 18, 1998.
<PAGE>
SUMMARY INFORMATION--Q&A
The following information supplements, and should be read together with,
the information contained in other parts of this Prospectus Supplement and in
the accompanying Prospectus. This summary highlights selected information from
this Prospectus Supplement and the accompanying Prospectus to help you
understand the 6.875% Cumulative Quarterly Income Preferred Securities
(QUIPS(SM)) (the "Preferred Securities"). You should carefully read this
Prospectus Supplement and the accompanying Prospectus to understand fully the
terms of the Preferred Securities as well as the tax and other considerations
that are important to you in making a decision about whether to invest in the
Preferred Securities. You should pay special attention to the "Risk Factors"
section beginning on Page S-6 of this Prospectus Supplement to determine whether
an investment in the Preferred Securities is appropriate for you.
WHAT ARE THE PREFERRED SECURITIES?
Each Preferred Security represents an undivided beneficial interest in the
assets of Southern Company Capital Trust V (the "Trust"). Each Preferred
Security will entitle the holder to receive quarterly cash distributions as
described in this Prospectus Supplement. The Trust is offering 6,000,000
Preferred Securities at a price of $25 for each Preferred Security.
WHO IS THE TRUST?
The Trust is a Delaware business trust. Its principal place of business is
c/o The Southern Company, 270 Peachtree Street, N.W., Atlanta, Georgia 30303,
and its telephone number is (770) 393-0650.
The Trust will sell its Preferred Securities to the public and its common
securities (the "Common Securities") to Southern Company Capital Funding, Inc.
("Capital"). The Trust will use the proceeds from these sales to buy a series of
6.875% junior subordinated deferrable interest notes due December 31, 2028 (the
"Series E Junior Subordinated Notes") from Capital with the same financial terms
as the Preferred Securities. The Southern Company ("Southern") will guarantee
payments made on the Series E Junior Subordinated Notes and the Preferred
Securities as described herein.
Bankers Trust Company will act as property trustee (the "Property Trustee")
of the Trust. Two employees of an affiliate of Southern also will act as
trustees (the "Administrative Trustees") of the Trust. Bankers Trust (Delaware)
will be an additional trustee (the "Delaware Trustee") of the Trust. Bankers
Trust Company will act as trustee (the "Indenture Trustee") under the
Subordinated Note Indenture, as supplemented (the "Subordinated Note
Indenture"), pursuant to which the Series E Junior Subordinated Notes will be
issued and will act as trustee (the "Guarantee Trustee") under the Preferred
Securities Guarantee of Southern (the "Preferred Securities Guarantee"). The
Property Trustee, Delaware Trustee and Administrative Trustees are sometimes
referred to as the "Securities Trustees."
WHO IS SOUTHERN?
Southern was incorporated under the laws of Delaware on November 9, 1945.
Southern is domesticated under the laws of Georgia and is qualified to do
business as a foreign corporation under the laws of Alabama. The principal
executive offices of Southern are located at 270 Peachtree Street, N.W.,
Atlanta, Georgia 30303, and the telephone number is (770) 393-0650.
WHO IS CAPITAL?
Capital was established to obtain financing for Southern and direct and
indirect subsidiaries of Southern other than the operating affiliates. Capital
does not and will not engage in business activities other than such financing.
S-2
<PAGE>
Capital was incorporated under the laws of Delaware on January 24, 1997 and
is a wholly-owned subsidiary of Southern Energy, Inc. (formerly known as SEI
Holdings, Inc.), which itself is a wholly-owned subsidiary of Southern. The
principal executive offices of Capital are located at 1403 Foulk Road, Suite
102, Wilmington, Delaware 19803, and the telephone number is (302) 427-1935.
WHEN WILL YOU RECEIVE QUARTERLY DISTRIBUTIONS?
If you purchase the Preferred Securities, you are entitled to receive
cumulative cash distributions at an annual rate of 6.875% (the "Securities
Rate") of the liquidation amount of $25 per Preferred Security. Distributions
will accumulate from the date the Trust issues the Preferred Securities (the
"Issue Date") and will be paid quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (each, a "Distribution Date"),
beginning March 31, 1999.
WHEN CAN PAYMENT OF YOUR DISTRIBUTIONS BE DEFERRED?
Capital can, on one or more occasions, defer interest payments on the
Series E Junior Subordinated Notes for up to 20 consecutive quarterly periods. A
deferral of interest payments cannot extend, however, beyond the maturity date
of the Series E Junior Subordinated Notes (which is December 31, 2028).
If Capital defers interest payments on the Series E Junior Subordinated
Notes, the Trust will also defer distributions on the Preferred Securities.
During this deferral period, distributions will continue to accrue on the
Preferred Securities at an annual rate of 6.875% of the liquidation amount of
$25 per Preferred Security. Also, the deferred distributions will themselves
accrue interest at an annual rate of 6.875% (to the extent permitted by law).
Once Capital makes all interest payments on the Series E Junior Subordinated
Notes, with accrued interest, it can again postpone interest payments on the
Series E Junior Subordinated Notes.
During any period in which Capital defers interest payments on the Series E
Junior Subordinated Notes, neither Southern nor Capital will be permitted to
(with limited exceptions):
- pay a dividend or make any distributions on its capital stock or redeem,
purchase, acquire or make a liquidation payment on any of its capital
stock, or make any guarantee payments with respect to the foregoing; or
- make an interest, principal or premium payment on, or repurchase or
redeem, any of its debt securities that rank equal with or junior to the
Series E Junior Subordinated Notes or the Series E Junior Subordinated
Notes Guarantee (as defined below).
If Capital defers payments of interest on the Series E Junior Subordinated
Notes, the Preferred Securities will, from the time of deferral, be treated as
being issued with original issue discount ("OID") for United States federal
income tax purposes. This means you will be required to recognize interest
income with respect to distributions and include such amounts in your gross
income for United States federal income tax purposes even though you will not
have received any cash distributions relating to such interest income. See
"Certain Federal Income Tax Considerations -- Original Issue Discount."
WHEN CAN THE TRUST REDEEM THE PREFERRED SECURITIES?
The Trust must redeem all of the outstanding Preferred Securities and
Common Securities (together, the "Trust Securities") when the Series E Junior
Subordinated Notes are paid at maturity on December 31, 2028. In addition, if
Capital redeems any Series E Junior Subordinated Notes before their maturity,
the Trust will use the cash it receives from the redemption to redeem, on a pro
rata basis, Preferred Securities and Common Securities having a combined
S-3
<PAGE>
liquidation amount equal to the principal amount of the Series E Junior
Subordinated Notes redeemed.
Capital can redeem some or all of the Series E Junior Subordinated Notes
before their maturity at 100% of their principal amount on one or more occasions
any time on or after December 23, 2003. Capital also has the option to redeem
the Series E Junior Subordinated Notes, in whole, but not in part, at any time
if certain changes in tax or investment company law occur and certain other
conditions are satisfied, as more fully described under "Description of the
Preferred Securities -- Special Event Redemption or Distribution." In any case,
Capital will pay accrued interest to the date of redemption.
WHAT IS SOUTHERN'S GUARANTEE OF THE PREFERRED SECURITIES?
Southern will guarantee the Preferred Securities based on:
- its guarantee of Capital's obligations to make payments on the Series E
Junior Subordinated Notes (the "Series E Junior Subordinated Notes
Guarantee");
- its obligations under the Preferred Securities Guarantee; and
- its obligations under the Trust Agreement and the Agreement as to
Expenses and Liabilities.
Southern's obligations under the Series E Junior Subordinated Notes
Guarantee are subordinate and junior to all of its Senior Indebtedness (as
defined under "Description of the Junior Subordinated Notes -- Subordination" in
the accompanying Prospectus).
The payment of distributions on the Preferred Securities is guaranteed by
Southern under the Preferred Securities Guarantee, but only to the extent the
Trust has funds legally and immediately available to make distributions.
Southern's obligations under the Preferred Securities Guarantee are:
- subordinate and junior in right of payment to its other liabilities;
- equal in rank to its most senior preferred stock; and
- senior to its common stock.
WHEN COULD THE SERIES E JUNIOR SUBORDINATED NOTES BE DISTRIBUTED TO YOU?
Capital has the right to terminate the Trust at any time. If Capital
terminates the Trust, the Trust will liquidate by distributing the Series E
Junior Subordinated Notes to holders of the Preferred Securities and the Common
Securities on a pro rata basis. If the Series E Junior Subordinated Notes are
distributed, Capital will use its best efforts to list the Series E Junior
Subordinated Notes on the New York Stock Exchange ("NYSE")(or any other exchange
on which the Preferred Securities are then listed) in place of the Preferred
Securities. For a discussion of Capital's ability to distribute the Series E
Junior Subordinated Notes, see "Description of the Preferred
Securities -- Special Event Redemption or Distribution" and "-- Liquidation
Distribution Upon Dissolution."
WILL THE PREFERRED SECURITIES BE LISTED ON A STOCK EXCHANGE?
Application has been made to list the Preferred Securities on the NYSE. If
approved, trading of the Preferred Securities is expected to begin within 30
days after they are first issued.
S-4
<PAGE>
WILL HOLDERS OF THE PREFERRED SECURITIES HAVE ANY VOTING RIGHTS?
Generally, the holders of the Preferred Securities will not have any voting
rights. See "Description of the Preferred Securities -- Voting Rights."
IN WHAT FORM WILL THE PREFERRED SECURITIES BE ISSUED?
The Preferred Securities will be represented by one or more global
securities that will be deposited with and registered in the name of The
Depository Trust Company ("DTC") or its nominee. This means that you will not
receive a certificate for your Preferred Securities and that your broker will
maintain your position in the Preferred Securities. Southern expects that the
Preferred Securities will be ready for delivery through DTC on or about December
23, 1998.
S-5
<PAGE>
RISK FACTORS
Your investment in the Preferred Securities will involve certain risks. You
should carefully consider the following discussion of risks, and the other
information in this Prospectus Supplement and the accompanying Prospectus,
before deciding whether an investment in the Preferred Securities is suitable
for you.
CAPITAL'S OBLIGATIONS UNDER THE SERIES E JUNIOR SUBORDINATED NOTES AND
SOUTHERN'S OBLIGATIONS UNDER THE SERIES E JUNIOR SUBORDINATED NOTES GUARANTEE
AND THE PREFERRED SECURITIES GUARANTEE ARE SUBORDINATED.
Capital's obligations under the Series E Junior Subordinated Notes will
rank junior in priority of payment to all of Capital's Senior Indebtedness (as
defined under "Description of the Junior Subordinated Notes -- Subordination" in
the accompanying Prospectus). The obligations of Southern under the Series E
Junior Subordinated Notes Guarantee will be subordinate and junior to all
present and future Senior Indebtedness of Southern. This means that neither
Capital nor Southern can make any payments on the Series E Junior Subordinated
Notes or the Series E Junior Subordinated Notes Guarantee if it defaults on a
payment of Senior Indebtedness and does not cure such default within the
applicable grace period or if the Senior Indebtedness becomes immediately due
because of a default and has not yet been paid in full. Capital currently has no
Senior Indebtedness outstanding. At September 30, 1998, Senior Indebtedness of
Southern aggregated approximately $618,000,000.
Southern's obligations under the Preferred Securities Guarantee will rank
in priority of payment as follows:
- subordinate and junior in right of payment to its other liabilities;
- equal in rank to its most senior preferred stock; and
- senior to its common stock.
This means that Southern cannot make any payments on the Preferred
Securities Guarantee if it defaults on a payment on any of its other
liabilities. In addition, in the event of the bankruptcy, liquidation or
dissolution of Southern, its assets would be available to pay obligations under
the Preferred Securities Guarantee only after Southern made all payments on its
other liabilities.
Neither the Preferred Securities, the Series E Junior Subordinated Notes,
the Series E Junior Subordinated Notes Guarantee nor the Preferred Securities
Guarantee limit the ability of Southern or Capital to incur additional
indebtedness, including indebtedness that ranks senior in priority of payment to
the Series E Junior Subordinated Notes, the Series E Junior Subordinated Notes
Guarantee and the Preferred Securities Guarantee. See "Description of the
Preferred Securities Guarantee -- Subordination" and "Description of the Junior
Subordinated Notes -- Subordination" in the accompanying Prospectus.
THE PREFERRED SECURITIES GUARANTEE ONLY COVERS PAYMENTS IF THE TRUST HAS CASH
AVAILABLE.
The ability of the Trust to pay scheduled distributions on the Preferred
Securities, the redemption price of the Preferred Securities and the liquidation
amount of each Preferred Security is solely dependent upon Capital making the
related payments on the Series E Junior Subordinated Notes when due.
If Capital defaults on its obligations to pay principal or interest on the
Series E Junior Subordinated Notes, the Trust will not have sufficient funds to
pay distributions, the redemption price or the liquidation amount of each
Preferred Security. In those circumstances, you will not be able to rely upon
the Preferred Securities Guarantee for payment of these amounts.
S-6
<PAGE>
Instead, you:
- may directly sue Southern or Capital or seek other remedies to
collect your pro rata share of payments owed; or
- may rely on the Property Trustee to enforce the Trust's rights under
the Series E Junior Subordinated Notes and the Series E Junior
Subordinated Notes Guarantee.
DEFERRAL OF DISTRIBUTIONS WOULD HAVE TAX CONSEQUENCES FOR YOU AND MAY AFFECT THE
TRADING PRICE OF THE PREFERRED SECURITIES.
Capital can, on one or more occasions, defer interest payments on the
Series E Junior Subordinated Notes for up to 20 consecutive quarterly periods.
If Capital defers interest payments on the Series E Junior Subordinated Notes,
the Trust will defer distributions on the Preferred Securities during any
deferral period. However, distributions would still accumulate and such deferred
distributions would themselves accrue interest at the annual rate of 6.875% per
annum (to the extent permitted by law).
If Capital defers payments of interest on the Series E Junior Subordinated
Notes, you will be required to recognize interest income for United States
federal income tax purposes (based on your pro rata share of the interest on the
Series E Junior Subordinated Notes held by the Trust) before you receive any
cash relating to such interest. In addition, you will not receive such cash if
you sell the Preferred Securities before the end of any deferral period or
before the record date relating to distributions which are paid.
Capital has no current intention of deferring interest payments on the
Series E Junior Subordinated Notes. However, if Capital exercises its right in
the future, the Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest on the Series E Junior
Subordinated Notes. If you sell the Preferred Securities during an interest
deferral period, you may not receive the same return on investment as someone
else who continues to hold the Preferred Securities. In addition, the existence
of Capital's right to defer payments of interest on the Series E Junior
Subordinated Notes may mean that the market price for the Preferred Securities
(which represent an undivided beneficial interest in the Series E Junior
Subordinated Notes) may be more volatile than other securities that do not have
these rights.
See "Certain Federal Income Tax Considerations" for more information
regarding the tax consequences of purchasing, holding and selling the Preferred
Securities.
PREFERRED SECURITIES MAY BE REDEEMED AT ANY TIME IF CERTAIN CHANGES IN TAX OR
INVESTMENT COMPANY LAW OCCUR.
If certain changes in tax or investment company law occur and are
continuing, and certain other conditions are satisfied, Capital has the right to
redeem the Series E Junior Subordinated Notes, in whole, but not in part, at any
time. Any such redemption will cause a mandatory redemption of all Preferred
Securities and Common Securities at a redemption price equal to $25 per security
plus any accrued and unpaid distributions. See "Description of the Preferred
Securities -- Special Event Redemption or Distribution."
PREFERRED SECURITIES MAY BE REDEEMED AT THE OPTION OF CAPITAL.
At the option of Capital, the Series E Junior Subordinated Notes may be
redeemed, in whole, at any time, or in part, from time to time, on or after
December 23, 2003 at a redemption price equal to the principal amount to be
redeemed plus any accrued and unpaid interest to the redemption date. See
"Description of the Series E Junior Subordinated Notes -- Redemption." You
should assume that Capital will exercise its redemption option if Capital is
able to refinance at a lower interest rate or it is otherwise in the interest of
Capital to redeem the Series E Junior
S-7
<PAGE>
Subordinated Notes. If the Series E Junior Subordinated Notes are redeemed, the
Trust must redeem the Preferred Securities and the Common Securities having an
aggregate liquidation amount equal to the aggregate principal amount of Series E
Junior Subordinated Notes to be redeemed. See "Description of the Preferred
Securities -- Redemption."
THERE CAN BE NO ASSURANCE AS TO THE MARKET PRICES FOR THE PREFERRED SECURITIES
OR THE SERIES E JUNIOR SUBORDINATED NOTES.
There can be no assurance as to the market prices for the Preferred
Securities or the Series E Junior Subordinated Notes that may be distributed in
exchange for Preferred Securities upon a termination of the Trust. Accordingly,
the Preferred Securities that an investor may purchase, whether pursuant to the
offer made by this Prospectus Supplement or in the secondary market, or the
Series E Junior Subordinated Notes that a holder of Preferred Securities may
receive upon a termination of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered by this
Prospectus Supplement. As a result of Capital's right to defer interest payments
on the Series E Junior Subordinated Notes, the market price of the Preferred
Securities (which represent undivided beneficial ownership interests in the
Trust, substantially all the assets of which consist of the Series E Junior
Subordinated Notes) may be more volatile than the market prices of other
securities that are not subject to such optional deferrals.
CAPITAL MAY TERMINATE THE TRUST AT ANY TIME.
Capital has the right to terminate the Trust at any time. If Capital
decides to exercise its right to terminate the Trust, the Trust will liquidate
by distributing the Series E Junior Subordinated Notes to holders of the
Preferred Securities and the Common Securities on a pro rata basis.
Under current United States federal income tax law, a distribution of
Series E Junior Subordinated Notes to you on the dissolution of the Trust should
not be a taxable event to you. However, if the Trust is characterized for United
States federal income tax purposes as an association taxable as a corporation at
the time it is dissolved or if there is a change in law, the distribution of
Series E Junior Subordinated Notes to you may be a taxable event to you.
Capital has no current intention of causing the termination of the Trust
and the distribution of the Series E Junior Subordinated Notes. Capital
anticipates that it would consider exercising this right in the event that
expenses associated with maintaining the Trust were substantially greater than
currently expected such as if certain changes in tax law or investment company
law occurred. See "Description of the Preferred Securities -- Special Event
Redemption or Distribution." Capital cannot predict the other circumstances
under which this right would be exercised.
Although Capital will use its best efforts to list the Series E Junior
Subordinated Notes on the NYSE (or any other exchange on which the Preferred
Securities are then listed) if they are distributed, we cannot assure you that
the Series E Junior Subordinated Notes will be approved for listing or that a
trading market will exist for those securities.
YOU HAVE LIMITED VOTING RIGHTS.
You will have limited voting rights. In particular, subject to certain
exceptions, only Capital can appoint or remove any of the Securities Trustees.
See "Description of the Preferred Securities -- Voting Rights."
S-8
<PAGE>
SOUTHERN COMPANY CAPITAL TRUST V
The Trust is a statutory business trust created under Delaware law pursuant
to the filing of a certificate of trust with the Delaware Secretary of State on
September 28, 1998. The Trust's business is defined in a trust agreement,
executed by Capital, as Depositor, and Bankers Trust (Delaware), as the Delaware
Trustee thereunder. This trust agreement will be amended and restated in its
entirety on the Issue Date (the "Trust Agreement"). The Trust Agreement has been
qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act").
The Trust exists for the exclusive purposes of (i) issuing the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in the Series E Junior
Subordinated Notes, and (iii) engaging in only those other activities necessary,
appropriate, convenient or incidental thereto. The Trust has a term of
approximately 31 years, but may terminate earlier as provided in the Trust
Agreement.
Upon issuance of the Preferred Securities, the purchasers thereof will own
all of the Preferred Securities. Capital will acquire all of the Common
Securities, which will have an aggregate liquidation amount equal to
approximately 3% of the total capital of the Trust. The Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the Preferred
Securities, except that upon the occurrence and continuance of a Subordinated
Note Indenture Event of Default (as defined below), the rights of the holders of
Common Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the Preferred Securities.
The Trust's business and affairs will be conducted by the Securities
Trustees, which shall be appointed by Capital as the holder of the Common
Securities. Two employees of a subsidiary of Southern initially will serve as
Administrative Trustees. Bankers Trust Company will serve as Property Trustee
and will hold legal title to the Series E Junior Subordinated Notes issued by
Capital on behalf of the Trust and the holders of the Trust Securities. Bankers
Trust (Delaware) will serve as Delaware Trustee. In certain circumstances, the
holders of a majority in liquidation amount of the Preferred Securities will be
entitled to appoint a Substitute Property Trustee. See "Description of the
Preferred Securities -- Voting Rights."
The Property Trustee will hold legal title to the Series E Junior
Subordinated Notes for the benefit of the Trust and the holders of the Trust
Securities and will have the power to exercise all rights, powers and privileges
under the Subordinated Note Indenture as the holder of the Series E Junior
Subordinated Notes. The Property Trustee will make payments of distributions and
payments on liquidation, redemption and otherwise to the holders of the Trust
Securities. Subject to the right of the holders of the Preferred Securities to
appoint a Substitute Property Trustee in certain instances, Capital, as the
holder of all the Common Securities, will have the right to appoint, remove or
replace all the Securities Trustees.
The Series E Junior Subordinated Notes will constitute substantially all of
the assets of the Trust. Other assets that may constitute "Trust Property" (as
that term is defined in the Trust Agreement) include any cash on deposit in, or
owing to, the payment account as established under the Trust Agreement, as well
as any other property or assets held by the Property Trustee pursuant to the
Trust Agreement. In addition, the Trust may, from time to time, receive cash
pursuant to the Agreement as to Expenses and Liabilities.
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the Trust
Agreement, the Delaware Business Trust Act, and the 1939 Act. See "Description
of the Preferred Securities."
The Trust's office in the State of Delaware is c/o Bankers Trust
(Delaware), E.A. Delle Donne Corporate Center, Montgomery Building, 1011 Centre
Road, Suite 200, Wilmington, Delaware 19805-1266. The principal place of
business of the Trust shall be c/o Southern, 270 Peachtree Street, N.W.,
Atlanta, Georgia 30303, telephone (770) 393-0650, Attn: Secretary.
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<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of Southern and, accordingly, the accounts of the Trust will be included in the
consolidated financial statements of Southern. The Preferred Securities will be
presented as a separate line item in the consolidated balance sheet of Southern,
and appropriate disclosures concerning the Preferred Securities, the Preferred
Securities Guarantee, the Series E Junior Subordinated Notes and the Series E
Junior Subordinated Notes Guarantee will be included in the notes to the
consolidated financial statements. For financial reporting purposes, Southern
will record distributions payable on the Preferred Securities as an expense.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information contained elsewhere in this
Prospectus Supplement or the accompanying Prospectus or incorporated herein by
reference.
<TABLE>
<CAPTION>
TWELVE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------- 1998(1)
1993 1994(1) 1995(1) 1996(1) 1997(1) (UNAUDITED)
------ ------- ------- ------- ------- -------------
(MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues.................. $8,489 $8,297 $9,180 $10,358 $12,611 $12,122
Income Before Interest Charges...... $1,827 $1,756 $1,900 $ 1,944 $ 2,037 $ 2,425
Consolidated Net Income............. $1,002 $ 989 $1,103 $ 1,127 $ 972 $ 1,224
Earnings per Share of Common
Stock............................. $ 1.57 $ 1.52 $ 1.66 $ 1.68 $ 1.42 $ 1.76
Dividends Paid per Share of Common
Stock............................. $ 1.14 $ 1.18 $ 1.22 $ 1.26 $ 1.30 $ 1.33
Ratio of Earnings to Fixed
Charges(2)........................ 3.41 3.63 3.75 3.68 2.87 2.77
Ratio of Earnings to Fixed Charges
Plus Preferred Dividend
Requirements (Pre-Income Tax
Basis)(3)......................... 2.84 3.01 3.13 3.12 2.67 2.70
</TABLE>
<TABLE>
<CAPTION>
CAPITALIZATION AS OF
SEPTEMBER 30, 1998
-------------------------
ACTUAL AS ADJUSTED(4)
------- ---------------
(MILLIONS, EXCEPT
PERCENTAGES)
<S> <C> <C> <C>
Common Stock Equity......................................... $10,090 $10,090 43.0%
Preferred Stock of Subsidiaries............................. 406 370 1.6
Company or Subsidiary Obligated Mandatorily Redeemable
Capital and Preferred Securities.......................... 1,991 2,181 9.3
Long-Term Debt.............................................. 10,698 10,839 46.1
------- ------- -----
Total, excluding amounts due within one year of
$1.193 billion.................................. $23,185 $23,480 100.0%
======= ======= =====
</TABLE>
- ---------------
(1) "Income Before Interest Charges" and "Consolidated Net Income" for the years
ended December 31, 1994, 1995, 1996 and 1997 and the twelve months ended
September 30, 1998 reflect charges of approximately $61,000,000,
$17,000,000, $53,000,000, $31,000,000 and $27,000,000, respectively, after
taxes relating to benefits provided pursuant to work force reduction
programs. In addition, "Income Before Interest Charges" and "Consolidated
Net
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<PAGE>
Income" for the year ended December 31, 1997 reflect a charge of
$111,000,000, after taxes, resulting from a windfall profits tax assessed
against Southern's South Western Electricity plc subsidiary in the United
Kingdom.
(2) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Income Before Interest Charges" all income taxes deducted
therefrom and the debt portion of allowance for funds used during
construction; and (ii) "Fixed Charges" consist of "Net Interest Charges"
plus the debt portion of allowance for funds used during construction.
(3) In computing this ratio, "Preferred Dividend Requirements" represent the
before-tax earnings necessary to pay such dividends, computed at the
effective tax rates for the applicable periods.
(4) Reflects (i) the issuance in October 1998 by Alabama Power Company
("ALABAMA") of $160,000,000 principal amount of its Series G 5 3/8% Senior
Notes due October 1, 2008; (ii) the issuance in November 1998 by ALABAMA of
$225,000,000 principal amount of its Series H 5.49% Senior Notes due
November 1, 2005 and $156,200,000 principal amount of its Series I 5.35%
Senior Notes due November 15, 2003; (iii) the issuance in November 1998 by
Georgia Power Company ("GEORGIA") of $200,000,000 principal amount of its
Series B 6.60% Senior Notes due December 31, 2038; (iv) the proposed
redemption in December 1998 by ALABAMA of the outstanding $100,000,000
aggregate principal amount of First Mortgage Bonds, 6.85% Series due August
1, 2002; (v) the issuance in December 1998 by GEORGIA of $150,000,000
principal amount of its Series C 5.50% Senior Notes due December 1, 2005;
(vi) the redemption in December 1998 by GEORGIA of $70,000,000 principal
amount of First Mortgage Bonds, 7.75% Series due April 1, 2023, $117,790,000
principal amount of First Mortgage Bonds, 7.95% Series due February 1, 2023
and $150,000,000 principal amount of First Mortgage Bonds, 6.875% Series due
September 1, 2002; (vii) the issuance in December 1998 by Savannah Electric
Capital Trust I of $40,000,000 aggregate liquidation amount of 6.85% Trust
Preferred Securities for the benefit of Savannah Electric and Power Company;
(viii) the proposed redemption in January 1999 by ALABAMA of the outstanding
$125,000,000 aggregate principal amount of First Mortgage Bonds, 7.00%
Series due January 1, 2003; (ix) the proposed redemption in January 1999 by
GEORGIA of $11,995,000 principal amount of First Mortgage Bonds, 7.625%
Series due March 1, 2023 and $36,407,300 aggregate amount of issues of
preferred stock; (x) the proposed redemption in February 1999 by ALABAMA of
$175,000,000 outstanding principal amount of its First Mortgage Bonds,
6 3/4% Series due February 1, 2003; and (xi) the issuance of the Preferred
Securities offered hereby.
RECENT DEVELOPMENTS
Since their purchase, the values of certain of Southern's South American
investments have declined significantly; therefore, in fiscal year 1998 Southern
plans to take a one time charge to net income to reflect this decline in value.
The amount of such charge has not yet been determined. Such one time charge will
significantly impact reported net income for 1998, but is not expected to impact
future periods. Southern's equity in these investments totals approximately
$400,000,000.
On December 18, 1998, the Georgia Public Service Commission (the "GPSC")
approved a new three-year accounting order for GEORGIA. Under the terms of the
order, to which GEORGIA has agreed, GEORGIA's earnings will continue to be
evaluated against a retail return on common equity range of 10% to 12 1/2%.
GEORGIA's retail rates will be decreased by $262,000,000 on an annual basis
effective January 1, 1999, and by an additional $24,000,000 effective January 1,
2000. The order further provides for $85,000,000 in each year, plus up to
$50,000,000 of any earnings in excess of the 12 1/2% return during the second
and third years, to be applied to accelerated amortization or depreciation of
assets. Two-thirds of any additional earnings in excess of such return in any
year will be applied to rate reductions. During the term of the order, GEORGIA
will not file for a general base rate increase unless its projected retail
return on common equity falls below 10%. GEORGIA will be required to file a
general rate case on July 1,
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2001, in response to which the GPSC would be expected to determine whether the
accounting order should be continued, modified or discontinued. Further under
the order, GEORGIA will voluntarily dismiss its appeal of the GPSC's prior order
that GEORGIA be allowed approximately $108,000,000 of its $143,000,000
investment in the Rocky Mountain pumped storage hydroelectric plant as of
December 31, 1998 (see note (N) to the condensed financial statements included
in GEORGIA's Quarterly Report on Form 10-Q for the quarter ended September 30,
1998, incorporated by reference herein).
USE OF PROCEEDS
The Trust will invest all of the proceeds from the sale of the Preferred
Securities in the Series E Junior Subordinated Notes. The proceeds from such
investment will be remitted to Southern and used by it to repay a portion of its
outstanding short-term debt which aggregated approximately $748,000,000 as of
December 18, 1998.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement has been qualified as an indenture under the 1939
Act. The Property Trustee will act as the indenture trustee with respect to the
Trust, as well as the Preferred Securities Guarantee, for purposes of compliance
with the provisions of the 1939 Act. The terms of the Preferred Securities will
include those stated in the Trust Agreement, the Delaware Business Trust Act,
and those made part of the Trust Agreement by the 1939 Act. The following
summary of the principal terms and provisions of the Preferred Securities does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the Trust Agreement, the form of which is filed as an exhibit to
the Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus are a part, as well as the Delaware Business Trust Act
and the 1939 Act.
GENERAL
The Trust Agreement authorizes the Administrative Trustees, on behalf of
the Trust, to issue the Preferred Securities, which represent preferred
undivided beneficial interests in the assets of the Trust, and the Common
Securities, which represent common undivided beneficial interests in the assets
of the Trust. All of the Common Securities will be owned by Capital. The Common
Securities rank pari passu, and payments will be made thereon on a pro rata
basis, with the Preferred Securities, except that upon the occurrence of a
Subordinated Note Indenture Event of Default, the rights of the holders of the
Common Securities to receive payment of periodic distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the Preferred Securities. The Trust Agreement does not permit the
issuance by the Trust of any securities other than the Trust Securities or the
incurrence of any indebtedness by the Trust. Pursuant to the Trust Agreement,
the Property Trustee will own and hold the Series E Junior Subordinated Notes
for the benefit of the Trust and the holders of the Trust Securities. The
payment of distributions out of money held by the Trust, and payments upon
redemption of the Preferred Securities or liquidation of the Trust, are
guaranteed by Southern on a subordinated basis as and to the extent described
under "Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. The Preferred Securities Guarantee does not cover payment of
distributions on the Preferred Securities when the Trust does not have legally
and immediately available funds sufficient to make such distributions. In such
event, the remedy of a holder of Preferred Securities is to direct the Property
Trustee to enforce its rights under the Series E Junior Subordinated Notes. In
addition, a holder of Preferred Securities may institute a legal proceeding
directly against Capital, without first instituting a legal proceeding against
the Property Trustee or any other person or entity, for enforcement of
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payment to such holder of principal of or interest on the Series E Junior
Subordinated Notes having a principal amount equal to the aggregate stated
liquidation amount of the Preferred Securities of such holder on or after the
due dates specified in the Series E Junior Subordinated Notes. The above
mechanisms and obligations, together with Southern's obligations under the
Series E Junior Subordinated Notes Guarantee and the Agreement as to Expenses
and Liabilities, constitute a full and unconditional guarantee by Southern and
Capital of payments due on the Preferred Securities. See "-- Voting Rights"
below.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at the Securities
Rate and will accrue from the Issue Date and, except in the event of an
Extension Period (as defined below), will be payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year commencing March
31, 1999. In the event that any date on which distributions are to be made on
the Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date. A "Business
Day" shall mean any day other than a Saturday or Sunday, a day on which banks in
New York City are authorized or obligated by law or executive order to remain
closed or a day on which the principal corporate trust office of the Property
Trustee or the Indenture Trustee is closed for business.
Distributions payable on any Distribution Date will be payable to the
holders of record on the Record Date for such Distribution Date, which is the
close of business on the fifteenth calendar day preceding such Distribution
Date. Subject to any applicable laws and regulations and the provisions of the
Trust Agreement, each such payment will be made as described under "--
Book-Entry Only Issuance -- The Depository Trust Company" below. The amount of
distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months.
Capital has the right under the Subordinated Note Indenture to defer
payments of interest on the Series E Junior Subordinated Notes by extending the
interest payment period from time to time on the Series E Junior Subordinated
Notes (each, an "Extension Period") which, if exercised, would defer quarterly
distributions on the Preferred Securities during any such extended interest
payment period. Deferred installments of interest on the Series E Junior
Subordinated Notes will bear interest, compounded quarterly, at a rate per annum
equal to the Securities Rate to the extent permitted by applicable law. If
distributions are deferred, the deferred distributions and accrued interest
thereon shall be paid, if funds are legally available therefor, to holders of
record of the Preferred Securities as they appear on the books and records of
the Trust on the Record Date next following the termination of such Extension
Period. See "Description of the Series E Junior Subordinated Notes -- Interest"
and "-- Option to Extend Interest Payment Period."
Distributions on the Preferred Securities must be paid on the Distribution
Dates to the extent that the Trust has funds legally and immediately available
for the payment of such distributions. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received under the Series E Junior Subordinated Notes. See "Description
of the Series E Junior Subordinated Notes."
REDEMPTION
The Preferred Securities are subject to mandatory redemption upon repayment
of the Series E Junior Subordinated Notes at maturity or their earlier
redemption. The Series E Junior Subordinated Notes will mature on December 31,
2028 and may be redeemed, in whole or in part, at the option of Capital, at any
time on or after December 23, 2003 or at any time in whole
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upon the occurrence of a Special Event (as defined below). Upon the repayment of
the Series E Junior Subordinated Notes, whether at maturity or upon redemption,
the proceeds from such repayment or payment shall simultaneously be applied to
redeem a like amount of Trust Securities upon not less than 30 nor more than 60
days' notice, at the Redemption Price (as defined below). See "Description of
the Series E Junior Subordinated Notes -- Optional Redemption." If a partial
redemption of the Series E Junior Subordinated Notes would result in the
delisting of the Preferred Securities, Capital may only redeem the Series E
Junior Subordinated Notes in whole. In the event that fewer than all of the
outstanding Trust Securities are to be redeemed, the Preferred Securities to be
redeemed will be selected as described under "-- Book-Entry Only Issuance -- The
Depository Trust Company" below. If the Preferred Securities are no longer in
book-entry only form, the Preferred Securities to be redeemed will be selected
by such method as the Property Trustee shall deem fair and appropriate and which
may provide for the selection for redemption of portions (equal to $25 or
integral multiples thereof) of the aggregate liquidation amount of Preferred
Securities of a denomination larger than $25; provided, however, that before
undertaking the redemption of the Preferred Securities on other than a pro rata
basis, the Property Trustee shall have received an opinion of counsel that the
status of the Trust as a grantor trust for federal income tax purposes would not
be adversely affected.
The Redemption Price for each Preferred Security shall equal the stated
liquidation amount of $25 plus accrued and unpaid distributions thereon to the
date of payment.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event at any time, Capital will have the
option to redeem the Series E Junior Subordinated Notes in whole (and thus cause
the redemption of the Preferred Securities in whole). A Special Event is either
an Investment Company Act Event or a Tax Event.
An "Investment Company Act Event" means that the Administrative Trustees,
Southern and Capital shall have received an opinion of independent counsel
(which may be counsel to Southern or Capital) to the effect that, as a result of
a change in law or regulation or a written change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority after the Issue Date, there is more than an
insubstantial risk that the Trust is or will be considered an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act").
"Tax Event" means that the Administrative Trustees, Southern and Capital
shall have received an opinion from independent tax counsel experienced in such
matters (which may be counsel to Southern or Capital) to the effect that, as a
result of (a) any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein or (b) any
amendment to, or change in, an interpretation or application of such laws or
regulations, there is more than an insubstantial risk that (i) the Trust would
be subject to United States federal income tax with respect to income accrued or
received on the Series E Junior Subordinated Notes, (ii) interest payable on the
Series E Junior Subordinated Notes would not be deductible by a member of
Southern's consolidated tax group for United States federal income tax purposes
or (iii) the Trust would be subject to more than a de minimis amount of other
taxes, duties or other governmental charges, which change or amendment becomes
effective on or after the Issue Date.
Capital will have the right at any time to terminate the Trust and, after
satisfaction of liabilities to creditors of the Trust, if any, cause the Series
E Junior Subordinated Notes to be distributed to the holders of the Preferred
Securities in liquidation of the Trust. See "-- Liquidation Distribution Upon
Dissolution" below. This right is optional and wholly within the discretion of
Capital. Circumstances under which Capital may determine to exercise such right
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could include the occurrence of an Investment Company Act Event or a Tax Event,
adverse tax consequences to Southern, Capital or the Trust that are not within
the definition of a Tax Event because they do not result from an amendment or
change described in such definition, and changes in the accounting requirements
applicable to the Preferred Securities as described under "Accounting
Treatment."
If Series E Junior Subordinated Notes are distributed to the holders of the
Preferred Securities, Southern and Capital will use their best efforts to have
the Series E Junior Subordinated Notes listed on the NYSE or on such other
exchange as the Preferred Securities are then listed. After the date for any
distribution of Series E Junior Subordinated Notes upon termination of the
Trust, (i) the Preferred Securities and the Preferred Securities Guarantee will
no longer be deemed to be outstanding, (ii) the depositary or its nominee, as
the record holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Series E Junior Subordinated Notes
to be delivered upon such distribution and (iii) any certificates representing
Preferred Securities and the Preferred Securities Guarantee not held by the
depositary or its nominee will be deemed to represent Series E Junior
Subordinated Notes having an aggregate principal amount equal to the aggregate
stated liquidation amount of, with an interest rate identical to the Securities
Rate of, and accrued and unpaid interest equal to accrued and unpaid
distributions on, such Preferred Securities, until such certificates are
presented to Capital or its agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Series E Junior Subordinated Notes that may be distributed in
exchange for the Preferred Securities if a termination and liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor may
purchase, or the Series E Junior Subordinated Notes that the investor may
receive on termination and liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the Preferred Securities offered
hereby.
REDEMPTION PROCEDURES
In the event that fewer than all of the Trust Securities are to be
redeemed, then the aggregate liquidation amount of the Trust Securities to be
redeemed shall be allocated 97% to the Preferred Securities and 3% to the Common
Securities.
The Preferred Securities redeemed on each redemption date shall be redeemed
at the applicable Redemption Price with the proceeds from the contemporaneous
redemption of the Series E Junior Subordinated Notes. The Redemption Price of
Preferred Securities shall be deemed payable on each redemption date only to the
extent that the Trust has funds legally and immediately available for payment of
such Redemption Price.
If the Property Trustee gives a notice of redemption in respect of
Preferred Securities (which notice will be irrevocable), then, by 2:00 P.M., New
York City time, on the redemption date, subject to the immediately preceding
paragraph, the Property Trustee will irrevocably deposit with the securities
depositary, so long as the Preferred Securities are in book-entry only form,
sufficient funds to pay the applicable Redemption Price. See "-- Book-Entry Only
Issuance -- The Depository Trust Company" below. If the Preferred Securities are
not in book-entry only form, the Property Trustee, subject to the immediately
preceding paragraph, shall irrevocably deposit with the Paying Agent funds
sufficient to pay the applicable Redemption Price and will give the Paying Agent
irrevocable instructions to pay the Redemption Price to the holders thereof upon
surrender of their Preferred Securities certificates. If notice of redemption
shall have been given and funds deposited as required, then immediately prior to
the close of business on the date of such deposit, distributions will cease to
accrue and all rights of holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the applicable Redemption Price, but without interest on
such Redemption Price. In the event that any date fixed for redemption of
Preferred Securities is not a Business
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Day, then payment of the Redemption Price payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the Redemption Price in
respect of Preferred Securities is improperly withheld or refused and not paid
either by the Trust or by Southern pursuant to the Preferred Securities
Guarantee or the Series E Junior Subordinated Notes Guarantee, distributions on
such Preferred Securities will continue to accrue at the then applicable rate,
from such redemption date originally established by the Trust for such Preferred
Securities to the date such Redemption Price is actually paid. See "-- Events of
Default" below, "Relationship Among the Preferred Securities, the Series E
Junior Subordinated Notes, the Preferred Securities Guarantee and the Series E
Junior Subordinated Notes Guarantee" herein and "Description of the Preferred
Securities Guarantees -- Events of Default" in the accompanying Prospectus.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), Southern, Capital or any of
their affiliates may, at any time and from time to time, purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will act as the initial securities depositary for the Preferred
Securities. The Preferred Securities will be issued only as fully registered
securities registered in the name of Cede & Co., DTC's nominee. One or more
fully registered global Preferred Securities certificates will be issued,
representing in the aggregate the total number of Preferred Securities, and will
be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the NYSE, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
Preferred Securities ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in
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Preferred Securities, except in the event that use of the book-entry system for
the Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities. DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the Preferred
Securities are being redeemed, DTC will reduce the amount of the interest of
each Direct Participant in the Preferred Securities in accordance with its
procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Distribution payments on the Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the account of customers registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Trust, any trustee,
Capital or Southern, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of distributions to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred
Security will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. Such laws may impair the ability to
transfer beneficial interests in a global Preferred Security.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates will be printed
and delivered to the holders of record. Additionally, Southern, Capital or the
Trust may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary) with respect to the Preferred
Securities. In that event, certificates for the Preferred Securities will be
printed and delivered to the holders of record.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Southern, Capital and the Trust believe to
be reliable, but Southern, Capital and the Trust take no responsibility for the
accuracy thereof. The Trust has no responsibility for the performance by DTC or
its Participants of their respective obligations as described herein or under
the rules and procedures governing their respective operations.
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LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Trust shall terminate on June 30,
2029, or earlier upon (i) the occurrence of a Bankruptcy Event (as defined in
the Trust Agreement) in respect of Capital, dissolution or liquidation of
Capital, or dissolution of the Trust pursuant to a judicial decree; (ii) the
delivery of written direction to the Property Trustee by Capital, as Depositor,
at any time (which direction is optional and wholly within the discretion of
Capital, as Depositor) to terminate the Trust and distribute the Series E Junior
Subordinated Notes to the holders of the Trust Securities in liquidation of the
Trust (see "-- Special Event Redemption or Distribution" above); or (iii) the
payment at maturity or redemption of all of the Series E Junior Subordinated
Notes, and the consequent payment of the Trust Securities.
If an early termination occurs as described in clause (i) or (ii) above,
the Trust shall be liquidated, and the Property Trustee shall distribute to each
holder of Preferred Securities and Common Securities a like amount of Series E
Junior Subordinated Notes, unless in the case of an event described in clause
(i) such distribution is determined by the Administrative Trustees not to be
practical, in which event such holders will be entitled to receive, out of the
assets of the Trust available for distribution to holders after satisfaction of
liabilities to creditors, an amount equal to the aggregate of the stated
liquidation preference of $25 per Trust Security plus accrued and unpaid
distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then subject to the next succeeding sentence, the
amounts payable directly by the Trust on the Trust Securities shall be paid on a
pro rata basis. The holder of the Common Securities will be entitled to receive
distributions upon any such dissolution pro rata with the holders of the
Preferred Securities, except that if a Subordinated Note Indenture Event of
Default has occurred and is continuing, the holders of Preferred Securities
shall have a preference over the holders of Common Securities.
EVENTS OF DEFAULT
Any one of the following events constitutes an "Event of Default" under the
Trust Agreement ("Trust Agreement Event of Default") with respect to the Trust
Securities issued thereunder (whatever the reason for such Event of Default, and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) the occurrence of an "Event of Default" as defined in Section 501
of the Subordinated Note Indenture ("Subordinated Note Indenture Event of
Default") (see "Description of the Junior Subordinated Notes -- Events of
Default" in the accompanying Prospectus); or
(ii) default by the Trust in the payment of any distribution when it
becomes due and payable, and the continuation of such default for a period
of 30 days; or
(iii) default by the Trust in the payment of any Redemption Price of
any Preferred Security or Common Security when it becomes due and payable;
or
(iv) default in the performance, or breach, of any covenant or
warranty of the Securities Trustees in the Trust Agreement (other than a
covenant or warranty a default in the performance of which or the breach of
which is dealt with in clause (ii) or (iii) above), and continuation of
such default or breach for a period of 60 days after there has been given,
by registered or certified mail, to such Securities Trustees by the holders
of at least 10% in liquidation amount of the outstanding Preferred
Securities a written notice specifying such default or breach and requiring
it to be remedied and stating that such notice is a "Notice of Default"
under the Trust Agreement; or
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(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Trust.
Within 90 days after the occurrence of any Trust Agreement Event of
Default, the Property Trustee shall transmit notice of any default known to the
Property Trustee to the holders of Trust Securities, Southern and Capital,
unless such Trust Agreement Event of Default shall have been cured or waived.
If a Trust Agreement Event of Default occurs and is continuing, then,
pursuant to the Trust Agreement, holders of a majority in aggregate liquidation
amount of Preferred Securities have the right to direct the exercise of any
trust or power conferred upon the Property Trustee under the Trust Agreement,
including the right to direct the Property Trustee under the Trust Agreement to
exercise the remedies available to it as holder of the Series E Junior
Subordinated Notes and the Series E Junior Subordinated Notes Guarantee. If the
Property Trustee fails to enforce its rights under the Series E Junior
Subordinated Notes and the Series E Junior Subordinated Notes Guarantee, a
holder of Preferred Securities may, to the fullest extent permitted by
applicable law, institute a legal proceeding directly against Southern and
Capital to enforce its rights under the Trust Agreement without first
instituting any legal proceeding against the Property Trustee or the Trust.
Notwithstanding the foregoing, a holder of Preferred Securities may institute a
legal proceeding directly against Southern and Capital, without first
instituting a legal proceeding against the Property Trustee or any other person
or entity, for enforcement of payment to such holder of principal of or interest
on the Series E Junior Subordinated Notes having a principal amount equal to the
aggregate stated liquidation amount of the Preferred Securities of such holder
on or after the due dates specified in the Series E Junior Subordinated Notes.
See "Relationship Among the Preferred Securities, the Series E Junior
Subordinated Notes, the Preferred Securities Guarantee and the Series E Junior
Subordinated Notes Guarantee" herein and "Description of the Preferred
Securities Guarantees -- Events of Default" in the accompanying Prospectus.
Unless a Subordinated Note Indenture Event of Default shall have occurred
and be continuing, the Securities Trustees may be removed at any time by act of
the holder of the Common Securities. If a Subordinated Note Indenture Event of
Default has occurred and is continuing, any Securities Trustee may be removed at
such time by act of the holders of a majority in liquidation amount of the
Preferred Securities, delivered to the appropriate Securities Trustee (in its
individual capacity and on behalf of the Trust). No resignation or removal of
any Securities Trustee and no appointment of a successor shall be effective
until the acceptance of appointment by the successor Trustee in accordance with
the requirements of the Trust Agreement.
If a Subordinated Note Indenture Event of Default has occurred and is
continuing, the holders of Preferred Securities shall have a preference over the
holders of Common Securities upon dissolution of the Trust as described above.
See "-- Liquidation Distribution Upon Dissolution."
VOTING RIGHTS
Except as provided below and under "Description of the Preferred Securities
Guarantees -- Amendments and Assignment" in the accompanying Prospectus and as
otherwise required by law and the Trust Agreement, the holders of the Preferred
Securities will have no voting rights.
If any proposed amendment to the Trust Agreement provides for, or the
Securities Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Preferred
Securities, whether by way of amendment to the Trust Agreement or otherwise, or
(ii) the dissolution, winding-up or termination of the Trust, other than
pursuant to the Trust Agreement, then the holders of outstanding Preferred
Securities will be entitled to vote as a class on such amendment or proposal of
the Securities Trustees, and such
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amendment or proposal shall not be effective except with the approval of the
holders of at least 66 2/3% in liquidation amount of such outstanding Preferred
Securities.
So long as any Series E Junior Subordinated Notes are held by the Property
Trustee, the Securities Trustees shall not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the Indenture Trustee
(as defined herein), or executing any trust or power conferred on the Indenture
Trustee with respect to the Series E Junior Subordinated Notes, (ii) waive any
past default which is waivable under the applicable provisions of the
Subordinated Note Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all Series E Junior Subordinated Notes shall
be due and payable, or (iv) consent to any amendment, modification or
termination of the Subordinated Note Indenture or the Series E Junior
Subordinated Notes, where such consent shall be required, or to any other
action, as the holder of the Series E Junior Subordinated Notes, under the
Subordinated Note Indenture, without, in each case, obtaining the prior approval
of the holders of at least 66 2/3% in liquidation amount of the outstanding
Preferred Securities; provided, however, that where a consent under the
Subordinated Note Indenture would require the consent of each holder of Series E
Junior Subordinated Notes affected thereby, no such consent shall be given by
the Securities Trustees without the prior consent of each holder of Preferred
Securities. The Securities Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Preferred Securities,
except pursuant to a subsequent vote of such holders. The Property Trustee shall
notify all holders of the Preferred Securities of any notice of default received
from the Indenture Trustee with respect to the Series E Junior Subordinated
Notes. In addition to obtaining the foregoing approvals of the holders of the
Preferred Securities, prior to taking any of the foregoing actions, the
Securities Trustees shall obtain an opinion of counsel experienced in such
matters to the effect that the Trust will not be classified as other than a
grantor trust for federal income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given at a
separate meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Administrative Trustees will cause a notice of
any meeting at which holders of Preferred Securities are entitled to vote to be
given to each holder of record of Preferred Securities in the manner set forth
in the Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned by Southern, Capital, the Securities Trustees or any
affiliate of Southern, Capital or any Securities Trustee, shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
CO-PROPERTY TRUSTEES AND SEPARATE PROPERTY TRUSTEE
At any time or times, for the purpose of meeting the legal requirements of
the 1939 Act or of any jurisdiction in which any part of the Trust Property (as
defined in the Trust Agreement) may at the time be located, the holder of the
Common Securities and the Property Trustee shall have power to appoint, and upon
the written request of the Property Trustee, Capital, as Depositor, shall for
such purpose join with the Property Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to appoint,
one or more persons approved by the Property Trustee either to act as
co-property trustee, jointly with the Property Trustee, of all or any part of
such Trust Property, or to act as separate trustee of any such property, in
either case with such powers as may be provided in the instrument of
appointment, and to vest in such person or persons in such capacity, any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the Trust Agreement. If Capital, as Depositor, does not join in
such appointment within 15 days after the receipt by it of a request so to do,
or in case a Subordinated Note Indenture Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make such
appointment.
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AMENDMENT OF THE TRUST AGREEMENT
The Trust Agreement may be amended from time to time by Capital and the
Securities Trustees without the consent of the holders of the Trust Securities
(i) to cure any ambiguity, correct or supplement any provision therein which may
be inconsistent with any other provision therein, or to make any other
provisions with respect to matters or questions arising under the Trust
Agreement, which shall not be inconsistent with the other provisions of the
Trust Agreement, provided that the amendment does not adversely affect in any
material respect the interests of any holder of Trust Securities, or (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such extent
as shall be necessary to ensure that the Trust will not be classified as other
than a grantor trust for federal income tax purposes. Except as provided in the
succeeding paragraph, other amendments to the Trust Agreement may be made (i)
upon approval of the holders of not less than 66 2/3% in aggregate liquidation
amount of the Trust Securities then outstanding and (ii) upon receipt by the
Securities Trustees of an opinion of counsel to the effect that such amendment
will not affect the Trust's status as a grantor trust or the Trust's exemption
from the 1940 Act.
Notwithstanding the foregoing, without the consent of each affected holder
of Trust Securities, the Trust Agreement may not be amended to (i) change the
amount or timing of any distribution on the Trust Securities or otherwise
adversely affect the amount of any distribution required to be made in respect
of the Trust Securities as of a specified date, (ii) restrict the right of a
holder of Trust Securities to institute suit for the enforcement of any such
payment on or after such date, or (iii) change the consent required to amend the
Trust Agreement.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. The Trust may at the request of Capital, with the consent of
the Administrative Trustees and without the consent of the holders of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by a
trust organized as such under the laws of any state; provided, that (i) such
successor entity either (A) expressly assumes all of the obligations of the
Trust with respect to the Trust Securities or (B) substitutes for the Preferred
Securities other securities having substantially the same terms as the Trust
Securities (the "Successor Securities") so long as the Successor Securities rank
the same as the Trust Securities rank in priority with respect to distributions
and payments upon liquidation, redemption and otherwise, (ii) Capital expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Series E Junior Subordinated
Notes, (iii) the Preferred Securities or any Successor Securities are listed, or
any Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed, (iv) such merger, consolidation, amalgamation or
replacement does not cause the Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the holders of
the Trust Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of the Trust, (vii) prior to such merger, consolidation, amalgamation or
replacement, Southern has received an opinion of counsel to the effect that (A)
such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect, and (B)
following such merger, consolidation, amalgamation or replacement, neither the
Trust nor such successor entity will be required to register as an investment
company under the 1940 Act, and (viii) Southern guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Preferred Securities Guarantee. Notwithstanding the foregoing,
the Trust shall not, except with the consent of holders of 100% in liquidation
amount of the Trust Securities, consolidate, amalgamate, merge with or into, or
be replaced by any other entity or permit any other entity to consolidate,
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amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger or replacement would cause the Trust or the successor
entity to be classified as other than a grantor trust for federal income tax
purposes.
Any corporation or other body into which any of the Property Trustee, the
Delaware Trustee or any Administrative Trustee that is not a natural person may
be merged or converted or with which it may be consolidated, or any corporation
or other body resulting from any merger, conversion or consolidation to which
any such Securities Trustee shall be a party, or any corporation or other body
succeeding to all or substantially all the corporate trust business of any such
Securities Trustee, shall be the successor of such Securities Trustee under the
Trust Agreement, provided such corporation is otherwise qualified and eligible
under the Trust Agreement.
PAYMENT AND PAYING AGENT
So long as DTC is acting as securities depositary for the Preferred
Securities, payments in respect of the Preferred Securities in global form shall
be made to DTC, which is to credit the relevant accounts at DTC on the
applicable Distribution Dates. If the Preferred Securities are not held by DTC,
such payments shall be made by check mailed to the address of the holder
entitled thereto as such address shall appear on the Securities Register (as
such term is defined in the Trust Agreement). The Paying Agent shall initially
be the Property Trustee. The Paying Agent shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Administrative Trustees and Capital.
In such event, the Administrative Trustees shall appoint a successor to act as
Paying Agent.
REGISTRAR AND TRANSFER AGENT
It is anticipated that the Property Trustee, or one of its affiliates, will
act as registrar and transfer agent (the "Securities Registrar") for the
Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment in respect of any tax or
other governmental charges which may be imposed in relation to it.
The Securities Registrar will not be required to register or cause to be
registered any transfer of Preferred Securities after they have been called for
redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a Trust Agreement Event of
Default with respect to the Trust Securities, undertakes to perform only such
duties as are specifically set forth in the Trust Agreement and, after default,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provisions, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Trust Agreement at the request of any holder of Preferred Securities, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby.
Bankers Trust Company, the Property Trustee, also serves as Indenture
Trustee and Guarantee Trustee. Southern and certain of its subsidiaries maintain
deposit accounts and banking relationships with Bankers Trust Company. Bankers
Trust Company serves as trustee under other indentures pursuant to which
securities of subsidiaries of Southern are outstanding.
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GOVERNING LAW
The Trust Agreement and the Trust Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware;
provided that the immunities and standard of care of the Property Trustee shall
be governed by New York law.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to operate the
Trust so that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or taxed as other than a grantor
trust for federal income tax purposes and so that the Series E Junior
Subordinated Notes will be treated as indebtedness of Capital for federal income
tax purposes. In this connection, the Administrative Trustees and Capital are
authorized to take any action, not inconsistent with applicable law, the Trust's
certificate of trust or the Trust Agreement, that the Administrative Trustees
and Capital determine in their discretion to be necessary or desirable for such
purposes, as long as such action does not materially and adversely affect the
interests of the holders of the Preferred Securities.
DESCRIPTION OF THE SERIES E JUNIOR SUBORDINATED NOTES
Set forth below is a description of the specific terms of the Series E
Junior Subordinated Notes. This description supplements, and should be read
together with, the description of the general terms and provisions of the Junior
Subordinated Notes set forth in the accompanying Prospectus under the caption
"Description of the Junior Subordinated Notes." The following description does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the description in the accompanying Prospectus and the
Subordinated Note Indenture.
GENERAL
The Series E Junior Subordinated Notes will be issued as a series of junior
subordinated notes under the Subordinated Note Indenture. The Series E Junior
Subordinated Notes will be limited in aggregate principal amount to
$154,639,200, such amount being the approximate aggregate liquidation amount of
the Trust Securities.
The entire principal amount of the Series E Junior Subordinated Notes will
mature and become due and payable, together with any accrued and unpaid interest
thereon, including Additional Interest (see "Description of the Junior
Subordinated Notes -- Additional Interest" in the accompanying Prospectus), if
any, on December 31, 2028. The Series E Junior Subordinated Notes are not
subject to any sinking fund provision.
The terms of the Series E Junior Subordinated Notes correspond to those of
the Preferred Securities, as described herein.
OPTIONAL REDEMPTION
Capital shall have the right to redeem the Series E Junior Subordinated
Notes, in whole or in part, without premium, from time to time, on or after
December 23, 2003, or at any time in whole upon the occurrence of a Special
Event as described under "Description of the Preferred Securities -- Special
Event Redemption or Distribution" upon not less than 30 nor more than 60 days'
notice, at a Redemption Price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest, including Additional Interest, if
any, to the Redemption Date. If a partial redemption of the Series E Junior
Subordinated Notes would result in the delisting of the Preferred Securities,
Capital may only redeem the Series E Junior Subordinated Notes in whole.
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INTEREST
Each Series E Junior Subordinated Note shall bear interest at the
Securities Rate from the Issue Date, payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year commencing March 31, 1999 to
the person in whose name such Series E Junior Subordinated Note is registered at
the close of business on the fifteenth calendar day prior to such payment date.
The amount of interest payable will be computed on the basis of a 360-day year
of twelve 30-day months. In the event that any date on which interest is payable
on the Series E Junior Subordinated Notes is not a Business Day, then payment of
the interest payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Capital shall have the right at any time, and from time to time, to defer
payments of interest on the Series E Junior Subordinated Notes by extending the
interest payment period for up to 20 consecutive quarters, but not beyond the
stated maturity date. At the end of an Extension Period, Capital shall pay all
interest then accrued and unpaid (including any Additional Interest) (together
with interest thereon at the Securities Rate, compounded quarterly, to the
extent permitted by applicable law); provided, that if Capital shall have given
notice of its election to select an Extension Period, subject to the exceptions
described under "-- Description of the Junior Subordinated Notes -- Certain
Covenants" in the accompanying Prospectus, (a) neither Southern nor Capital
shall declare or pay any dividend or distribution on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
or make any guarantee payments with respect to the foregoing, and (b) neither
Southern nor Capital shall make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities issued by it which
rank pari passu with or junior to the Series E Junior Subordinated Notes or the
Series E Junior Subordinated Notes Guarantee. Prior to the termination of any
Extension Period, Capital may further defer payments of interest by extending
the interest payment period, provided that such Extension Period, together with
all such previous and further extensions thereof, may not exceed 20 consecutive
quarters. Upon the termination of any Extension Period and the payment of all
amounts then due, Capital may select a new Extension Period, subject to the
above requirements. Capital has no present intention of exercising its rights to
defer payments of interest by extending the interest payment period on the
Series E Junior Subordinated Notes. See "Certain Federal Income Tax
Considerations -- Original Issue Discount."
Capital shall give the holder or holders of the Series E Junior
Subordinated Notes and the Indenture Trustee notice of its selection or
extension of an Extension Period at least one Business Day prior to the earlier
of (i) the record date relating to the interest payment date on which the
Extension Period is to commence or relating to the interest payment date on
which an Extension Period that is being extended would otherwise terminate or
(ii) the date Capital or the Trust is required to give notice to any applicable
self-regulatory organization of the record date or the date such distributions
are payable.
SERIES E JUNIOR SUBORDINATED NOTES GUARANTEE
Pursuant to the Subordinated Note Indenture, Southern will irrevocably and
unconditionally guarantee the Series E Junior Subordinated Notes as described
under "Description of the Series E Junior Subordinated Notes Guarantee."
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BOOK-ENTRY AND ISSUANCE
If distributed to holders of Trust Securities in connection with the
voluntary or involuntary dissolution, winding-up or liquidation of the Trust,
the Series E Junior Subordinated Notes are expected to be issued in the form of
one or more global certificates registered in the name of the securities
depositary or its nominee. In such event, the procedures applicable to the
transfer and payment of the Series E Junior Subordinated Notes are expected to
be substantially similar to those described with respect to the Preferred
Securities in "Description of the Preferred Securities -- Book-Entry Only
Issuance -- The Depository Trust Company."
DESCRIPTION OF THE SERIES E JUNIOR SUBORDINATED NOTES GUARANTEE
Pursuant to the Subordinated Note Indenture, Southern will irrevocably and
unconditionally guarantee the due and punctual payment of principal, premium, if
any, and interest on the Series E Junior Subordinated Notes when and as the same
shall become due and payable, whether at maturity, upon redemption or otherwise.
The Series E Junior Subordinated Notes Guarantee will constitute an unsecured
obligation of Southern and will rank subordinate and junior to all Senior
Indebtedness that may be issued by Southern. As of September 30, 1998, Senior
Indebtedness of Southern aggregated approximately $618,000,000. Since Southern
is a holding company, the right of Southern and, hence, the right of creditors
of Southern (including the holders of the Series E Junior Subordinated Notes) to
participate in any distribution of the assets of any subsidiary of Southern,
whether upon liquidation, reorganization or otherwise, is subject to prior
claims of creditors of each such subsidiary.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE SERIES E JUNIOR
SUBORDINATED NOTES, THE PREFERRED SECURITIES GUARANTEE
AND THE SERIES E JUNIOR SUBORDINATED NOTES GUARANTEE
As long as payments of interest and other payments are made when due on the
Series E Junior Subordinated Notes, such payments will be sufficient to cover
distributions and payments due on the Trust Securities primarily because (i) the
aggregate principal amount of Series E Junior Subordinated Notes will be equal
to the sum of the aggregate stated liquidation amount of the Trust Securities;
(ii) the interest rate and interest and other payment dates on the Series E
Junior Subordinated Notes will match the distribution rate and distribution and
other payment dates for the Preferred Securities; (iii) Southern shall pay for
all costs and expenses of the Trust pursuant to the Agreement as to Expenses and
Liabilities; and (iv) the Trust Agreement provides that the Securities Trustees
shall not cause or permit the Trust to, among other things, engage in any
activity that is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are legally and
immediately available) and other payments due on the Preferred Securities (to
the extent funds therefor are legally and immediately available) are guaranteed
by Southern as and to the extent set forth under "Description of the Preferred
Securities Guarantees" in the accompanying Prospectus. If Capital does not make
interest payments on the Series E Junior Subordinated Notes, it is not expected
that the Trust will have sufficient funds to pay distributions on the Preferred
Securities. The Preferred Securities Guarantee is a guarantee from the time of
its issuance, but does not apply to any payment of distributions unless and
until the Trust has sufficient funds legally and immediately available for the
payment of such distributions.
If Capital fails to make interest or other payments on the Series E Junior
Subordinated Notes when due (taking into account any Extension Period), the
Trust Agreement provides a mechanism whereby the holders of the Preferred
Securities may appoint a substitute Property Trustee. Such holders may also
direct the Property Trustee to enforce its rights under the Series E Junior
Subordinated Notes and the Series E Junior Subordinated Notes Guarantee,
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including proceeding directly against Capital to enforce the Series E Junior
Subordinated Notes and Southern to enforce the Series E Junior Subordinated
Notes Guarantee. If the Property Trustee fails to enforce its rights under the
Series E Junior Subordinated Notes or the Series E Junior Subordinated Notes
Guarantee, to the fullest extent permitted by applicable law, any holder of
Preferred Securities may institute a legal proceeding directly against Capital
to enforce the Property Trustee's rights under the Series E Junior Subordinated
Notes and against Southern to enforce the holder's rights under the Series E
Junior Subordinated Notes Guarantee without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, a holder of Preferred Securities may institute a
legal proceeding directly against Southern and Capital, without first
instituting a legal proceeding against the Property Trustee or any other person
or entity, for enforcement of payment to such holder of principal of or interest
on the Series E Junior Subordinated Notes having a principal amount equal to the
aggregate stated liquidation amount of the Preferred Securities of such holder
on or after the due dates specified in the Series E Junior Subordinated Notes.
If Southern fails to make payments under the Preferred Securities
Guarantee, the Preferred Securities Guarantee provides a mechanism whereby the
holders of the Preferred Securities may direct the Guarantee Trustee to enforce
its rights thereunder. In addition, any holder of Preferred Securities may
institute a legal proceeding directly against Southern to enforce the Guarantee
Trustee's rights under the Preferred Securities Guarantee without first
instituting a legal proceeding against the Guarantee Trustee or any other person
or entity.
The Series E Junior Subordinated Notes Guarantee, the Preferred Securities
Guarantee, the Subordinated Note Indenture, the Series E Junior Subordinated
Notes, the Trust Agreement and the Agreement as to Expenses and Liabilities, as
described above, constitute a full and unconditional guarantee by Southern and
Capital of the payments due on the Preferred Securities.
Upon any voluntary or involuntary dissolution, winding-up or termination of
the Trust, unless the Series E Junior Subordinated Notes are distributed in
connection therewith, the holders of Preferred Securities will be entitled to
receive, out of assets legally available for distribution to holders, the
Liquidation Distribution in cash. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Dissolution." Upon any voluntary or
involuntary liquidation or bankruptcy of Capital, the Property Trustee, as
holder of the Series E Junior Subordinated Notes, would be a subordinated
creditor of Capital, subordinated in right of payment to all Senior
Indebtedness, but entitled to receive payment in full of principal and interest
before any stockholders of Capital receive payments or distributions. Because
Southern is guarantor under the Preferred Securities Guarantee and the Series E
Junior Subordinated Notes Guarantee and has agreed to pay for all costs,
expenses and liabilities of the Trust (other than the Trust's obligations to
holders of the Preferred Securities) pursuant to the Agreement as to Expenses
and Liabilities, the positions of a holder of Preferred Securities and a holder
of Series E Junior Subordinated Notes relative to other creditors and to
stockholders of Southern in the event of liquidation or bankruptcy of Southern
would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Subordinated Note Indenture.
However, in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Series E Junior Subordinated
Notes provide that no payments may be made in respect of the Series E Junior
Subordinated Notes until such Senior Indebtedness has been paid in full or any
payment default thereunder has been cured or waived. Failure to make required
payments on the Series E Junior Subordinated Notes would constitute an Event of
Default under the Subordinated Note Indenture except that failure to make
interest payments on the Series E Junior Subordinated Notes will not be an Event
of Default during an Extension Period; provided, however, that any Extension
Period may not exceed 20 consecutive quarters or extend beyond the maturity of
the Series E Junior Subordinated Notes.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal income
tax consequences of the ownership and disposition of the Preferred Securities
and constitutes the opinion of Troutman Sanders LLP, counsel to Southern,
Capital and the Trust, insofar as it relates to matters of law and legal
conclusions. This summary deals only with Preferred Securities held as capital
assets within the meaning of Section 1221 of the Internal Revenue Code of 1986,
as amended to the date hereof (the "Code"), by Holders (as defined herein).
Moreover, it does not discuss all of the tax consequences that may be relevant
to a Holder in light of his particular circumstances or to Holders subject to
special rules, such as certain financial institutions, insurance companies,
dealers in securities, individual retirement and certain tax deferred accounts,
and persons who engage in a straddle or a hedge relating to a Preferred
Security. Prospective investors should consult their own tax advisors with
regard to the application of the tax considerations discussed below to their
particular situations as well as the application of any state, local or other
tax laws. This summary is based on laws, existing and proposed regulations, and
applicable judicial and administrative determinations, all of which are subject
to change at any time, and any such changes may be retroactively applied in a
manner that could adversely affect Holders. As used herein, the term "Holder"
means a beneficial owner of a Preferred Security that for United States federal
income tax purposes is (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, (iii) an
estate the income of which is subject to United States federal income taxation
regardless of its source or (iv) a trust if (a) a court within the United States
is able to exercise primary supervision over the administration of the trust and
(b) one or more U.S. persons have the authority to control all substantial
decisions of the trust. Thus, the following summary does not address any tax
consequences that apply specifically to nonresident aliens or foreign entities.
TREATMENT OF THE TRUST AND PREFERRED SECURITIES FOR FEDERAL INCOME TAX PURPOSES
The Trust will be treated as a "grantor trust" and not as an association
taxable as a corporation for federal income tax purposes. Thus, for federal
income tax purposes, each Holder will be treated as the beneficial owner of a
pro rata undivided interest in the Series E Junior Subordinated Notes and,
consequently, will be required to include in income the Holder's pro rata share
of the entire income from the Series E Junior Subordinated Notes. Each Holder
generally will determine its net income or loss with respect to the Trust in
accordance with its own method of accounting, although income arising from OID,
if any, must be taken into account under the accrual method of accounting even
if the Holder otherwise would use the cash receipts and disbursements method.
PAYMENTS OF INTEREST
Except as set forth below, stated interest on a Series E Junior
Subordinated Note will generally be taxable to a Holder as ordinary income at
the time it is paid or accrued in accordance with the Holder's own method of
accounting.
ORIGINAL ISSUE DISCOUNT
Under applicable income tax regulations, Southern and Capital believe that
the Series E Junior Subordinated Notes will not be treated as issued with OID.
It should be noted that these regulations have not yet been addressed in any
rulings or other interpretations by the IRS. Accordingly, it is possible that
the IRS could take a position contrary to the interpretations described herein.
The terms of the Series E Junior Subordinated Notes permit Capital to defer
the payment of interest on the Series E Junior Subordinated Notes at any time
and from time to time by
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extending the interest payment period for up to 20 consecutive quarters with
respect to each Extension Period; provided, however, that no Extension Period
may extend beyond the stated maturity date of the Series E Junior Subordinated
Notes. Should Capital exercise this option to defer payments of interest, the
Series E Junior Subordinated Notes would at that time be treated as issued with
OID and all the stated interest payments on the Series E Junior Subordinated
Notes would thereafter be treated as OID for as long as they remained
outstanding. As a result, all Holders would, in effect, be required to accrue
interest income even if such Holders are on a cash method of accounting.
Consequently, in the event that the payment of interest is deferred, a Holder
could be required to include OID in income on an economic accrual basis,
notwithstanding that Capital will not make any interest payments during such
period on the Series E Junior Subordinated Notes.
MARKET DISCOUNT
A purchaser of a Preferred Security at a discount from the liquidation
amount at maturity of such purchaser's pro rata share of the Series E Junior
Subordinated Notes acquires such Preferred Security with "market discount."
However, market discount with respect to a Preferred Security will be considered
to be zero if it is de minimis. Market discount will be de minimis with respect
to a Preferred Security if it is less than the product of (i) 0.25% of the
adjusted issue price of the purchaser's pro rata share of the Series E Junior
Subordinated Notes multiplied by (ii) the number of complete years to maturity
of such Series E Junior Subordinated Notes after the date of purchase. The
purchaser of a Preferred Security with more than a de minimis amount of market
discount generally will be required to treat any gain on the sale, exchange,
redemption or other disposition of all or part of the Preferred Securities (or
related Series E Junior Subordinated Notes) as ordinary income to the extent of
accrued (but not previously taxed) market discount. Market discount generally
will accrue ratably during the period from the date of purchase of such
Preferred Security to the maturity date of the Series E Junior Subordinated
Notes, unless the Holder irrevocably elects to accrue such market discount on
the basis of a constant interest rate.
A Holder who has acquired a Preferred Security at a market discount
generally will be required to defer any deductions of interest expense
attributable to any indebtedness incurred or continued to purchase or carry the
Preferred Security, to the extent such interest expense exceeds the related
interest income. Any such deferred interest expense generally will be allowable
as a deduction not later than the year in which the related market discount
income is recognized. As an alternative to the inclusion of market discount in
income upon disposition of all or a portion of a Preferred Security or the
related Series E Junior Subordinated Notes (including redemptions thereof), a
Holder may make an election (which may not be revoked without the IRS's consent)
to include market discount in income as it accrues on all market discount
instruments acquired by the Holder during or after the taxable year for which
the election is made. In that case, the preceding deferral rule for interest
expense will not apply.
In lieu of the foregoing treatment of market discount and interest expense,
a Holder may elect to treat any market discount (including a de minimis amount)
as OID and accrue such discount on a constant-yield basis in the same manner as
the Holder accrues OID.
SALE OF PREFERRED SECURITIES
Upon the sale, retirement (including redemption) or other taxable
disposition of all or part of a Preferred Security, a Holder thereof will
recognize gain or loss equal to the difference between the amount realized on
such sale, retirement or other disposition and such Holder's adjusted tax basis
in the Preferred Security or part thereof. If the Holder disposes of a Preferred
Security prior to the occurrence of an Extension Period, any portion of the
amount received that is attributable to accrued interest will be treated as
interest income to the Holder and will not be treated as part of the amount
realized for purposes of determining gain or loss on the disposition
S-28
<PAGE>
of the Preferred Security. Any recognized gain or loss will be capital gain or
loss, except to the extent of any accrued market discount (see "Market Discount"
above), and such capital gain or loss will be long-term if the holding period
for the Preferred Security is more than one year at the time of sale, retirement
or other disposition. A Holder's adjusted tax basis in a Preferred Security
acquired by purchase will equal the cost of such Preferred Security to the
Holder, increased by the amount of any related accrued OID and market discount
included in taxable income by the Holder and reduced by any prior payments on
the Series E Junior Subordinated Notes which are not qualified stated interest.
The redemption of only part of a Preferred Security will require an allocation
of the Holder's adjusted tax basis in his pro rata share of the related Series E
Junior Subordinated Notes between the portion of the Series E Junior
Subordinated Notes redeemed and retained by the Holder in order to determine
gain or loss.
RECEIPT OF SERIES E JUNIOR SUBORDINATED NOTES UPON LIQUIDATION OF THE TRUST
As described under "Description of the Preferred Securities -- Special
Event Redemption or Distribution," Series E Junior Subordinated Notes may be
distributed to Holders in exchange for the Preferred Securities and in
liquidation of the Trust. Such a distribution would be treated as a non-taxable
event to each Holder and each Holder would receive an aggregate tax basis in the
Holder's Series E Junior Subordinated Notes equal to the Holder's aggregate tax
basis in its Preferred Securities. A Holder's holding period with respect to the
Series E Junior Subordinated Notes so received in liquidation of the Trust would
include the period for which the Preferred Securities were held by such Holder.
INFORMATION REPORTING TO HOLDERS
Income on the Preferred Securities will be reported to Holders on Form
1099, which form should be mailed to Holders of Preferred Securities by January
31 following each calendar year.
BACKUP WITHHOLDING
A Holder may be subject to "backup withholding" under certain
circumstances. Backup withholding applies to a Holder if the Holder, among other
things, (i) fails to furnish his social security number or other taxpayer
identification number ("TIN") to the payor responsible for backup withholding
(for example, the Holder's securities broker), (ii) furnishes such payor an
incorrect TIN, (iii) fails to provide such payor with a certified statement,
signed under penalties of perjury, that the TIN provided to the payor is correct
and that the Holder is not subject to backup withholding, or (iv) fails to
report properly interest and dividends on his tax return. Backup withholding,
however, does not apply to payments made to certain exempt recipients, such as
corporations and tax-exempt organizations. The backup withholding rate is 31% of
"reportable payments," which generally will include distributions of interest
and principal payments on the Series E Junior Subordinated Notes.
THE FEDERAL INCOME TAX DISCUSSIONS SET FORTH ABOVE MAY NOT BE APPLICABLE TO
A HOLDER, DEPENDING UPON A HOLDER'S PARTICULAR SITUATION, AND THEREFORE EACH
HOLDER SHOULD CONSULT HIS TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF
THE OWNERSHIP AND DISPOSITION OF PREFERRED SECURITIES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAW.
S-29
<PAGE>
UNDERWRITING
Southern, Capital, the Trust and the underwriters for the offering named
below (the "Underwriters") have entered into an underwriting agreement (the
"Underwriting Agreement") with respect to the Preferred Securities. Subject to
certain conditions, each Underwriter has severally agreed to purchase the number
of Preferred Securities indicated in the following table. The Underwriters are
committed to take and pay for all the Preferred Securities, if any are taken.
Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, CIBC Oppenheimer Corp.,
Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Salomon Smith Barney Inc. are the representatives of the Underwriters.
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITERS SECURITIES
------------ ----------
<S> <C>
Goldman, Sachs & Co. ....................................... 720,000
Morgan Stanley & Co. Incorporated........................... 720,000
CIBC Oppenheimer Corp....................................... 720,000
Lehman Brothers Inc. ....................................... 720,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 720,000
Salomon Smith Barney Inc.................................... 720,000
Robert W. Baird & Co. Incorporated.......................... 70,000
Bear, Stearns & Co. Inc. ................................... 70,000
J.C. Bradford & Co. ........................................ 70,000
A.G. Edwards & Sons, Inc. .................................. 70,000
EVEREN Securities, Inc. .................................... 70,000
Interstate/Johnson Lane Corporation......................... 70,000
Legg Mason Wood Walker, Incorporated........................ 70,000
Morgan Keegan & Company, Inc. .............................. 70,000
Prudential Securities Incorporated.......................... 70,000
Raymond James & Associates, Inc. ........................... 70,000
The Robinson-Humphrey Company, LLC.......................... 70,000
Roney Capital Markets....................................... 70,000
A division of First Chicago Capital Markets, Inc.
Wheat First Securities, Inc. ............................... 70,000
Advest, Inc. ............................................... 35,000
Craigie Incorporated........................................ 35,000
Crowell, Weedon & Co. ...................................... 35,000
Dain Rauscher Incorporated.................................. 35,000
Fahnestock & Co. Inc. ...................................... 35,000
Fidelity Capital Markets,................................... 35,000
A division of National Financial Services Corporation
Fleet Securities, Inc. ..................................... 35,000
Gruntal & Co., L.L.C. ...................................... 35,000
J.J.B. Hilliard, W.L. Lyons, Inc. .......................... 35,000
Janney Montgomery Scott Inc. ............................... 35,000
McDonald Investments Inc., A Keycorp Company ............... 35,000
McGinn, Smith & Co., Inc. .................................. 35,000
Olde Discount Corporation................................... 35,000
Piper Jaffray Inc. ......................................... 35,000
Charles Schwab & Co., Inc. ................................. 35,000
Muriel Siebert & Co., Inc. ................................. 35,000
Stephens Inc. .............................................. 35,000
Sutro & Co. Incorporated.................................... 35,000
TD Securities (USA) Inc. ................................... 35,000
Trilon International Inc. .................................. 35,000
</TABLE>
S-30
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITERS SECURITIES
------------ ----------
<S> <C>
Tucker Anthony Incorporated................................. 35,000
Utendahl Capital Partners, L.P. ............................ 35,000
---------
Total............................................. 6,000,000
=========
</TABLE>
Because the Trust will invest the proceeds from the sale of the Preferred
Securities in the Series E Junior Subordinated Notes issued by Capital, the
Underwriting Agreement provides that Southern will pay an underwriting
commission of $0.7875 per Preferred Security (or $4,725,000 for all Preferred
Securities) to the Underwriters, as compensation; provided that, for sales of
10,000 or more Preferred Securities to a single purchaser, the commission will
be $0.50 per Preferred Security.
The Underwriters propose to offer the Preferred Securities to the public
initially at the initial public offering price set forth on the cover page of
this Prospectus Supplement. Any Preferred Securities sold by the Underwriters to
securities dealers may be sold at a discount of up to $0.50 per Preferred
Security from the initial public offering price. Any of those securities dealers
may resell the Preferred Securities they purchase from the Underwriters to
certain other brokers and dealers at a discount of up to $0.40 per Preferred
Security from the initial public offering price. If all the Preferred Securities
are not sold at the initial public offering price, the representatives may
change the offering price and other selling terms.
Southern, Capital and the Trust have agreed with the Underwriters, during
the period of 15 days from the date of the Underwriting Agreement, not to sell,
offer to sell, grant any option for the sale of, or otherwise dispose of any
preferred securities, any security convertible into or exchangeable into or
exercisable for preferred securities or junior subordinated notes or any debt
securities substantially similar to the Series E Junior Subordinated Notes or
equity securities substantially similar to the Preferred Securities (except for
the Series E Junior Subordinated Notes and the Preferred Securities issued
pursuant to the Underwriting Agreement), without the prior written consent of
Goldman, Sachs & Co.
Prior to this offering, there has been no public market for the Preferred
Securities. Application has been made to list the Preferred Securities on the
NYSE. If approved, trading in the Preferred Securities on the NYSE is expected
to begin within the 30-day period after the initial delivery of the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities, the Underwriters will undertake to sell lots of 100 or more to a
minimum of 400 beneficial owners.
The representatives of the Underwriters have advised Southern, Capital and
the Trust that they intend to make a market in the Preferred Securities.
However, the representatives are not obligated to do so and may discontinue
market making at any time without notice. No assurance is given as to the
liquidity of the trading market for the Preferred Securities.
In connection with the offering, the Underwriters may purchase and sell the
Preferred Securities in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the Underwriters of a greater
amount of Preferred Securities than they are required to purchase in the
offering. Stabilizing transactions consist of certain bids or purchases made for
the purpose of preventing or retarding a decline in the market price of the
Preferred Securities while the offering is in progress.
The Underwriters also may impose a penalty bid. This may occur when a
particular Underwriter repays to the Underwriters a portion of the underwriting
commissions because the Underwriters have repurchased Preferred Securities sold
by or for the account of that Underwriter in stabilizing or short covering
transactions.
S-31
<PAGE>
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Preferred Securities. As a result, the price of
the Preferred Securities may be higher than the price that would otherwise
prevail in the open market. If these activities are commenced, they may be
discontinued at any time. These transactions may be effected on the NYSE, in the
over-the-counter market or otherwise.
Southern estimates that its expenses in connection with this offering,
excluding underwriting discounts and commissions, will be approximately
$300,000.
Southern, Capital and the Trust have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. The Underwriters will reimburse Southern for
certain of its expenses.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to Southern and its affiliates, for which such Underwriters or their
affiliates have received or will receive customary fees and commissions.
LEGAL OPINIONS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of Capital and the Trust by Richards,
Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to Capital
and the Trust. The validity of the Series E Junior Subordinated Notes, the
Preferred Securities Guarantee and the Series E Junior Subordinated Notes
Guarantee and certain matters relating thereto will be passed upon on behalf of
Southern and Capital by Troutman Sanders LLP, Atlanta, Georgia. Troutman Sanders
LLP will also pass upon certain matters relating to United States federal income
tax considerations. Certain legal matters will be passed upon for the
Underwriters by Dewey Ballantine LLP, New York, New York.
S-32
PROSPECTUS
$1,300,000,000
THE SOUTHERN COMPANY
COMMON STOCK
THE SOUTHERN COMPANY
SOUTHERN COMPANY CAPITAL FUNDING, INC.
SENIOR NOTES
JUNIOR SUBORDINATED NOTES
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
---------------------------
SOUTHERN COMPANY CAPITAL TRUST V
SOUTHERN COMPANY CAPITAL TRUST VI
SOUTHERN COMPANY CAPITAL TRUST VII
TRUST PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
THE SOUTHERN COMPANY
---------------------------
The Southern Company, a Delaware corporation ("Southern"), may offer, from
time to time, shares of its common stock, par value $5 per share (the "Common
Stock"). Southern Company Capital Funding, Inc., a Delaware corporation and a
wholly-owned subsidiary of Southern ("Capital"), may offer, from time to time,
(i) its senior notes (the "Senior Notes") in one or more series, (ii) its junior
subordinated notes (the "Junior Subordinated Notes" and, together with the
Senior Notes, the "Debt Securities") in one or more series, (iii) Stock Purchase
Contracts (the "Stock Purchase Contracts") to purchase shares of Common Stock or
(iv) Stock Purchase Units, each representing ownership of a Stock Purchase
Contract and Debt Securities, Preferred Securities (as defined herein) or debt
obligations of third parties, including U.S. Treasury securities, securing the
holder's obligation to purchase Common Stock under the Stock Purchase Contracts
(the "Stock Purchase Units"). The Senior Notes will be unsecured obligations of
Capital, will rank pari passu (equal in priority) with all other unsecured and
unsubordinated debt of Capital and the due and punctual payment thereof will be
unconditionally guaranteed by Southern pursuant to the Senior Notes Guarantees
(the "Senior Notes Guarantees"). The Junior Subordinated Notes will be unsecured
obligations of Capital and will be subordinate and junior in right of payment to
Senior Indebtedness (as defined herein) of Capital and the due and punctual
payment thereof will be unconditionally guaranteed by Southern pursuant to the
Junior Subordinated Notes Guarantees (the "Junior Subordinated Notes
Guarantees"). The due and punctual payment of the Stock Purchase Contracts and
Stock Purchase Units will be unconditionally guaranteed by Southern pursuant to
the Stock Purchase Contracts Guarantees (the "Stock Purchase Contracts
Guarantees") and the Stock Purchase Units Guarantees (the "Stock Purchase Units
Guarantees" and, together with the Stock Purchase Contracts Guarantees, the
"Stock Purchase Guarantees"), respectively.
Southern Company Capital Trust V, Southern Company Capital Trust VI and
Southern Company Capital Trust VII, each a statutory business trust created
under the laws of the State of Delaware (individually, a "Trust" and
collectively, the "Trusts"), may offer, from time to time, trust preferred
securities (collectively, the "Preferred Securities") representing preferred
undivided beneficial interests in the assets of the respective Trusts. Capital
will own all the common securities (the "Common Securities" and, together with
the Preferred Securities, the "Trust Securities") representing common undivided
beneficial interests in the assets of the respective Trusts. The payment of
periodic cash distributions on the Preferred Securities of each Trust and
payments on liquidation or redemption with respect to such Preferred Securities,
in each case to the extent such Trust has funds legally and immediately
available therefor, will be guaranteed by Southern as described herein
(individually, a "Preferred Securities Guarantee" and collectively, the
"Preferred Securities Guarantees"). See "Description of the Preferred Securities
Guarantees." Southern's obligations under each Preferred Securities Guarantee
will be subordinate and junior in right of payment to all of its other
liabilities and will rank pari passu with the most senior preferred stock of
Southern. Concurrently with the issuance by a Trust of its Preferred Securities,
such Trust will invest the proceeds thereof and of Capital's purchase of the
Common Securities of such Trust in a related series of Junior Subordinated Notes
of Capital with terms corresponding to the terms of such Trust's Preferred
Securities. Junior Subordinated Notes may subsequently be distributed pro rata
to holders of the Trust Securities of a Trust in connection with the termination
of such Trust upon the occurrence of certain events as may be described in an
accompanying Prospectus Supplement.
As described herein, Southern and Capital will, through each Junior
Subordinated Notes Guarantee, each Preferred Securities Guarantee, the
Subordinated Note Indenture, the Junior Subordinated Notes of the related
series, the related Trust Agreement and the related Agreement as to Expenses and
Liabilities, fully and unconditionally guarantee all of each Trust's obligations
with respect to its Preferred Securities.
The Common Stock, the Preferred Securities, the Debt Securities, the Stock
Purchase Contracts and the Stock Purchase Units are referred to herein
collectively as the "Securities." The Preferred Securities Guarantees, the
Senior Notes Guarantees, the Junior Subordinated Notes Guarantees and the Stock
Purchase Guarantees are referred to herein collectively as the "Guarantees."
Specific terms of the Securities in respect of which this Prospectus is being
delivered will be set forth in an accompanying Prospectus Supplement with
respect to such Securities, which will describe, without limitation and where
applicable, the following: (a) in the case of Common Stock, the number of
shares, purchase price and any other specific terms of the offering, (b) in the
case of Debt Securities, the specific designation, aggregate principal amount,
denominations, maturity, interest payment dates, interest rate (or the method of
determining such rate), any redemption, exchange or sinking fund provisions, and
any other specific terms of the offering, (c) in the case of Preferred
Securities, the specific designation, number of Preferred Securities,
liquidation amount per security, distribution rate (or the method of determining
such rate), dates on which distributions will be payable, voting rights, any
redemption, exchange or sinking fund provisions, and any other rights,
preferences, privileges, limitations and restrictions thereof, (d) in the case
of Stock Purchase Contracts, the designation and number of shares of Common
Stock issuable thereunder, the purchase price of the Common Stock, the date or
dates on which the Common Stock is required to be purchased by the holders of
the Stock Purchase Contracts, any periodic payments required to be made by
Southern to the holders of the Stock Purchase Contracts or vice versa, and the
terms of the offering and sale thereof, and (e) in the case of Stock Purchase
Units, the specific terms of the Stock Purchase Contracts and any Preferred
Securities, Debt Securities or debt obligations of third parties securing the
holder's obligation to purchase the Common Stock under the Stock Purchase
Contracts, and the terms of the offering and sale thereof.
The Securities may be offered in amounts, at prices and on terms to be
determined at the time of offering; provided, however, that the aggregate
initial public offering price of all Securities shall not exceed $1,300,000,000.
Southern's Common Stock is listed on the New York Stock Exchange under the
symbol "SO." Any Prospectus Supplement will also contain information, where
applicable, as to any other listing on a securities exchange of the Securities
covered by the Prospectus Supplement.
The Prospectus Supplement relating to any series of Securities will contain
information concerning certain United States federal income tax considerations,
if applicable to such Securities.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------------
The Securities may be sold directly, through agents, underwriters or dealers
as designated from time to time, or through a combination of such methods. See
"Plan of Distribution." If agents or any underwriters or dealers are involved in
the sale of Securities in respect of which this Prospectus is being delivered,
the names of such agents, underwriters or dealers and any applicable commissions
or discounts will be set forth in or may be calculated from the Prospectus
Supplement with respect to such Securities.
---------------------------
December 17, 1998
<PAGE>
AVAILABLE INFORMATION
Southern, Capital and the Trusts have filed with the Securities and
Exchange Commission (the "Commission") a combined registration statement on Form
S-3 (the "Registration Statement," which term encompasses any amendments thereof
and exhibits thereto) under the Securities Act of 1933, as amended (the "1933
Act"). As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, to which reference is hereby
made.
Southern is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York
10048 and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material may also be obtained at prescribed rates
by writing to the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants including Southern that file electronically at
http://www.sec.gov. In addition, reports and other material concerning Southern
may be inspected at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005, on which Exchange the common stock of Southern is
listed.
No separate financial statements of Capital or any Trust have been included
herein. Southern, Capital and the Trusts do not consider that such financial
statements would be material to holders of the Securities because each of
Capital and each Trust is a special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than, in the case of Capital, obtaining financing for
Southern and direct and indirect subsidiaries of Southern other than the
operating affiliates (as defined herein) and, in the case of each Trust, holding
as trust assets Junior Subordinated Notes, issuing Trust Securities and engaging
in other activities as are necessary, advisable or incidental thereto. See
"Southern Company Capital Funding, Inc.," "Description of the Preferred
Securities," "Description of the Junior Subordinated Notes," "Description of the
Junior Subordinated Notes Guarantees" and "Description of the Preferred
Securities Guarantees." In addition, Southern does not expect that Capital or
any Trust will file reports, proxy statements and other information under the
1934 Act with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by Southern with the Commission
pursuant to the 1934 Act and are incorporated herein by reference and made a
part of this Prospectus:
(a) Southern's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(b) Southern's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998; and
(c) Southern's Current Reports on Form 8-K dated February 11, 1998 and
June 18, 1998.
All documents filed by Southern with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated herein by reference and made a part of this Prospectus from the
respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
2
<PAGE>
SOUTHERN WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS
IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY
OR ALL DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN THE EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE).
SUCH REQUESTS SHOULD BE DIRECTED TO TOMMY CHISHOLM, SECRETARY, THE SOUTHERN
COMPANY, 270 PEACHTREE STREET, N.W., ATLANTA, GEORGIA 30303, TELEPHONE: (770)
393-0650.
3
<PAGE>
THE SOUTHERN COMPANY
Southern was incorporated under the laws of Delaware on November 9, 1945.
Southern is domesticated under the laws of Georgia and is qualified to do
business as a foreign corporation under the laws of Alabama. The principal
executive offices of Southern are located at 270 Peachtree Street, N.W.,
Atlanta, Georgia 30303, and the telephone number is (770) 393-0650.
Southern owns all the outstanding common stock of Alabama Power Company
("ALABAMA"), Georgia Power Company ("GEORGIA"), Gulf Power Company ("GULF"),
Mississippi Power Company ("MISSISSIPPI") and Savannah Electric and Power
Company ("SAVANNAH")(ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH being
collectively referred to herein as the "operating affiliates"), each of which is
an operating public utility company, and of Southern Company Services, Inc. (the
system service company). ALABAMA and GEORGIA each owns 50% of the outstanding
common stock of Southern Electric Generating Company ("SEGCO"). The operating
affiliates supply electric service in the states of Alabama, Georgia, Florida,
Mississippi and Georgia, respectively, and SEGCO owns generating units at a
large electric generating station which supplies power to ALABAMA and GEORGIA.
Southern also owns all the outstanding common stock of Southern Energy, Inc.
("Southern Energy"), Southern Company Energy Solutions, Inc. ("Energy
Solutions"), Southern Nuclear Operating Company, Inc. ("Southern Nuclear") and
Southern Communications Services, Inc. ("Southern Communications"). Southern
Energy designs, builds, owns and operates power production and delivery
facilities and provides a broad range of technical services to industrial
companies and utilities in the United States and a number of international
markets. Energy Solutions explores, develops and markets energy management
services and other business lines relating to Southern's core business of
generating and distributing energy. Southern Nuclear provides services to the
Southern electric system's nuclear plants. Southern Communications provides
digital wireless communications services to the operating affiliates and
regional non-affiliates.
SOUTHERN COMPANY CAPITAL FUNDING, INC.
Capital was established to obtain financing for Southern and direct and
indirect subsidiaries of Southern other than the operating affiliates. Capital
does not and will not engage in business activities other than such financing.
Capital was incorporated under the laws of Delaware on January 24, 1997 and
is a wholly-owned subsidiary of Southern. The principal executive offices of
Capital are located at 1403 Foulk Road, Suite 102, Wilmington, Delaware 19803,
and the telephone number is (302) 427-1935.
THE TRUSTS
Each Trust is a statutory business trust created under Delaware law
pursuant to the filing of a certificate of trust with the Delaware Secretary of
State on September 28, 1998. Each Trust's business is defined in a trust
agreement, executed by Capital, as Depositor, and the Delaware Trustee
thereunder. This trust agreement of each Trust will be amended and restated in
its entirety substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part (the "Trust Agreement"). Each
Trust Agreement will be qualified as an indenture under the Trust Indenture Act
of 1939, as amended (the "1939 Act"). Each Trust exists for the exclusive
purposes of (i) issuing its Trust Securities representing undivided beneficial
interests in the assets of such Trust, (ii) investing the gross proceeds of its
Trust Securities in a related series of Junior Subordinated Notes, and (iii)
engaging in only those other activities necessary, appropriate, convenient or
incidental thereto.
Each Trust's business and affairs will be conducted by its trustees, which
shall be appointed by Capital as the holder of the Common Securities: two
employees of a subsidiary of Southern as Administrative Trustees; Bankers Trust
Company as Property Trustee; and Bankers Trust (Delaware) as Delaware Trustee.
The Property Trustee of each Trust will act as the indenture trustee with
respect to such Trust for purposes of compliance with the provisions of the 1939
Act.
4
<PAGE>
The principal place of business of each Trust shall be c/o Southern, 270
Peachtree Street, N.W., Atlanta, Georgia 30303, telephone (770) 393-0650, Attn:
Secretary.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a Trust for further information concerning such Trust.
ACCOUNTING TREATMENT OF TRUSTS
For financial reporting purposes, the Trusts will be treated as
subsidiaries of Southern and, accordingly, the accounts of the Trusts will be
included in the consolidated financial statements of Southern. The Preferred
Securities will be presented as a separate line item in the consolidated balance
sheet of Southern, and appropriate disclosures concerning the Preferred
Securities, the Preferred Securities Guarantees, the Junior Subordinated Notes
and the Junior Subordinated Notes Guarantees will be included in the notes to
the consolidated financial statements. For financial reporting purposes,
Southern will record distributions payable on the Preferred Securities as an
expense.
CERTAIN RATIOS
The following table sets forth the Ratios of Earnings to Fixed Charges and
Earnings to Fixed Charges Plus Preferred Dividend Requirements (Pre-Income Tax
Basis) for the periods indicated.
<TABLE>
<CAPTION>
TWELVE
MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------ SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(1)....... 3.41 3.63 3.75 3.68 2.87 2.77
Ratio of Earnings to Fixed Charges Plus
Preferred Dividend Requirements
(Pre-Income Tax Basis)(2)................. 2.84 3.01 3.13 3.12 2.67 2.70
</TABLE>
- ---------------
(1) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Income Before Interest Charges" all income taxes deducted
therefrom and the debt portion of allowance for funds used during
construction; and (ii) "Fixed Charges" consist of "Net Interest Charges"
plus the debt portion of allowance for funds used during construction.
(2) In computing this ratio, "Preferred Dividend Requirements" represent the
before-tax earnings necessary to pay such dividends, computed at the
effective tax rates for the applicable periods.
USE OF PROCEEDS
Each Trust will invest the proceeds received from the sale of its Preferred
Securities in Junior Subordinated Notes. Except as may be otherwise described in
an applicable Prospectus Supplement, the net proceeds received by Southern from
such investment and any proceeds received from the sale of Common Stock, Senior
Notes, Stock Purchase Contracts or Stock Purchase Units or other sales of Junior
Subordinated Notes will be used in connection with its ongoing construction
program, to pay scheduled maturities and/or refundings of its securities, to
repay short-term indebtedness to the extent outstanding and for other general
corporate purposes.
DESCRIPTION OF THE COMMON STOCK
The authorized capital stock of Southern currently consists of
1,000,000,000 shares of common stock, par value $5 per share. As of November 30,
1998, there were 699,772,723 shares of common stock issued and outstanding.
5
<PAGE>
All shares of common stock of Southern participate equally with respect to
dividends and rank equally upon liquidation. Each holder is entitled to one vote
for each share held and to cumulative voting at elections of directors. The vote
of two-thirds of the outstanding common stock is required to authorize or create
preferred stock or to effect certain changes in charter provisions affecting the
common stock. No stockholder is entitled to preemptive rights.
The shares of Common Stock offered hereby will be fully paid and
nonassessable by Southern.
The income of Southern is derived mainly from equity in earnings of its
operating affiliates. At September 30, 1998, $2,019,245,000 of consolidated
retained earnings, of a total of $4,164,073,000 at that date, was restricted
against the payment by the operating affiliates of cash dividends on common
stock under terms of bond indentures or charters. Southern's investment in
subsidiary companies is maintained on the equity method of accounting; however,
under the applicable accounting requirements of the Commission, cash dividends
are limited to Southern's retained earnings computed on the cost method of
accounting ($497,239,000 at September 30, 1998). The equity in undistributed
earnings of subsidiary companies, except for the $2,019,245,000 restricted under
the terms of bond indentures or charters, will become available for payment of
cash dividends by Southern as such amounts are paid to Southern by the
subsidiary companies.
Certain business combination transactions, including mergers, sales of
assets or securities having a fair market value of $100,000,000 or more,
liquidations, dissolutions, reclassifications or recapitalizations, between
Southern or any of its subsidiaries and any beneficial owner of more than 5% of
the outstanding voting stock of Southern or any affiliate of such owner must be
approved by the holders of 75% of the outstanding voting stock and a majority of
the outstanding voting stock held by persons other than such beneficial owner,
unless approved by a majority of the "Disinterested Directors" (generally
directors not affiliated with such beneficial owner) or certain minimum price
and procedural requirements are met. These provisions may have the effect of
delaying, deferring or preventing a change in control of Southern.
The transfer agent and registrar for the common stock is Southern Company
Services, Inc., Atlanta, Georgia.
DIVIDENDS AND PRICE RANGE
The table below sets forth, for the periods indicated, the high and low
sales prices of Southern's common stock as reported by The Wall Street Journal
as NYSE-Composite Transactions.
<TABLE>
<CAPTION>
YEAR HIGH LOW
- ---- ---- ---
<S> <C> <C> <C> <C>
1993............................ 23 5/8 18 3/8
1994............................ 22 17
1995............................ 25 19 3/8
1996............................ 25 7/8 21 1/8
1997............................ 26 1/4 19 7/8
</TABLE>
<TABLE>
<CAPTION>
BY QUARTERS HIGH LOW
- ----------- ---- ---
<S> <C> <C> <C> <C>
1996
First Quarter............ 25 7/8 22 3/8
Second Quarter........... 24 5/8 21 1/4
Third Quarter............ 24 5/8 21 3/4
Fourth Quarter........... 23 1/8 21 1/8
1997
First Quarter............ 23 3/8 20 3/4
Second Quarter........... 22 1/4 19 7/8
Third Quarter............ 23 20 13/16
Fourth Quarter........... 26 1/4 22
1998
First Quarter............ 28 11/16 23 15/16
Second Quarter........... 29 25 1/16
Third Quarter............ 29 13/16 25 1/4
Fourth Quarter........... 31 9/16 27 3/16
(through December 16,
1998)
</TABLE>
The last sale price of the common stock on December 16, 1998, as reported
by The Wall Street Journal, was $29 per share. The consolidated book value per
share of Southern's common stock at September 30, 1998 was $14.46.
6
<PAGE>
Dividends have been paid on the common stock without interruption since
1949 when Southern was organized. The following table sets forth the dividends
paid during the period 1994-1998. Future dividends will depend on future
earnings, the financial condition of Southern and the operating affiliates and
other factors.
<TABLE>
<CAPTION>
COMMON DIVIDENDS COMMON DIVIDENDS
PERIOD PER SHARE PERIOD PER SHARE
- ------ ---------------- ------ ----------------
<S> <C> <C> <C> <C>
1994........................ $1.18 1996 (first quarter)............. $.315
(second quarter)............ .315
1995........................ 1.22 (third quarter)............. .315
(fourth quarter)............ .315
1996........................ 1.26 1997 (first quarter)............. .325
(second quarter)............ .325
1997........................ 1.30 (third quarter)............. .325
(fourth quarter)............ .325
1998........................ 1.34 1998 (first quarter)............. .335
(second quarter)............ .335
(third quarter)............. .335
(fourth quarter)............ .335
</TABLE>
Southern has an investment plan pursuant to which registered owners of
shares of Southern's common stock may purchase additional shares by having
dividends automatically reinvested, or by making supplemental optional cash
purchases (not more than $150,000 per year), or both. For information concerning
the Southern Investment Plan, write SCS Stockholder Services, P.O. Box 54250,
Atlanta, Georgia 30308-0250.
DESCRIPTION OF THE SENIOR NOTES
Set forth below is a description of the general terms of the Senior Notes.
The following description does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the Senior Note Indenture to be
entered into among Southern, Capital and the trustee named in the applicable
Prospectus Supplement, as trustee (the "Senior Note Indenture Trustee"), as to
be supplemented by a supplemental indenture thereto establishing the Senior
Notes of each series (the Senior Note Indenture, as so supplemented, is
hereinafter referred to as the "Senior Note Indenture"), the forms of which are
filed as exhibits to the Registration Statement of which this Prospectus forms a
part. The terms of the Senior Notes will include those stated in the Senior Note
Indenture and those made a part of the Senior Note Indenture by reference to the
1939 Act. Certain capitalized terms used herein are defined in the Senior Note
Indenture.
GENERAL
The Senior Notes will be issued as unsecured senior debt securities under
the Senior Note Indenture and will rank pari passu with all other unsecured and
unsubordinated debt of Capital. The Senior Notes will be effectively
subordinated to all secured debt of Capital. At September 30, 1998 Capital had
no outstanding secured debt. The Senior Note Indenture does not limit the
aggregate principal amount of Senior Notes that may be issued thereunder and
provides that Senior Notes may be issued from time to time in one or more series
pursuant to an indenture supplemental to the Senior Note Indenture.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Senior Notes being offered
thereby: (i) the title of such Senior Notes; (ii) any limit on the aggregate
principal amount of such Senior Notes; (iii) the date or dates on which the
principal of such Senior Notes is payable; (iv) the rate or rates at which such
Senior Notes shall bear interest, if any, or any method by which such rate or
rates will be determined, the date or dates from which such interest will
accrue, the interest payment dates on which such interest shall be payable, and
the regular record date for the interest payable on any interest payment date;
(v) the place or places where the principal of (and premium, if any) and
interest, if any, on such Senior Notes shall be payable; (vi) the period or
periods within which, the price or prices at which and the terms and conditions
on which such Senior Notes may be redeemed, in whole or in part, at the option
of Capital; (vii) the obligation, if any, of Capital to redeem or purchase such
Senior Notes;
7
<PAGE>
(viii) the date or dates, if any, after which such Senior Notes may be converted
or exchanged at the option of the holder into or for shares of Common Stock of
Southern and the terms for any such conversion or exchange; (ix) the
denominations in which such Senior Notes shall be issuable; (x) if other than
the principal amount thereof, the portion of the principal amount of such Senior
Notes which shall be payable upon declaration of acceleration of the maturity
thereof; (xi) any deletions from, modifications of or additions to the Events of
Default or covenants of Capital as provided in the Senior Note Indenture
pertaining to such Senior Notes; (xii) whether such Senior Notes shall be issued
in whole or in part in the form of a Global Security; and (xiii) any other terms
of such Senior Notes.
The Senior Note Indenture does not contain provisions that afford holders
of Senior Notes protection in the event of a highly leveraged transaction
involving Southern or Capital.
SENIOR NOTES GUARANTEE
Pursuant to the Senior Note Indenture, Southern will irrevocably and
unconditionally guarantee the Senior Notes as described under "Description of
the Senior Notes Guarantees."
EVENTS OF DEFAULT
The Senior Note Indenture provides that any one or more of the following
described events with respect to the Senior Notes of any series, which has
occurred and is continuing, constitutes an "Event of Default" with respect to
the Senior Notes of such series:
(a) failure for 10 days to pay interest on the Senior Notes of such
series, when due on an Interest Payment Date other than at maturity or upon
earlier redemption; or
(b) failure to pay principal or premium, if any, or interest on the
Senior Notes of such series when due at maturity or upon earlier
redemption; or
(c) failure for three Business Days to deposit any sinking fund
payment when due by the terms of a Senior Note of such series; or
(d) failure to observe or perform any other covenant or warranty in
the Senior Note Indenture (other than a covenant or warranty which has
expressly been included therein solely for the benefit of one or more
series of Senior Notes other than such series) for 90 days after written
notice to Southern and Capital from the Senior Note Indenture Trustee or
the holders of at least 25% in principal amount of the outstanding Senior
Notes of such series; or
(e) certain events of bankruptcy, insolvency, or reorganization of
Southern or Capital.
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Senior Note Indenture Trustee with respect to the Senior Notes of such series.
If a Senior Note Indenture Event of Default occurs and is continuing with
respect to the Senior Notes of any series, then the Senior Note Indenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of the Senior Notes of such series may declare the principal amount
thereof due and payable immediately by notice in writing to Southern and Capital
(and to the Senior Note Indenture Trustee if given by the holders), and upon any
such declaration such principal amount shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to the Senior
Notes of any series has been made and before a judgment or decree for payment of
the money due has been obtained as provided in Article Five of the Senior Note
Indenture, the holders of not less than a majority in aggregate outstanding
principal amount of the Senior Notes of such series may rescind and annul such
declaration and its consequences if the default has been cured or waived and
Southern or Capital has paid or deposited with the Senior Note Indenture Trustee
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration and all sums paid or advanced by the Senior Note
Indenture Trustee, including reasonable compensation and expenses of the Senior
Note Indenture Trustee.
8
<PAGE>
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series may, on behalf of the holders of all
the Senior Notes of such series, waive any past default with respect to such
series, except (i) a default in the payment of principal or interest or (ii) a
default in respect of a covenant or provision which under Article Nine of the
Senior Note Indenture cannot be modified or amended thereunder without the
consent of the holder of each outstanding Senior Note of such series affected
thereby.
REGISTRATION AND TRANSFER
Capital shall not be required to (i) issue, register the transfer of or
exchange Senior Notes of any series during a period of 15 days immediately
preceding the date notice is given identifying the Senior Notes of such series
called for redemption, or (ii) register the transfer of or exchange any Senior
Notes so selected for redemption, in whole or in part, except the unredeemed
portion of any Senior Note being redeemed in part.
PAYMENT AND PAYING AGENT
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Senior Notes will be made only against surrender to the
Paying Agent of such Senior Notes. Principal of and interest on Senior Notes
will be payable, subject to any applicable laws and regulations, at the office
of such Paying Agent or Paying Agents as Capital may designate from time to
time, except that, at the option of the Company, payment of any interest may be
made by wire transfer or by check mailed to the address of the person entitled
thereto as such address shall appear in the Security Register with respect to
the Senior Notes. Payment of interest on Senior Notes on any interest payment
date will be made to the person in whose name the Senior Notes (or predecessor
security) are registered at the close of business on the Record Date for such
interest payment (the fifteenth calendar day before such interest payment date).
Unless otherwise indicated in an applicable Prospectus Supplement, the
Senior Indenture Trustee will act as Paying Agent with respect to the Senior
Notes. Capital may at any time designate additional Paying Agents or rescind the
designation of any Paying Agents or approve a change in the office through which
any Paying Agent acts.
All moneys paid by Capital to a Paying Agent for the payment of the
principal of or interest on the Senior Notes of any series which remain
unclaimed at the end of two years after such principal or interest shall have
become due and payable will be repaid to Capital, and the holder of such Senior
Notes will thereafter look only to Capital for payment thereof.
MODIFICATION
The Senior Note Indenture contains provisions permitting Capital, Southern
and the Senior Indenture Trustee, with the consent of the holders of not less
than a majority in principal amount of the outstanding Senior Notes of each
series affected thereby, to modify the Senior Note Indenture or the rights of
the holders of the Senior Note of such series; provided, that no such
modification may, without the consent of the holder of each outstanding Senior
Note affected thereby, (i) change the stated maturity of the principal of, or
any installment of principal of or interest on, any Senior Note, or reduce the
principal amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or change the method of calculating the rate of
interest thereon, or impair the right to institute suit for the enforcement of
any such payment on or after the stated maturity thereof (or, in the case of
redemption, on or after the redemption date), or (ii) reduce the percentage of
principal amount of the outstanding Senior Notes of any series, the consent of
whose holders is required for any such supplemental indenture, or the consent of
whose holders is required for any waiver (of compliance with certain provisions
of the Senior Note Indenture or certain defaults thereunder and their
consequences) provided for in the Senior Note Indenture, or (iii) modify any of
the provisions of the Senior Note Indenture relating to supplemental indentures,
waiver of past defaults, or waiver of certain covenants, except to increase any
such percentage or to provide that certain other provisions of the Senior Note
Indenture cannot be modified or waived without the consent of the holder of each
outstanding Senior Note affected thereby.
9
<PAGE>
In addition, Capital, Southern and the Senior Note Indenture Trustee may
execute, without the consent of any holders of Senior Notes, any supplemental
indenture for certain other usual purposes, including the creation of any new
series of senior notes.
CONSOLIDATION, MERGER AND SALE
Neither Southern nor Capital shall consolidate with or merge into any other
corporation or convey, transfer or lease its properties and assets substantially
as an entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such other corporation or person
expressly assumes, by supplemental indenture executed and delivered to the
Senior Note Indenture Trustee, the payment of the principal of (and premium, if
any) and interest on all the Senior Notes and the performance of every covenant
of the Senior Note Indenture on the part of Southern or Capital, as the case may
be, to be performed or observed; (2) immediately after giving effect to such
transactions, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have happened and be
continuing; and (3) Southern or Capital, as the case may be, has delivered to
the Senior Note Indenture Trustee an officers' certificate and an opinion of
counsel, each stating that such transaction complies with the provisions of the
Senior Note Indenture governing consolidation, merger, conveyance, transfer or
lease and that all conditions precedent thereto have been complied with.
INFORMATION CONCERNING THE SENIOR NOTE INDENTURE TRUSTEE
The Senior Note Indenture Trustee, prior to an Event of Default with
respect to Senior Notes of any series, undertakes to perform, with respect to
Senior Notes of such series, only such duties as are specifically set forth in
the Senior Note Indenture and, in case an Event of Default with respect to
Senior Notes of any series has occurred and is continuing, shall exercise, with
respect to Senior Notes of such series, the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
such provision, the Senior Note Indenture Trustee is under no obligation to
exercise any of the powers vested in it by the Senior Note Indenture at the
request of any holder of Senior Notes of any series, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Senior Note Indenture Trustee is not required to expend
or risk its own funds or otherwise incur any financial liability in the
performance of its duties if the Senior Note Indenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
GOVERNING LAW
The Senior Note Indenture and the Senior Notes will be governed by, and
construed in accordance with, the internal laws of the State of New York.
MISCELLANEOUS
Each of Southern and Capital will have the right at all times to assign any
of its rights or obligations under the Senior Note Indenture to a direct or
indirect wholly-owned subsidiary of Southern; provided, that, in the event of
any such assignment, Southern or Capital, as the case may be, will remain
primarily liable for all such obligations. Subject to the foregoing, the Senior
Note Indenture will be binding upon and inure to the benefit of the parties
thereto and their respective successors and assigns.
DESCRIPTION OF THE SENIOR NOTES GUARANTEES
Pursuant to the Senior Note Indenture, Southern will irrevocably and
unconditionally guarantee the due and punctual payment of principal, premium, if
any, and interest on the Senior Notes when and as the same shall become due and
payable. Each Senior Notes Guarantee will constitute an unsecured and
unsubordinated obligation of Southern and will rank pari passu with all other
unsecured and unsubordinated debt that may be issued by Southern. The Senior
Notes Guarantees will be effectively subordinated to all secured debt of
Southern. As of September 30, 1998, Southern had no secured debt. Since Southern
is a holding company, the
10
<PAGE>
right of Southern and, hence, the right of creditors of Southern (including
holders of Senior Notes) to participate in any distribution of the assets of any
subsidiary of Southern, whether upon liquidation, reorganization or otherwise,
is subject to prior claims of creditors of each such subsidiary.
DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES
Set forth below is a description of the general terms of the Junior
Subordinated Notes. The following description does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Subordinated Note Indenture, dated as of June 1, 1997, among Southern, Capital
and Bankers Trust Company, as trustee (the "Subordinated Note Indenture
Trustee"), as to be supplemented by a supplemental indenture thereto
establishing the Junior Subordinated Notes of each series (the Subordinated Note
Indenture, as so supplemented, is hereinafter referred to as the "Subordinated
Note Indenture"), the forms of which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part. The terms of the Junior
Subordinated Notes will include those stated in the Subordinated Note Indenture
and those made a part of the Subordinated Note Indenture by reference to the
1939 Act. Certain capitalized terms used herein are defined in the Subordinated
Note Indenture.
GENERAL
The Junior Subordinated Notes will be issued as unsecured junior
subordinated debt securities under the Subordinated Note Indenture. The
Subordinated Note Indenture does not limit the aggregate principal amount of
Junior Subordinated Notes that may be issued thereunder and provides that Junior
Subordinated Notes may be issued from time to time in one or more series
pursuant to an indenture supplemental to the Subordinated Note Indenture.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Junior Subordinated Notes
being offered thereby: (i) the title of such Junior Subordinated Notes; (ii) any
limit on the aggregate principal amount of such Junior Subordinated Notes; (iii)
the date or dates on which the principal of such Junior Subordinated Notes is
payable; (iv) the rate or rates at which such Junior Subordinated Notes shall
bear interest, if any, or any method by which such rate or rates will be
determined, the date or dates from which such interest will accrue, the interest
payment dates on which such interest shall be payable, and the regular record
date for the interest payable on any interest payment date; (v) the place or
places where the principal of (and premium, if any) and interest, if any, on
such Junior Subordinated Notes shall be payable; (vi) the period or periods
within which, the price or prices at which and the terms and conditions on which
such Junior Subordinated Notes may be redeemed, in whole or in part, at the
option of the Company; (vii) the obligation, if any, of Capital to redeem or
purchase such Junior Subordinated Notes; (viii) the date or dates, if any, after
which such Junior Subordinated Notes may be converted or exchanged at the option
of the holder into or for shares of Common Stock of Southern and the terms for
any such conversion or exchange; (ix) the denominations in which such Junior
Subordinated Notes shall be issuable; (x) if other than the principal amount
thereof, the portion of the principal amount of such Junior Subordinated Notes
which shall be payable upon declaration of acceleration of the maturity thereof;
(xi) any deletions from, modifications of or additions to the Events of Default
or covenants of Capital or Southern as provided in the Subordinated Note
Indenture pertaining to such Junior Subordinated Notes; (xii) whether such
Junior Subordinated Notes shall be issued in whole or in part in the form of a
Global Security; (xiii) the right, if any, of Capital to extend the interest
payment periods of such Junior Subordinated Notes; and (xiv) any other terms of
such Junior Subordinated Notes. The terms of each series of Junior Subordinated
Notes issued to a Trust will correspond to those of the related Preferred
Securities of such Trust as described in the Prospectus Supplement relating to
such Preferred Securities.
The Subordinated Note Indenture does not contain provisions that afford
holders of Junior Subordinated Notes protection in the event of a highly
leveraged transaction involving Southern or Capital.
11
<PAGE>
SUBORDINATION
The Junior Subordinated Notes are subordinated and junior in right of
payment to all Senior Indebtedness (as defined below) of Capital. No payment of
principal of (including redemption payments, if any), or premium, if any, or
interest on (including Additional Interest (as defined herein)) the Junior
Subordinated Notes may be made if (a) any Senior Indebtedness is not paid when
due and any applicable grace period with respect to such default has ended with
such default not being cured or waived or otherwise ceasing to exist, or (b) the
maturity of any Senior Indebtedness has been accelerated because of a default,
or (c) notice has been given of the exercise of an option to require repayment,
mandatory payment or prepayment or otherwise. Upon any payment or distribution
of assets of Capital to creditors upon any liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors, marshalling of assets
or liabilities, or any bankruptcy, insolvency or similar proceedings of Capital,
the holders of Senior Indebtedness shall be entitled to receive payment in full
of all amounts due or to become due on or in respect of all Senior Indebtedness
before the holders of the Junior Subordinated Notes are entitled to receive or
retain any payment or distribution. Subject to the prior payment of all Senior
Indebtedness, the rights of the holders of the Junior Subordinated Notes will be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to such Senior Indebtedness until all
amounts owing on the Junior Subordinated Notes are paid in full.
The term "Senior Indebtedness" means, with respect to any person, (i) any
payment due in respect of indebtedness of such person, whether outstanding at
the date of execution of the Subordinated Note Indenture or thereafter incurred,
created or assumed, (a) in respect of money borrowed (including any financial
derivative, hedging or futures contract or similar instrument) and (b) evidenced
by securities, debentures, bonds, notes or other similar instruments issued by
such person that, by their terms, are senior or senior subordinated debt
securities including, without limitation, all obligations under its indentures
with various trustees; (ii) all capital lease obligations; (iii) all obligations
issued or assumed as the deferred purchase price of property, all conditional
sale obligations and all obligations of such person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business and long-term purchase obligations); (iv) all obligations for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction; (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons the payment of which such
person is responsible or liable as obligor, guarantor or otherwise; and (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of such person (whether or
not such obligation is assumed by such person), except for (1) any such
indebtedness that is by its terms subordinated to or pari passu with the Junior
Subordinated Notes and (2) any unsecured indebtedness between or among such
person or its affiliates. Such Senior Indebtedness shall continue to be Senior
Indebtedness and be entitled to the benefits of the subordination provisions
contained in the Subordinated Note Indenture irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
ADDITIONAL INTEREST
"Additional Interest" is defined in the Subordinated Note Indenture as (i)
such additional amounts as may be required so that the net amounts received and
retained by a holder of Junior Subordinated Notes (if the holder is a Trust)
after paying taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed by the United States or any other
taxing authority will not be less than the amounts the holder would have
received had no such taxes, duties, assessments, or other governmental charges
been imposed; and (ii) any interest due and not paid on an interest payment
date, together with interest thereon from such interest payment date to the date
of payment, compounded quarterly, on each interest payment date.
JUNIOR SUBORDINATED NOTES GUARANTEE
Pursuant to the Subordinated Note Indenture, Southern will irrevocably and
unconditionally guarantee the Junior Subordinated Notes as described under
"Description of the Junior Subordinated Notes Guarantees."
12
<PAGE>
CERTAIN COVENANTS
Southern and Capital each covenants in the Subordinated Note Indenture, for
the benefit of the holders of each series of Junior Subordinated Notes, that,
(i) if at such time Capital shall have given notice of its election to extend an
interest payment period for such series of Junior Subordinated Notes and such
extension shall be continuing, (ii) if at such time Southern shall be in default
with respect to its payment or other obligations under (A) the Preferred
Securities Guarantee with respect to the Trust Securities, if any, related to
such series of Junior Subordinated Notes or (B) the Junior Subordinated Notes
Guarantee, if any, related to such series of Junior Subordinated Notes, or (iii)
if at such time an Event of Default thereunder with respect to such series of
Junior Subordinated Notes shall have occurred and be continuing, (a) neither
Southern nor Capital shall declare or pay any dividend or make any distributions
with respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock, and (b) neither Southern nor Capital shall
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by it which rank pari passu with
or junior to the Junior Subordinated Notes or the Junior Subordinated Notes
Guarantee. None of the foregoing, however, shall restrict (i) any of the actions
described in the preceding sentence resulting from any reclassification of
Southern's or Capital's capital stock or the exchange or conversion of one class
or series of Southern's or Capital's capital stock for another class or series
of Southern's or Capital's capital stock, (ii) the purchase of fractional
interests in shares of Southern's or Capital's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (iii) dividends, payments or distributions payable in
shares of capital stock, (iv) redemptions, purchases or other acquisitions of
shares of capital stock in connection with any employment contract, incentive
plan, benefit plan or other similar arrangement of Southern or any of its
subsidiaries or in connection with a dividend reinvestment or stock purchase
plan, or (v) any declaration of a dividend in connection with implementation of
any stockholders' rights plan, or the issuance of rights, stock or other
property under any such plan, or the redemption, repurchase or other acquisition
of any such rights pursuant thereto.
The Subordinated Note Indenture further provides that, for so long as the
Trust Securities of any Trust remain outstanding, Capital covenants (i) to
directly or indirectly maintain 100% ownership of the Common Securities of such
Trust; provided, however, that any permitted successor of Capital or Southern
under the Subordinated Note Indenture may succeed to Capital's ownership of such
Common Securities, and (ii) to use its reasonable efforts to cause such Trust
(a) to remain a statutory business trust, except in connection with the
distribution of Junior Subordinated Notes to the holders of Trust Securities in
liquidation of such Trust, the redemption of all of the Trust Securities of such
Trust, or certain mergers, consolidations or amalgamations, each as permitted by
the related Trust Agreement, and (b) to otherwise continue to be classified as a
grantor trust for United States federal income tax purposes.
EVENTS OF DEFAULT
The Subordinated Note Indenture provides that any one or more of the
following described events with respect to the Junior Subordinated Notes of any
series, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Junior Subordinated Notes of such series:
(a) failure for 10 days to pay interest on the Junior Subordinated
Notes of such series, including any Additional Interest (as defined in
clause (ii) of the definition thereof in the Subordinated Note Indenture)
in respect thereof, when due on an Interest Payment Date other than at
maturity or upon earlier redemption; provided, however, that a valid
extension of the interest payment period by Capital shall not constitute a
default in the payment of interest for this purpose; or
(b) failure for 10 days to pay Additional Interest (as defined in
clause (i) of the definition thereof in the Subordinated Note Indenture);
or
(c) failure to pay principal or premium, if any, or interest,
including Additional Interest (as defined in clause (ii) of the definition
thereof in the Subordinated Note Indenture), on the Junior Subordinated
Notes of such series when due at maturity or upon earlier redemption; or
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(d) failure for three Business Days to deposit any sinking fund
payment when due by the terms of a Junior Subordinated Note of such series;
or
(e) failure to observe or perform any other covenant or warranty in
the Subordinated Note Indenture (other than a covenant or warranty which
has expressly been included therein solely for the benefit of one or more
series of Junior Subordinated Notes other than such series) for 90 days
after written notice to Southern and Capital from the Indenture Trustee or
the holders of at least 25% in principal amount of the outstanding Junior
Subordinated Notes of such series; or
(f) certain events of bankruptcy, insolvency, or reorganization of
Southern or Capital.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Indenture Trustee with respect to the Junior Subordinated Notes of such
series. If a Subordinated Note Indenture Event of Default occurs and is
continuing with respect to the Junior Subordinated Notes of any series, then the
Indenture Trustee or the holders of not less than 25% in aggregate outstanding
principal amount of the Junior Subordinated Notes of such series may declare the
principal amount thereof due and payable immediately by notice in writing to
Southern and Capital (and to the Indenture Trustee if given by the holders), and
upon any such declaration such principal amount shall become immediately due and
payable. At any time after such a declaration of acceleration with respect to
the Junior Subordinated Notes of any series has been made and before a judgment
or decree for payment of the money due has been obtained as provided in Article
Five of the Subordinated Note Indenture, the holders of not less than a majority
in aggregate outstanding principal amount of the Junior Subordinated Notes of
such series may rescind and annul such declaration and its consequences if the
default has been cured or waived and Southern or Capital has paid or deposited
with the Indenture Trustee a sum sufficient to pay all matured installments of
interest (including any Additional Interest) and principal due otherwise than by
acceleration and all sums paid or advanced by the Indenture Trustee, including
reasonable compensation and expenses of the Indenture Trustee.
A holder of Preferred Securities may institute a legal proceeding directly
against Southern and Capital, without first instituting a legal proceeding
against the Property Trustee or any other person or entity, for enforcement of
payment to such holder of principal of or interest on the Junior Subordinated
Notes of the related series having a principal amount equal to the aggregate
stated liquidation amount of the Preferred Securities of such holder on or after
the due dates specified in the Junior Subordinated Notes of such series.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series may, on behalf of the
holders of all the Junior Subordinated Notes of such series, waive any past
default with respect to such series, except (i) a default in the payment of
principal or interest or (ii) a default in respect of a covenant or provision
which under Article Nine of the Subordinated Note Indenture cannot be modified
or amended thereunder without the consent of the holder of each outstanding
Junior Subordinated Note of such series affected thereby.
REGISTRATION AND TRANSFER
Capital shall not be required to (i) issue, register the transfer of or
exchange Junior Subordinated Notes of any series during a period of 15 days
immediately preceding the date notice is given identifying the Junior
Subordinated Notes of such series called for redemption, or (ii) register the
transfer of or exchange any Junior Subordinated Notes so selected for
redemption, in whole or in part, except the unredeemed portion of any Junior
Subordinated Note being redeemed in part.
PAYMENT AND PAYING AGENT
Payment of principal of any Junior Subordinated Notes will be made only
against surrender to the Paying Agent of such Junior Subordinated Notes.
Principal of and interest on Junior Subordinated Notes will be payable, subject
to any applicable laws and regulations, at the office of such Paying Agent or
Paying Agents as Capital may designate from time to time, except that, at the
option of Capital, payment of any interest may be
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made by wire transfer or by check mailed to the address of the person entitled
thereto as such address shall appear in the Security Register with respect to
the Junior Subordinated Notes. Payment of interest on Junior Subordinated Notes
on any interest payment date will be made to the person in whose name the Junior
Subordinated Notes (or predecessor security) are registered at the close of
business on the Record Date for such interest payment (the fifteenth calendar
day before such interest payment date).
The Indenture Trustee will act as Paying Agent with respect to the Junior
Subordinated Notes. Capital may at any time designate additional Paying Agents
or rescind the designation of any Paying Agents or approve a change in the
office through which any Paying Agent acts.
All monies paid by Capital to a Paying Agent for the payment of the
principal of or interest on the Junior Subordinated Notes of any series which
remain unclaimed at the end of two years after such principal or interest shall
have become due and payable will be repaid to Capital, and the holder of such
Junior Subordinated Notes will thereafter look only to Capital for payment
thereof.
MODIFICATION
The Subordinated Note Indenture contains provisions permitting Capital,
Southern and the Indenture Trustee, with the consent of the holders of not less
than a majority in principal amount of the outstanding Junior Subordinated Notes
of each series affected thereby, to modify the Subordinated Note Indenture or
the rights of the holders of the Junior Subordinated Notes of such series;
provided, that no such modification may, without the consent of the holder of
each outstanding Junior Subordinated Note affected thereby, (i) change the
stated maturity of the principal of, or any installment of principal of or
interest on, any Junior Subordinated Note, or reduce the principal amount
thereof or the rate of interest (including Additional Interest) thereon or any
premium payable upon the redemption thereof, or change the method of calculating
the rate of interest thereon, or impair the right to institute suit for the
enforcement of any such payment on or after the stated maturity thereof (or, in
the case of redemption, on or after the redemption date), or (ii) reduce the
percentage of principal amount of the outstanding Junior Subordinated Notes of
any series, the consent of whose holders is required for any such supplemental
indenture, or the consent of whose holders is required for any waiver (of
compliance with certain provisions of the Subordinated Note Indenture or certain
defaults thereunder and their consequences) provided for in the Subordinated
Note Indenture, or (iii) modify any of the provisions of the Subordinated Note
Indenture relating to supplemental indentures, waiver of past defaults, or
waiver of certain covenants, except to increase any such percentage or to
provide that certain other provisions of the Subordinated Note Indenture cannot
be modified or waived without the consent of the holder of each outstanding
Junior Subordinated Note affected thereby, or (iv) reduce any amount payable
under, delay or defer the required time of payment under, or impair the right to
institute suit to enforce any payment under the Notes Guarantee, or (v) modify
the provisions of the Subordinated Note Indenture with respect to the
subordination of the Junior Subordinated Notes or the Notes Guarantee in a
manner adverse to such holder.
In addition, Capital, Southern and the Indenture Trustee may execute,
without the consent of any holders of Junior Subordinated Notes, any
supplemental indenture for certain other usual purposes, including the creation
of any new series of junior subordinated notes.
CONSOLIDATION, MERGER AND SALE
Neither Southern nor Capital shall consolidate with or merge into any other
corporation or convey, transfer or lease its properties and assets substantially
as an entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such other corporation or person
expressly assumes, by supplemental indenture executed and delivered to the
Indenture Trustee, the payment of the principal of (and premium, if any) and
interest (including Additional Interest) on all the Junior Subordinated Notes
and the performance of every covenant of the Subordinated Note Indenture and the
Notes Guarantee on the part of Southern or Capital, as the case may be, to be
performed or observed; (2) immediately after giving effect to such transactions,
no Event of Default, and no event which, after notice or lapse of time or both,
would become an
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Event of Default, shall have happened and be continuing; and (3) Southern or
Capital, as the case may be, has delivered to the Indenture Trustee an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the provisions of the Subordinated Note Indenture governing
consolidation, merger, conveyance, transfer or lease and that all conditions
precedent thereto have been complied with.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to an Event of Default with respect to Junior
Subordinated Notes of any series, undertakes to perform, with respect to Junior
Subordinated Notes of such series, only such duties as are specifically set
forth in the Subordinated Note Indenture and, in case an Event of Default with
respect to Junior Subordinated Notes of any series has occurred and is
continuing, shall exercise, with respect to Junior Subordinated Notes of such
series, the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers vested in it by the
Subordinated Note Indenture at the request of any holder of Junior Subordinated
Notes of any series, unless offered reasonable indemnity by such holder against
the costs, expenses and liabilities which might be incurred thereby. The
Indenture Trustee is not required to expend or risk its own funds or otherwise
incur any financial liability in the performance of its duties if the Indenture
Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
GOVERNING LAW
The Subordinated Note Indenture and the Junior Subordinated Notes will be
governed by, and construed in accordance with, the internal laws of the State of
New York.
MISCELLANEOUS
Each of Southern and Capital will have the right at all times to assign any
of its rights or obligations under the Subordinated Note Indenture to a direct
or indirect wholly-owned subsidiary of Southern; provided, that, in the event of
any such assignment, Southern or Capital, as the case may be, will remain
primarily liable for all such obligations. Subject to the foregoing, the
Subordinated Note Indenture will be binding upon and inure to the benefit of the
parties thereto and their respective successors and assigns.
DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES GUARANTEES
Pursuant to the Subordinated Note Indenture, Southern will irrevocably and
unconditionally guarantee the due and punctual payment of principal, premium, if
any, and interest on the Junior Subordinated Notes when and as the same shall
become due and payable, whether at maturity, upon redemption or otherwise. Each
Junior Subordinated Notes Guarantee will constitute an unsecured obligation of
Southern and will rank subordinate and junior to all Senior Indebtedness that
may be issued by Southern. As of September 30, 1998, Senior Indebtedness of
Southern aggregated approximately $618,000,000. Since Southern is a holding
company, the right of Southern and, hence, the right of creditors of Southern
(including the holders of the Junior Subordinated Notes) to participate in any
distribution of the assets of any subsidiary of Southern, whether upon
liquidation, reorganization or otherwise, is subject to prior claims of
creditors of each such subsidiary.
DESCRIPTION OF THE PREFERRED SECURITIES
Each Trust may issue only one series of Preferred Securities having terms
described in the Prospectus Supplement relating thereto. The Trust Agreement of
each Trust will authorize the Administrative Trustees, on behalf of the Trust,
to issue the Preferred Securities of such Trust. The Preferred Securities of
each Trust will have such terms, including distributions, redemption, voting,
liquidation rights and such other preferred, deferral or other special rights or
such restrictions as shall be set forth in the Trust Agreement of such Trust.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a Trust for specific terms, including (i) the distinctive
designation of such Preferred Securities; (ii) the number of Preferred
Securities issued by such Trust; (iii) the annual distribution rate (or method
of determining such rate) for
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Preferred Securities of such Trust and the date or dates on which such
distributions shall be payable; (iv) whether distributions on such Preferred
Securities shall be cumulative and, in the case of Preferred Securities having
cumulative distribution rights, the date or dates, or method of determining the
date or dates, from which distributions on such Preferred Securities shall be
cumulative; (v) the amount or amounts that shall be paid out of the assets of
such Trust to the holders of the Preferred Securities of such Trust upon
voluntary or involuntary dissolution, winding-up or termination of such Trust;
(vi) the obligation, if any, of such Trust to purchase or redeem such Preferred
Securities and the price or prices at which, the period or periods within which,
and the terms and conditions upon which such Preferred Securities shall be
purchased or redeemed, in whole or in part, pursuant to such obligation; (vii)
the date or dates, if any, after which such Preferred Securities may be
converted or exchanged at the option of the holder into or for shares of Common
Stock of Southern or Debt Securities of Capital and the terms for any such
conversion or exchange; (viii) the voting rights, if any, of such Preferred
Securities in addition to those required by law, including the number of votes
per Preferred Security and any requirement for the approval by the holders of
Preferred Securities as a condition to specified action or amendments to the
Trust Agreement of such Trust; (ix) the rights, if any, to defer distributions
on the Preferred Securities by extending the interest payment period on the
related Junior Subordinated Notes; and (x) any other relative rights,
preferences, privileges, limitations or restrictions of such Preferred
Securities not inconsistent with the Trust Agreement of such Trust or applicable
law. All Preferred Securities offered hereby will be guaranteed by Southern to
the extent set forth under "Description of the Preferred Securities Guarantees."
Any material United States federal income tax considerations applicable to an
offering of Preferred Securities will be described in the Prospectus Supplement
relating thereto.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees that will be executed and delivered by Southern for the
benefit of the holders of Preferred Securities of the respective Trusts from
time to time. Each Preferred Securities Guarantee will be qualified as an
indenture under the 1939 Act. Bankers Trust Company will act as indenture
trustee under each Preferred Securities Guarantee (the "Guarantee Trustee") for
purposes of the 1939 Act. The terms of the respective Preferred Securities
Guarantees will be those set forth therein and those made part thereof by the
1939 Act. The following summary does not purport to be complete and is subject
in all respects to the provisions of, and is qualified in its entirety by
reference to, the Preferred Securities Guarantees, the form of which is filed as
an exhibit to the Registration Statement of which this Prospectus forms a part,
and the 1939 Act. Each Preferred Securities Guarantee will be held by the
Guarantee Trustee for the benefit of holders of the Preferred Securities to
which it relates.
GENERAL
Pursuant to each Preferred Securities Guarantee, Southern will irrevocably
and unconditionally agree, to the extent set forth therein, to pay in full, to
the holders of the related Preferred Securities, the Guarantee Payments (as
defined herein), to the extent not paid by, or on behalf of, the related Trust,
regardless of any defense, right of set-off or counterclaim that Southern may
have or assert against any person. The following payments or distributions with
respect to the Preferred Securities of any Trust to the extent not paid or made
by, or on behalf of, such Trust will be subject to the Preferred Securities
Guarantee related thereto (without duplication): (i) any accrued and unpaid
distributions required to be paid on the Preferred Securities of such Trust but
if and only if and to the extent that such Trust has funds legally and
immediately available therefor, (ii) the redemption price, including all accrued
and unpaid distributions to the date of redemption (the "Redemption Price"),
with respect to any Preferred Securities called for redemption by such Trust,
but if and only to the extent such Trust has funds legally and immediately
available therefor, and (iii) upon a dissolution, winding-up or termination of
such Trust (other than in connection with the distribution of Junior
Subordinated Notes to the holders of Trust Securities of such Trust or the
redemption of all of the Preferred Securities of such Trust), the lesser of (a)
the aggregate of the liquidation amount and all accrued and unpaid distributions
on the Preferred Securities of such Trust to the date of payment, to the extent
such Trust has
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funds legally and immediately available therefor, and (b) the amount of assets
of such Trust remaining available for distribution to holders of Preferred
Securities of such Trust in liquidation of such Trust (the "Guarantee
Payments"). Southern's obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by Southern to the holders of the
related Preferred Securities or by causing the related Trust to pay such amounts
to such holders.
Each Preferred Securities Guarantee will be a guarantee of the Guarantee
Payments with respect to the related Preferred Securities from the time of
issuance of such Preferred Securities, but will not apply to the payment of
distributions and other payments on such Preferred Securities when the related
Trust does not have sufficient funds legally and immediately available to make
such distributions or other payments. IF CAPITAL DOES NOT MAKE INTEREST PAYMENTS
ON THE JUNIOR SUBORDINATED NOTES HELD BY THE PROPERTY TRUSTEE UNDER ANY TRUST,
SUCH TRUST WILL NOT MAKE DISTRIBUTIONS ON ITS PREFERRED SECURITIES.
SUBORDINATION
Southern's obligations under each Preferred Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of Southern and
will rank (i) subordinate and junior in right of payment to all other
liabilities of Southern, except those obligations or liabilities made pari passu
or subordinate by their terms, (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by Southern and with any guarantee now
or hereafter entered into by Southern in respect of any preferred or preference
securities of any affiliate of Southern, and (iii) senior to all common stock of
Southern. The terms of the Preferred Securities will provide that each holder of
Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Preferred Securities Guarantee related
thereto. Southern has outstanding common stock that ranks junior to the
Preferred Securities Guarantees. See "Selected Information -- Selected Financial
Information."
Each Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without first instituting a legal proceeding against any other person
or entity).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially and adversely
affect the rights of holders of the related Preferred Securities (in which case
no consent will be required), each Preferred Securities Guarantee may be amended
only with the prior approval of the holders of not less than 66 2/3% in
liquidation amount of such outstanding Preferred Securities. The manner of
obtaining any such approval of holders of the Preferred Securities will be as
set forth in an accompanying Prospectus Supplement. All guarantees and
agreements contained in each Preferred Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of Southern and
shall inure to the benefit of the holders of the related Preferred Securities
then outstanding.
TERMINATION
Each Preferred Securities Guarantee will terminate and be of no further
force and effect as to the related Preferred Securities upon full payment of the
Redemption Price of all such Preferred Securities, upon distribution of Junior
Subordinated Notes to the holders of such Preferred Securities, or upon full
payment of the amounts payable upon liquidation of the related Trust. Each
Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the related
Preferred Securities must restore payment of any sums paid with respect to such
Preferred Securities or under such Preferred Securities Guarantee.
EVENTS OF DEFAULT
An event of default under each Preferred Securities Guarantee will occur
upon the failure by Southern to perform any of its payment obligations
thereunder. The holders of a majority in liquidation amount of the Preferred
Securities to which any Preferred Securities Guarantee relates have the right to
direct the time,
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method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of such Preferred Securities Guarantee or to direct
the exercise of any trust or power conferred upon the Guarantee Trustee under
such Preferred Securities Guarantee. Any holder of the related Preferred
Securities may institute a legal proceeding directly against Southern to enforce
its rights under such Preferred Securities Guarantee without first instituting a
legal proceeding against the Guarantee Trustee or any other person or entity.
The holders of a majority in liquidation amount of Preferred Securities of any
series may, by vote, on behalf of the holders of all the Preferred Securities of
such series, waive any past event of default and its consequences.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of any event of default with
respect to any Preferred Securities Guarantee and after the curing or waiving of
all events of default with respect to such Preferred Securities Guarantee,
undertakes to perform only such duties as are specifically set forth in such
Preferred Securities Guarantee and, in case an event of default has occurred,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provisions, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by any
Preferred Securities Guarantee at the request of any holder of the related
Preferred Securities, unless offered reasonable indemnity against the costs,
expenses and liabilities which might be incurred thereby.
Bankers Trust Company, the Guarantee Trustee, also serves as Property
Trustee and as Subordinated Note Indenture Trustee. Southern and certain of its
subsidiaries maintain deposit accounts and banking relationships with Bankers
Trust Company. Bankers Trust Company serves as trustee under other indentures
pursuant to which securities of subsidiaries of Southern are outstanding.
GOVERNING LAW
Each Preferred Securities Guarantee will be governed by, and construed in
accordance with, the internal laws of the State of New York.
THE AGREEMENTS AS TO EXPENSES AND LIABILITIES
Pursuant to an Agreement as to Expenses and Liabilities to be entered into
by Southern under each Trust Agreement, Southern will irrevocably and
unconditionally guarantee to each person or entity to whom each Trust becomes
indebted or liable the full payment of any indebtedness, expenses or liabilities
of such Trust, other than obligations of such Trust to pay to the holders of the
related Preferred Securities or other similar interests in such Trust the
amounts due such holders pursuant to the terms of such Preferred Securities or
such other similar interests, as the case may be.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED NOTES, THE PREFERRED SECURITIES GUARANTEES AND THE
JUNIOR SUBORDINATED NOTES GUARANTEES
As long as payments of interest and other payments are made when due on
each series of Junior Subordinated Notes issued to a Trust, such payments will
be sufficient to cover distributions and payments due on the related Trust
Securities of such Trust primarily because (i) the aggregate principal amount of
each series of Junior Subordinated Notes will be equal to the sum of the
aggregate stated liquidation amount of the related Trust Securities; (ii) the
interest rate and interest and other payment dates on each series of Junior
Subordinated Notes will match the distribution rate and distribution and other
payment dates for the related Preferred Securities; (iii) Southern shall pay for
all costs and expenses of each Trust pursuant to the Agreements as to Expenses
and Liabilities; and (iv) each Trust Agreement provides that the Securities
Trustees thereunder shall not cause or permit the Trust to, among other things,
engage in any activity that is not consistent with the purposes of the Trust.
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Payments of distributions (to the extent funds therefor are legally and
immediately available) and other payments due on the Preferred Securities (to
the extent funds therefor are legally and immediately available) will be
guaranteed by Southern as and to the extent set forth under "Description of the
Preferred Securities Guarantees." If Capital does not make interest payments on
any series of Junior Subordinated Notes, it is not expected that the related
Trust will have sufficient funds to pay distributions on its Preferred
Securities. Each Preferred Securities Guarantee is a guarantee from the time of
its issuance, but does not apply to any payment of distributions unless and
until the related Trust has sufficient funds legally and immediately available
for the payment of such distributions.
If Capital fails to make interest or other payments on any series of Junior
Subordinated Notes when due (taking into account any extension period as
described in the applicable Prospectus Supplement), the Trust Agreement provides
a mechanism whereby the holders of the related Preferred Securities may appoint
a substitute Property Trustee. Such holders may also direct the Property Trustee
to enforce its rights under the Junior Subordinated Notes of such series and the
related Junior Subordinated Notes Guarantee, including proceeding directly
against Capital to enforce such Junior Subordinated Notes and against Southern
to enforce such Junior Subordinated Notes Guarantee. If the Property Trustee
fails to enforce its rights under any series of Junior Subordinated Notes or the
related Junior Subordinated Notes Guarantee, to the fullest extent permitted by
applicable law, any holder of related Preferred Securities may institute a legal
proceeding directly against Capital to enforce the Property Trustee's rights
under such series of Junior Subordinated Notes and against Southern to enforce
such Junior Subordinated Notes Guarantee without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, a holder of Preferred Securities may institute a
legal proceeding directly against Southern and Capital, without first
instituting a legal proceeding against the Property Trustee or any other person
or entity, for enforcement of payment to such holder of principal of or interest
on Junior Subordinated Notes of the related series having a principal amount
equal to the aggregate stated liquidation amount of the Preferred Securities of
such holder on or after the due dates specified in the Junior Subordinated Notes
of such series.
If Southern fails to make payments under any Preferred Securities
Guarantee, such Preferred Securities Guarantee provides a mechanism whereby the
holders of the Preferred Securities to which such Preferred Securities Guarantee
relates may direct the Guarantee Trustee to enforce its rights thereunder. In
addition, any holder of Preferred Securities may institute a legal proceeding
directly against Southern to enforce the Guarantee Trustee's rights under the
related Preferred Securities Guarantee without first instituting a legal
proceeding against the Guarantee Trustee or any other person or entity.
Each Junior Subordinated Notes Guarantee, each Preferred Securities
Guarantee, the Subordinated Note Indenture, the Junior Subordinated Notes of the
related series, the related Trust Agreement and the related Agreement as to
Expenses and Liabilities, as described above, constitute a full and
unconditional guarantee by Southern and Capital of the payments due on the
related series of Preferred Securities.
Upon any voluntary or involuntary dissolution, winding-up or termination of
any Trust, unless Junior Subordinated Notes of the related series are
distributed in connection therewith, the holders of Preferred Securities of such
Trust will be entitled to receive, out of assets legally available for
distribution to holders, a liquidation distribution in cash as described in the
applicable Prospectus Supplement. Upon any voluntary or involuntary liquidation
or bankruptcy of Capital, the Property Trustee, as holder of the related series
of Junior Subordinated Notes, would be a subordinated creditor of Capital,
subordinated in right of payment to all Senior Indebtedness, but entitled to
receive payment in full of principal and interest, before any stockholders of
Capital receive payments or distributions. Because Southern is guarantor under
each Preferred Securities Guarantee and each Junior Subordinated Notes Guarantee
and has agreed to pay for all costs, expenses and liabilities of each Trust
(other than the Trust's obligations to holders of the Preferred Securities)
pursuant to the related Agreement as to Expenses and Liabilities, the positions
of a holder of Preferred Securities and a holder of Junior Subordinated Notes of
the related series relative to other creditors and to stockholders of Southern
in the event of liquidation or bankruptcy of Southern would be substantially the
same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Subordinated Note Indenture.
However, in the event of payment defaults under, or
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acceleration of, Senior Indebtedness, the subordination provisions of the Junior
Subordinated Notes provide that no payments may be made in respect of the Junior
Subordinated Notes until such Senior Indebtedness has been paid in full or any
payment default thereunder has been cured or waived. Failure to make required
payments on the Junior Subordinated Notes of any series would constitute an
Event of Default under the Subordinated Note Indenture with respect to the
Junior Subordinated Notes of such series except that failure to make interest
payments on the Junior Subordinated Notes of such series will not be an Event of
Default during an extension period as described in the applicable Prospectus
Supplement.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
Capital may issue and sell from time to time Stock Purchase Contracts,
including contracts obligating holders to purchase from Southern, and Southern
to sell to the holders, a specified number of shares of common stock of Southern
at a future date or dates. The consideration per share of common stock may be
fixed at the time the Stock Purchase Contracts are issued or may be determined
by reference to a specific formula set forth in the Stock Purchase Contracts.
The Stock Purchase Contracts may be issued separately or as a part of units
("Stock Purchase Units") consisting of a Stock Purchase Contract and Debt
Securities, Preferred Securities or debt obligations of third parties, including
U.S. Treasury securities, securing holders' obligations to purchase the common
stock of Southern under the Stock Purchase Contracts. The Stock Purchase
Contracts may require Southern or Capital to make periodic payments to the
holders of the Stock Purchase Units or vice versa, and such payments may be
unsecured or prefunded on some basis. The Stock Purchase Contracts may require
holders to secure their obligations thereunder in a specified manner. The Stock
Purchase Contracts may be guaranteed by Southern as more fully described under
"Description of the Stock Purchase Guarantees."
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units. The description in the Prospectus
Supplement will summarize the terms and conditions of any Stock Purchase
Contracts and Stock Purchase Units, and reference will be made to the Stock
Purchase Contracts, and, if applicable, collateral arrangements and depositary
arrangements, relating to such Stock Purchase Contracts or Stock Purchase Units.
DESCRIPTION OF STOCK PURCHASE GUARANTEES
Pursuant to the documents under which the Stock Purchase Contracts and
Stock Purchase Units will be issued, Southern may irrevocably and
unconditionally guarantee the due and punctual periodic payments to holders of
Stock Purchase Contracts and Stock Purchase Units when and as the same shall
become due and payable. Each Stock Purchase Guarantee will constitute an
unsecured and unsubordinated obligation of Southern and will rank pari passu
with all other unsecured and unsubordinated debt that may be issued by Southern.
The Stock Purchase Guarantees will be effectively subordinated to all secured
debt of Southern. As of September 30, 1998, Southern had no secured debt. Since
Southern is a holding company, the right of Southern and, hence, the right of
creditors of Southern (including holders of Stock Purchase Contracts and Stock
Purchase Units) to participate in any distribution of the assets of any
subsidiary of Southern, whether upon liquidation, reorganization or otherwise,
is subject to prior claims of creditors of each such subsidiary.
PLAN OF DISTRIBUTION
Southern may sell the Common Stock, Capital may sell the Debt Securities,
the Stock Purchase Contracts and the Stock Purchase Units and the Trusts may
sell the Preferred Securities in one or more of the following ways from time to
time: (i) to underwriters for resale to the public or to institutional
investors; (ii) directly to institutional investors; or (iii) through agents to
the public or to institutional investors. The Prospectus Supplement with respect
to any Securities will set forth the terms of the offering of such Securities,
including the name or names of any underwriters or agents, the purchase price of
such Securities and the proceeds to Southern, Capital or the applicable Trust
from such sale, any underwriting discounts or agency fees and other items
constituting underwriters' or agents' compensation, any initial public offering
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price, any discounts or concessions allowed or reallowed or paid to dealers and
any securities exchange on which such Securities may be listed.
If underwriters participate in the sale, such Securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale.
Unless otherwise set forth in the Prospectus Supplement, the obligations of
the underwriters to purchase any series of Securities will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all of
such series of Securities, if any are purchased.
Underwriters and agents may be entitled under agreements entered into with
Southern, Capital and/or the applicable Trust to indemnification against certain
civil liabilities, including liabilities under the 1933 Act. Underwriters and
agents may engage in transactions with, or perform services for, Southern in the
ordinary course of business.
Each series of Senior Notes, Junior Subordinated Notes, Preferred
Securities, Stock Purchase Contracts or Stock Purchase Units will be a new issue
of securities and will have no established trading market. Any underwriters to
whom Senior Notes, Junior Subordinated Notes, Preferred Securities, Stock
Purchase Contracts or Stock Purchase Units are sold for public offering and sale
may make a market in such Senior Notes, Junior Subordinated Notes, Preferred
Securities, Stock Purchase Contracts or Stock Purchase Units, but such
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. The Senior Notes, Junior Subordinated Notes,
Preferred Securities, Stock Purchase Contracts or Stock Purchase Units may or
may not be listed on a national securities exchange.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of Capital and the Trusts by Richards,
Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to Capital
and the Trusts. The validity of the Common Stock, Debt Securities, the
Guarantees, the Stock Purchase Contracts, the Stock Purchase Units and certain
matters relating thereto will be passed upon on behalf of Southern and Capital
by Troutman Sanders LLP, Atlanta, Georgia.
EXPERTS
The financial statements and schedules of Southern included in Southern's
Annual Report on Form 10-K for the year ended December 31, 1997, incorporated by
reference in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the Preferred Securities offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
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TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary Information -- Q&A................ S-2
Risk Factors.............................. S-6
Southern Company Capital Trust V.......... S-9
Accounting Treatment...................... S-10
Selected Consolidated Financial
Information............................. S-10
Recent Developments....................... S-11
Use of Proceeds........................... S-12
Description of the Preferred Securities... S-12
Description of the Series E Junior
Subordinated Notes...................... S-23
Description of the Series E Junior
Subordinated Notes Guarantee............ S-25
Relationship Among the Preferred
Securities, the Series E Junior
Subordinated Notes, the Preferred
Securities Guarantee and the Series E
Junior Subordinated Notes Guarantee..... S-25
Certain Federal Income Tax
Considerations.......................... S-27
Underwriting.............................. S-30
Legal Opinions............................ S-32
Prospectus
Available Information..................... 2
Incorporation of Certain Documents by
Reference............................... 2
The Southern Company...................... 4
Southern Company Capital Funding, Inc..... 4
The Trusts................................ 4
Accounting Treatment of Trusts............ 5
Certain Ratios............................ 5
Use of Proceeds........................... 5
Description of the Common Stock........... 5
Description of the Senior Notes........... 7
Description of the Senior Notes
Guarantees.............................. 10
Description of the Junior Subordinated
Notes................................... 11
Description of the Junior Subordinated
Notes Guarantees........................ 16
Description of the Preferred Securities... 16
Description of the Preferred Securities
Guarantees.............................. 17
Relationship Among the Preferred
Securities, the Junior Subordinated
Notes, the Preferred Securities
Guarantees and the Junior Subordinated
Notes Guarantees........................ 19
Description of the Stock Purchase
Contracts and Stock Purchase Units...... 21
Description of the Stock Purchase
Guarantees.............................. 21
Plan of Distribution...................... 21
Legal Matters............................. 22
Experts................................... 22
</TABLE>
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6,000,000 Preferred Securities
SOUTHERN COMPANY
CAPITAL TRUST V
6.875% Cumulative Quarterly Income
Preferred Securities (QUIPS(SM))
(Liquidation Amount $25 per
Preferred Security)
Fully and unconditionally guaranteed,
as described herein, by
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(Southern Company Logo)
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GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
CIBC OPPENHEIMER
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
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