Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-72784
333-72784-01
333-72784-02
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS RELATE TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933; BUT ARE NOT
COMPLETE AND MAY BE CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES AND ARE NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
Subject to Completion. Dated September 25, 2002.
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 15, 2001)
200,000 PREFERRED SECURITIES
(ALABAMA POWER LOGO)
ALABAMA POWER CAPITAL TRUST V
FLEXIBLE TRUST PREFERRED SECURITIES
(SEVEN YEAR INITIAL FIXED RATE PERIOD)
(LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN
---------------------------
The initial distribution rate on the Flexible Trust Preferred Securities
will be % per annum from the date of original issuance through September 30,
2009, which is the initial fixed rate period. Thereafter, the distribution rate
for the Preferred Securities may be at fixed rates determined through
remarketings of the Preferred Securities for specific periods of varying length
or may be at floating rates reset quarterly based on 3-month LIBOR plus %.
A brief description of the Preferred Securities can be found under "Summary
Information -- Q&A" in this Prospectus Supplement.
See "Risk Factors" section beginning on page S-8 for a description of
specific risks associated with these Preferred Securities.
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Per
Preferred Security Total
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Initial public offering price(1)............................ $ $
Underwriting commissions to be paid by Alabama Power
Company................................................... $ $
Proceeds to Alabama Power Capital Trust V................... $ $
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(1) Plus accumulated distributions, if any, from the date of original issuance,
which is expected to be October , 2002.
---------------------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this Prospectus Supplement or the Prospectus to which it relates.
Any representation to the contrary is a criminal offense.
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 October , 2002.
LEHMAN BROTHERS
ABN AMRO INCORPORATED
BANC ONE CAPITAL MARKETS, INC.
MIZUHO INTERNATIONAL PLC
SCOTIA CAPITAL
Prospectus Supplement dated September , 2002.
In making your investment decision, you should rely only on the information
contained or incorporated by reference in this Prospectus Supplement and the
attached Prospectus. We have not authorized anyone to provide you with any other
information. If you receive any unauthorized information, you must not rely on
it.
We are offering to sell the Preferred Securities only in places where sales
are permitted.
You should not assume that the information contained or incorporated by
reference in this Prospectus Supplement or the attached Prospectus is accurate
as of any date other than its respective date.
---------------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Summary Information -- Q&A................. S-3
Risk Factors............................... S-8
Alabama Power Capital Trust V.............. S-11
Selected Financial Information............. S-12
Use of Proceeds............................ S-13
Description of the Preferred Securities.... S-13
Description of the Series E Junior
Subordinated Notes....................... S-27
Relationship Among the Preferred
Securities, the Series E Junior
Subordinated Notes and the Guarantee..... S-29
Certain Federal Income Tax Consequences.... S-31
Certain ERISA Considerations............... S-35
Underwriting............................... S-36
Experts.................................... S-37
Legal Opinions............................. S-37
PROSPECTUS
About this Prospectus...................... 2
Available Information...................... 2
Incorporation of Certain Documents by
Reference................................ 2
Selected Information....................... 4
Alabama Power Company...................... 4
The Trusts................................. 5
Accounting Treatment of Trusts............. 5
Certain Ratios............................. 6
Use of Proceeds............................ 6
Description of the New Bonds............... 6
Description of the New Stock............... 9
Description of the Senior Notes............ 12
Description of the Junior Subordinated
Notes.................................... 15
Description of the Preferred Securities.... 20
Description of the Guarantees.............. 21
Relationship Among the Preferred
Securities, the Junior Subordinated Notes
and the Guarantees....................... 23
Plan of Distribution....................... 25
Legal Matters.............................. 25
Experts.................................... 25
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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 Flexible Trust Preferred Securities (the "Preferred Securities").
You should carefully read this Prospectus Supplement and the accompanying
Prospectus to understand fully the terms of the Preferred Securities, as well as
the tax and other considerations that are important to you in making a decision
about whether to invest in the Preferred Securities. You should pay special
attention to the "Risk Factors" section beginning on page S-8 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 Alabama Power Capital Trust V (the "Trust"). Each Preferred Security
will entitle the holder to receive cash distributions as described in this
Prospectus Supplement. The Trust is offering 200,000 Preferred Securities at a
price of $1,000 for each Preferred Security.
WHO IS THE TRUST?
The Trust is a Delaware statutory trust. Its principal place of business is
c/o Alabama Power Company, 600 North 18th Street, Birmingham, Alabama 35291, and
its telephone number is (205) 257-1000.
The Trust will sell its Preferred Securities to the public and its common
securities (the "Common Securities") to Alabama Power Company (the "Company").
The Trust will use the proceeds from these sales to buy a series of junior
subordinated notes due October 1, 2042 (the "Series E Junior Subordinated
Notes") from the Company with the same financial terms as the Preferred
Securities.
JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank) will act
as property trustee (the "Property Trustee") of the Trust. Two officers of the
Company also will act as trustees (the "Administrative Trustees") of the Trust.
Chase Manhattan Bank USA, National Association will be an additional trustee
(the "Delaware Trustee") of the Trust. JPMorgan Chase Bank (formerly known as
The Chase Manhattan Bank) will act as trustee (the "Indenture Trustee") under
the Subordinated Note Indenture, as supplemented (the "Subordinated Note
Indenture"), pursuant to which the Series E Junior Subordinated Notes will be
issued and will act as trustee (the "Guarantee Trustee") under the Preferred
Securities Guarantee of the Company (the "Guarantee"). The Property Trustee,
Delaware Trustee and Administrative Trustees are sometimes referred to as the
"Securities Trustees."
WHO IS THE COMPANY?
The Company is a corporation organized under the laws of the State of
Alabama on November 10, 1927, by the consolidation of a predecessor Alabama
Power Company, Gulf Electric Company and Houston Power Company. The Company has
its principal office at 600 North 18th Street, Birmingham, Alabama 35291,
telephone (205) 257-1000. The Company is a wholly owned subsidiary of The
Southern Company ("Southern").
The Company is a regulated public utility engaged in the generation,
transmission, distribution and sale of electric energy within an approximately
44,500 square mile service area comprising most of the State of Alabama.
WHAT WILL THE DISTRIBUTION RATE BE ON THE PREFERRED SECURITIES?
Distributions on the Preferred Securities ("Distributions") will initially
be paid at a rate (a "Distribution Rate") of % per annum (the "Initial
Distribution Rate"), payable semiannually in arrears, for the period from the
date of original issuance of the Preferred Securities, which is expected to be
October , 2002, through September 30, 2009 (the "Initial Fixed Rate Period"). If
the Preferred Securities are not redeemed,
S-3
the Company and the Trust will have the option to remarket the Preferred
Securities prior to expiration of the Initial Fixed Rate Period (to be in effect
after the Initial Fixed Rate Period) to establish a new fixed per annum
Distribution Rate (together with the Initial Distribution Rate, a "Fixed Rate")
with respect to the Preferred Securities. Any new Fixed Rate so established will
be in effect for such period (together with the Initial Fixed Rate Period, a
"Fixed Rate Period") as the Company and the Trust determine in connection with
the remarketing, provided that a Fixed Rate Period must be for a duration of at
least six months. A Fixed Rate Period may not extend beyond October 1, 2042, the
final maturity of the Series E Junior Subordinated Notes, and may not end on a
day other than a day immediately preceding a Distribution Payment Date, as
defined herein. Distributions on Preferred Securities during any Fixed Rate
Period will be payable semiannually in arrears. Prior to the expiration of any
Fixed Rate Period, the Company and the Trust will have the option to again
remarket the Preferred Securities to establish a new Fixed Rate for a new Fixed
Rate Period.
If the Preferred Securities are not redeemed and if the Company and the
Trust elect not to remarket the Preferred Securities prior to expiration of the
Initial Fixed Rate Period or any subsequent Fixed Rate Period, or if they are
unable to successfully remarket all Preferred Securities tendered for sale in a
remarketing, Distributions on the Preferred Securities will thereafter be
payable at a floating rate (a "Floating Rate") reset quarterly based on 3-month
LIBOR plus %, subject to the right of the Company and the Trust to subsequently
remarket Preferred Securities to again establish a Fixed Rate for a new Fixed
Rate Period as described below. During any period during which a Floating Rate
is in effect (a "Floating Rate Period"), Distributions on the Preferred
Securities will be payable quarterly in arrears. The Company and the Trust may
elect to remarket the Preferred Securities prior to any Distribution Payment
Date relating to a Floating Rate Period in order to again establish a new Fixed
Rate for a new Fixed Rate Period.
In this prospectus supplement, we sometimes refer to each semiannual
distribution period in a Fixed Rate Period (including, without limitation, the
Initial Fixed Rate Period) and each quarterly distribution period in a Floating
Rate Period as a "Distribution Period."
WHAT ARE THE PROCEDURES FOR REMARKETING THE PREFERRED SECURITIES AND
ESTABLISHING THE DISTRIBUTION RATE FOR DISTRIBUTION PERIODS SUBSEQUENT TO THE
INITIAL FIXED RATE PERIOD?
In connection with any remarketing of the Preferred Securities, holders of
Preferred Securities will be given the option to elect to retain or tender all
or a portion of their Preferred Securities for sale in the remarketing. Such
election will be required to be made on a date that is no later than the fifth
business day prior to the proposed remarketing date (an "Election Date"). A
holder that fails to give an election notice to the remarketing agent by the
Election Date will be deemed to have elected to sell its Preferred Securities in
the remarketing. A holder of Preferred Securities may notify the remarketing
agent of its interest in retaining all or some of its Preferred Securities,
provided that the new Distribution Rate is a Fixed Rate not less than a rate per
annum specified by the holder. In such case, the holder will be given priority
to purchase the specified number of Preferred Securities in the remarketing,
provided the new Distribution Rate is a Fixed Rate not less than the rate
specified by the holder.
If the remarketing agent is able to remarket all Preferred Securities
tendered or deemed tendered in connection with the remarketing at a price equal
to $1,000 per Preferred Security for the desired new Fixed Rate Period selected
by the Company and the Trust, the Distribution Rate on the Preferred Securities
for the new Fixed Rate Period will be the rate that the remarketing agent
determines, in its sole judgment, to be the lowest rate per annum, if any, that
will enable it to remarket all Preferred Securities tendered or deemed tendered
for remarketing at a price of $1,000 per Preferred Security.
If the remarketing agent is unable to remarket all Preferred Securities
tendered or deemed tendered in connection with a remarketing at a price equal to
$1,000 per Preferred Security for the desired new Fixed Rate Period selected by
the Company and the Trust, the Distribution Rate on the Preferred Securities
will be the then applicable Floating Rate. In such case, each holder will
continue to hold its Preferred Securities at the Floating Rate.
The purchase price payable to a holder for any Preferred Securities
repurchased from it in a remarketing is expected to be equal to $1,000 per
Preferred Security, plus accrued and unpaid Distributions. Lehman
S-4
Brothers Inc. is expected to act as remarketing agent (the "Remarketing Agent")
in connection with any remarketing of the Preferred Securities.
You should read "Description of Preferred Securities -- Remarketing" for
more information regarding the procedures relating to a remarketing of the
Preferred Securities.
WHEN WILL YOU RECEIVE DISTRIBUTIONS?
If you purchase the Preferred Securities, you are entitled to receive
Distributions at the Distribution Rate on the applicable distribution payment
date (each, a "Distribution Payment Date"). During the Initial Fixed Rate
Period, Distributions will be payable semi-annually in arrears on April 1 and
October 1 of each year, commencing on April 1, 2003. In any subsequent Fixed
Rate Period, Distributions will be payable semiannually in arrears determined
based on the remarketing date (if the Preferred Securities are remarketed for a
new Fixed Rate Period that begins on April 1 or October 1, Distributions will be
payable on April 1 and October 1 of each year and if the Preferred Securities
are remarketed for a new Fixed Rate Period that begins on January 1 or July 1,
Distributions will be payable on January 1 and July 1 of each year).
Distributions during any Floating Rate Period will be payable on January 1,
April 1, July 1 and October 1 of each year.
WHEN CAN PAYMENT OF YOUR DISTRIBUTIONS BE DEFERRED?
The Company can, on one or more occasions, defer interest payments on the
Series E Junior Subordinated Notes for up to five years at a time (each, an
"Extension Period"). A deferral of interest payments cannot extend, however,
beyond the maturity date of the Series E Junior Subordinated Notes (which is
October 1, 2042). See "Description of the Series E Junior Subordinated Notes --
Option to Extend Interest Payment Period."
If the Company defers interest payments on the Series E Junior Subordinated
Notes, the Trust will also defer Distributions on the Preferred Securities.
During any Extension Period, Distributions will continue to accrue on the
Preferred Securities. If the Company elects to defer interest during a Fixed
Rate Period, Distributions will continue to accrue at the Fixed Rate until the
expiration of the Fixed Rate Period. Upon expiration of such Fixed Rate Period
and any Fixed Rate Period during the Extension Period, the Company and the Trust
will have the option to remarket the Preferred Securities for a new Fixed Rate
Period. If the Company and the Trust do not remarket the Preferred Securities,
the Floating Rate during the deferral period shall not be less than the Fixed
Rate for the Fixed Rate Period just ended. If the Company elects to defer
interest during a Floating Rate Period, Distributions will continue to accrue at
the applicable Floating Rate, reset quarterly, subject to the right of the
Company and the Trust to remarket the Preferred Securities prior to any
Distribution Payment Date in order to establish a new Fixed Rate Period to begin
on that Distribution Payment Date. Deferred Distributions will themselves accrue
interest at the then prevailing Distribution Rate (to the extent permitted by
law). Once the Company makes all interest payments on the Series E Junior
Subordinated Notes, with accrued interest, it can again defer interest payments
on the Series E Junior Subordinated Notes.
During any period in which the Company defers interest payments on the
Series E Junior Subordinated Notes, the Company will not be permitted to (with
limited exceptions):
- pay a dividend or make any distributions on its capital stock or redeem,
purchase, acquire or make a liquidation payment on any of its capital
stock, or make any guarantee payments with respect to the foregoing; or
- make an interest, principal or premium payment on, or repurchase or
redeem, any of its debt securities that rank equal with or junior to the
Series E Junior Subordinated Notes.
If the Company 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. You
S-5
should consult with your own tax advisor regarding the tax consequences of an
investment in the Preferred Securities. See "Certain Federal Income Tax
Consequences -- 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 October 1, 2042 or are otherwise due.
In addition, if the Company 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 liquidation amount equal to the principal amount of
the Series E Junior Subordinated Notes redeemed.
The Company can redeem some or all of the Series E Junior Subordinated
Notes before their maturity on the last Distribution Payment Date relating to
any Fixed Rate Period (including, without limitation, the Initial Fixed Rate
Period) or on any Distribution Payment Date relating to a Floating Rate Period
(the "Redemption Date") at 100% of their principal amount plus accrued and
unpaid interest to that redemption date (the "Redemption Price"). The Company
also has the option to redeem the Series E Junior Subordinated Notes, in whole,
but not in part, at any time at the Redemption Price if certain changes in tax
or investment company law occur and certain other conditions are satisfied, as
more fully described under "Description of the Preferred Securities -- Special
Event Redemption; Distribution of Series E Junior Subordinated Notes."
WHAT IS THE COMPANY'S GUARANTEE OF THE PREFERRED SECURITIES?
The Company will guarantee the Preferred Securities based on:
- its obligations to make payments on the Series E Junior Subordinated
Notes;
- its obligations under the Guarantee; and
- its obligations under the Trust Agreement and the Agreement as to
Expenses and Liabilities between the Company and the Trust (the
"Agreement as to Expenses and Liabilities").
The Company's obligations under the Series E Junior Subordinated Notes are
subordinate and junior in right of payment to all of its Senior Indebtedness (as
defined under "Description of the Junior Subordinated Notes -- Subordination" in
the accompanying Prospectus), which aggregated approximately $4,285,000,000 at
June 30, 2002.
The payment of Distributions on the Preferred Securities is guaranteed by
the Company under the Guarantee, but only to the extent the Trust has funds
legally and immediately available to make Distributions.
The Company's obligations under the Guarantee are:
- subordinate and junior in right of payment to its other liabilities;
- equal in rank to its most senior preferred stock; and
- senior to its common stock.
WHEN COULD THE SERIES E JUNIOR SUBORDINATED NOTES BE DISTRIBUTED TO YOU?
The Company has the right to terminate the Trust at any time. If the
Company terminates the Trust, the Trust will liquidate by distributing the
Series E Junior Subordinated Notes to holders of the Preferred Securities and
the Common Securities on a pro rata basis. For a discussion of the Company's
ability to distribute the Series E Junior Subordinated Notes, see "Description
of the Preferred Securities -- Special Event Redemption; Distribution of Series
E Junior Subordinated Notes" and "-- Liquidation Distribution Upon Dissolution."
S-6
WILL THE PREFERRED SECURITIES BE LISTED ON A STOCK EXCHANGE?
The Preferred Securities will not be listed on a stock exchange.
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 a
securities depository or its nominee. This means that you will not receive a
certificate for your Preferred Securities and that your broker will maintain
your position in the Preferred Securities. The Company expects that the
Preferred Securities will be ready for delivery through a securities depository
on or about October , 2002. The Depository Trust Company ("DTC") will act as the
initial securities depository for the Preferred Securities.
S-7
RISK FACTORS
Your investment in the Preferred Securities will involve certain risks. You
should carefully consider the following discussion of risks, and the other
information in this Prospectus Supplement and the accompanying Prospectus,
before deciding whether an investment in the Preferred Securities is suitable
for you.
THE COMPANY'S OBLIGATIONS UNDER THE GUARANTEE AND THE SERIES E JUNIOR
SUBORDINATED NOTES ARE SUBORDINATED.
The Company's obligations under the Series E Junior Subordinated Notes will
rank junior in priority of payment to all of the Company's Senior Indebtedness
(as defined under "Description of the Junior Subordinated Notes --
Subordination" in the accompanying Prospectus). This means that the Company
cannot make any payments on the Series E Junior Subordinated Notes if it
defaults on a payment of Senior Indebtedness and does not cure such default
within the applicable grace period or if the Senior Indebtedness becomes
immediately due because of a default and has not yet been paid in full. The
Company's Senior Indebtedness was approximately $4,285,000,000 as of June 30,
2002.
The Company's obligations under the Guarantee will rank in priority of
payment as follows:
- subordinate and junior in right of payment to its other liabilities;
- equal in rank to its most senior preferred stock; and
- senior to its common stock
This means that the Company cannot make any payments on the Guarantee if it
defaults on a payment on any of its other liabilities. In addition, in the event
of the bankruptcy, liquidation or dissolution of the Company, its assets would
be available to pay obligations under the Guarantee only after the Company made
all payments on its other liabilities.
Neither the Preferred Securities, the Series E Junior Subordinated Notes
nor the Guarantee limit the ability of the Company to incur additional
indebtedness, including indebtedness that ranks senior in priority of payment to
the Series E Junior Subordinated Notes and the Guarantee. See "Description of
the Guarantees -- Subordination" and "Description of the Junior Subordinated
Notes -- Subordination" in the accompanying Prospectus.
THE GUARANTEE ONLY COVERS PAYMENTS IF THE TRUST HAS CASH AVAILABLE.
The ability of the Trust to pay scheduled Distributions on the Preferred
Securities, the redemption price of the Preferred Securities and the liquidation
amount of each Preferred Security is solely dependent upon the Company making
the related payments on the Series E Junior Subordinated Notes when due.
If the Company 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 Guarantee for payment of these amounts.
Instead, you:
- may directly sue the Company or seek other remedies to collect your
pro rata share of payments owed; or
- may rely on the Property Trustee to enforce the Trust's rights under
the Series E Junior Subordinated Notes.
DEFERRAL OF DISTRIBUTIONS WOULD HAVE TAX CONSEQUENCES FOR YOU AND MAY AFFECT THE
TRADING PRICE OF THE PREFERRED SECURITIES.
The Company can, on one or more occasions, defer interest payments on the
Series E Junior Subordinated Notes for up to five years at any time. If the
Company defers interest payments on the Series E
S-8
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 prevailing Distribution Rate (to the extent permitted by law).
If the Company 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 the event of a deferral, this income
would constitute OID. 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. Instead, the accrued
Distributions will be paid to the holder of record on the record date,
regardless of who the holder of record may have been on any date during the
deferral period. Moreover, the accrued OID will be added to your adjusted tax
basis in the Preferred Securities but might not be reflected in the amount you
realize on the sale. To the extent the amount realized on a sale is less than
your adjusted tax basis, you will recognize a capital loss for United States
federal income tax purposes. The deduction of capital losses is subject to
limitations.
The Company has no current intention of deferring interest payments on the
Series E Junior Subordinated Notes. However, if the Company exercises its right
in the future, the Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest on the Series 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 the Company'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 Consequences" 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.
Certain tax law changes have been proposed from time to time which could
affect the deductibility of interest paid on the Series E Junior Subordinated
Notes. None of these proposals has become law. If certain changes in tax or
investment company law occur and are continuing, and certain other conditions
are satisfied, the Company has the right to redeem the Series 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 $1,000 per security plus any accrued
and unpaid Distributions. See "Description of the Preferred Securities --
Special Event Redemption; Distribution of Series E Junior Subordinated Notes"
and "Certain Federal Income Tax Consequences -- Effect of Possible Tax Law
Changes on the Preferred Securities."
PREFERRED SECURITIES MAY BE REDEEMED AT THE OPTION OF THE COMPANY.
At the option of the Company, the Series E Junior Subordinated Notes may be
redeemed, in whole or in part, on the last Distribution Payment Date relating to
any Fixed Rate Period (including, without limitation, the Initial Fixed Rate
Period) or on any Distribution Payment Date relating to a Floating Rate Period
at the Redemption Price. See "Description of the Series D Junior Notes --
Optional Redemption." You should assume that the Company will exercise its
redemption option if the Company is able to refinance at a lower interest rate
or it is otherwise in the interest of the Company to redeem the Series E Junior
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."
S-9
THERE CAN BE NO ASSURANCE AS TO THE LIQUIDITY OF THE PREFERRED SECURITIES.
There is no assurance that a secondary market for the Preferred Securities
will develop or, if such a market develops, that the Preferred Securities will
trade at or close to their stated liquidation amount. The ability of a holder of
the Preferred Securities to sell such Preferred Securities may depend on the
success of the remarketing. If the Remarketing Agent cannot remarket the
Preferred Securities or the Company does not elect to remarket the Preferred
Securities, the holders of the Preferred Securities may not be able to sell
Preferred Securities. It is not expected that the Preferred Securities will be
listed on any securities exchange.
AFTER THE INITIAL FIXED RATE PERIOD, THE DISTRIBUTION RATE ON THE PREFERRED
SECURITIES WILL VARY.
The Distribution Rate on the Preferred Securities is fixed at % per annum
for the Initial Fixed Rate Period. Thereafter, the Preferred Securities will pay
distributions at Fixed Rates during future Fixed Rate Periods, which rates will
be determined through remarketings of the Preferred Securities, or at Floating
Rates during Floating Rate Periods, which rates will be determined by reference
to 3-month LIBOR plus %. In connection with any proposed remarketing to set a
Fixed Rate for a new Fixed Rate Period, you may have the opportunity to elect to
sell your Preferred Securities to the Remarketing Agent at a price of $1,000,
plus accrued and unpaid distributions, per Preferred Security. If, however, the
remarketing is unsuccessful, the Preferred Securities will pay Distributions at
a Floating Rate until any future time that the Company and the Trust elect to
remarket the Preferred Securities to set a new Fixed Rate and are able to
successfully remarket the Preferred Securities.
Fixed Rate Periods and Floating Rate Periods can be of varying lengths and
varying Distribution Rates. Distribution Rates on the Preferred Securities may
move back and forth between Fixed Rates and Floating Rates over the life of the
Preferred Securities.
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, in a Remarketing, 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 the Company'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.
THE COMPANY MAY TERMINATE THE TRUST AT ANY TIME.
The Company has the right to terminate the Trust at any time. If the
Company decides to exercise its right to terminate the Trust, the Trust will
liquidate by distributing the Series 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.
The Company has no current intention of causing the termination of the
Trust and the distribution of the Series E Junior Subordinated Notes. The
Company anticipates that it would consider exercising this right in the event
that expenses associated with maintaining the Trust were substantially greater
than currently
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expected such as if certain changes in tax law or investment company law
occurred. See "Description of the Preferred Securities -- Special Event
Redemption; Distribution of Series E Junior Subordinated Notes." The Company
cannot predict the other circumstances under which this right would be
exercised.
YOU HAVE LIMITED VOTING RIGHTS.
Generally, you will not have any voting rights. In particular, subject to
certain exceptions, only the Company can appoint or remove any of the Securities
Trustees. See "Description of the Preferred Securities -- Voting Rights."
ALABAMA POWER CAPITAL TRUST V
The Trust is a statutory trust created under Delaware law pursuant to the
filing of a certificate of trust with the Delaware Secretary of State on
November 18, 1997. The Trust's business is defined in a trust agreement,
executed by the Company, as Depositor, and the Delaware Trustee thereunder. This
trust agreement will be amended and restated in its entirety on the date of
original issuance of the Preferred Securities substantially in the form filed as
an exhibit to the Registration Statement of which this Prospectus Supplement and
the accompanying Prospectus form a part (the "Trust Agreement"). The Trust
Agreement will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "1939 Act"). The Trust exists for the exclusive purposes
of (i) issuing the Trust Securities representing undivided beneficial interests
in the assets of the Trust, (ii) investing the gross proceeds of the Trust
Securities in the Series 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 45 years, but may terminate earlier as
provided in the Trust Agreement.
Upon issuance of the Preferred Securities, the purchasers thereof will own
all of the Preferred Securities. The Company will acquire all of the Common
Securities, which will have an aggregate liquidation amount equal to
approximately 3% of the total capital of the Trust. The Common Securities will
rank on a parity with, and payments will be made thereon pro rata, with the
Preferred Securities, except that upon the occurrence and continuance of a
Subordinated Note Indenture Event of Default (as defined below), the rights of
the holders of Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise will be subordinated to the
rights of the holders of the Preferred Securities.
The Trust's business and affairs will be conducted by the Securities
Trustees, which shall be appointed by the Company as the holder of the Common
Securities. Two officers of the Company initially will serve as the
Administrative Trustees. JPMorgan Chase Bank will serve as Property Trustee and
will hold legal title to the Series E Junior Subordinated Notes issued by the
Company on behalf of the Trust and the holders of the Trust Securities. Chase
Manhattan Bank USA, National Association 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, the Company, as the
holder of all the Common Securities, will have the right to appoint, remove or
replace all the Securities Trustees.
The Series 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.
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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 Statutory Trust Act, and the 1939 Act. See "Description
of the Preferred Securities."
The Trust's registered office in the State of Delaware is c/o Chase
Manhattan Bank USA, National Association, c/o JPMorgan Chase, 500 Stanton
Christiana Road, Building 4 (3rd Floor), Newark, Delaware 19713. The principal
place of business of the Trust shall be c/o the Company, 600 North 18th Street,
Birmingham, Alabama 35291, telephone (205) 257-1000, Attn: Treasurer.
SELECTED FINANCIAL INFORMATION
The following data of the Company is qualified in its entirety by reference
to and, therefore, should be read together with the detailed information and
financial statements appearing in the documents incorporated herein by
reference.
SIX
MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------ JUNE 30,
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ -----------
(MILLIONS, EXCEPT RATIOS) (UNAUDITED)
Operating Revenues........................ $3,149 $3,386 $3,385 $3,667 $3,586 $1,727
Earnings Before Interest and Income
Taxes................................... 836 892 900 959 922 443
Net Income After Dividends on Preferred
Stock................................... 376 377 400 420 387 188
Ratio of Earnings to Fixed
Charges(1)(4)........................... 3.46 3.12 3.59 3.46 3.31 3.44
Ratio of Earnings to Fixed Charges Plus
Preferred Dividend Requirements (Pre-
Income Tax Basis)(2)(4)................. 3.18 2.90 3.26 3.18 3.05 3.16
CAPITALIZATION
AS OF JUNE 30, 2002
-------------------------------
ACTUAL AS ADJUSTED(3)
------ --------------
(MILLIONS, EXCEPT PERCENTAGES)
Common Stock Equity......................................... $3,285 $ %
Cumulative Preferred Stock.................................. 318
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Company Junior
Subordinated Notes........................................ 347
Senior Notes................................................ 2,815
Other Long-Term Debt........................................ 515
------ ------ -----
Total, excluding amounts due within one year (approximately
$908,000,000)............................................. $7,280 $ 100.0%
====== ====== =====
---------------
(1) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Earnings Before Interest and Income Taxes" 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.
(3) Reflects the issuance of the Preferred Securities and the proposed issuance
of 100,000 Alabama Power Capital Trust IV Flexible Trust Preferred
Securities (Five Year Initial Fixed Rate Period) (Liquidation Amount $1,000
Per Preferred Security) and the use of the proceeds thereof.
(4) These ratios have been revised to reflect a reclassification of income and
expense of the Company's external nuclear decommissioning trust funds as
presented in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.
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USE OF PROCEEDS
The Trust will invest the proceeds received from the sale of the Preferred
Securities in Series E Junior Subordinated Notes. The net proceeds received by
the Company from such investment will be used by the Company to redeem higher
cost securities of the Company and for other general corporate purposes.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement will be qualified as an indenture under the 1939
Act. The Property Trustee will act as the Indenture trustee with respect to the
Trust, as well as the 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 and the Delaware Statutory 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 Statutory Trust Act and 1939 Act.
GENERAL
The Trust Agreement authorizes the Administrative Trustees, on behalf of
the Trust, to issue the Preferred Securities, which represent preferred
undivided beneficial interests in the assets of the Trust, and the Common
Securities, which represent common undivided beneficial interests in the assets
of the Trust. All of the Common Securities will be owned by the Company. The
Common Securities rank on a parity with, 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 the Company on a subordinated basis as and to the extent described
under "Description of the Guarantees" in the accompanying Prospectus. The
Guarantee does not cover payment of Distributions on the Preferred Securities
when the Trust does not have legally and immediately available funds sufficient
to make such Distributions. In such event, the remedy of a holder of Preferred
Securities is to direct the Property Trustee to enforce its rights under the
Series E Junior Subordinated Notes. In addition, a holder of Preferred
Securities may institute a legal proceeding directly against the Company,
without first instituting a legal proceeding against the Property Trustee or any
other person or entity, for enforcement of payment to such holder of principal
of or interest on the Series 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
the Company's obligations under the Agreement as to Expenses and Liabilities,
constitute a full and unconditional guarantee by the Company of payments due on
the Preferred Securities. See "-- Voting Rights" below.
DISTRIBUTIONS
General
The Initial Distribution Rate on the Preferred Securities will be % per
annum, payable semiannually in arrears, for the Initial Fixed Rate Period. If
the Preferred Securities are not redeemed, the Company and the Trust will have
the option to remarket the Preferred Securities prior to the expiration of the
Initial Fixed Rate Period (to be in effect after the Initial Fixed Rate Period)
to establish a new Fixed Rate with respect to the Preferred Securities. Any new
Fixed Rate so established will be in effect for such Fixed Rate Period as the
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Company and the Trust determine in connection with the remarketing, provided
that a Fixed Rate Period must be for a duration of at least six months, may not
extend beyond the stated maturity of the Series E Junior Subordinated Notes, and
may not end on a day other than the last day of a calendar quarter.
Distributions on Preferred Securities during any Fixed Rate Period will be
payable semiannually in arrears. Prior to expiration of any Fixed Rate Period,
the Company and the Trust will have the option to again remarket the Preferred
Securities to establish a new Fixed Rate for a new Fixed Rate Period.
If the Preferred Securities are not redeemed and if the Company and the
Trust elect not to remarket the Preferred Securities prior to expiration of the
Initial Fixed Rate Period or any subsequent Fixed Rate Period, or if they are
unable to successfully remarket all Preferred Securities tendered for sale in a
remarketing, Distributions on the Preferred Securities will thereafter be
payable at the Floating Rate, subject to the right of the Company and the Trust
to subsequently remarket Preferred Securities to again establish a Fixed Rate
for a new Fixed Rate Period. During any Floating Rate Period, Distributions on
the Preferred Securities will be payable quarterly in arrears. The Company and
the Trust may elect to remarket the Preferred Securities prior to any
Distribution Payment Date occurring relating to a Floating Rate Period in order
to again establish Distributions at a Fixed Rate for a new Fixed Rate Period.
During the Initial Distribution Period, Distributions will be payable
semiannually in arrears on April 1 and October 1 of each year, commencing on
April 1, 2003. In any subsequent Fixed Rate Period, Distributions will be
payable semiannually in arrears determined based on the remarketing date (if the
Preferred Securities are remarketed for a new Fixed Rate Period that begins on
April 1 or October 1, Distributions will be payable on April 1 and October 1 of
each year, and if the Preferred Securities are remarketed for a new Fixed Rate
Period that begins on January 1 or July 1, Distributions will be payable on
January 1 and July 1 of each year). Distributions during any Floating Rate
Period will be payable on January 1, April 1, July 1 and October 1 of each year.
Distributions shall be payable on the Distribution Payment Date to holders
of record as of the opening of business on the Business Day immediately
preceding such Distribution Payment Date (the "Record Date").
The amount of Distributions per Preferred Security payable on each
semiannual Distribution Payment Date relating to a Fixed Rate Period will be
computed on the basis of a 360-day year of twelve 30-day months.
The amount of Distributions per Preferred Security payable on each
quarterly Distribution Payment Date in respect of a Floating Rate Period will be
computed by multiplying the per annum Distribution Rate in effect for such
Distribution Period by a fraction, the numerator of which will be the actual
number of days in such Distribution Period (or portion thereof) (determined by
including the first day thereof and excluding the last thereof) and the
denominator of which will be 360, and multiplying the rate so obtained by
$1,000.
Distributions on the Preferred Securities must be paid on the Distribution
Payment 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."
Determining the Floating Rate
During any Floating Rate Period, the Floating Rate shall be 3-month LIBOR
plus % reset quarterly. The Calculation Agent shall calculate 3-month LIBOR and
the amount of Distributions payable on each quarterly Distribution Payment Date
relating to a Floating Rate Period. Promptly upon such determination, the
Calculation Agent shall notify the Company, the Indenture Trustee and the
Property Trustee, if the Property Trustee or Indenture Trustee is not then
serving as the Calculation Agent, of the Floating Rate for the new Distribution
Period. The Floating Rate determined by the Calculation Agent, absent manifest
error, shall be binding and conclusive upon the beneficial owners and holders of
the Preferred Securities, the Company and the Securities Trustees.
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If the following circumstances exist on any Floating Rate Determination
Date, the Calculation Agent shall determine the Floating Rate as follows:
(1) In the event no 3-month LIBOR appears on Telerate Page 3750 as of
approximately 11:00 a.m., London time, on a Floating Rate Determination
Date, the Calculation Agent shall request the principal London offices of
each of four major banks in the London interbank market selected by the
Calculation Agent (after consultation with the Company) to provide a
quotation of the rate (the "Rate Quotation") at which three-month deposits
in amounts of not less than $1,000,000 are offered by it to prime banks in
the London interbank market, as of approximately 11:00 a.m., London time,
on such Floating Rate Determination Date, that is representative of single
transactions at such time (the "Representative Amounts"). If at least two
Rate Quotations are provided, the Floating Rate will be the arithmetic mean
of the Rate Quotations obtained by the Calculation Agent, plus %.
(2) In the event no 3-month LIBOR appears on Telerate Page 3750 as of
approximately 11:00 a.m., London time, on a Floating Rate Determination
Date and there are fewer than two Rate Quotations, the Floating Rate will
be the arithmetic mean of the rates quoted at approximately 11:00 a.m., New
York City time, on such Floating Rate Determination Date, by three major
banks in New York City selected by the Calculation Agent (after
consultation with the Company), for loans in Representative Amounts in U.S.
dollars to leading European banks, having an index maturity of three months
for a period commencing on the second London Business Day immediately
following such Floating Rate Determination Date, plus %; provided, however,
that if fewer than three banks selected by the Calculation Agent are
quoting such rates, the Floating Rate for the applicable Floating Rate
Period will be the Floating Rate in effect for the preceding Floating Rate
Period.
As used herein:
"Business Day" means a day other than (i) a Saturday or Sunday, (ii) a day
on which banks in New York, New York are authorized or obligated by law or
executive order to remain closed, or (iii) a day on which the Indenture
Trustee's corporate trust office is closed for business.
"Calculation Agent" means JPMorgan Chase Bank, or its successor appointed
by the Company, acting as calculation agent.
"3-month LIBOR" for any Floating Rate Determination Date will be the
offered rate for deposits in U.S. dollars having an index maturity of three
months for a period commencing on the second London Business Day immediately
following the Floating Rate Determination Date in amounts of not less than
$1,000,000, such a rate as appears on Telerate Page 3750 or a successor reporter
of such rates selected by the Calculation Agent and acceptable to the Company,
at approximately 11:00 a.m., London time, on the Floating Rate Determination
Date (the "Reported Rate").
"London Business Day" means a day that is a Business Day and a day on which
dealings in deposits in U.S. dollars are transacted, or with respect to any
future date are expected to be transacted, in the London interbank market.
"Telerate Page 3750" means the display designated on page 3750 on Moneyline
Telerate (or such other page as may replace the 3750 page on the service or such
other service as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar deposits).
"Floating Rate Determination Date" means the second London Business Day
immediately preceding the first day of the relevant Distribution Period in the
Floating Rate Period.
Deferred Distributions
The Company 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 which, if exercised, would defer Distributions on the Preferred Securities
during any Extension Period. During this Extension Period, Distributions will
continue to accrue on the Preferred Securities at the then applicable
Distribution Rate. If the Company elects to defer interest during a
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Fixed Rate Period, Distributions will continue to accrue at the Fixed Rate until
the expiration of the Fixed Rate Period. Upon expiration of such Fixed Rate
Period and any Fixed Rate Period during the Extension Period, the Company and
the Trust will have the option to remarket the Preferred Securities for a new
Fixed Rate Period. If the Company and the Trust do not remarket the Preferred
Securities, the Floating Rate during the Extension Period shall not be less than
the Fixed Rate for the Fixed Rate Period just ended. If the Company elects to
defer interest during a Floating Rate Period, Distributions will continue to
accrue at the applicable Floating Rate, reset quarterly, subject to the right of
the Company and the Trust to remarket the Preferred Securities prior to any
Distribution Payment Date in order to establish a new Fixed Rate for a new Fixed
Rate Period.
An Extension Period shall not extend beyond the stated maturity of the
Series E Junior Subordinated Notes. Prior to the termination of any Extension
Period, the Company may further defer payments of interest provided that the
Extension Period, together with all such previous and further extensions
thereof, may not exceed five (5) years. The Company may only terminate an
Extension Period on the last day of a Distribution Period. Upon the termination
of any Extension Period and the payment of all amounts then due, the Company may
select a new Extension Period, subject to the above requirements. There could be
multiple Extension Periods of varying lengths throughout the term of the Series
E Junior Subordinated Notes.
Deferred installments of interest on the Series E Junior Subordinated Notes
will bear interest, compounded on each Interest Payment Date, at a rate per
annum equal to the applicable Distribution Rate. Any 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 preceding the termination of such
Extension Period. See "Description of the Series E Junior Subordinated Notes --
Interest" and "-- Option to Extend Interest Payment Period."
REDEMPTION
The Preferred Securities are subject to mandatory redemption upon repayment
of the Series E Junior Subordinated Notes at maturity, their earlier redemption
or when they are otherwise due. The Series E Junior Subordinated Notes will
mature on October 1, 2042, and may be redeemed, in whole or in part, at the
option of the Company, on the last Distribution Payment Date relating to any
Fixed Rate Period (including, without limitation, the Initial Fixed Rate
Period), and on any Distribution Payment Date relating to a Floating Rate Period
or at any time in whole upon the occurrence of a Special Event (as defined
herein). Upon the repayment of the Series E Junior Subordinated Notes, whether
at maturity, upon redemption or when they are otherwise due, 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. See "Description of the Series E Junior Subordinated
Notes -- Optional Redemption." 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 $1,000 or
integral multiples thereof) of the aggregate liquidation amount of Preferred
Securities of a denomination larger than $1,000; 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 $1,000 plus accrued and unpaid Distributions thereon to
the date of payment (the "Redemption Price").
SPECIAL EVENT REDEMPTION; DISTRIBUTION OF SERIES E JUNIOR SUBORDINATED NOTES
Upon the occurrence of a Special Event at any time, the Company will have
the option to redeem the Series E Junior Subordinated Notes in whole (and thus
cause the redemption of the Preferred Securities in
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whole) (a "Special Event Redemption"). A Special Event is either an Investment
Company Act Event or a Tax Event.
An "Investment Company Act Event" means that the Administrative Trustees
and the Company shall have received an opinion of independent counsel (which may
be counsel to the Company) to the effect that, as a result of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority after the Issue Date, there is more than an insubstantial risk that
the Trust is or will be considered an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act").
"Tax Event" means that the Administrative Trustees and the Company shall
have received an opinion from independent tax counsel experienced in such
matters (which may be counsel to the Company) to the effect that, as a result of
(a) any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to, or
change in, an interpretation or application of such laws or regulations, there
is more than an insubstantial risk that (i) the Trust would be subject to United
States federal income tax with respect to income accrued or received on the
Series E Junior Subordinated Notes, (ii) interest payable on the Series E Junior
Subordinated Notes would not be deductible by the Company for United States
federal income tax purposes or (iii) the Trust would be subject to more than a
de minimis amount of other taxes, duties or other governmental charges, which
change or amendment becomes effective on or after the Issue Date.
The Company will have the right at any time to terminate the Trust and,
after satisfaction of liabilities to creditors of the Trust, if any, cause the
Series 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 the Company. Circumstances under which the Company may
determine to exercise such right could include the occurrence of an Investment
Company Act Event or a Tax Event, adverse tax consequences to the Company or the
Trust that are not within the definition of a Tax Event because they do not
result from an amendment or change described in such definition, and changes in
the accounting requirements applicable to the Preferred Securities as described
under "Accounting Treatment of the Trusts" in the accompanying Prospectus.
If Series E Junior Subordinated Notes are distributed to the holders of the
Preferred Securities, the Interest Rate, interest payable, Interest Periods and
Interest Payment Dates for the Series E Junior Subordinated Notes will be
determined in the same manner as the Distribution Rate, Distributions,
Distribution Periods and Distribution Payment Dates for the Preferred Securities
and the associated Remarketing Procedures shall remain the same except (i) the
effects of Trust Agreement Events of Default shall be occasioned only by the
Subordinated Note Indenture Events of Default and (ii) the cure and waiver
provisions relating to Trust Agreement Events of Default shall be superceded by
the cure and waiver provisions relating to Subordinated Note Indenture Events of
Default. See "Description of Junior Subordinated Notes -- Events of Default" in
the accompanying Prospectus. After the date for any distribution of Series E
Junior Subordinated Notes upon termination of the Trust, (i) the Preferred
Securities and the Guarantee will no longer be deemed to be outstanding, (ii)
the securities 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 Guarantee not held by the securities 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 Distribution Rate of, and accrued and unpaid
interest equal to accrued and unpaid Distributions on, such Preferred
Securities, until such certificates are presented to the Company or its agent
for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Series 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
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Trust, may trade at a discount to the price that the investor paid to purchase
the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
In the event that fewer than all of the Trust Securities are to be
redeemed, then the aggregate liquidation amount of the Trust Securities to be
redeemed shall be allocated 97% to the Preferred Securities and 3% to the Common
Securities.
The Preferred Securities redeemed on each redemption date shall be redeemed
at the Redemption Price with the proceeds from the contemporaneous redemption of
the Series 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
no longer 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 Redemption Price, but without
interest on such redemption price. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day. In
the event that payment of the Redemption Price in respect of Preferred
Securities is improperly withheld or refused and not paid either by the Trust or
by the Company pursuant to the Guarantee, Distributions on such Preferred
Securities will continue to accrue at the then applicable Distribution Rate,
from such redemption date originally established by the Trust for such Preferred
Securities to the date such redemption price is actually paid. See "-- Events of
Default" below, "Relationship Among the Preferred Securities, the Junior
Subordinated Notes and the Guarantees" and "Description of the Guarantees --
Events of Default" in the accompanying Prospectus.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), the Company or its
affiliates may, at any time and from time to time, purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
REMARKETING
Remarketing Procedures
Set forth below is a summary of the procedures to be followed in connection
with a remarketing of the Preferred Securities (or, if the Series E Junior
Subordinated Notes have been distributed to holders of the Securities in
liquidation of the Trust, the Series E Junior Subordinated Notes):
If the Company and the Trust elect to conduct a remarketing not less than
20 nor more than 35 Business Days prior to the related Election Date, the Trust
is required to give the notice of remarketing of the Preferred Securities to DTC
(unless a shorter period shall be acceptable to DTC). Such notice will describe
the Remarketing and will indicate the length of the proposed new Fixed Rate
Period and the proposed Remarketing Date. At any time prior to the Election
Date, the Company may elect to terminate a remarketing
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by giving DTC, the Remarketing Agent, the Property Trustee, the Indenture
Trustee and the Calculation Agent notice of such termination.
Not later than 4:00 P.M., New York City time, on an Election Date, each
holder of Preferred Securities may give, through the facilities of DTC, a notice
to the Property Trustee of its election ("Notice of Election") (i) to retain and
not to have all or any portion of the Preferred Securities owned by it
remarketed in the remarketing or (ii) to tender all or any portion of such
Preferred Securities for purchase in the Remarketing (such portion, in either
case, is required to be in the liquidation amount of $1,000 or any integral
multiple thereof). Any Notice of Election given to the Property Trustee will be
irrevocable and may not be conditioned upon the level at which the Fixed Rate is
established in the Remarketing. Promptly after 4:30 P.M., New York City time, on
such Election Date, the Property Trustee, based on the Notices of Election
received by it through DTC prior to such time, will notify the Trust, the
Company and the Remarketing Agent of the number of Preferred Securities to be
retained by holders of Preferred Securities and the number of Preferred
Securities tendered for purchase in the remarketing.
If any holder of Preferred Securities gives a Notice of Election to tender
Preferred Securities as described in clause (ii) in the prior paragraph, the
Preferred Securities so subject to such Notice of Election will be deemed
tendered for purchase in the Remarketing, notwithstanding any failure by such
holder to deliver or properly deliver such Preferred Securities to the
Remarketing Agent for purchase. If any holder of Preferred Securities fails
timely to deliver a Notice of Election, as described above, such Preferred
Securities will be deemed tendered for purchase in such remarketing,
notwithstanding such failure or the failure by such holder to deliver or
properly deliver such Preferred Securities to the Remarketing Agent for
purchase.
The right of each holder of Preferred Securities to have Preferred
Securities tendered for purchase shall be limited to the extent that (i) the
Remarketing Agent conducts a remarketing pursuant to the terms of the
Remarketing Agreement (as defined herein), (ii) Preferred Securities tendered
have not been called for redemption, (iii) the Remarketing Agent is able to find
a purchaser or purchasers for tendered Preferred Securities at a Fixed Rate and
(iv) such purchaser or purchasers deliver the purchase price therefor to the
Remarketing Agent.
Any holder of Preferred Securities that desires to continue to retain a
number of Preferred Securities, but only if the Fixed Rate is not less than a
specified rate per annum, should submit a Notice of Election to tender such
Preferred Securities and separately notify the Remarketing Agent of its interest
at the telephone number set forth in the Notice of Remarketing. If such holder
so notifies the Remarketing Agent, the Remarketing Agent will give priority to
such holder's purchase of such number of Preferred Securities in the
remarketing, providing that the Fixed Rate is not less than such specified rate.
If holders submit Notices of Election to retain all of the Preferred
Securities then outstanding, the Fixed Rate will be the rate determined by the
Remarketing Agent, in its sole discretion, as the rate that would have been
established had a remarketing been held on the related Remarketing Date.
On any Remarketing Date on which the remarketing is to be conducted, the
Remarketing Agent will use commercially reasonable efforts to remarket, at a
price equal to 100% of the liquidation amount thereof, Preferred Securities
tendered or deemed tendered for purchase.
If, as a result of such efforts, on any Remarketing Date, the Remarketing
Agent has determined that it will be able to remarket all Preferred Securities
tendered or deemed tendered for purchase in the remarketing at a Fixed Rate and
at a price of $1,000 per Preferred Security, prior to 4:00 P.M., New York City
time, on such Remarketing Date, the Remarketing Agent will determine the Fixed
Rate, which will be the rate per annum (rounded to the nearest one-thousandth
(0.001) of one percent per annum) which the Remarketing Agent determines, in its
sole judgment, to be the lowest Fixed Rate per annum, if any, that will enable
it to remarket all Preferred Securities tendered or deemed tendered for
remarketing at a price of $1,000 per Security.
If the Remarketing Agent is unable to remarket by 4:00 P.M., New York City
time, all Preferred Securities tendered or deemed tendered for purchase at a
price of $1,000 per Preferred Security the
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Distribution Rate shall be the Floating Rate. In such case, no Preferred
Securities will be sold in the remarketing and each holder will continue to hold
its Preferred Securities at the Floating Rate.
All Preferred Securities tendered or deemed tendered in the remarketing
will be automatically delivered to the account of the Remarketing Agent through
the facilities of DTC against payment of the purchase price therefor on the
Remarketing Settlement Date. The Remarketing Agent will make payment to the DTC
Participant of each tendering holder of Preferred Securities in the remarketing
through the facilities of DTC by the close of business on the Remarketing
Settlement Date.
In accordance with DTC's normal procedures, on the Remarketing Settlement
Date, the transactions described above with respect to each Preferred Security
tendered for purchase and sold in the remarketing will be executed through DTC
and the accounts of the DTC Participants will be debited and credited and such
Preferred Securities delivered by book entry as necessary to effect purchases
and sales of such Preferred Securities. DTC is expected to make payment in
accordance with its normal procedures.
If any holder selling Preferred Securities in the remarketing fails to
deliver such Preferred Securities, the DTC Participant of such selling holder
and of any other person that was to have purchased Preferred Securities in the
remarketing may deliver to any such other person a number of Preferred
Securities that is less than the number of Preferred Securities that otherwise
was to be purchased by such person. In such event, the number of Preferred
Securities to be so delivered will be determined by such DTC Participant and
delivery of such lesser number of Preferred Securities will constitute good
delivery.
The Remarketing Agent is not obligated to purchase any Preferred Securities
that would otherwise remain unsold in a remarketing. Neither the Trust, any
Securities Trustee, the Company nor the Remarketing Agent shall be obligated in
any case to provide funds to make payment upon tender of Preferred Securities
for remarketing.
As used herein:
"Remarketing Date" means any Business Day no later than the third Business
Day prior to any Remarketing Settlement Date.
"Remarketing Settlement Date" means the first Business Day of the next
Distribution Period.
"Election Date" means no later than the fifth Business Day prior to the
proposed Remarketing Date.
Remarketing Agent
The Remarketing Agent will be Lehman Brothers Inc. The Company and the
Trust will enter into a Remarketing Agreement (the "Remarketing Agreement") with
the Remarketing Agent which provides, among other things, that Lehman Brothers
Inc. will act as the exclusive Remarketing Agent and will use commercially
reasonable efforts to remarket Preferred Securities tendered or deemed tendered
for purchase in the remarketing at a price of $1,000 per Preferred Security.
Under certain circumstances, some portion of the Preferred Securities tendered
in the remarketing may be purchased by the Remarketing Agent. See "--
Remarketing Procedures."
The Remarketing Agreement provides that the Remarketing Agent shall incur
no liability to the Company or to any holder of Preferred Securities in its
individual capacity or as Remarketing Agent for any action or failure to act in
connection with a remarketing or otherwise, except as a result of gross
negligence or willful misconduct on its part.
The Company has agreed to indemnify the Remarketing Agent against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"), arising out of or in connection with its duties under
the Remarketing Agreement.
The Remarketing Agreement will also provide that any Remarketing Agent may
resign and be discharged from its duties and obligations thereunder; provided,
however, that no such resignation will become effective until the Company has
appointed at least one nationally recognized broker-dealer as successor
Remarketing Agent and such successor Remarketing Agent has entered into a
remarketing agreement with the Company
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and the Trust. In such case, the Company and the Trust will use its best
reasonable efforts to appoint a successor Remarketing Agent and enter into such
a remarketing agreement with such person as soon as reasonably practicable.
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 (the "Exchange Act"). DTC holds and provides asset
servicing for over 2 million issues of U.S. and non-U.S. equity issues,
corporate and municipal debt issues, and money market instruments from over 85
countries that DTC's participants ("Direct Participants") deposit with DTC. DTC
also facilitates the post-trade settlement among Direct Participants of sales
and other securities transactions in deposited securities, through electronic
computerized book-entry transfers and pledges between Direct Participants'
accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non-U.S. securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations. DTC is a wholly-owned subsidiary of The Depository Trust &
Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct
Participants of DTC and Members of the National Securities Clearing Corporation,
Government Securities Clearing Corporation, MBS Clearing Corporation, and
Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also
subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the
American Stock Exchange LLC, and the National Association of Securities Dealers,
Inc. Access to the DTC system is also available to others such as both U.S. and
non-U.S. securities brokers and dealers, banks, trust companies, and clearing
corporations that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants"). The
DTC Rules applicable to its Participants are on file with the Securities and
Exchange Commission (the "Commission"). More information about DTC can be found
at www.dtcc.com.
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 purchase. Beneficial Owners are, however,
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 Direct and Indirect Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Preferred Securities,
except in the event that use of the book-entry system for the Preferred
Securities is discontinued.
To facilitate subsequent transfers, all Preferred Securities deposited by
Direct Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of Preferred Securities with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect
any change in beneficial ownership. 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 Direct and
Indirect Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
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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's practice is to determine by lot the amount
of the interest of each Direct Participant in such Preferred Securities to be
redeemed.
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 Cede &
Co., or such other nominee as may be requested by an authorized representative
of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's
receipt of funds and corresponding detail information from the Trust or the
Property Trustee, on the payment date in accordance with their respective
holdings shown on DTC's records. Payments by Participants to Beneficial Owners
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant
and not of DTC nor its nominee, the Trust, or the Property Trustee, 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, the Company may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary) with respect to the Preferred Securities. In that event,
certificates for the Preferred Securities will be printed and delivered to the
holders of record.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company and the Trust believe to be
reliable, but the Company and the Trust take no responsibility for the accuracy
thereof. The Trust has no responsibility for the performance by DTC or its
Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Trust shall terminate on December 31,
2042 or earlier upon (i) the occurrence of a Bankruptcy Event (as defined in the
Trust Agreement) in respect of the Company, dissolution or liquidation of the
Company, or dissolution of the Trust pursuant to a judicial decree; (ii) the
delivery of written direction to the Property Trustee by the Company, as
Depositor, at any time (which direction is optional and wholly within the
discretion of the Company, as Depositor) to terminate the Trust and distribute
the Series E Junior Subordinated Notes to the holders of the Preferred
Securities in liquidation of the Trust (see "-- Special Event Redemption;
Distribution of Series E Junior Subordinated Notes" above); or (iii) the
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payment at maturity, upon redemption, or otherwise when due 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 $1,000 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
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Trust.
Within 90 days after the occurrence of any Trust Agreement Event of
Default, the Property Trustee shall transmit notice of any default known to the
Property Trustee to the holders of Trust Securities and the Company, unless such
Trust Agreement Event of Default shall have been cured or waived.
If a Trust Agreement Event of Default occurs and is continuing, then,
pursuant to the Trust Agreement, holders of a majority in aggregate liquidation
amount of Preferred Securities have the right to direct the exercise of any
trust or power conferred upon the Property Trustee under the Trust Agreement,
including the right to direct the Property Trustee under the Trust Agreement to
exercise the remedies available to it as holder of the Series E Junior
Subordinated Notes. If the Property Trustee fails to enforce its rights under
the Series E Junior Subordinated Notes, a holder of Preferred Securities may, to
the fullest extent permitted by applicable law, institute a legal proceeding
directly against the Company to enforce its rights under the Trust
S-23
Agreement without first instituting any legal proceeding against the Property
Trustee or the Trust. Notwithstanding the foregoing, a holder of Preferred
Securities may institute a legal proceeding directly against the Company,
without first instituting a legal proceeding against the Property Trustee or any
other person or entity, for enforcement of payment to such holder of principal
of or interest on the Series 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 and the Guarantee" herein and "Relationship
Among the Preferred Securities, the Junior Subordinated Notes and the
Guarantees" and "Description of the Guarantees -- Events of Default" in the
accompanying Prospectus.
A Trust Agreement Event of Default will be deemed to be cured or waived if,
at any time, (a) after a Trust Agreement Event of Default exists and payment of
interest and principal on the Series E Junior Subordinated Notes has been
accelerated under the terms of the Subordinated Note Indenture or (b) prior to a
judgment or decree for the payment of the money due on the Preferred Securities
has been obtained, the following events occur: (i) the holders of a least 66
2/3% in liquidation amount of the outstanding Preferred Securities give written
notice to the Property Trustee, the Administrative Trustees and the Company to
rescind and annul such declaration of acceleration of the Series E Junior
Subordinated Notes and its consequences, (ii) the Trust pays and deposits with
the securities depository a sum sufficient to pay all Distributions (including
any accrued interest) and liquidation amounts due on the Preferred Securities
otherwise than caused by the acceleration of the Series E Junior Subordinated
Notes and (iii) all other Trust Agreement Events of Default are no longer
continuing or have been waived.
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 "-- Distributions" herein and
"Description of the Guarantees -- Amendments and Assignment" in the accompanying
Prospectus and as otherwise required by law and the Trust Agreement, the holders
of the Preferred Securities will have no voting rights.
If any proposed amendment to the Trust Agreement provides for, or the
Securities Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Preferred
Securities, whether by way of amendment to the Trust Agreement or otherwise, or
(ii) the dissolution, winding-up or termination of the Trust, other than
pursuant to the Trust Agreement, then the holders of outstanding Preferred
Securities will be entitled to vote as a class on such amendment or proposal of
the Securities Trustees, and such amendment or proposal shall not be effective
except with the approval of the holders of at least 66 2/3% in liquidation
amount of such outstanding Preferred Securities.
So long as any Series 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,
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 Section 513 of the Subordinated Note Indenture, (iii) exercise
any right to rescind or annul a declaration that the principal of all the 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
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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 the Company, the Securities Trustees or any
affiliate of the Company or any Securities Trustee, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
CO-PROPERTY TRUSTEES AND SEPARATE PROPERTY TRUSTEE
At any time or times, for the purpose of meeting the legal requirements of
the 1939 Act or of any jurisdiction in which any part of the Trust Property may
at the time be located, the holder of the Common Securities and the Property
Trustee shall have power to appoint, and upon the written request of the
Property Trustee, the Company, as Depositor, shall for such purpose join with
the Property Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint, one or more persons
approved by the Property Trustee either to act as co-property trustee, jointly
with the Property Trustee, of all or any part of such Trust Property, or to act
as separate trustee of any such property, in either case with such powers as may
be provided in the instrument of appointment, and to vest in such person or
persons in such capacity, any property, title, right or power deemed necessary
or desirable, subject to the provisions of the Trust Agreement. If the Company,
as Depositor, does not join in such appointment within 15 days after the receipt
by it of a request so to do, or in case a Subordinated Note Indenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.
AMENDMENT OF THE TRUST AGREEMENT
The Trust Agreement may be amended from time to time by the Company and the
Securities Trustees without the consent of the holders of the Trust Securities
(i) to cure any ambiguity, correct or supplement any provision therein which may
be inconsistent with any other provision therein, or to make any other
provisions with respect to matters or questions arising under the Trust
Agreement, which shall not be inconsistent with the other provisions of the
Trust Agreement, provided that the amendment does not adversely affect in any
material respect the interests of any holder of Trust Securities, or (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such extent
as shall be necessary to ensure that the Trust will not be classified as other
than a grantor trust for federal income tax purposes. Except as provided in the
succeeding paragraph, other amendments to the Trust Agreement may be made (i)
upon approval of the holders of not less than 66 2/3% in aggregate liquidation
amount of the Trust Securities then outstanding and (ii) upon receipt by the
Securities Trustees of an opinion of counsel to the effect that such amendment
will not affect the Trust's status as a grantor trust or the Trust's exemption
from the 1940 Act.
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Notwithstanding the foregoing, without the consent of each affected holder
of Trust Securities, the Trust Agreement may not be amended to (i) change the
amount or timing of any Distribution on the Trust Securities or otherwise
adversely affect the amount of any Distribution required to be made in respect
of the Trust Securities as of a specified date, (ii) restrict the right of a
holder of Trust Securities to institute suit for the enforcement of any such
payment on or after such date, or (iii) change the consent required to amend the
Trust Agreement.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. The Trust may at the request of the Company, with the consent
of the Administrative Trustees and without the consent of the holders of the
Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by
a trust organized as such under the laws of any state; provided, that (i) such
successor entity either (x) expressly assumes all of the obligations of the
Trust with respect to the Trust Securities or (y) substitutes for the Preferred
Securities other securities having substantially the same terms as the Trust
Securities (the "Successor Securities") so long as the Successor Securities rank
the same as the Trust Securities rank in priority with respect to distributions
and payments upon liquidation, redemption and otherwise, (ii) the Company
expressly appoints a trustee of such successor entity possessing the same powers
and duties as the Property Trustee as the holder of the Junior Subordinated
Notes, (iii) the Preferred Securities or any Successor Securities are listed, or
any Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed, (iv) such merger, consolidation, amalgamation or
replacement does not cause the Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the holders of
the Trust Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of the Trust, (vii) prior to such merger, consolidation, amalgamation or
replacement, the Company has received an opinion of counsel to the effect that
(A) such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect, and (B)
following such merger, consolidation, amalgamation or replacement, neither the
Trust nor such successor entity will be required to register as an investment
company under the 1940 Act, and (viii) the Company guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100% in liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or the successor entity to be classified as
other than a grantor trust for federal income tax purposes.
Any corporation or other body into which any of the Property Trustee, the
Delaware Trustee or any Administrative Trustee that is not a natural person may
be merged or converted or with which it may be consolidated, or any corporation
or other body resulting from any merger, conversion or consolidation to which
any such Securities Trustee shall be a party, or any corporation or other body
succeeding to all or substantially all the corporate trust business of any such
Securities Trustee, shall be the successor of such Securities Trustee under the
Trust Agreement, provided such corporation is otherwise qualified and eligible
under the Trust Agreement.
PAYMENT AND PAYING AGENT
So long as DTC is acting as securities depositary for the Preferred
Securities, payments in respect of the Preferred Securities shall be made to
DTC, which is to credit the relevant accounts at DTC on the applicable
Distribution Payment 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
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Register (as such term is defined in the Trust Agreement). The Paying Agent
shall initially be the Property Trustee. The Paying Agent shall be permitted to
resign as Paying Agent upon 30 days' written notice to the Administrative
Trustees and the Company. In such event, the Administrative Trustees shall
appoint a successor to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
It is anticipated that the Property Trustee, or one of its affiliates, will
act as registrar and transfer agent (the "Securities Registrar") for the
Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment in respect of any tax or
other governmental charges which may be imposed in relation to it.
The Securities Registrar will not be required to register or cause to be
registered any transfer of Preferred Securities after they have been called for
redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a Trust Agreement Event of
Default with respect to the Trust Securities, undertakes to perform only such
duties as are specifically set forth in the Trust Agreement and, after default,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provisions, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Trust Agreement at the request of any holder of Preferred Securities, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby.
JPMorgan Chase Bank, the Property Trustee, also serves as Indenture Trustee
and Guarantee Trustee. The Company and certain of its affiliates maintain
deposit accounts and banking relationships with JPMorgan Chase Bank. JPMorgan
Chase Bank serves as trustee under other indentures pursuant to which securities
of the Company and affiliates of the Company are outstanding.
GOVERNING LAW
The Trust Agreement and the Trust Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware;
provided that the immunities and standard of care of the Property Trustee shall
be governed by New York law.
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 C Junior
Subordinated Notes will be treated as indebtedness of the Company for federal
income tax purposes. In this connection, the Administrative Trustees and the
Company are authorized to take any action, not inconsistent with applicable law,
the Trust's certificate of trust or the Trust Agreement, that the Administrative
Trustees and the Company determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially and
adversely affect the interests of the holders of the Preferred Securities.
DESCRIPTION OF THE SERIES 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,
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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
$206,186,000, 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 (as defined in the Subordinated Note
Indenture), if any, on October 1, 2042. 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
The Company shall have the right to redeem the Series E Junior Subordinated
Notes, in whole or in part, without premium, from time to time, on the last
Interest Payment Date, as defined below, relating to any Fixed Rate Period
(including, without limitation, the Initial Fixed Rate Period), on any Interest
Payment Date, as defined below, relating to a Floating Rate Period or at any
time in whole upon the occurrence of a Special Event as described under
"Description of the Preferred Securities -- Special Event Redemption;
Distribution of Series E Junior Subordinated Notes," upon not less than 30 nor
more than 60 days' notice, at the Redemption Price.
INTEREST
Each Series E Junior Subordinated Note shall bear interest at a rate equal
to the Distribution Rate payable on the Preferred Securities (the "Interest
Rate"). The periods for which interest is payable shall be the same as the
semiannual or quarterly Distribution Periods for the Preferred Securities (each,
an "Interest Period"). Interest shall be payable on the same dates as
Distributions are payable on the Preferred Securities (each, an "Interest
Payment Date") to the person in whose name such Series E Junior Subordinated
Note is registered on the Record Date. The Interest Rate payable on each
Interest Payment Date and the length of each Interest Period shall be determined
and shall be computed in the same manner as Distributions and Distribution
Periods are computed for the Preferred Securities.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time, to
defer payments of interest on the Series E Junior Subordinated Notes by
extending the interest payment period for up to five years, but not beyond the
stated maturity date. During this deferral period, Distributions and interest
will continue to accrue on the Preferred Securities and the Series E Junior
Subordinated Notes. If the Company elects to defer interest during a Fixed Rate
Period, interest will continue to accrue at the Fixed Rate until the expiration
of the Fixed Rate Period. Upon expiration of such Fixed Rate Period and any
Fixed Rate Period during the Extension Period, the Company and the Trust will
have the option to remarket the Preferred Securities for a new Fixed Rate
Period. If the Company and the Trust do not remarket the Preferred Securities,
the Floating Rate during the Extension Period shall not be less than the Fixed
Rate for the Fixed Rate Period just ended. If the Company elects to defer
interest during a Floating Rate Period, interest will continue to accrue at the
applicable Floating Rate, reset quarterly, subject to the right of the Company
and the Trust to remarket the Preferred Securities prior to any Interest Payment
Date in order to establish a new Fixed Rate for a new Fixed Rate Period.
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If the Company decides to defer interest payments on the Series E Junior
Subordinated Notes, the Extension Period shall not exceed five years. An
Extension Period shall not extend beyond the stated maturity of the Series E
Junior Subordinated Notes. Prior to the termination of any Extension Period, the
Company may further defer payments of interest, provided that the Extension
Period, together with all such previous and further extensions thereof, may not
exceed five years. The Company may only terminate an Extension Period on the
last day of any Interest Period. Upon the termination of any Extension Period
and the payment of all amounts then due, the Company may select a new Extension
Period, subject to the above requirements. There could be multiple Extension
Periods of varying lengths throughout the term of the Series E Junior
Subordinated Notes.
At the end of an Extension Period, the Company shall pay all interest then
accrued and unpaid (together with interest thereon at the prevailing Interest
Rate, to the extent permitted by law, compounded on each Interest Payment Date);
provided, that if the Company shall have given notice of its election to select
an Extension Period, (a) the Company shall not declare or pay any dividend or
distribution on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payments with respect
to the foregoing, and (b) the Company shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees other than the Guarantee) issued by the Company
which rank on a parity with or junior to the Series E Junior Subordinated Notes.
The Company 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
Consequences -- Original Issue Discount."
The Company 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 the Company or the Trust is required to give notice to any
applicable self-regulatory organization of the Record Date or the date such
interest or Distributions are payable.
EVENTS OF DEFAULT
For a description of Subordinated Note Indenture Events of Default with
respect to the Series E Junior Subordinated Notes, see "Description of the
Junior Subordinated Notes -- Events of Default" in the accompanying Prospectus.
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."
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SERIES E JUNIOR SUBORDINATED NOTES AND THE 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
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and distribution and other payment dates for the Preferred Securities; (iii) the
Company shall pay for all costs and expenses of the Trust pursuant to the
Agreement as to Expenses and Liabilities; and (iv) the Trust Agreement provides
that the Securities Trustees shall not cause or permit the Trust to, among other
things, engage in any activity that is not consistent with the purposes of the
Trust.
Payments of distributions (to the extent of funds therefor are legally and
immediately available) and other payments due on the Preferred Securities (to
the extent funds therefor are legally and immediately available) are guaranteed
by the Company as and to the extent set forth under "Description of the
Guarantees" in the accompanying Prospectus. If the Company does not make
interest payments on the Series E Junior Subordinated Notes, it is not expected
that the Trust will have sufficient funds to pay distributions on the Preferred
Securities. The Guarantee is a guarantee from the time of its issuance, but does
not apply to any payment of distributions unless and until the Trust has
sufficient funds legally and immediately available for the payment of such
distributions.
If the Company fails to make interest or other payments on the Series 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, including proceeding directly against the Company to enforce
the Series E Junior Subordinated Notes. If the Property Trustee fails to enforce
its rights under the Series E Junior Subordinated Notes, to the fullest extent
permitted by applicable law, any holder of Preferred Securities may institute a
legal proceeding directly against the Company to enforce the Property Trustee's
rights under the Series E Junior Subordinated Notes without first instituting
any legal proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, a holder of Preferred Securities may institute a
legal proceeding directly against the Company, without first instituting a legal
proceeding against the Property Trustee or any other person or entity, for
enforcement of payment to such holder of principal of or interest on the Series
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 the Company fails to make payments under the Guarantee, the Guarantee
provides a mechanism whereby the holders of the Preferred Securities may direct
the Guarantee Trustee to enforce its rights thereunder. In addition, any holder
of Preferred Securities may institute a legal proceeding directly against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee or any other
person or entity.
The Guarantee, the Subordinated Note Indenture, the Series 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 the Company of the payments due on the Preferred Securities.
Upon any voluntary or involuntary dissolution, winding-up or termination of
the Trust, unless the Series 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 the Company, the Property Trustee, as holder of the
Series E Junior Subordinated Notes, would be a subordinated creditor of the
Company, subordinated in right of payment to all Senior Indebtedness, but
entitled to receive payment in full of principal and interest, before any
stockholders of the Company receive payments or distributions. Because the
Company is guarantor under the Guarantee and has agreed to pay for all costs,
expenses and liabilities of the Trust (other than the Trust's obligation 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 the Company in the event of liquidation or bankruptcy of the
Company would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Subordinated Note Indenture.
However, in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Series E Junior Subordinated
Notes
S-30
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 five years or extend beyond the stated maturity of the
Series E Junior Subordinated Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income tax
consequences of the ownership and disposition of the Preferred Securities, but
does not purport to be a complete analysis of all the potential tax
considerations relating thereto. Unless otherwise stated, this summary deals
only with Preferred Securities held as capital assets by Holders (as defined
herein). The tax treatment of a Holder may vary depending on its particular
situation. This summary does not deal with special classes of Holders, such as
foreign persons, dealers in securities or currencies, banks, thrifts, real
estate investment trusts, regulated investment companies, insurance companies,
tax exempt organizations, persons holding Preferred Securities as part of a
straddle or as part of a hedging or conversion transaction or other integrated
investment, or persons whose functional currency is not the United States
dollar. Further, it does not include any description of alternative minimum tax
consequences or the tax laws of any state, local or foreign government that may
be applicable to the Preferred Securities. Prospective investors should consult
their own tax advisors with regard to the application of any state, local or
other tax laws. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury regulations thereunder and administrative and
judicial interpretations thereof, all as of the date hereof, and all of which
are subject to change (possibly on a retroactive basis). The authorities on
which this summary is based are subject to various interpretations, and it is
therefore possible that the federal income tax treatment of the ownership and
disposition of the Preferred Securities may differ from the treatment described
below. The Company has not sought any ruling from the Internal Revenue Service
(the "IRS") with respect to the statements made and the conclusions reached in
the following summary, and there can be no assurance that the IRS will agree
with such statements and conclusions. In addition, the IRS is not precluded from
asserting a contrary position. This summary does not consider the effect of any
applicable foreign, state, local or other tax laws.
As used herein, the term "Holder" means a beneficial owner of Preferred
Securities, that is for United States federal income tax purposes: (i) a citizen
or resident (as defined in Section 7701(b) of the Code) of the United States,
(ii) a corporation, partnership or other entity created or organized under the
laws of the United States or a political subdivision thereof, (iii) an estate
the income of which is subject to 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 United States persons have the authority to control all substantial
decisions of the trust.
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.
See "-- Original Issue Discount" below.
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PAYMENTS OF INTEREST
Except as set forth below with respect to OID, if any, 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 tax accounting.
ORIGINAL ISSUE DISCOUNT
The terms of the Series E Junior Subordinated Notes permit the Company to
defer the payment of interest on the Series E Junior Subordinated Notes at any
time and from time to time by extending the interest payment period for up to
five years 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.
Under applicable Treasury regulations, a remote contingency that stated
interest will not be timely paid is ignored in determining whether a debt
instrument is issued with OID. While the law is not entirely clear, because the
Company's exercise of the option to defer payments of stated interest on the
Series E Junior Subordinated Notes would prevent the Company from paying
dividends on any class of stock, the Company believes that the likelihood of its
exercising its option to defer payments is remote within the meaning of the
regulations. As a result, each Holder should include in gross income such
Holder's allocable share of interest in the Series E Junior Subordinated Notes
in accordance with such Holder's method of tax accounting. 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.
Should the Company exercise its option to defer payments of interest, the
Series E Junior Subordinated Notes would, at that time, be treated as issued
with OID. Thereafter, the sum of the remaining interest payments on the Series E
Junior Subordinated Notes would be treated as OID, which a Holder would be
required to accrue and include in taxable income on an economic accrual basis
(regardless of the Holder's method of accounting for income tax purposes) over
the remaining term of the Series E Junior Subordinated Notes (including any
period of interest deferral), without regard to the timing of payments under the
Series E Junior Subordinated Notes. The amount a Holder would include in taxable
income would be determined on the basis of a constant-yield method over the
remaining term of the Series E Junior Subordinated Notes and the actual receipt
of future payments of stated interest on the Series E Junior Subordinated Notes
would no longer be separately reported as taxable income. The total amount of
OID that would accrue during the deferred interest period would be approximately
equal to the amount of the cash payment due at the end of such period. Any OID
included in income would increase a Holder's adjusted tax basis in their
Preferred Securities, and a Holder's actual receipt of cash would reduce such
Holder's basis in the Preferred Securities.
MARKET DISCOUNT AND PREMIUM
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
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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
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.
Prior to the exercise by the Company of its option to defer payments of
stated interest on the Series E Junior Subordinated Notes, a Holder that
acquires a Preferred Security for an amount that is greater than its Redemption
Price will be considered to have purchased the Preferred Security at a "premium"
equal to such excess and may elect (in accordance with applicable Code
provisions) to amortize such premium on a constant-yield basis over the
remaining term of the Preferred Security (subject to special rules concerning
early call provisions). If an election to amortize the premium on a Preferred
Security, if any, is not made, the premium will decrease the gain or increase
the loss otherwise recognized on a taxable disposition of the Preferred
Security. Following the exercise by the Company of its option to defer payments
of stated interest on the Series E Junior Subordinated Notes, a Holder that has
acquired a Preferred Security for a purchase price in excess of its "adjusted
issue price" may generally apply such "acquisition premium" to reduce the amount
of OID required to be included in income. The "adjusted issue price" will
generally be equal to the original issue price of a Preferred Security increased
by the amount of OID previously includible in the gross income of any Holder and
decreased by any payments made after the Company has exercised its option to
defer payments.
CORPORATE HOLDERS
Corporate Holders of Preferred Securities will not be entitled to a
dividends-received deduction for any income from the Preferred Securities.
SALE OF PREFERRED SECURITIES
Upon the sale, retirement (including redemption) or other taxable
disposition of all or part of a Preferred Security, a Holder thereof will
recognize gain or loss equal to the difference between the amount realized on
such sale, retirement or other disposition and such Holder's adjusted tax basis
in the Preferred Security or part thereof. If the Holder disposes of a Preferred
Security prior to the occurrence of an Extension Period, any portion of the
amount received that is attributable to accrued interest will be treated as
interest income to the Holder and will not be treated as part of the amount
realized for purposes of determining gain or loss on the disposition of the
Preferred Security. Any recognized gain or loss will be capital gain or loss,
except to the extent to any accrued market discount. See "-- Market Discount and
Premium" above. The 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. If, however, the Series E Junior Subordinated Notes were
determined not to qualify as "variable rate debt instruments" under the Income
Tax Regulations, they would be treated as "contingent payment debt instruments"
with the result that any recognized gain upon disposition of Preferred
Securities would be treated as ordinary income to the Holder rather than as
capital gain. Any loss recognized would be ordinary loss to the extent of the
Holder's ordinary income previously taken in account. A Holder's adjusted tax
basis in a Preferred Security acquired by purchase will equal the cost of such
Preferred Security to 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 distributed on the
Preferred Security. The redemption of only part of a Preferred Security will
require an allocation of the Holder's adjusted tax basis in his pro rata share
of the related Series E Junior Subordinated
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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; Distribution of Series E Junior Subordinated Notes," 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 AND BACKUP WITHHOLDING
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. In addition, 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 payment made to certain exempt
recipients, such as corporations and tax-exempt organizations. Backup
withholding applies to "reportable payments," which generally will include
distributions of interest and principal payments on the Series E Junior
Subordinated Notes. Currently, the backup withholding tax rate is 30%, but will
be gradually reduced to 28% by 2006.
EFFECT OF POSSIBLE TAX LAW CHANGES ON THE PREFERRED SECURITIES
On January 24, 2002, legislation was proposed in Congress that generally
would deny an interest deduction for interest paid or accrued on debt
instruments that are not shown as part of the total liabilities in the certified
annual report of an issuer. If this provision were to apply to the Series E
Junior Subordinated Notes, the Company would not be able to deduct interest
payments on the Series E Junior Subordinated Notes. This provision is proposed
to be effective for instruments issued on or after the date of enactment of such
legislation. Consequently, as drafted, the proposed legislation would not affect
the Preferred Securities or the Series E Junior Subordinated Notes or otherwise
affect the tax treatment of the transaction described in this Prospectus
Supplement. However, there can be no assurance that the final terms of the
proposed legislation, if adopted, or other further legislative proposals will
not adversely affect our ability to deduct interest on the Series E Junior
Subordinated Notes. If such an event were to occur, the Company would be
permitted to redeem the Series E Junior Subordinated Notes. Such redemption
would cause a mandatory redemption of the Preferred Securities at a redemption
price equal to their liquidation amount plus accumulated and unpaid
distributions and would constitute a taxable event. See "Risk Factors --
Preferred Securities May be Redeemed at Any Time if Certain Changes in Tax or
Investment Company Law Occur."
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE MAY NOT BE APPLICABLE TO
A HOLDER, DEPENDING UPON A HOLDER'S PARTICULAR SITUATION, AND THEREFORE EACH
HOLDER SHOULD CONSULT HIS TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF
THE OWNERSHIP AND DISPOSITION OF PREFERRED SECURITIES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAW.
S-34
CERTAIN ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (an "ERISA Plan") should consider the fiduciary standards of ERISA in
the context of the ERISA Plan's particular circumstances before authorizing an
investment in the Preferred Securities. Among other factors, the fiduciary
should consider whether such an investment is in accordance with the documents
governing the ERISA Plan and whether the investment is appropriate for the ERISA
Plan in view of its overall investment policy and diversification of its
portfolio.
Certain provisions of ERISA and the Code prohibit ERISA Plans, as well as
individual retirement accounts and Keogh plans subject to section 4975 of the
Code (collectively, "Plans"), from engaging in certain transactions involving
"plan assets" with parties that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the Plan. The U.S.
Department of Labor has issued a final regulation (the "Regulation") with regard
to whether the underlying assets of an entity in which employee benefit plans
acquire equity interests are deemed to be plan assets.
Under such Regulation, for purposes of ERISA and section 4975 of the Code,
the assets of the Trust would be deemed to be "plan assets" of a Plan whose
assets were used to purchase Preferred Securities if the Preferred Securities
were considered to be equity interests in the Trust and no exception to plan
asset status was applicable under the Regulation.
If the assets of the Trust were deemed to be plan assets of Plans that are
holders of the Preferred Securities, a Plan's investment in the Preferred
Securities might be deemed to constitute a delegation under ERISA of the duty to
manage plan assets by a fiduciary investing in Preferred Securities. In
addition, the Company might be considered a "party in interest" or "disqualified
person" with respect to Plans whose assets were used to purchase Preferred
Securities. If this were the case, an investment in Preferred Securities by a
Plan might constitute or, in the course of the operation of the Trust, give rise
to a prohibited transaction under ERISA or the Code. In particular, it is likely
that, under such circumstances, a prohibited "extension of credit" to the
Company would be considered to occur under ERISA and the Code.
Because of the possibility that the assets of the Trust would be considered
plan assets of Plans whose assets were invested in the Preferred Securities, and
the likelihood that under such circumstances a prohibited extension of credit
would occur, the Preferred Securities may not be purchased or held by any Plan
or any person investing "plan assets" of any Plan, unless such purchaser or
holder is eligible for the exemptive relief available under Prohibited
Transaction Class Exemption ("PTCE") 96-23 (for certain transactions determined
by in-house asset managers), PTCE 95-60 (for certain transactions involving
insurance company general accounts), PTCE 91-38 (for certain transactions
involving bank collective investment funds), PTCE 90-1 (for certain transactions
involving insurance company separate accounts) or PTCE 84-14 (for certain
transactions determined by independent qualified asset managers). Any purchaser
of the Preferred Securities or any interest therein will be deemed to have
represented that either (a) it is not a Plan and is not purchasing such
securities (or interest therein) on behalf of or with "plan assets" of any Plan
or (b) its purchase and holding of the Preferred Securities (or interest
therein) is eligible for the exemptive relief available under PTCE 96-23, 95-60,
91-38, 90-1 or 84-14.
Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is important that any person considering
the purchase of Preferred Securities with Plan assets consult with its counsel
regarding the consequences under ERISA and the Code of the acquisition and
ownership of Preferred Securities and the availability of exemptive relief under
the class exemptions listed above. Employee benefit plans which are governmental
plans (as defined in Section 3(32) of ERISA) and certain church plans (as
defined in Section 3(33) of ERISA) generally are not subject to ERISA
requirements but may be subject to comparable requirements.
S-35
UNDERWRITING
The Company and the Trust have entered into an underwriting agreement (the
"Underwriting Agreement") with Lehman Brothers Inc. as representative (the
"Representative") of the several underwriters named below (the "Underwriters").
In the Underwriting Agreement, each Underwriter has severally agreed, subject to
the terms and conditions set forth therein, to purchase all of the Preferred
Securities set opposite its name below if any of the Preferred Securities are
purchased.
NUMBER OF
NAME PREFERRED SECURITIES
---- --------------------
Lehman Brothers Inc. .......................................
ABN AMRO Incorporated.......................................
Banc One Capital Markets, Inc...............................
Mizuho International plc....................................
Scotia Capital (USA) Inc....................................
-------
Total............................................. 200,000
=======
Because the Trust will invest the proceeds from the sale of the Preferred
Securities in the Series E Junior Subordinated Notes issued by the Company, the
Underwriting Agreement provides that the Company will pay an underwriting
commission of $ per Preferred Security (or $ for all Preferred Securities) to
the Representative for the account of the several Underwriters, as compensation.
The Underwriters propose to offer the Preferred Securities directly to the
public at the initial public offering set forth on the cover page of this
Prospectus Supplement and may offer them to certain securities dealers at such
price less a concession not in excess of % of the liquidation amount per
Preferred Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of % of the liquidation amount of the Preferred
Security to certain brokers and dealers. After the Preferred Securities are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the Underwriters.
Prior to this offering, there has been no public market for the Preferred
Securities. The Preferred Securities will not be listed on a securities
exchange. The Representative has advised the Company that the Underwriters
intend to make a market in the Preferred Securities. The Underwriters will have
no obligation to make a market in the Preferred Securities, however, and may
cease market making activities, if commenced, at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company's expenses associated with the offer and sale of the Preferred
Securities are estimated to be $ .
In order to facilitate the offering of the Preferred Securities, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Preferred Securities. Specifically, the Underwriters may
over-allot in connection with the offering, creating short positions in the
Preferred Securities for their own account. In addition, to cover
over-allotments or to stabilize the price of the Preferred Securities, the
Underwriters may bid for, and purchase, Preferred Securities in the open market.
The Underwriters may reclaim selling concessions allowed to an Underwriter or
dealer for distributing Preferred Securities in the offering, if the
Underwriters repurchase previously distributed Preferred Securities in
transactions to cover short positions, in stabilization transactions or
otherwise. Any of these activities may stabilize or maintain the market price of
the Preferred Securities above independent market levels. The Underwriters are
not required to engage in these activities, and may end any of these activities
at any time.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
S-36
Neither the Company, the Trust nor the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Preferred
Securities. In addition, neither the Company, the Trust nor the Underwriters
makes any representation that the Underwriters will engage in such transactions
or that such transactions once commenced will not be discontinued without
notice.
Because NASD Regulation, Inc. ("NASDR") is expected to view the Preferred
Securities as interests in a direct participation program, the offering is being
made in compliance with Rule 2810 of the NASDR's Conduct Rules. Offers and sales
of Preferred Securities will be made only to (i) "qualified institutional
buyers", as defined in Rule 144A under the Securities Act; or (ii) institutional
"accredited investors", as defined in Rule 501(a)(1)-(3) of Regulation D under
the Securities Act. The Underwriters may not confirm sales to any accounts over
which they exercise discretionary authority without the prior written approval
of the transaction by the customer.
The Underwriters and their affiliates engage in transactions with, and,
from time to time, have performed services for, the Company and its affiliates
in the ordinary course of business.
EXPERTS
The financial statements and schedules of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001,
incorporated by reference herein, have been audited by Arthur Andersen LLP
("Andersen"), 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.
On March 28, 2002, the Board of Directors of Southern, upon recommendation
of its Audit Committee, decided not to engage Andersen as the Company's
principal public accountants and engaged Deloitte & Touche LLP to serve as the
Company's principal public accountants for fiscal year 2002.
LEGAL OPINIONS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Company and the Trust by
Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel
to the Company and the Trust. The validity of the Series E Junior Subordinated
Notes, the Guarantee and certain matters relating thereto will be passed upon on
behalf of the Company by Balch & Bingham LLP, Birmingham, Alabama, and by
Troutman Sanders LLP, Atlanta, Georgia. Balch & Bingham 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-37
200,000 PREFERRED SECURITIES
(ALABAMA POWER LOGO)
ALABAMA POWER CAPITAL TRUST V
FLEXIBLE TRUST PREFERRED SECURITIES
(SEVEN YEAR INITIAL FIXED RATE PERIOD)
(LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN
---------------------------
PROSPECTUS SUPPLEMENT
September , 2002
---------------------------
LEHMAN BROTHERS
ABN AMRO INCORPORATED
BANC ONE CAPITAL MARKETS, INC.
MIZUHO INTERNATIONAL PLC
SCOTIA CAPITAL