Filed Pursuant to Rule 424(b)(3)
Registration Nos. 333-59942
333-59942-01
333-59942-02
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 December 4, 2002
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 1, 2001)
40,000 Preferred Securities
[LOGO]
GULF
POWER
A SOUTHERN COMPANY
Gulf Power Capital Trust IV
Flexible Trust Preferred Securities
(T-FLEX/SM/)
(Five 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 November 30,
2007, 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.
================================================================================
Per
Preferred Security Total
- -----------------------------------------------------------------------------------
Initial public offering price(1)......................... $ $
Underwriting commissions to be paid by Gulf Power Company $ $
Proceeds to Gulf Power Capital Trust IV.................. $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accumulated distributions, if any, from the date of original issuance,
which is expected to be December , 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 December , 2002.
LEHMAN BROTHERS
SUNTRUST ROBINSON HUMPHREY
Prospectus Supplement dated December , 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
Gulf Power Capital Trust IV................. S-12
Selected Financial Information.............. S-13
Accounting Treatment........................ S-13
Use of Proceeds............................. S-14
Description of the Preferred Securities..... S-14
Description of the Series E Junior
Subordinated Notes........................ S-29
Relationship Among the Preferred Securities,
the Series E Junior Subordinated Notes and
the Guarantee............................. S-31
Certain Federal Income Tax Consequences..... S-33
Certain ERISA Considerations................ S-37
Underwriting................................ S-39
Experts..................................... S-40
Legal Opinions.............................. S-40
Page
----
Prospectus
About this Prospectus....................... 2
Available Information....................... 2
Incorporation of Certain Documents by
Reference................................. 2
Selected Information........................ 4
Gulf Power Company.......................... 5
The Trusts.................................. 5
Accounting Treatment of Trusts.............. 6
Use of Proceeds............................. 6
Description of the Senior Notes............. 6
Description of the Junior Subordinated Notes 10
Description of the Preferred Securities..... 15
Description of the Guarantees............... 16
Relationship Among the Preferred Securities,
the Junior Subordinated Notes and the
Guarantees................................ 18
Plan of Distribution........................ 19
Legal Matters............................... 20
Experts..................................... 20
S-2
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 Gulf Power Capital Trust IV (the "Trust"). Each Preferred Security
will entitle the holder to receive quarterly cash distributions
("Distributions") as described in this Prospectus Supplement. The Trust is
offering 40,000 Preferred Securities at a price of $ for each Preferred
Security.
Who is the Trust?
The Trust is a Delaware statutory trust. The mailing address of its
principal place of business is c/o Gulf Power Company, One Energy Place,
Pensacola, Florida 32520-0100, and its telephone number is (850) 444-6111.
The Trust will sell its Preferred Securities to the public and its common
securities (the "Common Securities") to Gulf Power Company (the "Company"). The
Trust will use the proceeds from these sales to buy a series of junior
subordinated notes due December 1, 2042 (the "Series E Junior Subordinated
Notes") from the Company with the same financial terms as the Preferred
Securities. The Company will guarantee payments made on the Preferred
Securities as described herein.
JPMorgan Chase 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 also 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,
the Delaware Trustee and the Administrative Trustees are sometimes referred to
as the "Securities Trustees."
Who is Gulf Power Company?
The Company is a corporation organized under the laws of the State of Maine
on November 2, 1925, and admitted to do business in Florida on January 15,
1926, in Mississippi on October 25, 1976 and in Georgia on November 20, 1984.
The mailing address of the Company's principal executive offices is One Energy
Place, Pensacola, Florida 32520-0100, and the telephone number is (850)
444-6111. 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
7,400 square mile service area within the northwestern portion of the State of
Florida.
S-3
What will the Distribution Rate be 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 (the "Issue Date"), which is expected to be December , 2002,
through November 30, 2007 (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 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
and any subsequent fixed rate established pursuant to a remarketing, as
described below, 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 and any subsequent period established pursuant to
a remarketing, as described below, 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 December 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 below).
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
(to be in effect after the expiration of the then current Distribution 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 (to be in effect after the
expiration of the then current Distribution Period).
In this Prospectus Supplement, 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 are
sometimes referred to 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 (as defined below) prior to the proposed remarketing date (an
"Election Date"). A holder that fails to give an election notice to the
Remarketing Agent (as defined below) 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.
S-4
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 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 the 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 June 1 and
December 1 of each year, commencing on June 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 June 1 or December 1, Distributions will
be payable on June 1 and December 1 of each year and if the Preferred
Securities are remarketed for a new Fixed Rate Period that begins on March 1 or
September 1, Distributions will be payable on March 1 and September 1 of each
year). Distributions during any Floating Rate Period will be payable on March
1, June 1, September 1 and December 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
December 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 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 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.
S-5
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 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 December 1, 2042 or are otherwise
due. In addition, if the Company redeems the Series E Junior Subordinated Notes
before their maturity, the Trust will use the cash it receives from the
redemption to redeem 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, in whole, but not in part, the Series E Junior
Subordinated Notes before their maturity on the last Distribution Payment Date
relating to the Initial Fixed Rate Period, on such dates with respect to any
other Fixed Rate Period as the Company and the Trust may determine prior to the
remarketing establishing such Fixed Rate Period or on any Distribution Payment
Date relating to a Floating Rate Period (each, a "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
$579,000,000 at September 30, 2002.
S-6
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."
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 December , 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
aggregated approximately $579,000,000 as of September 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 Junior
S-8
Subordinated Notes, the Trust will defer Distributions on the Preferred
Securities during any Extension 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 other date during
the Extension 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, but not in part, on the last Distribution Payment Date
relating to the Initial Fixed Rate Period, on such dates with respect to any
other Fixed Rate Period as the Company and the Trust may determine prior to the
remarketing establishing such Fixed Rate Period or on any Distribution Payment
Date relating to a Floating Rate Period at the Redemption Price. See
"Description of the Series E Junior Subordinated 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 upon 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.
S-10
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 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.
You will have limited voting rights. In particular, subject to certain
exceptions, only the Company can appoint or remove any of the Securities
Trustees. See "Description of the Preferred Securities--Voting Rights."
S-11
GULF POWER CAPITAL TRUST IV
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 April
25, 2001. The Trust's business is defined in a trust agreement, executed by the
Company, as Depositor, and the Delaware Trustee thereunder. This trust
agreement will be amended and restated in its entirety on the Issue Date
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus Supplement and the accompanying Prospectus form a part
(the "Trust Agreement"). The Trust Agreement has been qualified as an indenture
under the Trust Indenture Act of 1939, as amended (the "1939 Act"). The Trust
exists for the exclusive purposes of (i) issuing the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in the Series 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 42 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, and payments will be made thereon pro rata, with the
Preferred Securities, except that upon the occurrence and continuance of a
Subordinated Note Indenture Event of Default (as defined below), the rights of
the holders of Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise will be subordinated to the
rights of the holders of the Preferred Securities.
The Trust's business and affairs will be conducted by the Securities
Trustees, which shall be appointed by the Company as the holder of the Common
Securities. Two officers of the Company initially will serve as Administrative
Trustees. 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 of the Common Securities, will
have the right to appoint, remove or replace all the Securities Trustees.
The Series E Junior Subordinated Notes will constitute substantially all of
the assets of the Trust. Other assets that may constitute "Trust Property" (as
that term is defined in the Trust Agreement) include any cash on deposit in, or
owing to, the payment account as established under the Trust Agreement, as well
as any other property or assets held by the Property Trustee pursuant to the
Trust Agreement. In addition, the Trust may, from time to time, receive cash
pursuant to the Agreement as to Expenses and Liabilities.
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the Trust
Agreement, the Delaware 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 mailing
address of the principal place of business of the Trust shall be c/o the
Company, One Energy Place, Pensacola, Florida 32520-0100, telephone (850)
444-6111, Attn: Treasurer.
S-12
SELECTED FINANCIAL INFORMATION
The following data is qualified in its entirety by reference to and,
therefore, should be read together with the detailed information and financial
statements appearing herein, in the accompanying Prospectus or in the documents
incorporated herein by reference.
Nine
Months
Year Ended December 31, Ended
-------------------------------------------- September 30,
1997 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- -------------
(Thousands, except ratios) (unaudited)
Operating Revenues................. $625,856 $650,518 $674,099 $714,319 $725,203 $616,521
Earnings Before Interest and Income
Taxes............................ 124,428 120,946 119,576 116,892 121,227 123,232
Net Income After Dividends on
Preferred Stock.................. 57,610 56,521 53,667 51,843 58,307 59,183
Ratio of Earnings to Fixed
Charges(1)....................... 4.18 3.83 3.62 3.38 3.64 3.95
Ratio of Earnings to Fixed Charges
Plus Preferred Dividend
Requirements
(Pre-Income Tax Basis)(2)........ 3.53 3.72 3.58 3.34 3.60 3.92
Capitalization
As of September 30,
2002
-------------------
(Thousands, except
percentages)
Common Stock Equity............................................................... $ 552,874 49.2%
Cumulative Preferred Stock........................................................ 4,236 0.4
Company Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trusts
Holding Company Junior Subordinated Notes(3).................................... 115,000 10.2
Long-Term Debt.................................................................... 451,943 40.2
---------- -----
Total excluding amounts due within one year.................................... $1,124,053 100.0%
========== =====
- --------
(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) Substantially all of the assets of the respective Trusts are Junior
Subordinated Notes of the Company, and upon redemption of such debt, the
related Preferred Securities will be mandatorily redeemable.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust will be included in
the consolidated financial statements of the Company. The Preferred Securities
will be presented as a separate line item in the consolidated balance sheet of
the Company, and appropriate disclosures concerning the Preferred Securities,
the Guarantee and the Series E Junior Subordinated Notes will be included in
the notes to the consolidated financial statements. For financial reporting
purposes, the Company will record distributions payable on the Preferred
Securities as an expense.
S-13
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
$40,000,000 in aggregate liquidation amount of Gulf Power Capital Trust I
7.625% Cumulative Quarterly Income Preferred Securities.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement has been qualified as an indenture under the
1939 Act. The Property Trustee will act as the indenture trustee with respect
to the Trust, as well as the Guarantee, for purposes of compliance with the
provisions of the 1939 Act. The terms of the Preferred Securities will include
those stated in the Trust Agreement 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 the 1939 Act.
General
The Trust Agreement authorizes the Administrative Trustees, on behalf of the
Trust, to issue the Preferred Securities, which represent preferred undivided
beneficial interests in the assets of the Trust, and the Common Securities,
which represent common undivided beneficial interests in the assets of the
Trust. All of the Common Securities will be owned by the Company. The Common
Securities rank on a parity, 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
S-14
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 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 a day immediately preceding a Distribution Payment Date.
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 (to be in
effect after the expiration of the then current Distribution Period). The
Company and the Trust also have the option to remarket the Preferred Securities
for the purpose of establishing a new Fixed Rate for a new Fixed Rate Period
prior to any Distribution Payment Date during a time in which Preferred
Securities are redeemable in a subsequent Fixed Rate Period.
If the Preferred Securities are not redeemed and 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 relating to a Floating Rate Period in order to again
establish Distributions at a Fixed Rate for a new Fixed Rate Period (to be in
effect after the expiration of the then current Distribution Period).
During the Initial Distribution Period, Distributions will be payable
semiannually in arrears on June 1 and December 1 of each year, commencing on
June 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 June 1 or December 1, Distributions will be payable on June 1 and December 1
of each year, and if the Preferred Securities are remarketed for a new Fixed
Rate Period that begins on March 1 or September 1, Distributions will be
payable on March 1 and September 1 of each year). Distributions during any
Floating Rate Period will be payable on March 1, June 1, September 1 and
December 1 of each year. If any Distribution Payment Date with respect to a
Fixed Rate Period is not a Business Day, then Distributions will be payable on
the first Business Day following such Distribution Payment Date with the same
force and effect as if payment was made on the date such payment was originally
payable. If any Distribution Payment Date with respect to a Floating Rate
Period is not a Business Day, then Distributions will be payable on the first
Business Day following such Distribution Payment Date and Distributions shall
accrue to the actual payment date (except for a Distribution Payment Date that
coincides with the Redemption Date).
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."
S-15
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 the 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.
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 and the Trust, acting as calculation agent.
"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.
"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).
S-16
"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.
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 any 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
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 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 December 1, 2042 and may be redeemed, in whole but not in part, at
the option of the Company on the last Distribution Payment Date relating to the
Initial Fixed Rate Period, on such dates with respect to any other Fixed Rate
Period as the Company and the Trust may determine prior to the remarketing
establishing such Fixed Rate Period or on any Distribution Payment Date
relating to a Floating Rate Period or at any time in whole, but not in part,
upon the occurrence of a Special Event (as defined below) at the Redemption
Price. Upon the repayment of the Series E Junior Subordinated Notes, whether at
maturity, upon redemption or when 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 equal to the stated liquidation amount of $1,000 plus accrued
and unpaid Distributions thereon to the date of payment (the "Preferred
Securities Redemption Price"). See "Description of the Series E Junior
Subordinated Notes--Optional Redemption."
S-17
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 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."
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 procedure shall remain the same
except (i) the effects of Trust Agreement Events of Default (as defined below)
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.
S-18
There can be no assurance as to the market prices for the Preferred
Securities or the Series E Junior Subordinated Notes that may be distributed in
exchange for the Preferred Securities if a termination and liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor may
purchase, or the Series E Junior Subordinated Notes that the investor may
receive on termination and liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the Preferred Securities offered
hereby.
Redemption Procedures
Redemption of the Preferred Securities shall be at the Preferred Securities
Redemption Price with the proceeds from the contemporaneous redemption of the
Series E Junior Subordinated Notes. The Preferred Securities Redemption Price
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 Preferred
Securities 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 Preferred Securities 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 Preferred
Securities Redemption Price and will give the Paying Agent irrevocable
instructions to pay the Preferred Securities 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 Preferred Securities Redemption
Price, but without interest on such Preferred Securities Redemption Price. In
the event that any date fixed for redemption of Preferred Securities is not a
Business Day, then payment of the Preferred Securities 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 Preferred Securities 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 Preferred Securities Redemption Price is
actually paid. See "--Events of Default" below, "Relationship Among the
Preferred Securities, the Series E Junior Subordinated Notes and the Guarantee"
below and "Description of the Guarantees--Events of Default" in the
accompanying Prospectus.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), the Company or its
affiliates may, at any time and from time to time, purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
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 Trust 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, the Remarketing Agent, the Property Trustee, the Indenture Trustee and the
Calculation Agent. Such notice will describe the Remarketing and will indicate
the length of the proposed new Fixed Rate Period, the proposed Remarketing Date
and any redemption provisions that will apply during such new Fixed
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Rate Period. At any time prior to the Election Date, the Company and the Trust
may elect to terminate a remarketing 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 below), (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 Preferred Security.
S-20
If the Remarketing Agent is unable to remarket by 4:00 P.M., New York City
time on the third Business Day prior to the Remarketing Settlement Date, all
Preferred Securities tendered or deemed tendered for purchase at a price of
$1,000 per Preferred Security, the 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 Participants (as defined below) 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 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 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 (i) the first Business Day of the next
Distribution Period following the expiration of the Initial Fixed Rate Period,
(ii) any Distribution Payment Date during a Floating Rate Period or (iii) any
Distribution Payment Date during a time in which Preferred Securities are
redeemable in a Fixed Rate Period subsequent to the Initial Fixed Rate Period.
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 rendered 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.
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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 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, or such other
name as may be requested by an authorized representative of DTC. 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 "1934 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 ("Direct Participants"). 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" and, together with the Direct Participants, the
"Participants"). The DTC rules applicable to its Participants are on file with
the Securities and Exchange 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 purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participants through which the Beneficial Owners purchased
Preferred Securities. Transfers of ownership interests in the Preferred
Securities are to be accomplished by entries made on the books of Direct or
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.
S-22
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.
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.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. (nor any other
DTC nominee) will consent or vote with respect to Preferred Securities. Under
its usual procedures, DTC mails 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 relevant 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 account 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, any trustee or the
Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of distributions to Cede & Co. (or such
nominee as may be requested as an authorized representative of 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 Company and the Trust have 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.
S-23
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
payment at maturity or redemption of all of the Series E Junior Subordinated
Notes, and the consequent payment of the Trust Securities.
If an early termination occurs as described in clause (i) or (ii) above, the
Trust shall be liquidated, and the Property Trustee shall distribute to each
holder of Preferred Securities and Common Securities a like amount of Series E
Junior Subordinated Notes, unless in the case of an event described in clause
(i) such distribution is determined by the Administrative Trustees not to be
practical, in which event such holders will be entitled to receive, out of the
assets of the Trust available for distribution to holders after satisfaction of
liabilities to creditors, an amount equal to the aggregate of the stated
liquidation preference of $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 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.
S-24
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 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 "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 at
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 "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
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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 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
S-26
provision therein which may be inconsistent with any other provision therein,
or to make any other provisions with respect to matters or questions arising
under the Trust Agreement, which shall not be inconsistent with the other
provisions of the Trust Agreement, provided that the amendment does not
adversely affect in any material respect the interests of any holder of Trust
Securities, or (ii) to modify, eliminate or add to any provisions of the Trust
Agreement to such extent as shall be necessary to ensure that the Trust will
not be classified as other than a grantor trust for federal income tax
purposes. Except as provided in the succeeding paragraph, other amendments to
the Trust Agreement may be made (i) upon approval of the holders of not less
than 66 2/3% in aggregate liquidation amount of the Trust Securities then
outstanding and (ii) upon receipt by the Securities Trustees of an opinion of
counsel to the effect that such amendment will not affect the Trust's status as
a grantor trust or the Trust's exemption from the 1940 Act.
Notwithstanding the foregoing, without the consent of each affected holder
of Trust Securities, the Trust Agreement may not be amended to (i) change the
amount or timing of any Distribution on the Trust Securities or otherwise
adversely affect the amount of any Distribution required to be made in respect
of the Trust Securities as of a specified date, (ii) restrict the right of a
holder of Trust Securities to institute suit for the enforcement of any such
payment on or after such date or (iii) change the consent required to amend the
Trust Agreement.
Mergers, Consolidations or Amalgamations
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. The Trust may at the request of the Company, with the consent
of the Administrative Trustees and without the consent of the holders of the
Trust Securities, consolidate, amalgamate, merge with or into, or be replaced
by a trust organized as such under the laws of any state; provided, that (i)
such successor entity either (A) expressly assumes all of the obligations of
the Trust with respect to the Trust Securities or (B) substitutes for the
Preferred Securities other securities having substantially the same terms as
the Trust Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Trust Securities rank in priority with respect
to distributions and payments upon liquidation, redemption and otherwise, (ii)
the Company expressly appoints a trustee of such successor entity possessing
the same powers and duties as the Property Trustee as the holder of the Series
E Junior Subordinated Notes, (iii) the Preferred Securities or any Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then listed, (iv) such
merger, consolidation, amalgamation or replacement does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect, (vi) such
successor entity has a purpose substantially identical to that of the Trust,
(vii) prior to such merger, consolidation, amalgamation or replacement, 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
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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 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 E 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.
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DESCRIPTION OF THE SERIES E JUNIOR SUBORDINATED NOTES
Set forth below is a description of the specific terms of the Series E
Junior Subordinated Notes. This description supplements, and should be read
together with, the description of the general terms and provisions of the
Junior Subordinated Notes set forth in the accompanying Prospectus under the
caption "Description of the Junior Subordinated Notes." The following
description does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the description in the accompanying Prospectus
and the Subordinated Note Indenture.
General
The Series E Junior Subordinated Notes will be issued as a series of Junior
Subordinated Notes under the Subordinated Note Indenture. The Series E Junior
Subordinated Notes will be limited in aggregate principal amount to
$41,238,000, 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 (see "Description of the Junior
Subordinated Notes--Additional Interest" in the accompanying Prospectus), if
any, on December 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, but not in part, without premium, from time to time, on the
last Interest Payment Date, as defined below, relating to the Initial Fixed
Rate Period, on such dates with respect to any other Fixed Rate Period as the
Company and the Trust may determine prior to the remarketing establishing such
Fixed Rate Period, on any Interest Payment Date relating to a Floating Rate
Period or 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 any Extension 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
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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.
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 applicable 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."
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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 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 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
S-31
the Company receive payments or distributions. Because the Company is guarantor
under the Guarantee and has agreed to pay for all costs, expenses and
liabilities of the Trust (other than the Trust's obligations to holders of the
Preferred Securities) pursuant to the Agreement as to Expenses and Liabilities,
the positions of a holder of Preferred Securities and a holder of Series 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 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.
S-32
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
below). 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 foreign, 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 successfully adopting a
contrary position.
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.
Payment 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
S-33
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, unless and until the Company exercises its option to
defer payments of stated interest, 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.
This discussion of "Certain Federal Income Tax Consequences" is based on the
assumption that the Series E Junior Subordinated Notes qualify as "variable
rate debt instruments" ("VRDIs") that are issued without any OID (other than
"de minimis" OID, if any) within the meaning of applicable Treasury
regulations. However, it is possible that the IRS could take the position that
the Series E Junior Subordinated Notes are either (i) VRDIs issued with OID or
(ii) contingent payment debt instruments. If the IRS were successful in either
assertion, Holders would experience United States federal income tax
consequences significantly different from those discussed herein.
Market Discount and Premium
Prior to the exercise by the Company of its option to defer payment of
stated interest on the Series E Junior Subordinated Notes, 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." Following the exercise
by the Company of its option to defer payments of stated interest on the Series
E Junior Subordinated Notes, a purchaser of a Preferred Security at a discount
from its "revised issue price" acquires such Preferred Security with "market
discount." For this purpose, the "revised issue price" is the issue price of
the Preferred Security plus the aggregate amount of OID includible in the gross
income of all holders of the security for all periods before the acquisition.
However, in either case, 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 Subordinated Notes multiplied by (ii) the number of complete years to
maturity of such Series E 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
S-34
Subordinated Notes) as ordinary income to the extent of accrued (but not
previously taxed) market discount. Market discount generally will accrue
ratably during the period from the date of purchase of such Preferred Security
to the maturity date of the Series E Junior Subordinated Notes unless the
Holder irrevocably elects to accrue such market discount on the basis of a
constant interest rate.
A Holder who has acquired a Preferred Security at a market discount
generally will be required to defer any deductions of interest expense
attributable to any indebtedness incurred or continued to purchase or carry the
Preferred Security, to the extent such interest expense exceeds the related
interest income. Any such deferred interest expense generally will be allowable
as a deduction not later than the year in which the related market discount
income is recognized. As an alternative to the inclusion of market discount in
income upon disposition of all or a portion of a Preferred Security of the
related Series E Junior Subordinated Notes (including redemptions thereof), a
Holder may make an election (which may not be revoked without the IRS's
consent) to include market discount in income as it accrues on all market
discount instruments acquired by the Holder during or after the taxable year
for which the election is made. In that case, the preceding deferral rule for
interest expense will not apply.
In lieu of the foregoing treatment of market discount and interest expense,
a Holder may elect to treat any market discount (including a de minimis amount)
as OID and accrue such discount on a constant-yield basis in the same manner as
the Holder accrues OID.
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
liquidation amount at maturity 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 of 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 applicable Treasury 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
S-35
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 generally equal the cost of such Preferred Security
to Holder. A Holder's adjusted tax basis in a Preferred Security is increased
by the amount of any related accrued OID and market discount included in
taxable income by the Holder. Also, a Holder's adjusted tax basis in a
Preferred Security is reduced by any amortized "premium" and, following
exercise by the Company of its option to defer payments of stated interest on
the Series E Junior Subordinated Notes, it is also reduced by subsequent
payment on the Series E Junior Subordinated Notes distributed on the Preferred
Security.
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 payments 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. However, 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. Nevertheless, 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."
S-36
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.
CERTAIN ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan (an
"ERISA Plan") subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), 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
professional 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.
S-37
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-38
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........... --
SunTrust Capital Markets, Inc. --
------
Total.................... 40,000
======
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
transaction 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-39
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 Beggs & Lane, Pensacola, Florida, and by Troutman
Sanders LLP, Atlanta, Georgia. Troutman Sanders LLP will also pass upon certain
matters relating to United States federal income tax considerations. Certain
legal matters will be passed upon for the Underwriters by Dewey Ballantine LLP,
New York, New York.
S-40
40,000 Preferred Securities
[LOGO]
GULF
POWER
A SOUTHERN COMPANY
Gulf Power Capital Trust IV
Flexible Trust Preferred Securities
(T-FLEX/SM/)
(Five Year Initial Fixed Rate Period)
(Liquidation Amount $1,000 per Preferred Security)
Fully and unconditionally guaranteed, as described herein
-----------------
PROSPECTUS SUPPLEMENT
December , 2002
-----------------
LEHMAN BROTHERS
SUNTRUST ROBINSON HUMPHREY